Famous for its motto “You press the button, we do the rest”, Kodak is among the America’s first innovative companies, by transforming complicated and unwieldy processes handy to use and easily reached by everybody since 1888. From that time on, Eastman Kodak Company lead the world with numerous products that made the company a household name until now.
It is a company listed in NYSE (symbol: EK), even a component in the Dow Jones Industrial Average. It is brand recognized in almost all countries around the world, with most of world’s photography products related to it.
However, because of many technological events that took place, especially with the introduction of digital photography, the future profitability prospects of Kodak were predicted by experts to be very limited unless the company will seek ways to reinvent existing markets.
II. Changes in Kodak’s business Environment
There are many changes in the firm’s business environment that had tremendous impacts to the profitability of the firm. Most of the changes in the past especially the boom in the color technology had propelled the company into a $1 billion dollar firm in 1963 and a $10 billion firm in 1981.
In addition, the company had committed mistakes in its operations that failed it to see future industry changes, the most recent revolution of which is the digital revolution, wherein the company had endured the pain of not being able to fully adapt to the technological change.
i. Revolution Number 1: The Color Technology Revolution-The Boom
Kodak banked on basic principles of mass production at low costs, heavy advertising, international reach and customer growth and focus through research and development (Mendes, 2005). Its competitive philosophy had endured for many decades making the firm very profitable. However, as movies and cartoons become colored, the boom continued for Kodak, as its business seem like a monopoly for US market. The color technology boom prospered, but Kodak had ignored an opportunity that turned out to be a threat afterwards: the Digital Revolution
ii. Revolution Number 2: The Digital Revolution and Kodak
The digital camera revolution can be traced back in the 1970’s when Texas instruments introduced the first film-less camera. Kodak was also able to develop camera cassette tape recorders as storage of images, however, further research and development was not explored as the camera was not meant for mass production (Bellis, 2007). Kodak during the period 1983-1993 on the other hand diversified on other businesses such as IBM copier services business such as Clinical Diagnostics (in-vitro blood analyzers), Mass Memory (floppy disks), Other bioscience & lab research firms, Sterling Drug (pharmaceutical firm) , while its competitor Fuji Photo and Film Co. is gaining a foothold in the US market. Kodak ignored this move, as Kodak still controlled 90% of the camera market in 1976. On the same period, Fuji introduced films under its name and many photo finishers started switching to Fuji. The market share of Kodak eroded, but managers continued to ignore it as they “didn’t believe that the American public would buy the firm. (Gavetti, 2005)
For more than half a century, the management and marketing scheme of Kodak didn’t changed much. It avoided ventures that seem to be risky and too innovative, and harnessed processes and strategies that seem to stick with the status quo. Thus, Kodak seems to avoid the effect of technological change.
Fuji started embarking on massive advertising campaigns, with the likes of sponsoring the Olympics and establishing a well known global brand. Fuji in the mid 1980’s started selling disposable cameras and other innovative products; Kodak had claimed that it had developed similar products but was not able to patent it (Gavetti, 2005)
Kodak on the other hand, focused on business they felt tied to its core businesses. Sony had developed the first digital camera but not for the mass market purposes. Kodak still felt that switching to digital will destroy their core businesses. However, the introduction of the disposable camera was considered to be the “Pearl Harbor Bomb attack to Kodak”. In the 1980’s Kodak explored digital imaging but blended little technologies, and still concentrated on core values. It can be aptly called the “film based digital”. In the early 1990’s, Kodak introduced products that lacked innovation, expensive products (Photo CD and disks); this move prompted Kodak to fully reconsider and overhaul its marketing strategies, including stopping to produce analog cameras.
III. Kodak’s Strategies and Reactions Changing Business Environments: Mistakes and Lessons
Kodak’s recent advertising and marketing strategies have strongly reflected to its sliding market share, as it faces competition with veteran firms Sony, Canon, Nikon, Olympus, etc.
In 2004, according to the research firm International Data Corporation (IDC), Sony was able to seize 20% market share of the digital camera market, while Kodak’s share to decrease at 19.8%. On the other hand, Canon held 16% of the market and Olympus increased its share to 12%. At this period, Kodak had made intensive investments worth billions in order to shift to shift its business to digital imaging (Becker, 2004).
In the same research by IDC, Improvements for Kodak came in 2005 when it was able to get 25% of the market share. However, a year after, Kodak’s market share crashed by 31% to land with only with 16%, way at the back of Canon and Sony. The last two companies held to 20% and 17% of the total market share, experiencing a 21% and 3 % gain over the year. At the same time, Nikon and HP controlled 10% and 7% of the market respectively. In addition, other firms which occupy lower than 5% of the market share saw their market share increase by more than 120% (Samsung), and 199% (Panasonic) and Casio (136%). The US market also slowed in 2006 by experiencing only a 5% increase, compared to more than 21% a year before. The strong gains of Canon and Nikon are highly attributed to the introduction to the market of low cost digital single lens reflex cameras (DSLR), highly preferred by both professional and amateur photographers more than the compact point-and-shoot models. (Williams, 2006).
In terms of promotion, it can be seen that Kodak is struggling hard to compete with better-managed companies like Sony and Canon(they are among the world’s most admired companies). Since the two firms already possess market leadership, it was seen that Kodak products are selling for less in its two distinct market segments. This scheme could probably mean that Kodak is immensely promoting its product in order to take advantage of sales volumes. It has also significantly decreased its costs by divesting many businesses which are still heavily tied to traditional film. It has also streamlined its businesslike into three major product lines.
Price wise, Kodak competes in a wide variety of price ranges, with some products below $200, and some even below $100 (Easy Share C Series Line), thereby commanding a price advantage over other more expensive brands. On the other hand, its Easy Share Z series commands some price range of $200 to $299. The C series is consumer-friendly point and shoot models, employing cheap DSLR technologies which exhibit high preference by amateurs and professionals, as well as by most people. The C series is also designed for the budget conscious; its features do not sacrifice quality over functionality. Its other product line also include the high zoom series (Z), pocket series (V) for the style conscious and the performance series (P) for professionals who needs advanced capabilities. There is also a Wi-Fi enabled camera (Easy-Share One Series), one of the first kinds of its own to enter the market, available below $200 ( Kodak.com, 2007)
In terms of product development, the company is more pressured than ever to be more efficient, at the same time produce cameras that are known for quality and durability. Since the growing preference of consumers on uncomplicated and quality products, the development of the DSLR compounded the ability of Canon and Nikon to gain a large share of the market. Sony and Panasonic participated in the market by also coming up with their own cameras equipped with DSLR.
In addition, aside from cameras, Kodak is also reviving the photo-printing through the introduction of all-in-one-printers. Its ink refill cartridges compete well with those of HP, a market leader in printing products. It has also succeeded well in online printing services, by providing professionally printed and affordable photos.
In response to intense pressure to cut costs and be more efficient, Kodak had also streamlined its businesses to focus on consumer products, dental and medical imaging and graphic communications. This move is a product of sell-offs, acquisitions and divestments in order to have a competitive company.
It has also taken partnerships with many companies both local and international, in order to expand its global presence. Kodak strongly believes that the US market is matured, and growth could be found in Europe and in Asia. To possess a more efficient distribution, some manufacturing is transferred to China, and some 3% of the workforce is slashed.
Some of the things that Kodak has to explore are emerging markets, because it has to progress in order to move forward. Intense competition in technology industries can also drive competitive advantage. In addition, in the technology industry, the focus is the future of the industry, thereby commanding the relevance of research and development in the firm’s expansion. Kodak must continually explore these possibilities, as market dynamics continue to change incessantly.
Becker, D. (2004). Kodak catches up with Sony in camera sales [Electronic Version]. Retrieved May 7, 2007 from http://news.com.com/Kodak+catches+up+with+Sony+in+camera+sales/2100-1041_3-5460051.html.
Bellis, M. (2007). History of the Digital Camera [Electronic Version]. Retrieved May 7, 2007 from http://inventors.about.com/library/inventors/bldigitalcamera.htm.
Giovanni Gavetti, R. H., Simona Giorgi. (2005). Kodak and the Digital Revolution (A): Harvard Business School.
MENDES, G. (2005) What Went Wrong at Eastman Kodak?
Williams, M. (2006). Kodak loses out in U.S. camera market [Electronic Version]. Retrieved May 7, 2007 from http://www.macworld.com/news/2007/02/05/cameras/index.php.