Term Paper on Marketing Management

Submitted By: Saiful Islam Mollah

ID: 2011-1-95-062

Submitted To: Dr. Mizanur Rahman

Submission Date: 13-12-2012

History of Kodak

With the slogan "you press the button, we do the rest," George Eastman put the first simple camera into the hands of a world of consumers in 1888. Since that time, the Eastman Kodak Company has led the way with an abundance of new products and processes to make photography simpler, more useful and more enjoyable. In fact, today's Kodak is known not only for photography, but also for images used in a variety of leisure, commercial, entertainment and scientific applications. Its reach increasingly involves the use of technology to combine images and information--creating the potential to profoundly change how people and businesses communicate.

Just as Eastman had a goal to make photography "as convenient as the pencil," Kodak continues to expand the ways images touch people's daily lives. The company ranks as a premier multinational corporation, with a brand recognized in virtually every country around the world.

Key people of Kodak: Antonio M. Perez Chairman and CEO, Philip J. Faraci (President and COO)

Revenue US$ 6.02 billion Operating income US$ -600 million Net income US$ -764 million Total assets US$ 4.67 billion Total equity US$ -2.35 billion

Kodak business includes:

Printer-both industry and person Printing supplies Document image or information Film and television Aerial and industrial market Medical imaging (this was sold off).

Corporate Vision:

To be the World Leader in Imaging

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The Demise of Kodak: Five Reasons

1. Caught in Time

Kodak’s top management never fully grasped how the world around them was changing. They hung on to now obsolete assumptions about who took pictures, why and when.

Kodak always thought that people would never part with hard prints and that people valued film-based photos for their high quality. In other words, they saw digital as a direct substitute for film based photography. It was interesting to see how little this mindset had shifted even 20 years later. In the end, digital cameras came to dominate not because they offered higher quality or because everyone was able to or inclined to get a set of hard prints easily, but because they did not feel the need to.

2. Every Picture Tells a Story

With digital, a significant shift in mind-set occurred in the meanings associated with cameras. Rather than being identified as a piece of purely photographic equipment, digital cameras came to be seen as electronic gadgets.

The implications of this shift were enormous.

With digital devices, newcomers such as Sony were able to bypass one of Kodak’s massive strengths: its distribution network. Instead, digital cameras became available in electronic retail outlets next to other gadgets. Kodak was now playing on Sony’s and other entrants’ turf rather than its own. Similarly, Kodak’s brand came to be associated with traditional photography rather than digital.

3. Back to the Future

“Digital” disrupted Kodak’s neat equilibrium in yet another important way; women were no longer the main customers, men were.

With women giving way to men as primary users of cameras, Kodak—which excelled at marketing to women—lost its footing. With digital cameras, images could be viewed on the camera, phone or a PC without any need for hard prints.

For Kodak, the severing of the link between taking photographs and hardcopy prints was a serious concern. While men took lots of pictures, their role had never been that of family archivists (a role reserved for women). Hence they tended to take pictures that industry insiders called “transient”.

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Kodak was in uncharted territory and rather than accepting it as the new reality, it kept trying to recreate the photography universe of yesteryear, one based around sentimental images taken by women at family reunions and vacations.

4. The Camera Never Lies

Even when the writing was very much on the wall, Kodak’s attempts were at best half-hearted.

Unwilling to let go of the extremely lucrative (gross margins of nearly 70%) film business, it tried for many years to prolong the life of film through smaller cameras and digitally coded film and hybrid technologies such as Photo CD.

Its digital imaging division, locked up in its headquarters in Rochester, always appeared to be under pressure to create synergies between film and digital. But doing digital from Rochester was always going to be a challenge. The best example is Kodakgallery.com, Kodak’s attempt to generate revenue from digital images. The site was essentially a digital version of its analogue offerings. Digital’s potential was never fully realized at Kodak.

5. Over-Exposed

Kodak did not realize its own limitations, and consequently its strategy for revival never had much of a chance.

As articulated by the current chairman and CEO, Antonio Perez, it was: “To make Kodak do for photos what Apple does for music: help people to organize and manage their personal library of images. In an ideal world, consumers of the future will snap pictures on Kodak’s cameras, save them on its memory cards, put them on paper through its printers, and edit them on in-store digital kiosks.”

Trying to engulf the consumer in the Kodak universe was always unrealistic. Whereas a company like Apple could probably do it with its design and plug-and-play capabilities, Kodak could not and it died trying.

Lessons Learned

Kodak followed a template used by many incumbents facing technological challenges to their hegemony.

First, they try to ignore the new technology hoping it would go away by itself.

Then they deride it using various justifications (too expensive, too slow, too complicated etc). After that, they try to prolong the life of the existing technology by attempting to create synergies between the new technology and the old (like Photo CD). In doing so, they keep delaying any serious commitment to the new order of things.

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The truth is that when it was dabbling in digital versions of its analogue products, Kodak should have also invested in several start-ups based in Silicon Valley.

These Valley-based companies would not have been encumbered by Kodak’s legacy assets, its emotional attachment to the brand, and its product-based mentality. Led by twenty-something’s on shoestring budgets these startups would have been led by people who get digital. They would not have been hung up about brands, or current revenue sources. They would have been perfectly comfortable with the high mortality rate of digital business models. They would also have been at ease with empowering users and living with the unpredictability that it ushers in.

Finally, they would not have lived in a “photographic universe”, unlike the people in Rochester, and would have been much more willing to allow a convergence between pictures and activities such as social networking or gaming.

In short, Kodak needed to let the new generation of users and entrepreneurs take charge. It should have embraced uncertainty and be prepared to be driven in unforeseen directions—a far cry from how the company had spent its life.

The challenges Kodak faced were not unique.

The important things were to avoid the attachment and weight of legacy assets onto new ventures; refrain from prolonging the life of existing product lines while trying to create false synergies between the old and the new; and, most of all, to base strategy around users, rather than the existing business model.

Relaunch Kodak Products:

To relaunch KODAK products the company has to go through a long procedure. The hole procedure is explained below.

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External environment analysis:

A company’s external environment include all relevant factor and influences outside the company boundaries; by relevant ,means important enough to have a bearing on the decision the company ultimately makes about its direction, objective, strategy and business model.

External environment consists of five sectors: the macro environment sector, industry structure, strategic group mapping, competitor analysis, critical success factor.

The macro environment:

It’s consists of global, technology, economic, demographic, political/legal social-culture. We are going to discuss it

Demographic: Demographic elements are population growth rates, life span, age of population, geographic dispersion, people trend etc. People tastes are always changing .People are no longer interested to purchase traditional camera when the digital camera are introduce. People like a camera which photo can be share electronically, no longer need to print and easy to carry. This all is for change of people taste and trend to digital technology

Technology: The photography industry is based on technology. A rapid technology change makes the traditional film business obsolete. New product innovation and huge investment in research and development in digital photography area create a new edge.

Political /Legal: Government has a direct impact on the photography industry

Global: Kodak expand its business nearly every country around the world.

Economic: If income of people increases, people likes to spend much money buy this kind of products.

Socio-cultural: If women more are in workforce, the demand of photography equipment will increase because women and children are main consumer of this equipment.

Industry analysis:

An industry’s competitive environment tends to be attractive from a profit-making standpoint when

Rivalry is moderate Entry barriers are high and no firm is likely to enter few threat from substitutes product Suppliers and customers are in a weak bargaining position

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Competition and established rivals:

Photography industries face a fiercer competition. It’s a technology driven based industry. The main competitor of the industry are Kodak,Fuji,Sony,Hewlett-Packard(HP).The secondary competitor are Konica,Xerox,Olympus.All competitors always releasing new version of product and innovations. The price of the competitor is low. So the industry is not attractive at this way.

Potential new entrants:

Without the main competitor of Kodak like Canon,Fuji,Sony,HP etc and second level competitors, there are many opportunity for new entrance entering into this industry. LG and Panasonic are making inroads into digital camera market. New competitor can also enter in Kiosk, health imaging document imaging or printing supplies equipment areas.

Substitute products:

Mobile and internet becomes substitute product of traditional film. Mobile phone with inbuilt digital camera makes easy to capture a picture and share through internet. People are no longer need to print the photo.

The bargaining power of suppliers:

Kodak does not rely on suppliers .Its does everything in its house. It’s a strength of a Kodak, but also add cost to the value since supplier can make or supply product at a reduce cost with added quality.

The bargaining power of buyers:

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The major player in the industry –Kodak, Canon,Fuji,Sony,HP have strong positions from which they can bargain and obtain service for their products.

People buying capability increase for globalization and they can purchase any company product without considering price. Thirst for new technology can also ignore the price of the product.

Internal Analysis

Core CompetencyKodak’s core competencies are its large resource base and strong brand identity.

Its large resource base includes (i) its management team assembled from Kodak itself and from outside of traditional photography business: Lexmark, HP, and Olympus Optical, and (ii) its huge investment in R&D and the resulting innovations.

Kodak has a worldwide iconic status in the traditional photography market.

SWOT analysisSWOT represents the first letter in

S trengths

W eaknesses

O pportunities

T hreats

For a company’s strategy to be well-conceived, it must be

Matched to its resource strengths and weaknesses

Aimed at capturing its best market opportunities and defending against external threats to its well-being

Kodak Strengths

Kodak is Iconic Brand in the world. Strong brand image in cinematic film segment and in health imaging.

Kodak is Second in digital imaging. Strong distribution channel. Good management staff. Great detail of product features & uses.

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Kodak Weaknesses

Sales revenue are rapidly decrease EBIT are low to competitor Workforce has been cut. Unprofitable product No E-Commerce

Kodak Opportunity

Some technology can become obsolete even before marketing to market, e.g. Phoenix, a joint venture with Hewlett Packard.

The traditional market is mature and has begun to decline. Aggressive competition from traditional rivals and new entrants into the digital photography

market. Hewlett Packard is the incumbent market leader in consumer inkjet printers and, consequently, is

strongly motivated and well-resourced to defend its position.

Kodak Threats

Low profit earnings, reduce share price. If economic condition becomes downward, people do not attempt to purchase this type of

products. Traditional markets are no longer attractive Huge Price sensitive Fierce competition in digital photography market Mobile with camera inbuilt reduces the demand of digital camera.

Business strategy:

Business level strategy is a plan of action which focuses on the direct utilization of resources, strengths and core competencies in the search of competitive advantage over rivals in a particular industry.

The Generic Business Strategy:

Cost leadership: being the lowest cost producer/suppliers in the industry.

Differentiation: the consumer perception of uniqueness in the product and service.

Focus: Finding a market segment and concentrate activities there.

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Kodak follows the Cost leadership strategy but they became failure because they could not sell their products.

Corporate level strategy: Corporate level strategy is an action taken to gain a competitive advantage through the selection and management of a mix of business of business completing in several industry or product market.

Kodak have had adopt strategic partnership with Motorola to supply digital cameras for that organization mobile phones.

Another one is Kodak follow the related diversification on their product. Also acquire many companies that are strategic aligned like Encad and Olympus to improve its strategic position.

Recommendation

Discontinue unprofitable products Investing in selective industries Improvements in products and services Brand name recognition in digital industry Innovation Improves communication and commerce Focus on high potential products Emphasize on niche market i.e. medical market and professional photography

Sources: google.com, http://articles.marketwatch.com/2012-01-05/industries/30780163_1_eastman-kodak-digital-imaging-digital-patents

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