Imagine you are a digital camera manufacturer. You're in the market, but prices are falling, affecting your profits and ability to stay in business. What do you do?
a. Think of new or improved features that make your product compelling (but that costs R&D money).
b. Cut costs internally.
c. Shift production to lower cost countries (but so do your competitors).
d. Shift production to higher cost products (but so do your competitors).
e. Get out of the business of making digital cameras, because the market is getting saturated.
Olympus is going for option b. after finding option c. no longer effective. Last year, its camera division lost US$121 million. To break-even this year, it plans to cut the cost of making cameras by 30% through the elimination of 4,000 jobs -- mostly in China. It will also try to get parts suppliers to cut their costs, and perhaps re-lable even more cameras made by Sanyo.
My daughters think their Verve cameras are very cool, but found them too expensive. "Our priority this year is profit in the digital camera business rather than market share,'' says the company president.
As for option e., I think non-camera companies, like HP and Epson, should get out of the business. More specifically, any company that does design the lens itself, because it is the lens that makes the picture, not the electronics.