Kodak Case Study Essay
From the start, the Eastman Kodak company had many distinct advantages. After the invention of the silver halide photographic film, Kodak had a step ahead of any other company during its time. In 1888 Kodak developed a camera which was portable and George Eastman was able to revolutionize the photography industry. He patented his invention and began a journey on developing more advanced photographic technology toward the future of the company. Kodak had a distinctive competency over its competition because of the operations of its business. This helped lead the Kodak Company toward the continuous growth of their business.
During the 1970’s-1980’s Kodak encountered problems with revenue and became aware of competition which was rapidly threatening the survival of their business. Kodak began to realize that drastic changes in the structure of the company and the technology of their products would be vital toward success of the Kodak brand. Kodak began restructuring their company with the help of key people and began another journey toward being the top maker of photographic equipment and accessories. The introduction of digital technology would prove to either break or help the Kodak Company.
The Kodak Company from the beginning understood the importance of having much strength over their competition. They implemented a system of operations that would make the company run efficient and allow the company to save a large amount of money and time. They had four key objectives from the start. The implementation of the mass production of products to allow for low production costs was vital to the early success of the Kodak Company. They had strengths in technology because of the focus on research and development, which allowed them to stay ahead of their competition by offering new unique products to consumers.
Another strength that Kodak had was the massive amount of advertising used to get the word out about their advance in products. This allowed for Kodak to gain an advantage in the aspect of Marketing, thus putting them ahead of upcoming rivals. I believe the most important strength that Kodak had, was the extension of the company into the world marketplace. They wanted to make sure that whenever a person thought of taking a picture, they would use their yellow boxes with the word Kodak on the side. This was an excellent marketing tool within itself, because people would see this invention used by other people and would want one of their own.
The Kodak company brand became a household name and also helped generate revenue for the company for many years ahead. Even without large amounts of actual advertising on the radio and television, just by having the products all around the world, it proved as a good enough marketing tool. During the 1970’s Kodak had strength in the design of their 35mm cameras, because they were relatively simple to operate compared to the competitor’s 35mm single reflex camera design. During the later part of the 1980’s Kodak took advantage of strengths in both marketing and research and design with the invention and promotion of newly developed battery.
Kodak worked with a company called Matsushita to develop batteries for consumers to use. They were able to design a new lithium battery which lasted over six times longer than any conventional battery produced by any competitor at the time. They successfully marketed these batteries for people to use with all of their electronic equipment and were able to get an edge on their competition. They also had a large distinctive competency in information systems. Kodak realized the need for digital products would be arising in the near future and if they could get an early jump on the technology, it would prove beneficial.
Kodak began purchasing companies that had experience with digital equipment to stay ahead of their competition. This worked well because it bought them time to improve and perfect the operations of early digital equipment that they had recently taken over. In the late part of the 1990’s, Kodak was becoming very successful in the digital camera market. They were becoming more popular among consumers and they had a distinct competency in the field of digital kiosks to change and enhance photos taken with the cameras. They also had a competitive advantage in the field of software for the cameras because it was easy to use by consumers.
Colby Chandler tackled the unorganized infrastructure of Kodak and had plans of strengthening and making the management system of Kodak more efficient. He had two main objectives, including reducing costs within the company and making the organization more flexible and more aware of competitors in the marketplace. Chandler orchestrated many programs to cut costs in the infrastructure, including the downsizing of the workforce and splitting up the massive grouping of operations to create a lean system of operations within the Kodak Company.
During the 1960’s Kodak began running into many different issues, which developed into weaknesses within the company. Kodak began the process of designing a camera to compete with the successful instant camera that Polaroid had developed. Kodak realized that they wouldn’t be able to hesitate at the chance of competing with Polaroid in the instant camera market. Years later Kodak filed a claim with the court system, stating that they were going to have a patent for the design of the instant camera.
However Polaroid had the successful ruling in court, when Kodak was ordered out of the instant camera market because of violating seven of the patents that Polaroid already owned for the invention. The 1980’s started another weakness among the Kodak Company which was also affecting the survival of their company. One weakness that they faced was the weakness in research and design. Kodak invented a camera which used a disk with a negative smaller than the one within the pocket sized Instamatic camera. Even though it was smaller and easier for consumers to use, it was not able to compare to the sales of Kodak Instamatic camera.
They had a lot of trouble with the infrastructure of the company in its early stages. They had problems with productivity and constantly rising costs of materials needed for their products. During the late 1980’s into the early 1990’s Kodak did not give managers equity stake in new ventures that they were entering. This was one reason for the failure of Kodak managing new ventures and acquisitions. They began to change the way that employees were paid. Instead of the employees being compensated by time, they would be paid on level of performance they have completed.
Kodak had many opportunities to further advance the company and receive a larger distribution market of their products. One opportunity that they achieved was the implementation of a new corporate strategy by Colby Chandler. He set up four short term goals for the company including the increase in control of their existing chemical based imaging business. They were able to introduce new products by spending more time and focus on this aspect of the company. Chandler also aimed to make Kodak the leader in electronic imaging, diversify into new businesses to increase profitability, and reduce costs within the company and increase productivity.
These objectives were a key to the advancement of the company. Within six years, Chandler was able to restructure the company into four main operating groups with each group having a distinct focus on internal operations. He took the opportunity and turned it into a reality. Kodak also took advantage of an opportunity of branching into the designing of new products for consumers to purchase. Kodak moved into the copier business and expanded their investment into sixteen countries outside of the domestic United States. Kodak also saw the expansion in the areas of medical imaging.
They used this opportunity to develop products that were in a new area than they were previously part of. They developed laser imaging films and other products that were revolutionary to the industry at the time. They had developed distinctive competencies in the areas of chemistry and biotechnology and began commercializing the products they had invented. During the long history of the Kodak Company, Kodak has overcome many threats to the survival of their business. One of the first threats that became apparent quickly to Kodak was the stiff competition from new competitors in the film processing market.
Fuji and other Japanese companies were able to design paper used for printing film at much cheaper rates than Kodak could offer to their consumers. This became a large problem for Kodak because they were unable to get an edge on their competition and get a part of that market share. Also with the amount of competition rising in the market for photographic products, Kodak had to take a cut in their revenue and lower the prices of their products to remain competitive with rivals. Another major threat to the company was the introduction of substitute products by other companies.
There was an increase in the development and production of equipment to produce and record images. The introduction of portable video cameras gave consumers a way to produce their own images and capture video easily. It became apparent to Kodak that they had fallen behind the competition on the idea of improving technology and that there was a fast increase in the switch from analog to digital. Kodak’s managers did not perceive this rapid change to the world of digital technology and realized that the threats were going to only increase in the future if they didn’t act quickly.
The threats continued in 1988 when Sony introduced an electronic camera which was able to take pictures and display them on a television screen. Kodak realized that they needed to act extremely fast in the technology of imaging and they began to focus on the area of communications. Kodak also ran into problems when they expanded its core photographic products business. Fierce competition from companies such as IBM, Apple and Sun affected the market share that Kodak had been fighting for. Kodak had little knowledge in the field and was up against a group of dedicated companies with many years of focus and research.
In 2006, Kodak had troubles with revenue when they realized that they had spent a large amount of capital toward the digital camera market. They still lacked a secure group of digital products to make sure that the future of the company would be successful. Competition is such a large threat to the survival of the Kodak Company with the growing risk of entry by potential competitors. The competitors keep advancing their technology and by managing their operations efficiently, they are able to sell their products at lower prices than Kodak can offer to the general public.
When Colby Chandler designed his restructuring plan for the company, he reduced the control at the top of the Kodak management. He focused on decentralizing the manager’s decision making control and bringing it to lower level managers within the company. Chandler was able to organize the company into seventeen areas of operation. Some of these operations included marketing, finance, planning, manufacturing and research and development. One of the main reasons he decided to change the structure of the company was because there was competition and integration within the company.
He believed that change in these tasks would promote speed, control, and structure and allow for new innovation in the future. Kodak would be a lot more efficient in all of the areas of operations because of the focus on each specific task. By each department having control over all aspects, everyone within the company would know of their surroundings and would be better prepared with any situation that may arise. Chandler helped Kodak implement new control techniques in the organization.
They introduced a technique called the “office of submitted ideas” under this idea; the people within the company were able screen outside projects of Kodak. This was a concurrent control technique because they were able to screen an activity while it was taking place. Kodak received roughly three thousand proposals for the projects they were attempting to complete, and only thirty survived the screening process. They had a quantitative control technique because Kodak kept a close eye on revenue and budgeting for rojects that they were entering. It seemed that Kodak didn’t have many other types of control techniques in place later on during the developmental stages of digital technology. They were caught off guard when the other companies started releasing the products into the market. Throughout the history of Kodak, they have had a lot of success with marketing and selling their products. There are things that I would change within the company. The competitors of Kodak continue to design cameras with sleek looks and easy to use buttons and software.
Many consumers see Kodak’s digital cameras as being “cheaply” made. Some of the materials that they use in the design process could possibly be changed to have more appeal to the potential customers. They need to advertise more on television, and other types of media. I cannot even tell you when I saw the last advertisement for Kodak. Even though they have a very long history of promoting their products, they will need to continue advertising their products to remain in consumer’s minds when they go to purchase a product.
I think they need to spend more time on developing more control techniques. Possibly using surveys of potential digital camera buyers would help Kodak with what areas of their cameras to improve. I would also suggest that Kodak start spending more money in the research and development areas of the company. If they design products that appeal to the consumers that the competition has not yet thought of, it will give them an edge that can make them extremely profitable. Kodak could also start selling their cameras in bundle packages.
Lots of camera companies continue to sell the camera and the accessories separate. Consumers like the ease of having everything together in one package for one low price. Especially around holidays this would be a great marketing tool to increase sales of their products. In the future I believe that Kodak will still remain at the top in the areas of digital photography. They have been overcome many obstacles and as long as they can compete with the constant competition from previous designers and with companies that are entering the same market daily, they will survive.
Kodak Case Study Essay
2) Compare traditional photography to digital imaging. What are the main structual differences? How have value creation and value capture changed from traditional to digital photography? The main difference between traditional photography and digital imaging is that digital imaging doesn’t need physical films to take pictures and papers to see the pictures taken. This changed the customer experience of the whole process of enjoying pictures as below.
Traditional Photography Digital Photography. Eliminating of three processes, which were used to be necessary, buying films, visiting retailers, and waiting moved customers focus more to on cameras than films. Also as average digital camera price goes down, the sales increased promptly (Exhibit 11 and Exhibit 7, 8). For Kodak, before the digital cameras, the equipment (traditional camera) was just a tool to let people use their film and papers, especially for common family customers. However, as the value chain has changed, the company had to face competitions with not only traditional film makers, but also with camera manufacturers like Canon and Sony.
Even needed to compete or cooperate with high tech companies. Also, confronting the potential cannibalization within the company restrained Kodak from transformation to digital image business and made the situation worse for the company. In results, this digital imaging innovation has threatened the long-lasted hegemony of Kodak. Kodak 3) What is Kodak’s current position in digital imaging? Would Kodak’s position be different had the company adopted a different digital imaging strategy in the eighties and the nineties? Evaluate Kodak’s strategy starting in the mid-eighties.
Kodak still has biggest market share in the film market and the comparatively strong position in digital camera market, but it had some difficult time in the Photofinishing Market and has been loosing money in digital camera sales. Digital Camera: Kodak has about 13% market share of US digital camera market, which is the 2nd biggest. However the digital camera business is not making profit yet and expected to have very server competition among many other strong competitor, such as Sony, Cannon, HP, and Nikon(Exhibit 10).
Photofinishing Market: Due to previous contract, Kodak had difficulties to emerge to new strong channels such as Wal-Mart and Fuji has enjoyed the stronger position(60% M/S) in this market. Traditional Film Market: Kodak still has more than 30% of worldwide film market share(Exhibit 3) and maintained the number one position in Chinese market. But, the Fuji film came over the Kodak in terms of market share(Exhibit 3), and the entire film market is shrinking due to digital imaging. (Exhibit 12).
Kodak’s strategy in digital imaging from mid-eighties to mid-nineties was trying to shape the new market creating the “film-based digital imaging”. Even though they have invested in R&D and possessed patents for digital imaging technology, due to the huge profit from film business, management were retained to move on to new market and challenge. At the same time to avoid the cannibalization or to make something as profitable as color film, Kodak could not fully focus on digital formation and efficiently used its resources.
As it appears in the case, managements in Kodak certainly had no deep understandings in coming change through Internet(ex. People will pay to upload their pictures) and underestimated digital camera’s potential. In Kodak, digitalization was just “adding the flexibility offered by electronics. ” If Kodak focused more on the photography industry rather than diversification to different industries, such as pharmacy, it could have been used more dominant market position in the photography industry.
Also, the big mistake was too concerned about the cannibalization and satisfied with the profit of film business and too passive for innovation and adopting changes. Kodak should have used its strong R&D power and advanced technology for creating new ecology for digital imaging from capturing pictures(cameras) to Photofinishing. If so, it could have made the new standard in the digital market again and might be able to maintain its power. Kodak 4) What should Kodak do next? Kodak should reinforce the Photofinishing business, find a strategic partner or Digital Camera manufacturing, and expand to the home printing paper market. First, it should strengthen the Photofinishing business. Although it had difficulties in aggressively expanding its channels in Photofinishing market, but Kodak still has the biggest brand name in film and pretty big number of Photomaker kiosks and mini-lab stations. The share of pictures printed over pictures captured(Exhibit 14), however the retail portion of digital images printed market has rapid growth(CAGR 34%). This market is very familiar for Kodak and can expand without huge additional investment.
Second, Kodak should find a strategic partner for making more competitive digital camera. Appendix A explains about the competitors in digital camera business and most of them have long experience in camera manufacturing. Since Kodak didn’t focus on and succeed in the equipment business, it need to find a partner to address its weakness and prepare for the customers higher expectation in digital cameras as I mentioned in question 2. The capturing image criteria will be more important and Kodak will have difficulties to meet their needs even though they have no. market share currently using its brand name and already developed technology. Lastly, rapid growth of home image printing market will be another opportunity for Kodak since it has been enjoyed its privilege brand name in the paper category for long time. Strategic partnership with home printer makers such as Epson would secure soft landing in this market. Also Kodak branded special home printing papers for images will connect the memories of customers who have enjoyed the pictures on the Kodak papers.