The names of Kodak and Fujifilm are well known around the world. They are two companies that have made a name from photos, film, cameras and printers. They are competitors that started in the same business and took different paths. Though they shared similar products their management direction and company direction differed. The differences led one company to be successful and the other to struggle. The founder of Kodak, George Eastman, was a photography enthusiast and wanted to simplify the process of creating photos.
Eastman established what was to evolve into the Kodak Company in 1880. The Kodak Company was built on four basic principles: mass production at low cost, international distribution, widespread advertising, and customer focus. Throughout its history a few more policies were added: growth and development through continuing research, human resources, and a profit reinvestment program. (Building the Foundation) The approach of Kodak in ethics and social responsibility was different from the normal way of doing business at the time.
George Eastman had a firm belief in people creating the foundation for prosperity of the business and this was reflected in how he ran the company. In 1899 he distributed a substantial sum of his money directly to the employees working for him as a gift. This was the ground work for his “Wage Dividend” system where employees benefitted above their wages in proportion to the company stock. . The wage dividends represented a large part of the company’s net earnings and were viewed as an innovation at the time. In 1919, he gave one-third of his stock, which at the time was worth $10 million, to the employees of the company. He ensured employees could look forward to a secure future by adding retirement annuity, life insurance, and disability benefit plans to the existing profit sharing. These may have decreased the initial returns of the company but it has proven through history since that it can increase the overall profitability of the company. (George Eastman) The Kodak Company was undisputed in the photo industry until Fujifilm, a Japanese company, was established in 1934. Since its inception Fujifilm has become a leader in motion picture photography, audio and videotape and the floppy disc industries. The company also boasts products such as still cameras, camcorders, photofinishing equipment, paper and chemicals, imaging and information products for the office and health care markets. Fujifilm got its start with the production of motion picture film, dry plates and photographic paper. It was difficult for Fujifilm initially to develop brand recognition due to the market prevalence of the Eastman Kodak Company. Fujifilm’s quality standards were not on par with Kodak and this created a challenge to gaining any traction. Fujifilm’s plan to compete was to develop film and paper that were compatible with the processing systems used mostly worldwide. By 1969, all of their films, photo paper and chemicals completely matched these processing systems.
With the concentration on the quality of its products, Fujifilm was able to develop its first film product and a motion-picture negative film which proved to consumers in Japan that Fujifilm was technically proficient and resulted in a demand for their products. Fujifilm was able to being exporting film and optical products after World War II ended, they primarily focused on South American and Asia. There was a great demand for new products to be developed in the post war boom, and this created an advantage for Fujifilm. A key downfall for Eastman Kodak, but an advantage to Fuji, was the agreement between Kodak and Fujifilm to allow Fujifilm to produce black and white amateur roll film during 1952 and three more black and white roll film products by 1958. It created an opportunity for Fujifilm to become the number one manufacturer in Japan and allowed them to make more export agreements and open sales offices in other countries including Kodak’s home market the United States. (The History of Fujifilm – Part 1) Fujifilm did not enter the US market quietly. It introduced a cartridge-film eight-millimeter home movie system, which was countered and swept aside by Kodak’s version of the same product. To gain a larger market presence Fujifilm altered its strategy. It began marketing to amateurs and professionals about the differences between the two products, while Kodak continued their primary strategy of concentrating on beginning consumers. To stay in the film product business Fujifilm had to concentrate on innovation and advancing the technology, so they could get products to market faster than Kodak. The new strategy included developing, manufacturing, and marketing comparable products on an accelerated timetable to release merchandise before Kodak was able to. Fujifilm became the third largest film producer in the US market by 1980. One example of Fujifilm’s business strategy was the release of the digital camera in 1988. (The History of Fujifilm – Part 2) In comparison Kodak had previously developed a digital camera in 1979 but didn’t release it to consumers. (1960-1979) Kodak waited until 1991 to release a digital camera for consumers. (1990-1999) Kodak underestimated the demand for the digital camera and bet on the market not wanting to move away from film. The management of both companies took a different route to adapting to changing market conditions. Kodak focused on marketing to amateur photographers, keeping in line with the original goal of the company to bring photography to the beginner. Kodak focused on quality first, it wouldn’t release a product until it worked consistently, and it was easy to use for the target customer base, beginners. It can be argued that Kodak never really strayed from their original business plan. The most noticeable mistake they made was not getting focusing on the digital camera and where that was going to lead photography for the consumer in a timely manner. Fujifilm focused on both the amateur and the professional which allowed a larger market base. Fujifilm also focused on getting products to market faster than the competition instead of focusing solely on the quality of the product. Fujifilm continued to adjust the products it was offering as the needs of the market changed. It diversified its business to include medical products including x-ray imaging and nutritional vitamins.
It also used it base in chemicals for photo developing to branch into personal cosmetics. The differences in strategy allowed Fujifilm to have great success while Kodak limited its potential. There are many ways a company should building flexibility to complement its decision-making process. Focusing on research and development is a great way to complement the decision-making process. Constantly improving your products and services will create a greater chance of beating your competitors to market and staying ahead of the curve. Though you may not create every innovation in your market you can increase your chances of quickly responding to a competitors innovation if your company has a strong focus on research and development. Focusing on research and development will also increase your ability to change the conditions of the market instead of reacting to the changing market. Constantly scanning the external environment is another way to build in flexibility. By scanning the external environment the company will have a greater chance of knowing where market trends are going and prevent them from reacting too late when a competitor creates a new product or service. Scanning the external environment will also prevent you from being blindsided by shortages in supply or demand. If you were not scanning the external environment you might overlook the impact a governmental shutdown could have. If a large portion of your customer base was affected by the government shutdown, they may have less money to spend on your products. You could be undercut by a lower priced competitor and harmed in the long run as they transfer their consumer loyalty to your competitor. The third way I would recommend for companies to build in flexibility would be to rotate positions within the decision-making body of the company. By rotating the members of the board periodically a company can increase the chance of coming up with new ideas for increasing profitability and market presence. I wouldn’t recommend a complete overhaul of the board, it would be better to rotate qualified people into positions without removing the entire board. By keeping some of the previous board and only rotating a few people at any given time you can ensure that the company’s overall direction doesn’t make too drastic of a change.
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