KODAK case study

Kodak’s Performance Today
Kodak is in trouble: for the nine months ended 30 September 2005, Eastman Kodak’s revenues increased by only 3% to US$10.07bn and the net-loss from continuing operations totalled US$1.32bn, versus an income of US$139m.6 Last month, film sales for Kodak fell 37% for rolls and 13% in single-use cameras,7 and despite similar shocks affecting the rest of the industry Kodak’s declines were the steepest – versus Fuji's declines of 28% in roll and 5% in single use cameras and other private label's decline of 12% in role and gain of 5% in single use cameras.8 Share loss at Kodak appears to be driven by price as it grapples to increase revenues from an outdated industry, as Big Yellow's roll price increased 5% compared to declines of 9% and 11% for Fuji and Private Labels.
What was done wrong?
- Kodak used a razor-blade strategy: it sold cameras at a low cost, and film fuelled Kodak’s growth and profits => The business became heavily dependent on this highly profitable margin from film, and progressively paid less attention to equipment.
-Kodak’s tried and tested strategy was evident throughout the business – and even in Dental Products. In a similar theme to T. Levitt’s Marketing Myopia16, Kodak’s lack of strategic creativity led it to misinterpret the very line of work and type of industry that it was operating in which was later devastated with a fundamental shift towards the digital age
- Strategic problems were tackled through rigid means, and as mistakes in the in the manufacturing process were costly, and profitability was high
- Kodak avoided risky decisions, and instead developed procedures and policies to maintain the quo
Difficulties arose in 1984, when firstly the Japanese firm Fuji Photo Film Co. encroached on Kodak’s market share as customers switched to their products after launching a 400-speed colour film that was 20% cheaper than Kodak’s. Kodak’s response was that “they didn’t believe the American public would buy another film”.18 Secondly, when the late 1980s ushered a radically new perspective on Kodak’s business the company failed to recognise the imminent change ahead. Instead however, Kodak virtually committed corporate suicide by sticking to a business model that was to be no longer valid in the post-digital age.
A radical change was required, and one that could have been found in a more flexible and intuitive approach. When it did change did come, it was a matter of too little too late after Mr Carp's moment of insight – that analysts at the time derided it as his “sudden-epiphany strategic plan”, came in as late as September 2003