Situation Analysis

A. Internal Environment

Review of Marketing Goals and Objectives

Although proclaiming itself as the world’s foremost imaging innovator, Eastman Kodak

has attempted to adapt its marketing strategy to the growing demands of digital technology. The

firm is divided into three separate segments, each with its own marketing goals and objectives.

The Consumer Digital Imaging Group (CDIG) segment’s mission is to enhance people’s lives

and social interactions through digital imaging and printing technology with the objective to

drive profitable revenue growth by leveraging a powerful brand, a deep knowledge of

consumers, and extensive digital imaging & materials science intellectual properties [1]. The

Graphic Communications Group (GCG) segment offers innovative, powerful solutions that

entice production efficiency, open new revenue opportunities, and improve return on marketing

investment (ROMI). Kodak has developed a wide-ranging portfolio of digital products,

workflow, equipment, media & services to create value-added complete solutions. The final

segment, the Film, Photofinishing, and Entertainment Group (FPEG) has an objective to provide

sustainable cash generation by exceeding materials science assets in traditional & new markets.

Providing support for the company’s marketing objectives, CEO Antonio Perez has set

the goal to end the year with at least $1.6 billion in cash [2]. Perez also forecasted consumer

printer sales will break even in 2011. With the need for digital growth, the company has a goal to

double revenue in the digital business by 2013. Facing intense competition in the digital camera

industry, the company created a digital strategy that is centered on exploiting competitive

advantage at the intersection of materials science and digital imaging science [3].

With a vision to be the “World Leader of Imaging” Kodak faces strong challenges to

fulfill its primary goals to increase revenue from digital growth initiatives and drive positive cash

generation (net cash) [1]. The aforementioned objectives bring attention to key components of

the company’s mission statement including: “building a results-oriented culture” as shown in its

revenue growth initiatives, “bring[ing] differentiated cost-effective solutions” demonstrated in its

aim to sustain cash generation by utilizing its assets in new & traditional markets, and displaying

“world-class talent and skills” as shown in its employees’ abilities to communicate solutions [4].

Each of Kodak’s three segments has a specific strategy to ensure company goals are

achieved. The Consumer Digital Imaging Group heavily emphasizes customer contact with in-

store presentations, aggressive social media, CRM and PR techniques. Social media is one of the

areas where Kodak has excelled as an early adapter, involving its customers in the naming of

some of its products and providing an interactive environment with valuable content.

Specifically, Kodak has had great success with some of its corporate blogs, receiving acclaim for

its “A Thousand Words” blog which features content about the “soul” of Kodak [5]. Another one

of its segments, the Graphics Communications Group, focuses on reaching direct & indirect

channels, including but not limited to: creative, data center, packaging, and newspaper segments.

This group specifically communicates how Kodak products are superior to competitors in

technology, solutions, and price. The third segment, FPEG, emphasizes the quality and

availability of traditional photofinishing & film offerings, looking for ways to combat alternative

digital entertainment and foreign companies that have taken away market share.

Review of Current Marketing Strategy and Performance

Kodak has experienced successes and failures in the various aspects of its marketing mix.

With respect to product, Kodak, the company that originally invented the digital camera but did

not choose to produce it for years, is now trying to gain market share in the very competitive

digital camera market. The company is implementing actions to provide multifunction products

that create solutions. For example, its line of HERO all-in-one printers demonstrates one product

from Kodak’s portfolio of tools that creates these value-added solutions. With a new business

model developed in the last five years, Kodak’s product element is a work-in-progress, and its

value will take time to measure under the current company strategies.

One of Kodak’s strengths is its distribution. Kodak provides convenient access to its

products for both consumers and commercial businesses through online channels including the

company website and social media outlets. These outlets successfully reach the varied segments

Kodak pursues. The company sustains its relationships with suppliers and vendors including US

Government agencies, small-business startups, and universities. Kodak products are already sold

by the largest, carrier-of-top-brand, retailers in the world, such as Best Buy and Wal-Mart. One

of Kodak’s aims is global expansion, specifically in the Chinese, Indian, and Southeast Asian

regions, which have projected growth in consumer electronics expenditures greater than 8% and

up to 18% in India [7].

In a product category that is the primary focus for Kodak in their marketing objectives,

ink jet printing, the firm emphasizes its low-cost pricing strategy. With a belief that consumers

will save money long-term because Kodak provides the cheapest ink, the company has the ability

to charge more up front for its printers. Even by cutting prices last year, its unit cost per printer

was on average 14% higher than HP’s machines [6]. With printing as the future of the

organization, the company’s marketing strategy in relation to price appears to be risky, but is

backed by research that states the consumers’ largest dissatisfaction with printers is the cost of

the ink.

The Kodak brand has strong equity throughout the world, which has aided a variety of

successful advertising campaigns and promotions. Within its Consumer Digital Imaging Group,

the company is targeting younger consumers ages 18-34, emphasizing urban areas. To reach out

to this age group, Kodak uses what Vice President of Brand Communications, Leslie Dance,

refers to as a powerful “media cocktail” [8]. Says Dance, “We let each consumer tell us which

ingredients to use. And then we add our own twist to make the cocktail memorable. In other

words, we need to go beyond reaching our consumers. We need to engage them.” In its “So

Kodak” campaign for the EasyShare line of digital cameras, the company successfully engages

its target market with the use of hip-hop artists Drake, Pitbull, and Trey Songs, who combined

have over ten million Facebook followers, bringing great appeal to this market [9]. The

campaign effectively integrates email, print, online, social media, and radio in key urban markets

to create personal marketing programs for its consumers [8].

The other segment where promotional efforts have been effective is the Graphic

Communications Groups. A recent effort from 2009, “It’s Time for You and Kodak,” centers on

the brand as the focal point, instead of products, to reach the commercial market. The campaign

emphasizes Kodak as “solution-centric” with the tagline “The perfect connection takes more than

technology” [10]. Like the “So Kodak” campaign, this campaign also utilizes the company’s

social media strengths and provides an interactive experience for its B2B suppliers and

customers to visualize the benefits Kodak offers its commercial partners through its products

used in everyday life. This is demonstrated in the airport situation of the advertisements. To

promote this campaign, Kodak utilized its blog, twitter, and online testimonials among other

means to spread the word.

With Kodak entering the digital market later than the competition, but still holding a

well-known brand name, the company currently produces mixed performance results. This year

revenue from sales of consumer ink jet printers and ink grew by 48% in the second quarter. On

the other hand, losses in the commercial group swelled to $45 million from $17 million a year

earlier, due to unanticipated costs of adapting technology to customers’ environments [2]. The

business has increased its share in consumer printers to 5% from 3.5% last year, but still ranks

fifth, behind HP, Cannon, Epson Seiko, and Brother International [6]. In relation, PC World

ranked Kodak’s ESP 9250 Printer number nine on its list of Top Ten Ink Jet Multifunction

Printer. Consumers prefer competitors’ printers over Kodak because they are faster and created

with better quality.

Kodak’s performance will ultimately be determined by its fourth quarter results with the

company usually generating the bulk of its revenue leading up to the holiday season. Revenue in

the line of inkjet printers grew 13% combined, but the company is quickly losing money in the

consumer digital-imaging group. In this group sales tumbled 38 percent to $408 million [27].

This poor performance is a reflection of Kodak’s shift to pricier camera models. There is a

greater preference for smartphones and video cameras, and the public correctly perceives the

brands of these devices to have a competitive advantage over Kodak.

As a whole, U.S. based Copier & Optical Machinery Manufacturing, which is Kodak’s

primary NAICS classification, is expected to experience slight growth over the next five years.

The risk of the industry is medium-low with the overall demand expected to increase at a slow

rate. Also, multifunction devices have cut away from the profit of standalone copies. Kodak must

find additional strategies to overcome the digital disadvantage it has with the majority of its film

products reaching maturity.

Review of Current and Anticipated Organizational Resources

The largest issue Kodak faces is its lack of cash reserves. The company continues to lose

consumer confidence as cash dwindles, which has affected all of its operations. At the end of the

second quarter, the company had $957 million in cash reserves, which still falls significantly

short of its goal to end the year with at least $1.6 billion in cash. As of the end of the third

quarter, the company has lost an additional 10% of its cash reserves, posting a $222 million loss

for the year thus far [28]. The company does not appear to be turning around its debt any time

soon, expecting to pay off $50 million in debt due this year and another $350 million by 2013

[11]. To combat this lack of cash, CEO Perez has put up 1,100 of the company’s patents on the

trading block with potential to generate as much as $3 billion in revenue [6]. As of November

2011, Kodak has yet to make a sale of its patents, which must range in the billions because the

clock is ticking for the company to avoid bankruptcy. The company is looking to raise $500

million in debt as a short-term alternative. Kodak, which generated $1.9 billion in licensing its

patents from 2008-2010, has recently reached a licensing deal with IMAX for $50 million, but

this in no way resolves its cash crisis [29]. Patents continue to be Kodak’s greatest resource with

over 11,000 registered company patents. The company is also looking to gain $1 billion from a

pending lawsuit against Research in Motion and Apple Inc.

As a result of its struggles to produce a profit, Kodak has cut back its workforce

significantly in the past decade. In 2004 Kodak employed 16,300 workers in Rochester, New

York alone and 54,800 employees worldwide. Now those numbers have shrunk to 7,100 in its

Rochester headquarters and 18,800 employees worldwide [2]. Kodak must leverage its

innovative resources to find unique market opportunities with new technologies to create more

job opportunities within the company instead of reducing the company’s workforce. The outlook

is not positive for turning around these numbers with the company’s current situation in the near

future.

Even with a large network of suppliers, Kodak’s commercial printing business has stalled

even more than its consumer ink jet printing due to a lack of demand. The company is trying to

increase business for its room-size machines that can print thousands of pages per minute, but

only has a few dozen interested customers for these machines that must be built by hand. The

company needs to utilize its strong network to reach out to more potential customers who have

large printing needs such as publishers and marketers. As the company continues to show

negative financial results, more businesses are wary to create long-term relationships with

Kodak. Perez says most commercial printers still use old-fashioned gear and will have to go

digital in coming years, but relying on the future, instead of the known present, with a primary

focus on digital products may jeopardize the existence of Kodak’s current structure and

negatively affect the opinions of its stakeholders [6].

Kodak has always excelled at being a very innovative company on the cutting edge of

developing many new competitive products. However, it seems Kodak does not always manage

to capitalize on its own ideas as well as some of their competitors. Even though Kodak has won

countless awards for innovation with a host of new products, they have also continued to lose

money over the last few years. Kodak has been pushed up against the wall and they are desperate

at this point.

However dire things might look for the future of Kodak from a financial aspect, the

company certainly still leads the way in the industry by developing many new products each

year. For instance, this year Kodak has developed and released a smartphone app, which allows

consumers to print photos directly from their phone [15]. This same software also enables

customers to send photos wirelessly to a Kodak Digital Picture Frame, another innovation of

Kodak from the last 10 years. Also, Kodak is now implementing a new line of Google Cloud

print-ready printers that will enable customers to print documents or photos from anywhere in

the world directly to their home printers [16]. Kodak has not been limited to only developing

technologies for the private sector though, because employees also developed the technology that

is being used by NASA to capture images of Jupiter with a spacecraft that was launched for the

purposes of exploration and the charting of said planet [17]. These are all technologies Kodak

had before any other company, but these innovations do not seem to directly result in any more

revenue for Kodak.

While Kodak has not seen a significant rise in revenue from its latest efforts in the

research and development field, Kodak still continues to offer a wide selection of photo and

image related products to assist customers in capturing their memories. Kodak’s problem does

not seem to lie in research or development, because they have certainly been ahead of the

competition and an industry leader in this field for a long time. Instead, the area in which Kodak

appears to struggle is finding a way to market their products to their consumers, whereas their

competitors are doing this effectively.

Review of Current and Anticipated Cultural and Structural Issues

Kodak has a very isolated corporate culture which causes a variety of problems. Many

employees believe there are too many mid-level managers and have concerns about the vision of

upper management. In fact, according to Glassdoor.com CEO Antonio Perez has a 32% approval

rating from employees. One of the contributors to this lower rating is the constant downsizing the

company has experienced as well as Perez’s decisions to put former HP employees in

management positions at Kodak, using connections from his career at HP. Kodak is backed by

ambitious employees with new ideas, but a lack of opportunity for growth has lowered these

employees’ morale and determination to succeed. Internally employees are as worried if not

more worried about the future direction of the company as its external stakeholders. With regards

to its long-term objectives, many employees feel the company should focus on its critical

elements and cut those items that do not have a foreseeable bright future.

The positive aspects of the current culture come from its openness to minorities and

women as well as being named one of the Best Places to Work for LGBT Equality by the Human

Rights Campaign [12]. Generally employees enjoy working with their co-workers in an

environment that is very accommodating and as one employee put “40 hours means 40 hours.”

The marketing function itself has been a positive and effective aspect of the current culture, but

the issue is with the product and solutions being marketed, not the effectiveness of the marketing

itself.

The firm’s current structure is not fully supportive of the current market strategy. There

has been slight improvement, as the focus is not to cut costs as much as it is to expand

production to reach new markets, thereby increasing profits. The company emphasizes providing

innovative solutions, but has yet to provide an outstanding new technology in the digital market,

and the demand for its products are not as great as the demand for its competitors’ offerings.

Often projects are judged by their completion with many projects cut short when they should be

judged by their effectiveness and added value to the organization. Kodak is a company that is

reputable for its past successes but needs to use its current resources effectively to create future

successes.

With regards to the resources available to Kodak, the company has success with

intellectual resources. Unfortunately, with its current cash flow situation, the company has

decided to curb funding new ventures at a point it definitely needs to continue its culture of

innovation. The company’s legal status is up in the air right now with the possibility to gain a

much needed billion dollars as a result of a lawsuit with Research in Motion and Apple that will

reconvene December 30th. Kodak’s secondary strength is its reputation. The Kodak brand has

been very strong and thus holds value in the minds of the company’s target market with a very

recognizable symbol, but that reputation has been tarnished by the changing needs of this market

that Kodak has not been able to accommodate in the 21st century. Kodak has excellent relational

resources with a variety of distributors and partners in many different industries. As a result the

company has been able to grow its inkjet commercial printer business. The challenge remains for

Kodak to produce first, a competitive advantage and second, sustain that advantage.