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Kodak's leadership in the development of advanced color film for simple, easy-touse cameras and in quality film processing was maintained by constant research
and development in its many research laboratories. Its huge volume of production
also allowed it to obtain economies of scale. Kodak became one of the most
profitable American corporations, and its return on shareholders equity averaged
18% for many years. To maintain its competitive advantage, it continued to invest
heavily in research and development in silver halide photography, remaining
principally in the photographic business.
However, during the 1970s and 1980s, the return on equity dropped significantly
due to the major changes in the photographic technology and increasing
competition within the industry. Kodak tried to cope up with change and the
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competition but failed to come up with effective strategies which could give them
competitive advantage. Now, after spending billions of dollars to create the digital
competences necessary to give Kodak a competitive advantage and cutting tens of
thousands of jobs, the companys future is still in doubt.
Fuji Photo Film Company (a Japanese film manufacturer) invested in huge, low
cost manufacturing plants, using the latest technology to mass-produce film
in large volume. Their low production costs and aggressive, competitive price
film processing.
Kodak had done little internally to improve productivity to counteract rising
costs.
Kodak lost its patent suit with Polaroid Corp. and had to settle out of court
businesses;
(2) He aimed to make Kodak the leader in electronic imaging;
(3) He spearheaded attempts by Kodak to diversify into new businesses to
increase profitability;
(4) He began on major efforts to reduce costs and improve productivity.
For implementing these strategies, Kodak acquired many businesses. However,
these strategies did not work and eventually the company started incurring huge
losses.
new entrants would lack experience and knowledge (technical and business) in key
areas of digital imaging and photography.
Bargaining Power of Buyers
The bargaining power of consumers is high especially for consumer electronics.
Buyers are given a range of differentiated digital camera products from a number of
companies. They expect better offerings and customization of goods and services.
Kodak has to meet these expectations at the same time maintain competitive
pricing.
Bargaining Power of Suppliers
Bargaining power of supplier power is low in this industry. A lot of the suppliers are
located around the world for Kodak to choose from, both locally and internationally.
Moreover, Kodak has their own supply of raw materials for some of its products.
SWOT Analysis
Strengths
Kodak is a household brand name. It has brand recognition not only in the US,
but all over the world. It also has highly valuable brand equity.
Kodak has strong distribution channels in virtually every country of the world.
Even though the company has incurred losses in the past few years, it still
has huge financial resources left.
Weaknesses
Lack of change in business strategies to cope with the changing time and
customer demands.
Company culture of traditional and conservative values hindering strategic
changes.
Inability to translate innovation into marketable products (e.g. instant
Opportunities
Threats
Canon etc.
Kodak has been struggling with a price war between strong competitors such
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organization where core values may not integrate well into the new brand.
Leadership and Organizational Learning
Kodak will need to train staff, especially managers in weak areas on vision and
strategy. For example, managers can be taught design methods, to generate
growth, evolve, and react as the marketplace and user needs changes so that the
business model can evolve to bypass extinction.
Eliminate Non-profitable Products
Subsequently, Kodak will need to discontinue some of its products, especially in
saturated markets such as digital cameras where profit margins are low and
competition is fierce. It can better utilize its resources and real core competencies
to make it difficult to imitate its products and demonstrate leadership.
Joint ventures and outsourcing
Kodak can form joint ventures with other companies. It can create new emerging
industries or new value propositions, alliances and collaboration to be form by
complementing and adding to its capabilities and resources. It can capitalize heavily
on its existing patent portfolio.
Kodak will need to outsource a lot more of its manufacturing, while part-time and
casual staff can lead to the reduction of labor costs. Extreme care needs to be taken
where processes of high strategic importance should not be outsourced. The result
will allow Kodak, to develop new competencies for future developments and sustain
the importance of long-term success.
Conclusion
To sustain competitive advantage, Kodak needs to strategically transform its entire
business model around to capture new and unique growth opportunities. It is
recommended that Kodak simplify the organization hierarchy to improve efficiency;
impart leadership to communicate and influence vision and change; and capture
new business models and better match user needs and economic value. Though,
developing a coherent strategy is not going to be easy for a digital imaging business
like Kodak, it will be Kodaks last chance to survive in the industry and avoid
bankruptcy.
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