Kodak Business History and Analysis

Kodak Case Study In 1888, George Eastman had a vision of simplifying photography so that everyone
could enjoy it. He popularized the slogan "You push the button; we do the rest" (Aventail). Mr.
Eastman's vision was to take the cumbersome and complex technology; understood only by a few, and
reinvent it for use by the general public. Kodak has achieved a great amount of success over the years as
it continues to strive to create the finest quality in still picture images. The company believes that there
will always be a basic human need to stop and record time, so that we can reflect back on certain special
moments. A fortune 100 company, Eastman Kodak has been the dominant force in the world of pictures
for nearly a century. The company earned over $14 billion in sales in 1999, which represented a five
percent increase over 1998 (Aventail). For closer look at Kodak's past five-year history and competition
refer to the table and graphs on the following page (page 2). The company's main focus is to provide
products and services in all fields that deal with photographic imaging. These include: film, cameras, x-
rays, professional photography, motion pictures, printing, copiers, publishing, business and digital
imaging (Aventail). Eastman Kodak currently employs more than 80,000 people in more than 150
countries (Schwab).

Kodak Business History and Analysis

The days of growing fat off the high margin, silver-halide film that is packaged in the ubiquitous yellow
boxes has quickly become a faded piece of history (Dobbin). The high profile business that turned Kodak
into one of the most recognizable name brands in the world has spent the last ten years struggling for
survival. To make matters worse, with the technological advance in the popularity of film-less digital
cameras quickly becoming the norm, the company must do all it can to stay even with its main
competitor in the global arena, the Japanese company Fuji. Fuji has attained a high market share not
only in Japan, but in the United States as well. Kodak is developing a digital film processing station to try
and compete with its rival. This feature allows customers to manipulate their pictures and print them
out almost immediately. Kodak will try and implement this new product globally in the near future but is
currently facing various growing more immediate problems. Fuji is plain and simply, out competing
Kodak. Kodak took Fiji to court claiming that they were using unfair practices to gain a competitive
advantage (Fujifilm). The court struck down Kodak's accusations against Fuji, which left Kodak looking
for another plan to tackle its rival in the global marketplace.

Kodak Business History and Analysis

Currently, Fuji is getting twice as many sales per employee than Kodak can and additionally retains a
bigger market share that continues to climb at a steady rate in almost every country that the companies
compete in (Dobbin). With the yen dropping in value against the United States dollar, this provides the
Japanese company with just another advantage in the ongoing fight for market share. If Kodak wants to
compete globally, it will have to come up with some serious long-term and short-term strategies in both
its product development and its marketing department. These concepts will need to be cutting-edge to
be able to catch the eye and hold the attention of the fickle technological innovative consumer. Kodak is
not the same company that it was back in the seventies. Technology is the driving force in the world
today. Technology continues to change at a rapid pace and if you do not keep up with the changes you
most certainly face the inevitable prospects of some serious problems. The company cannot live with its
head in the clouds and rely on its past successes. The time is long overdue to look ahead and anticipate
the changes that are looming just over the horizon and plan for them. Without any hindsight on what
will be the new "hot item" that the consumer will be looking for, the company will be doomed to failure.

Kodak Business History and Analysis

Kodak needs to constantly keep tabs on Fuji. What is the company doing right? How are they managing
to stay profitable and maintain their large chunk of the market share? Instead of listening to how Wall
Street thinks the company should be run, Kodak's CEO George Fisher must not lose focus on what needs
to be done to bring the company back to the lofty position that it experienced in the past. Get the
company moving in the right direction; win back the faith and trust of the consumers worldwide and the
company will again be profitable making the folks on Wall Street happy. A major issue that the company
will have to address is the constant downsizing and laying off of employees year after year. From 1983 to
1997, Kodak has cut or laid off more than 67,000 positions (Illinois). This is definitely a large derailing
factor in the company's future success. How many quality employees will the company be able to recruit
in the near future knowing your job could be cut at any moment because the company has a lack of
know-how and direction for the immediate future? Without a qualified and technically savvy workforce
how can you expect to make quality products for your customers? Most everything today is going
digital. If Kodak can concentrate its attention in this area and continue to innovate, it will be able to
follow the leads of major camera companies like Cannon and Minolta (Aventail). In the fall of 1998,
Kodak entered into the digital camera marketplace. They supplied the digital camera market with its
Digital Photograph Kit. The consumer received a digital camera, easy to use software packages and
paper to make quality prints. In addition, the kit provided a photo CD, which contained pictures that
could be loaded onto a computer. Sales of this product proved to be disappointing as consumers were
slow to move away from their familiar traditional cameras. The new digital cameras also required the
user to be connected to a computer. In an effort to bridge the gap between traditional and digital
cameras, Kodak teamed up with Intel (Illinois). Kodak intended to use this collaborative agreement to
communicate the simplicity of digital imaging that resulted from using Kodak picture CD. In moving to
"digitization" the ability to convert traditional film to a digital format through the standard photographic
processing method, consumers were able to receive their prints and a CD containing digital images. This
new technology extended Kodak well beyond its initial core competencies in film and cameras. Few
consumers connected the Kodak brand with computers and computer technology.

In the mid-1990's Fuji began aggressively pursuing the U.S. market, primary through price-cutting. This
price war cut deeply into Kodak's margins at the same time that Kodak was investing heavily in digital
imaging and digitization. This resulted in a lot of red numbers for the company, and an initial layoff of
7,600 jobs. As the company continued to see red numbers, a second round of layoffs was initiated,
costing 12,300 jobs and additionally reducing costs by another $1 Billion (Illinois). Kodak was committed
to growing its digital imaging business, but could they convince consumers that this was the future trend
in photography? In emphasizing digital, Kodak was continually criticized for not paying the proper
attention to its core business problems with film and cameras. Kodak's slow response to Fuji's price war
allowed for a 30 percent differential to occur between the two competitors. A major concern for Kodak
as it tries to return to profitability is that its marketing department is failing in its attempt to market
digital cameras. The slow growth in sales is a direct result of this issue. Kodak has failed to identify a
number of key issues: 1) Consumers did not associate their products with computers 2) Digital picture
taking can be expensive when compared with traditional pictures 3) Most people were not ready to
change from traditional photography 4) The available market was limited to computer literate and
computer owners 5) The company was ahead of its time releasing the digital camera without first
establishing the digitization market.

This issue proved very costly to the company. As a result, Kodak had to grow and support two new
products, digital cameras and digitization. This put a tremendous burden on the company's financial
resources and left it unable to react when its core products came under attack by the pricing pressures
applied by its nearest competitor, Fuji. This slow response forced Kodak to lower prices, eliminate less-
profitable product items, and make price promotion offers forcing the company into a reactive instead
of proactive type of response. A more deep-rooted approach shows that Kodak really only has itself to
blame for its own decline in the 1970's and 1980's. The company was not paying attention in Japan and
failed to take control of its own distribution. This failure made it impossible to supply the right products
to the consumers in the marketplace. As early as 1971, Kodak could have entered into a 50-50 joint
venture in manufacturing, distribution or photo finishing (Fujifilm). By 1976, Kodak could have owned
such enterprises outright. Kodak did not choose to invest in these options. As late as 1984, Kodak had
only 25 employees in Japan, and finally in 1986, after ignoring the issue for almost 16 years, Kodak
finally began investing in its Japanese distributor (Fujifilm). Note that there is no mention of any
government restriction on Kodak's ability to invest in and control its own distribution in Japan. The
decision not to control its own destiny in Japan for years was Kodak's, and Kodak's alone. This conclusion
is borne out by the words of the former president of Kodak Japan, Albert Sieg, who said in his 1988 book
"Taking on Japan; that "The glaring mistake was waiting so long to take aggressive action in this market.
We should have been here with this approach ten years ago. Clearly the momentum of our local
competitors got a strong forward thrust, and our task will be much, much more difficult." Strengths "
Established company with 100 year history " Well known name brand globally " Held dominant position
in the market for over 50 years " Technical innovations " Quality patents " Practically a monopoly for 50
years Weaknesses " Inefficient marketing tactics " Strayed form core competencies " Misjudged the
future " Missed opportunities in Japan " Weak cash flow " Declining profit margins and market share "
Declining workforce " Inability to attract and retain quality workers

Opportunities " Digital cameras on the rise " Video " Distribution " Changing global economy " Low
interest rates in US " Internet user growth Threats " Competitors " Weak Economy " Emergence of new
technology " Changing consumer wants Critical Success Factors " Need to concentrate on their core
business " Concentrated growth " Win back market share and consumer " Slowly introduce the customer
into digitalization first " Put digital technology on hold for at least a year

Grand Strategy Options and Recommendations The situation being what it is, Kodak is going to be forced
to make some significant changes. Core products are heavily depended upon to fund growth potential in
new areas. An attack during the infancy of a new product growth cycle should always be anticipated and
strategically planned for. Be that as it may, in order to respond to the growing issues that the company
must face on a daily basis, the following recommendations seem most likely to steady the ship and bring
the company back some needed respectability. Kodak must approach its growth more conservatively
than it did in the mid-90's. Investment in new product lines is necessary for all companies to continue to
operate in the future; however, this could lead to over stretching resources that can make the company
weak in core technologies. Kodak should significantly reduce its focus in the digital camera segment of
the digitization product line. Returning resources back to the core technologies in both the marketing
and cost reduction areas will provide Kodak the opportunity to reestablish any losses in market share
and provide necessary financial resources to purse other growth areas but at a slower, more
conservative pace. A positive marketing strategy in the core technologies should begin with recapturing
the traditional film market while advertising should be focusing on slowly introducing the consumer to
the new emerging product lines.

In addition, Kodak should significantly slowdown the development and promotion of its digital camera
market for a period of at least one-year. After that time, further evaluation of the product line can be
reassessed. The additional resources that will be made available due to this approach should be used to
firm up the company's core product market and aid in the growing of its digitization market. However,
once the core market is brought back up to speed to a desired level, the primary focus should then shift
to increasing awareness in the digitization market. This will be the correct time for the company to
emphasize and reintroduce its picture CD into the computer market. This will help to smoothly transition
the company in the eyes of the consumer into the computer marketplace. In conclusion, Kodak must
redirect its attention and capital from the ailing digital camera market to its core products and
digitization. They need to focus on what they do best, and what products got them to where they are
today. The core business will finance any future innovative product lines. To firm up its core business,
Kodak must increase advertising. Additional marketing of sales promotions that include free samples,
coupons, and price packs will certainly get the attention of a majority of consumers. With the core
business back on track, Kodak can then start increasing its attention to digitization. When they feel
comfortable that the marketplace is 'up to speed' with associating Kodak with computers, they must use
inventive advertising to get their Picture CD noticed. This would be a great idea for a Christmas gift and
free samples in the summertime could translate into big wintertime sales.

Additional ideas involve combining the in-store film locations with the picture CD technology. They must
evoke a customer mindset of "When you think of pictures, you think of Kodak". Then, turn that thought
process into: "When you develop your pictures you want to keep them forever", using Kodak's Picture
CD. A great marketing tool would be to set up a computer at the local film developing station that would
allow the consumer to develop his/her own film and change the pictures to their liking before printing
them out. They would then be able to store the negatives on a CD that they could burn themselves, and
place them on their home computer for future usage. When Kodak software is compatible with other
cameras, printers and computer manufactures, retailers will offer the software with the sale of any or all
of these products. Finally the timing will be right for the marketing of digital cameras. A good place to
start marketing this product will be from the list of customers who already own the Kodak Picture CD.

Works Cited Aventail, Industry Case Study, Eastman Kodak Reduces Costs and Creates Internet-based
Alliances with Business Partner Network, Dobbin, Ben, Case Study: Kodak, Kodak in negative territory,
Company fighting to make headway in hot digital arena, Associated press, 26 July 2003, Copyright 2003
Union-Tribune Publishing Co. FujiFilm, Analysis: Kodak's problems were caused by Kodak alone, Fujifilm
Worldwide - WTO Film Case - latest Analysis, http://home.fujifilm.com/info/wto/ana4.html Illinois State
University, Ups and Downs at Kodak, Analysis Questions for Cases, Schwab, Charles, My Reaseach
Report, Quotes & Research, www.schwab.com

Kodak Case Study

KODAK CASE STUDY

SRN 162658
 1. Summary

2. Brief Introduction

a. Introduction of a Strategic Position

b. Introduction of Eastman Kodak Company

3. Analysis of Strategic Position of Kodak

a. Analysis of External Environment

i. General Environment

ii. Industry Environment

iii. Competitive Environment of Kodak

iv. Introduction of Directional Policy Matrix

v. Apply Directional Policy Matrix to Kodak

vi. Conclusion

b. Internal Resource Audit

i. Physical Resources of Kodak

ii. Human Resources of Kodak

iii. Financial Resources of Kodak

iv. Intangibles of Kodak

c. Introduction of SWOT Analysis

i. Apply SWOT Analysis to Kodak

ii. Conclusion

4. International marketing and recommendations

5. Appendices

1. Executive summary
This essay attempts to analyse the strategic position of Kodak

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get better grades through different models/tools of strategic audit. The first section of this essay
describes the context of strategic position and introduces the background of Kodak and its strategic
position in present.

Three steps analysis are followed in second section to analyse the strategic position of Kodak:
Directional Policy Matrix is applied to analyse the competitive environment of Kodak; different types of
resources of Kodak are audited and listed in detail; SWOT analysis is applied to identify Kodak’s
competences. Through above three steps, we can acquire a clear understanding of Kodak’s strategic
position.

In the last section of this essay, it summarises the application of different models/tools of strategic
management and international marketing, and points out the disadvantages of these models/tools as
well as the recommendation of further application of them.

2. Brief Introduction

a. Introduction of Strategic Position

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