Kodak Company

Additional

Objectives

            The research aims to determine the effects of the introduction of digital photography on Kodak Company. The study would analyze the changes in the marketing and managing strategies of the leading company in order to survive the competition in the industry of photography.

 LITERATURE REVIEW

Secondary Research

            It was in 1839 when the photographic industry was introduced in the United States by the French and it was in the year 1880 that Eastman invented and patented a machine to mass produce the dry plate needed before taking a photograph. (1998)  By 1884, roll film was introduced in the industry expanding the demand for photography and it was in 1888 that the name “Kodak” was born (1998) Since then, the growth in the imaging industry also indicates the growth in all of the products of Kodak, including films, cameras, photoprocessing, chemicals, equipment, projectors, photocopiers and other viewing devices. (1998)

            After decades of dominating the photographic industry, Kodak is now sharing its market to two other major companies, Agfa-Gevaert, from the Bayer group in Germany, and Fuji Photo Film, from Japan. (1991) Although Kodak still holds its leading position in worldwide distribution, each of these companies is strongest in its home region and Kodak still owns half of the European film market. (1991) Kodak is able to establish its good reputation by producing high-quality products, which enabled it to survive bankruptcy from 1890s to the 1900s. (1998)

            Aside from quality control, other key areas of the strategies of Kodak, includes “distribution, advertising, research and development (), cost strategies, system selling, planned obsolescence of products, pricing, and patents”. (1998) The distribution strategy includes selling to non-traditional outlets such as drugstores and hardware stores and overseas distribution. (1998) Advertising is a key competitive strategy of Kodak. They focused on creating icons which would symbolize their product that would stand in time, like the “Kodak girl” changing the model of her camera every year and the yellow trade dress. (1998)  The original R & D department was composed of Eastman himself. But through the years, Eastman hired full-time research scientists. It is in this department that the high-quality products of Kodak originated. Kodak also developed partnerships outside the firm for R & D, with Edison for the motion picture camera and the US government for aerial cameras. 

Because of detailed advertising and R & D strategies, Kodak was able to produce its products at the lowest possible price to the consumers. The systems-selling approach was focused on a variety of interconnected markets, like cameras, films compatible only to Kodak cameras that enabled the company to create a monopolistic market for film to make profits. (1998)

Kodak has also committed several mistakes in its strategy. The first one is allowing Fuji to have leverage in the market in Japan. ( 1991) The infringement case on photographic patents of Polaroid against Kodak forced the company to move out of instant photo market and cost them 3% of their sales and the cost of litigation. (1991) The company also has to reduce its employees because of the higher sales per employee of its competitor, Agfa.

Among the criticisms to Kodak is its incompetence in addressing issues and problems in the industry. (1991) It does not pay attention to foreign competitors and is not aggressive in developing new products, (1991) Kodak has been negligent in following its market share, which might have cost them their market share in Japan where no senior manager was assigned until 1984. (1991) The case with Polaroid almost cost Kodak its well-established reputation, aside form the management time and effort and the cost of the litigation. (1991) Kodak’s acquisition of Sterling Drug also cost the company a lot of money, in debt, unamortized goodwill and stockholder’s equity. The reduction of employees and management reorganization has lowered the morale of the employees without any signs of improvement and progress. (1991) These mistakes are indicative that serious changes have to be done in the company to maintain its dominance in the photographic industry. (1991)

SWOT Analysis

Strengths

Kodak is known for delivering high-quality products to its customer, which allowed it to earn its reputation. It is able to manipulate the average people in using technical gadget like their cameras. Kodak serves a wide range of customers by its distribution strategy of catering not only to those interested in photography but they can also attract ordinary customers by their promotional campaigns and rewards. Like occasional offerings to loyal customers and holiday give-away, like giving out cameras to mothers on Mother’s Day and such. It also has a well-established product, film, which lead to the use of simplistic cameras as a consequence.

Weaknesses

Although film is a mature product, it has a relative growth, even if it generates profit for Kodak. Kodak has also been lax in watching out for the micro and macro environment products that can affect the company and its profits. The company also misjudged the rapid technological development that could have easily outdated its products. And it is also because of this miscalculation that Kodak failed to consider the threat brought b the new entrant into the industry and substitutes in the film market. Kodak may have the largest market in its home region, and almost half in Europe, but it has a relatively weak name in Asia.

Opportunities

In its mature stage, the film industry is already a well-established industry with mass market. The competition among the resident firms, including Kodak, has already been defined and there exist a good competition among them. The suppliers and the buyers are relatively weak to control the market forces of the industry. It is still the producers that dictate the price and competition in the film industry. With all these, the threat of new entrants is weak. Kodak can still stand ahead of other when it comes to the film industry. In addition, it has also been able to branch out to imaging, aside from photography and its products. It has developed partnerships both in government and non-government agencies in expanding the range of services it provide.  Advertising now is not only limited to the “Kodak girl” and the yellow trade dress. There is now the internet which more people have access.

Threat

The strongest threat that van be considered for the film industry is the rapidly growing market segment of the digital substitutes. And although internet is a good channel for promoting the company and its services and products, it is also a source of threat for Kodak. The rapid development of technology and the expansion of the internet might cause the film photography to become obsolete and be phase out from the market. And with the proliferation of cellular phones and the personal digital assistants (PDAs), is the decline of the traditional method of photography.

Marketing Strategies

            The initial dominant position of Kodak in photographic industry is mainly through patents and improvements on high-quality products in three markets, cameras, films, and photofinishing, with film as the core market. (1998) It also increased demand by having a wider distribution in different retail outlets aside from photographic stores, low prices and “product differentiation through advertising and unique packaging”. (1998)

            To maintain its dominance, Kodak improved on its R & D to reduce the costs of and expenses of the company without lowering the quality of the products. The company also bought “a number of new film and camera technologies. It also made several advances in photo-finishing”. (1998) Kodak established partnerships and tie-ups in order to maintain its dominance in the important markets, like photography. The system selling approach allowed Kodak to introduce new film in a new camera.

As the leading company in the film industry, Kodak has a system for the film market. The “make-sell-profit” system has worked for the film market of the company. This begins with acquiring all the necessary inputs, like the raw materials and the machines in order to produce the product. After the price is determined, it will be sent to the market, where there have been promotions and advertisements and they are distributed to the consumers. The profit shall be based on the volume of sales of the product.

The marketing strategy for the film industry is focused on the price, place and promotion and it has proven to be suitable for the mature industry of film. Price lowering, distribution to non-traditional outlets like the drugstores and hardware stores, and heavy promotion are the tools used to enhance the market share of Kodak in the film industry.

In the advent of technological advance, Kodak has to adopt certain changes in its system and marketing strategy in order to maintain their leading position in the photographic industry ad eventually in the digital imaging industry.

 

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