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Kodak and Fujifilm

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The History and Core Business of Kodak
The company we know today as Kodak was started by an American named George Eastman with his partner Henry Strong in 1881 by producing dry photographic plates. These dry gelatin plates were far superior to the messy wet plate counterpart of the day. The major advantage that dry gelatin plates gave photographers of the time was the fact that they did not require a wet coating right after exposure for them to be developed. Eastman invented and started producing his next evolution of dry plates by evolving his design from using a gelatin coating, to using an emulsion coating. The business evolved from a partnership to a $200,000 corporation with 14 shareholders in 1884. At that same time, the company name was changed to EASTMAN Negative Paper. The next evolutionary step for the company was one year later in 1885. This is when the first transparent photographic film came to market. With this groundbreaking and revolutionary product, EASTMAN Negative Paper opened a wholesale office in London England. The next few years were so good at EASTMAN Negative Paper that they were able to employ a full-time research scientist to help the company in the commercialization of a flexible, transparent film. A few years later in 1888 the name Kodak was born and they adopted and marketed the slogan “You press the button – we do the rest”. The next years for Kodak were filled with the growth of their film product and the cameras that used the film, while they developed many new products for the photography industry they always stayed true to their core business of producing film and cameras. That is until the digital camera killed the film industry.

The History and Core Business of Fujifilm
In 1934, Fuji Photo Film Co. LTD was established because of a Japanese government plan to create a domestic film manufacturing industry. The company immediately started producing photographic film, photographic print paper, dry plates, and a few other photosensitive materials. Over the next few years, the company changed names and entered into strategic partnerships with some large international companies like U.K. based Xerox Limited. In 1965, they opened up a headquarters in New York State to help manage their business in North America. While not as exciting of a start as Kodak, Fujifilm also stayed true to its core business of photographic film, development of that film, and the cameras that took the pictures.
Kodak’s Management Approach on Embracing Innovation
While Fujifilm prides itself with staying on the cutting edge of innovation, Kodak top executives were caught sleeping at the wheel when the age of digital photography took off. Kodak’s revenues maxed out at nearly $16 billion in 1996 and its profits at $2.5 billion in 1999. A consensus forecast by analysts at the time was that its profits in 2011 would be $6.2 billion. In 2011, Kodak reported a third-quarter loss of $222 million, the ninth quarterly loss in three years. In 1988, Kodak had over 145,000 workers in their international operation; now it employs barely one-tenth as many. Kodak’s share price has also fallen by nearly 90% in the past few years. All of this was brought on because the leaders did not accept that the world of photography was changing from film to a digital world.
Now teaching at the University of Rochester’s Simon School of Business, former Kodak executive Larry Matteson recalls writing a report in 1979 detailing, fairly accurately, how different parts of the photography market would switch from film to digital, starting with government reconnaissance, then moving to professional photography and finally the mass market, all by 2010. (Munoz)
He was right about the move to digital and was only a few years off.
Fujifilm’s Management Approach on Embracing Innovation
While Kodak had to be reactive to the digital photography movement, Fujifilm was on the cutting edge. Fujifilm’s current philosophy on embracing innovation in today’s ever changing and evolving world is “We will create new value by integrating our distinctive and leading-edge technologies as well as turning out proprietary technologies to continue providing top-quality products and services that cultivate customer trust and satisfaction. Through the efforts we will transcend past boundaries of ‘Imaging and Information’ to advance the development of culture, science, technology and industry across society and furthermore improve human health and protect the environment. Our new corporate philosophy is based on the recognition that our mission, through our sustained corporate activities, is to significantly contribute to the realization of a society in which all people across the world can lead lives that are abundant in spiritual as well as material wealth with a sense of fulfillment and satisfaction.” (Fujifilm)
How Management Differences Have Impacted the Relative Success of Kodak and Fujifilm
While both companies made great investments in research and development over the years, in 1986 both Kodak and Fujifilm entered in to partnerships with other companies to develop and introduce a new 24mm Advanced Photo System (APS) film. (Palmer)
This new film required a new generation camera that was a hybrid between digital and traditional technologies. The new technology was very popular in Japan where Fujifilm had most of the market share allowing Fujifilm to make a profit on the new product. Kodak, with its limited market in Japan, lost money on the project due to the technology not taking off in the US. In this case, Fujifilm’s management philosophy of investing lots of time and money in the Japanese market to own market share was a major difference between the short-term successes of Fujifilm. The management at Kodak did not have the same market share in Japan because they decided not to invest lots of time, money and resources in the Japanese market. This Management decision lead to Kodak not having any success with the APS film technology.
One of Kodak’s major strategies around 2010 was to suit its competitors for use of its patent or license. Kodak's biggest revenue score of 2010 was $838 million it collected from patent licensing, evidently including a settlement it reached with LG after suing the South Korean company for patent infringement. Some large companies in the cellphone industry have also adopted this strategy. Apple and Samsung are two of the companies that are trying to earn additional profits by licensing some of their patent portfolio to other companies while using the court system to battle and slow down the progress of one another. One key management philosophy difference between Kodak and Fujifilm around this same time is the percentage of sales that should go back in to research and development. (Munoz)

R&D costs of Kodak and Fujifilm as a percent of sales
Ethics and Social Responsibility and the Impact Those Approaches on Kodak and Fujifilm
While both Kodak and Fujifilm strive to be good ethical and socially responsible companies, while researching this topic you could see the importance that Kodak puts on these topics. While the Fujifilm site talked and said all of the right things to make you understand that they do their part and comply with all of the laws, the way that Kodak communicates their views made you feel that they actually cared and were concerned about these topics. One of the ways that Kodak is socially responsible is that they do not just care about how the act and conduct business, but they care about how their suppliers act and conduct business. I am sure that this impacts their profits by not always going with the lowest cost for a supply need. While Fujifilm might also feel this way or conduct their business in this manor, they do not communicate or make you feel like they are dedicated. This behavior would give Fujifilm a competitive advantage by allowing them to make decisions based solely on the bottom line.
How Management of Kodak and Fujifilm Adapted to Changing Market Conditions
During the years when the world and US markets were still thriving, Kodak and Fujifilm took different approaches to try to maximize profits. Kodak stayed focused on producing film related products and developing products, while Fujifilm took the opportunity to diversify the company. Fujifilm branched out and started a cosmetics line called Astalift. This cosmetic line was produced and distributed strictly in Asia. While it was a risk to venture out and create a cosmetics line, they did have some understanding about anti-oxidants because of their research and development around the use of 2,000 chemicals dealing with anti-oxidants.
Ways Any Company Could Build in Flexibility to Back up its Decision-Making Process in Order to Adapt to Changing Market Conditions
One way that you can protect your business from making some of the mistakes that Kodak made over the years is to invest in the research and development. While you might have a great product with a long sales life ahead of it, if you want, your company to succeed for many years you need to be thinking about the next big thing. Another way to protect your business from losing a competitive technological edge is to use a compression approach to innovation. This will allow the company to incrementally implement technological innovations. By doing it in this manor, they will be able to speed up the innovation process when it is time to implement it. One of the best ways to make sure that your company has flexibility in the decision making process is to use multifunctional teams in its core structure. This will allow leaders from each team to come together and make recommendations to leadership based on their technical expertise.

References
Palmer, S. (n.d.). Retrieved from http://www.kodak.com/ek/US/en/Home.htm
Munoz, C. (n.d.). Retrieved from http://www.economist.com/node/21542796 (n.d.). Retrieved from http://www.richsmanagementblog.com/a-case-in-poor-management-kodak/management-principles/
(n.d.). Retrieved from http://www.forbes.com/
(n.d.). Retrieved from http://www.fujifilm.com/

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