1

Kodak Eastman Case Study

 2

Introduction:

This report is focused on Eastman Kodak Company, which is an America based

multinational company, and works in printing and picture and. The organization mainly

functions in three main divisions: Consumer Digital Imaging Group (CDG), Graphic

Communications Group (GCG), and Film, Photofinishing and Entertainment Group

(FPEG). The company was best known for its photographic film merchandises and once retained

a dominant position in this sector (Eastman Kodak Company, 2012). However, is facing number

of litigation, lawsuits by courts and bankruptcy. The company layoff around 3,500 to 4,500 jobs,

as a result, of losses in its digital and photography products (Acker, 2012).

It is considerable that technology has come out as the key innovation, which Kodak

has generated over the period of time, however futile to fruitfully commercialize it. The most

well-known technology created by the company is digital camera, developed by Steven Sasson,

who was an engineer in Kodak. Since the year 2003, Kodak has winded up its 13 production

factories along with 130 processing laboratories, as well as also reduced its labor force by

47,000. Thus, the company now employs merely 17,000 workforces worldwide, as compared

to 63,900, which is less than a decade before. It is notable that when novel and advanced

technologies were revolutionizing the globe some companies fixed off-guard while other

adapted and companies like Kodak can saw the future, but were not able to do anything

(Knowledge@Wharton, 2012).

Adaptation to technological change was a challenge for Kodak as entrenched leadership

in the company found it tricky to shatter old processes that once fetched success. The history of

Kodak makes it clear that innovation is not only enough, but companies must also espouse on a

strong to become accustomed with changing times as without an effective strategy a company
 3

can even when it innovates. Therefore, the success of the company reversed because the

company was in fear that commencing novel technologies would disturb its film business, and

consequently did not adapted to change (Knowledge@Wharton, 2012).

Issues Associated with Kodak’s Approach to Innovation:

It is notable that the conventional photography industry was set near Kodak, which

was dominating the market, manufacturing cameras and delivering them at cost effective

range. Kodak used to make profit by selling film and provisions required for the purpose of

generating and printing images. The company has a good strength of its brand name in the

market that helps and drives the company to create huge investments in R&D. Kodak was a long

time leader in the market (until the arrival of Fuji) and was capable of pouring revenues into

Research & Development which assured the supremacy of the company in the industry (The

Economist, 2012). Other companies in the industry were tentative to compete with Kodak, which

was a successful and market controlling company. The huge profits fetched by the film sales to

retailers assisted in ensuring that the company subjugated shelf room in shops, and made it

more difficult for competitor to access the market. At that time, majority of the film creation

was happening in autonomous drug stores, kiosks, and specialist companies; everyone

utilizing the products provided by Kodak. However, digital imaging is very much dissimilar

from traditional photography as no company was dominating the market and it was also

competitive for Kodak as the company faced losses while selling digital cameras (Lucas and

Goh, 2009).

Traditionally, Kodak produced its individual cameras, but digital cameras are

capable of utilizing technology from diverse companies and the production is recurrently

contracted out to China for lowering expenses. Digital imaging is different from traditional
 4

photography as digital images are possible to print out at home, can be utilized at a lab and

drug store, send by email to a particular company, or can be used at Wal-Mart photo lab. These

images also do not require print as they can be saved in a computer or can be displayed via

internet.

Value creation and value appropriation altered considerably in digital photography as

compared to traditional photography as with the largely cutthroat marketplaces for cameras as

well as a highly interchangeable printing area, the value generation reclines with consumers.

Customers probably purchase a Kodak camera just like they are purchasing a camera with no

name, one which has the same characteristics and also comes at a lower cost. Now, brand

devotion and leadership does not exist in the market and customers buy products which comply

with their needs. In relation to printing images also value is with consumers as they do not who

produced the machine for printing, they look for lower price and expediency otherwise will print

photo somewhere else (Tripsas and Gavetti, 2000).

Even though, Kodak has a bright prospect to do well in the digital imaging industry,

but now it is going to be immensely troublesome. Kodak is required to set up а team, which

is formed from the management personnel of the company, and at the same time, its digital

photography experts who are able to incessantly fabricate and manufacture money-making

digital cameras and other associated products that comply with consumer requirements. It is

necessary that the team of Kodak should all the time look for the requirements of consumers.

In relation to its declining sales, Kodak has to generate lucrative plus cost effective strategies

(Schilling, 2010). Instead of satisfying the requirements of its entire target markets, the

company should keep its concentration primarily on its most significant digital industry.

Further, when the digital market becomes steady, Kodak can later on progress to the
 5

subsequent market and by performing in this manner, the force of considered failure can be

abridged. The company should at first focus its strategy on sales creation and market

establishment. This is due to the fact that Kodak requires the resources in abundant

quantity for the purpose enlarging further. With the intention of improving the prosperity

of its digital products sales, the company is required to branch out its product portfolio and

its formulated team must continuously look for ideas that are dissimilar from its rivals.

Kodak should also keep on lessening its reliance on conventional cameras and emphasize its

foremost funds on digital products generation and endorsement (Gavetti, Henderson and

Giorgi, 2005).

Challenges and Opportunities faced by the Organization over Time and the

Way it Managed:

Kodak alleged patent violation complaints in opposition to Apple and Research in

Motion (RIM), putting allegations that BlackBerry and iPhone products are violating on the

company’s digital imaging know-how. The inventers of the company gained 19,576 U.S.

exclusive rights from the year 1900 to 1999, and the organization also had a compilation of

more than 1,000 exclusive rights in merely digital imaging, which now Kodak is hoping to

put up for sale being a component of its reorganization. The legacy of the company moves far

from its patents and capital equipment (The Economist, 2012). However, the company could

have shunned such demised fortune if it would have defectively utilized its wealth, which

Kodak gained throughout its bright period to penetrate into the technologies it was not

possessing.

Even though the company made several acquisitions over the period, but majority of

them was "bit players" and not allowed Kodak getting a lead. The key dilemma was that the
 6

company had generated a great deal of sluggishness and wasn’t able to act in response

speedily. Apart from dragging foot in the digital market, the company also becomes distended

when it was at the peak of success, and did not recognize the way to scale back in the past

decade (Neate, 2012). Moreover, it was also not apparent that Kodak desired to become a

services corporation or a products corporation or a customer or B2B corporation. Hence,

the shortage of a comprehensible approach for digital products and along with this

functioning in manifold areas directed it to its present condition (Johnson, 2012).

When Kodak suffered considerably because of its futile decisions, its enduring

competitor Fujifilm performed considerably sound. Both the companies have a lot of common

things and the two companies had worthwhile near-monopolies in their domestic marketplaces;

Kodak operating in the USA, and Fujifilm in Japan. Fujifilm and Kodak also observed their

conventional business becoming outdated, but on one hand, Kodak has until now futile to

become accustomed, Fujifilm has altered itself into a firmly profitable company (Johnson, 2012).

Kodak’s weaknesses were its culture, slow movement to change, mentality of its

executives to make ideal or just the right offerings, rather than a ultra-modern approach of

manufacturing it, initiating it, setting it up, and bad luck was also there as its pharmaceutical

processed sizzled. In contrast, Fujifilm diversified well, the company initiated a range of

cosmetics, sought novel outlets for its proficiency in film (The Economist, 2012).

Fisher’s Attempt to Transform Kodak and Reason of Failure:

The initial attempt of Fisher at Kodak, separating from the unconnected companies

was a constructive initiation as it allowed the company to concentrate on its central dealing of

imaging and this was actually what the organization required. Consequent endeavors of

Fisher were also constructive, but he failed to change the key aspect of the company, which was
 7

required for him to succeed i.e. is the culture. Its competitor Motorola successfully changed its

culture that prompted conversation and argument, probably reviving the company. The

insiders of Kodak defended against the attempts of Fisher to reorganize the organization. It

is notable that Fisher capable alter the culture of Kodak from the top, however failed to

transform the culture at the middle leveled and managers at this level did not comprehend

the idea (digital) due to which Fisher was attempting to change Kodak into (Gavetti, Henderson

and Giorgi, 2005).

In 1998 with Fisher’s about face for the purpose of changing into a network and

consumables on the basis of business model he stated that his previous arrangement was a

breakdown. As a substitute, Fisher realized that the company should tender services for

which consumers are ready to pay, and should focus on associates who would generate

majority of the hardware, which Kodak required. This about face may have facilitated the

company to be trapped off guard by Fujifilm, when it declined prices in the year 1998 in an

effort to grab hold of the market share. This resulted into a considerable decrease in the

market share of Kodak in film that sustained near the beginning of 2000s. Fisher was not

able to act in response directed by enormous job decreases of 20% of payroll in the year 1999

and also a new CEO in the year 2000.

Therefore, it is not easy to mention in retrospection if one of the attempt of Fisher to

modify the corporation was superior to the other one, nevertheless the weakness of Fisher to

transform the culture of the company did not facilitated him to gather the assistance of the

managers at the middle level of the company. The malfunction Fisher to make over Kodak’s

culture can be the cause due to which he was not able to change the organization into the

vivacious corporation, which it used to be at one time. Fisher endeavored one more
 8

Motorola, where the executives could debate thoughts openly, but at Kodak executives

clearly performed what they were asked to do from their superiors (Gavetti, Henderson and

Giorgi, 2005).

Kodak’s Current Position in Digital Imaging:

The digital epoch forced Kodak to react quickly, but the company seemed to drop focus.

It has restructuring attempts and appointed CEO after CEO and with this much interruption and

change, it become complicated to execute a long-term and successful strategy. Kodak was in a

position that if it had performed in a different way and acquired the supremacy in digital

imaging, it would have been the leader in the market, if it has espoused on a dissimilar digital

imaging approach in the 1980s and 1990s. After years of dominance, the company is now

giving out the industry; dropping workforce, and required the preeminence, which it used to

enjoy a long time ago (Knowledge@Wharton, 2012).

In 1983, Kodak departed on an acquisition extravaganza, including Sterling Drug; and

did not realize that its main business was film and this charged the corporation a great deal of

wealth, liabilities, goodwill, and stockholder’s equity. If Kodak had transferred the money to

its core business, the situation would have been different. The company explored digital imaging,

but tried to merge it with conventional business and its idea of pursuing film based digital

imaging also failed. Carp and Fisher implemented their own strategies trying to make the

company profitable but all in vain. Kodak’s strategies have turned out ineffective and

consequently it is having a tough time in digital imaging business (Lucas and Goh, 2009).

Recommendations:

 Kodak should streamline its business operations while moving forward. The company is

in a lot of lines of business, and thus, it is required to articulate an unambiguous

 9

strategy and discover that whether it should concentrate on the customer segment or

business segment and which particular subdivisions within that fragment (McQuivey,

2013).

 The company should concentrate on refocusing its business and adapting to the changing

business technologies. The company should put an end to its unprofitable products and

specialize in one value chain only (Johnson, 2012).

 It is suggested that the company should espouse on the Business Process Re-

engineering and organizations learning strategy, for improving its efficiency and

simplifying the firm. It should incarcerate novel business models and balance customers

needs and economic value in a better manner (McQuivey, 2013).

 It is also recommended for the company to execute vertical integration strategy. With the

help of vertical integration strategy, the company can expand its business by acquisition

of other firms, which would help it to supply raw materials timely, minimize operating

cost and increase productivity. With the help of vertical integration strategy, company

can invest in R&D and innovations. It can be helpful for the company for product

development for the customers and introduce new technological products and services to

the customers (Pearce, Robinson and Mital, 2010)..

 Since, Kodak is aiming at the beginner photographer section; it is significant that the

products of the company should integrate easy-to-use features and mechanical

attributes that provide greater quality pictures. Kodak’s digital cameras are though

competing appropriately on a variety of utilities delivered, but do not actually makes a

distinction. The similar suits for the printer groupings with criticisms of multifaceted

interfaces, burdensome loader trays, as well as a shortage of built-in arrangement

 10

potentials. Kodak is required to search for simplifying its offerings crossways its

entire product lines (Johnson, 2012).

Conclusion:

To conclude, it can be mentioned that Kodak which once had the supremacy in the

photography and film business it now going through a depressing phasing. This is because the

company failed to adapt to market changes and did not responded in an effective and quick

manner. The number of ineffective decisions and strategies made by the company resulted to its

demise, in the industry and success of its competitors. In this context, the report brings out a

considerable discussion and recommendations for the company in order to maintain its

competitive position in future and earn its lost fame.

 11

References:

Acker, D. 2012. Recent company layoffs – Kodak. [Online]. Available at:

http://www.latimes.com/business/la-fi-layoffs-ke7clcnc,0,5106196.photo [Accessed on:
29 December 2014].

Gavetti, G., Henderson, R. and Giorgi, S. 2005. Kodak and the Digital Revolution (A). Harvard
Business School.

Johnson, D. 2012. Why Kodak failed and how to avoid the same fate. [Online]. Available at:
http://www.cbsnews.com/8301-505143_162-57363629/why-kodak-failed-and-how-to-
avoid-the-same-fate/ [Accessed on: 29 December 2014].

Knowledge@Wharton. 2012. What’s Wrong with This Picture: Kodak’s 30-year Slide into
Bankruptcy. [Online]. Available at: http://knowledge.wharton.upenn.edu/article/whats-
wrong-with-this-picture-kodaks-30-year-slide-into-bankruptcy/ [Accessed on: 29
December 2014].

Lucas, H.C. and Goh, J.M. 2009. Disruptive technology: How Kodak missed the digital
photography revolution. Journal of Strategic Information Systems, 18, pp. 46–55.

McQuivey, J. 2013. Digital disruption: Unleashing the next wave of innovation. Las Vegas, NV:
Amazon Publishing.

Neate, R. 2012. Kodak falls in the 'creative destruction of the digital age'. [Online]. Available at:
http://www.theguardian.com/business/2012/jan/19/kodak-bankruptcy-protection
[Accessed on: 29 December 2014].

Pearce, J.A., Robinson, R.B. and Mital, A. 2010. Strategic Management, McGraw-Hill
Professional.

Schilling, M. A. 2010. Strategic Management of Technological Innovation. McGraw-Hill Irwin,

2010.

The Economist. 2012. The last Kodak moment? The Economist [Online]. Available from:
http://www.economist.com/node/21542796 [Accessed on: 29 December 2014].

Tripsas, M. and Gavetti, G. 2000. Capabilities, cognition, and inertia: evidence from digital
imaging. Strategic Management Journal, 21, pp. 1147–1161.