2.

Fuji, seeing that Kodak is trying to capture market share by launching a

brand close to Fujis price can respond in the following manner:
Fuji can enter into a price war with Kodak in this situation. Considering that
Fuji is already well established in the economy segment, it will try everything
possible to ensure that Kodak stays out of that segment. Market share of
Kodak is the highest currently(70%) but their concern after seeing the growth
rate of Fuji(18%) has made them think about launching Funtime to compete
with economy brands. In terms of cost advantage, Fuji had an advantage
over Kodak because of following reasons:
Low advertising cost- Kodak spent close to $50 Million on advertising. This
was four times that of Fujis advertising cost ($12.5 Million).
The other cost advantage that Fuji had over Kodak was the margin
advantage that Fuji got (55%) over a film of $2.91 versus the margin that
Kodak got(70%) over a film of $3.49. If Kodak did decide to launch Funtime
version, their margins would also be affected because of cannibalization and
seeing the increase in product lines that Kodak has to offer, we can assume
that dealers could increase their margin on Kodak film from 20% to 25%,
thus again hurting Kodak. Kodak historically focused on increasing
advertising and focusing on marketing, however it is important that they also
build in house strength and keep the price on line like Fuji did.
3. Considering introduction of Funtime, we calculated the breakeven points in
terms of increase in market share and breakeven units needed. As per the

below calculations, Kodak would gain market share of almost 24% if it goes
ahead with the introduction of Funtime.
Also, for cannibalization we assumed the rate to be 10%. The other
assumption we made was the split of unit sales from Kodak gold plus would
be 80%.
Fun Time
Price
Gross Margin
Dealer Margin
Profit Markup
Selling Price
Per Unit Profit
Cannibalization
Lost Profit
Breakeven Units
Mkt Share Gained
Absolute Market
Share

Price
Gross Margin
Dealer Margin
Profit Markup
Selling Price
Profit
Sales
Profit

2.792
70%
20%
0.5584
2.2336
1.56352
37520000
73329088
46900000
23.33%
7.00%
Gold Plus
Current
New Price
3.49
2.9665
70%
70%
20%
20%
0.698
0.5933
2.792
2.3732
1.9544
1.66124
375200000
441411764.7
733290880
733290880
Increase in Sales
17.65%