Core Competences, Media 2.0, and Consolidation
Adobe to acquire Macromedia. This is a smart play, the first of many Media 2.0 consolidation plays to come (here's another - GameStop and EB). I think we'll see a lot more horizontal consolidation in the next few months, and vertical integration will accelerate shortly afterwards, as value chain segment owners try and extend their market power. This shouldn't be confused with horizontal integration in micromedia (viz Yahoo and Flickr, Ask and Bloglines, etc), which is about finding the dominant design in new markets.
In traditional markets, strengthening and leveraging competences into complements is a smart way to survive and grow in an environment that's converging on several levels (content, standards, distribution), largely by creating scope economies and end to end solutions to exert market power upstream and downstream, and feed the rents back into strengthened innovative capacity. (MeFi).