Kodak is one of the oldest companies on the photography market, established more than100 years ago. This was the iconic, American organization, always on the position of the leader.Its cameras and films have become know all over the world for its innovations. Kodaks strengthwas it brand ± one of the most recognizable and resources, that enabled creating newtechnologies. Since the formation of Kodak, the company has remained the world’s leading film provider with virtually no competitors. That is until the arrival of Fuji Photo Film, which nowsurpasses Kodak in earnings per share and is viewed as the industries number two. It is evidentthat there has been a significant shift from the use of traditional film cameras to a market fullyfledged and saturated with modern and updated digital cameras and digital photographic tools.
Kodak not only sell pictures film, Kodak is enough number of lines to offer products and services (product diversification), such as digital images, Printer cartridges, paper and innovative equipment markers, which sell Kodak global. Furthermore, the aim and purpose of the overall quality of the Kodak is to achieve Total Customer Satisfaction. This is achieved by leveraging the appropriate process improvement techniques (e.g., Zero Defects, Supplier Certification, Lean, Six Sigma, etc.) in ways that deliver increased productivity and optimal deployment of resources.
The company is organized along three segments: the Graphic Communications Group (GCG); the Film, Photofinishing, Entertainment Group (FPEG); and the Consumer Digital Imaging Group (CDG). Thirty-nine percent of Kodak‘s revenue comes from the GCG segment, which provides products and services to businesses with large scale printing operations. Thirty-one percent of Kodak‘s revenue comes from the FPEG segment, which provides traditional photographic products and services to consumer, professional, and industrial markets. Thirty percent of Kodak‘s revenue comes from the CDG segment, which provides digital consumer products.
Kodak reacted slowly to the digital revolution. Since the takeoff of digital cameras, Kodak has seen revenues plummet from $15 billion to $9.4 billion (Butcher, 2009). Kodak has cut 40,000 jobs over the last five years, and plans to eliminate 3,500 to 4,500 in 2009 (Dobbin, 2009). Since 2003, Kodak has sought to meet this challenge with robust restructuring programs. Approximately 80% of Kodak revenue is from new products and services developed within the last five years (Butcher, 2009). Approximately 60% of Kodak employees have been there less than four years (Butcher, 2009).
However over the time, the situation started to change for Kodak, as it has underestimated thechanges on the market. There has been a significant shift from the use of traditional film camerasto a market fully fledged and saturated with modern and updated digital cameras and digital photographic tools. The age of digital technologies were emerging. The core business of Kodak-the film business, started to decline and some areas of the business started to be less profitableand filled with many competitors, especially cheap ones from Asia. Also, the prices of the digitalcameras were falling
Kodak faces the challenge of high restructuring costs and declining demand for its digital products, while trying to redefine its organizational structure and brand name. On top of company-specific problems, Kodak faces a stiff macro-economic headwind, as consumers continue to watch their spending on luxury items. To combat these problems, Kodak has cut costs via layoffs and reductions in R&D expenditures, removed dividend payments to common stockholders and targeted its cash conversion cycle. In the near term, Kodak appears to be poorly positioned to handle an extended economic contraction, and must act immediately to generate additional revenues and profits.
Kodak’s Current Marketing Strategy
Kodak is likely targeting a segment of the consumer market that meets the following criteria:
- adult, post-baccalaureate, 25-40 years old;
- (2) active/ involved;
- (3) caring about relationships (friends & family);
- (4) non-professional, sub-standard skills in photography;
- (5) high interest in capturing images of life (freeze in time) and sharing those images in digital or printed form.
Kodak‘s marketing decisions (explained below) imply the following positioning statement: Kodak is preferred by adults who are active, busy and care about meaningful relationships and want to encapsulate and share important moments in their lives, because Kodak’s products enable them to capture, share, display, and store pictures and create keepsakes, with more ease than competitors like Canon, Nikon, and Fujifilm.
Kodak fails to offer clear, distinguishing benefits to consumers. The company attempts to position itself as a provider of user-friendly products, typically offering products whose names include the word easy‘. However, some of Kodak‘s product attributes detract from the credibility of this position . Other than a long battery life, the Kodak EasyShare M1033 digital camera features few differentiating attributes that appeal to the user-friendly consumer. The Kodak EasyShare 5300 printer has a cumbersome interface and PC Loader tray that lacks built-in networking capability. Kodak‘s user-friendly‘ position is undermined with products that do not deliver the promised benefit.
Kodak develops products quickly due to its competitive environment. A comprehensive program designed to include all desirable features is nearly impossible due to the speed at which the industry evolves.
Product types face different risk scenarios depending on their newness to the company and their newness to the market. Digital cameras are familiar to the market and to Kodak. Thus, a line extension of Kodak‘s digital cameras creates a risk of cannibalization and a lack of incremental sales. Kodak‘s new approach to printers, with higher upfront costs and lower ink costs, presents different risks. The product type is new to the market and new to the company, representing a new to the world concept. Thus, the product introduction is at risk of a lack of company-market fit.
Using the economic pricing model, a firm strives to deliver products that demand a price premium over its competitors. Based on this, we compared the pricing of Kodak‘s core consumer products (digital cameras and inkjet printers), and its secondary consumer products (digital picture frames and Kodak Gallery), to the pricing of its direct competitors in each category. In the compact digital camera segment, Kodak‘s products are generally priced below the products of its most direct competitors of Canon, Nikon, and Fujifilm. For example, Kodak cameras sell in the range of $80 to $160, while cameras offered by the competitors sell in the range of $110 to $500 .
This price differential implies that Kodak is suffering from negative price differentiation. While a lower price may offer the benefit of capturing a large portion of the price sensitive consumer, we believe that the lower price signals lower quality to the consumer, when in actuality Kodak‘s cameras deliver comparable quality to that of its competitors. As a result, we believe that there is an opportunity for Kodak to raise its prices in this segment. The other consumer products do not suffer from negative price differentiation, and thus we do not believe an opportunity exists to change the pricing of these products .
Overall, Kodak‘s placement strategy is similar to that of its competitors, in each of the main consumer product categories. Digital cameras, inkjet printers, and digital picture frames, are typically sold through each company‘s website, and through all major retailers such as Best Buy, Target, and Wal-Mart, both in stores and online. The photo storage products are all offered exclusively online. Kodak‘s placement employs wide market coverage because its products are easily accessible to all consumers. It is difficult for Kodak to differentiate itself within the placement component of the marketing framework; however, it is important that it monitors the retailers to ensure both consistency across channels and alignment of objectives between itself and the retailers.
Understanding the consumer
Kodak‘s target consumers have lower levels of expertise than an amateur photographer. They are typically more concerned about the moments captured in pictures and video rather than the art or technical skills required to do so. These consumers will likely look to an expert (or perceived expert) in the field of photography for advice if any questions arise. Thus, the level of involvement of Kodak‘s consumer tends to be low. While in some cases, consumers may do some research to learn about the product they‘re seeking, this type of research is typically shallow in technicalities or details. Once these consumers have learned what brands are reliable, where the best deals are, and how to obtain the product, they are ready to purchase. This is when Kodak must be ready to sell.
Increased sales is the ultimate marketing objective for Kodak. At the same time, Kodak‘s promotional strategy seems to have more specific goals depending on where the consumer is within the buying process. Prior to purchasing, Kodak wants to represent peace of mind‘, fun, and overall inspiration . Kodak also appeals to creative consumers who are interested in creating picture books, cards, t-shirts, and the like. These additional, creative options entice the consumer to invest more in Kodak products . Hence, after the first purchase, Kodak‘s goal is to create a repeat customer.
The availability of products is vital to Kodak‘s success. Therefore, Kodak must ensure the consumer is directly connected to preferred retailers whenever they are ready to buy. Unfortunately, that is not always the case in Kodak‘s current marketing campaign. While Kodak is improving its presence amongst consumers by using several digital initiatives, it is not always clear what is the best way to obtain the products. There is not always a link or message that directs consumers to retailers Kodak prefers. Consequently, consumers interested in purchasing Kodak products may find inconsistent messages while searching for a channel
Kodak‘s marketing communications today are focused on triggering emotions and presenting an argument in favor of some of its product attributes. The company‘s latest campaign, ―It‘s time to smile,‖ stems from the consumer insight that today‘s work-life balance and the economic situation have negatively impacted relationships (Exhibit 3); even though, consumers perceive it is easier to connect with friends and family today than it was 5 years ago (thanks to e-mail, cell phones, and social networks) (Kodak, 2009). Kodak seeks to connect with the consumer at an emotional level and encourage them to smile and make others smile – all while capturing and sharing their newfound happy moments with Kodak products. However, the company fails to deliver a clear and differentiating promise that resonates with a meaningful number of consumers.
Even though Kodak‘s new integrated marketing campaign is present in all major social media channels (Facebook, Twitter, YouTube) the company‘s number of followers is significantly lower when compared with those of competitors and other successful brands. Kodak cannot afford to lose in the digital space as social media has the powerful effect of creating communities of ever-growing fans who evangelize the brand – all at a relatively low and fixed cost.
Currently Kodak does not utilize the services of a celebrity spokesperson. This reduces any risks of brand confusion or poor representation, commonly associated with endorsements. However, Kodak is betting too much on the strength of its brand alone, while competitors enlist the help of famous characters like Ashton Kutcher (Nikon), and Maria Sharapova (Canon) to energize its brand.
Overall, there seems to be a lack of buzz, energy, top-of-mind awareness, or fuel behind the Kodak brand. The current marketing campaigns are not driving the number of customers necessary to create the sense of community that Kodak is expecting, nor generating the revenues the company needs to survive.
SWOT Analysis, is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective. The aim of any SWOT analysis is to identify the key internal and external factors that are important to achieving the objective. SWOT analysis groups key pieces of information into two main categories: Internal factors – The strengths and weaknesses internal to the organization. External factors – The opportunities and threats presented by the external environment. The internal factors may be viewed as strengths or weaknesses depending upon their impact on the organization’s objectives. What may represent strengths with respect to one objective may be weaknesses for another objective. The factors may include all of the 4P’s; as well as personnel, finance, manufacturing capabilities, and so on. The external factors may include macroeconomic matters, technological change, legislation, and socio-cultural changes, as well as changes in the marketplace or competitive position. The results are often presented in the form of a matrix. SWOT analysis is just one method of categorization and has its own weaknesses. For example, it may tend to persuade companies to compile lists rather than think about what is really important in achieving objectives. It also presents the resulting lists uncritically and without clear prioritization so that, for example, weak opportunities may appear to balance strong threats.
Kodak SWOT Analysis
The main issue behind this case is the problems faced by the Eastman Kodak Company in the process of changing to Digital technology in printing. It failed to establish market share andmarket leadership in the Digital sector. It is threatened with either immediate or rapiddiversification in technology. Kodak has been extremely successful over the last century in filmsales and film development. Now the time has come for the Eastman Kodak to respond to thechallenges of digital cameras and also contemplate other issues as follows:
- Will the companys current strengths and capabilities to make Kodak as The Picture Company´?
- How serious are the weakness and competitive deficiencies?
- Does the company have attractive market opportunities that are well suited with Kodaks resources? Does it have the internal resources to continue spending money investing innew technology?
- What type of strategy should it use to enter the digital camera business and how will Kodak leverage its strategic resources?
- Can Kodak once again dominate the world market?
Kodak started facing difficulties in 1984, when the Japanese firm Fuji Photo Film Co. invadedon Kodaks market share as customers switched to their products after launching a 400-speedcolor film that was 20% cheaper than Kodaks. Secondly, during 1980s the company failed torecognize the change in the environment and instead followed and sticked to a business modelthat was no longer valid for the post-digital age. After the management realized the change andreact accordingly but it was too late
Strategies of Eastman Kodak
- Vertical integration combined with continuous innovation and product development.Speed is also required cutting cycle times in manufacturing and product development.
- To systematize and accelerate product development and improve product-launch, quality,Kodak introduced a new product development methodology called ManufacturingAssurance Process´(MAP).
- Joint venture with HP, Microsoft to introduce new products that required in the market.Collaborate with expert to enhance the competency.
- Digital strategy was to create greater coherence among Kodaks multiple digital projects.
- Previously they had diversification strategy but later Fisher focus in Imaging business.
Kodaks strength and Competitive Capabilities
Kodaks strength can take several forms as follows:
- Valuable intangible assets: Kodaks strengths were its brand equity and distribution presence. After almost a century of global leadership in the photographic industry, Kodak possessed brand recognition and worldwide distribution. Kodak could bring new productsto consumers attention and to support these products with one of the worlds best knownand most widely respected brand names as a huge advantage in the market wheretechnological change created uncertainty for consumers. Kodaks brand reputation wassupported by its massive. , worldwide distribution presence ± primarily through retail photography stores, film processors, and professional photographers.
- Competitive Capabilities: Prior to 1990s Kodak had invested huge in R&D. Moreover,its century of innovation and development of photographic images gave Kodak tremendous depth of understanding of recording and processing images. Central to Kodaks imaging capability was its color management capability. In the digitizing color and transferring digital images to paper, Kodak possessed a powerful set of complementary technologies in sensing, color management and thermal printing.
- Market advantage: Through its wider distribution network, it has been able to maintaina huge market coverage and accessibility. It had worldwide distribution presence ± primarily through retail photography stores, film processors, and professional photographers.
Companys competence and Competitive capabilities
- Competency: Eastman Kodak has been Leveraging competencies in film and paper media, color management. It has been known for the best quality films and cameras worldwide. Its journey of more than 100 years has helped to gain the experience and excel in its Endeavour. Theorganizational changes like decentralization and accountability that George Fisher made helpedincrease speed of manufacturing and product development .i.e short product development cycles.Secondly, a strength could be also considered Kodak’s favorable corporate image (and implicitlya significant brand equity) that results from the values which are said to lead the staff’s behaviors(“respect for the dignity of the individual, integrity, trust, credibility, continuous improvementand personal renewal, recognition and celebration”), a transparent management which allowsshareholders to have a realistic and up-to-date image of the operations performed, strong HumanResources policies and commitment to the community.
- Core Competency: Eastman Kodak was a highly integrated company that did its own R&D andmanufactured its own parts. Changing global markets and cost pressures in the 1980s and 1990sthreatened the way of doing business. So the knowledge, company s intellectual capital are alsoaffected and repercussion is proficiency in its core competency started diminish. George Fisher,CEO in 1993, refocused the company on core competencies and joined the trend of outsourcingwith close relationships to suppliers and announced a new explicit social contract as part of therestructuring effort. By 1997, the company could not grow out of its competitiveness problemslike major price competition from its biggest international competitor, Fuji, which was engagedin a major price-cutting campaign aimed at increasing its market share internationally and particularly in U.S. markets. In response, Kodak made more significant changes designed to reduce its costs and to recapture market share in the companys core products. But all theseattempts only lead to decrease market share and declining profit.
- Distinctive Competency: Firstly, the brand image of the company that has been built sincecentury is the distinctive competency for Kodak. Before the digital age, its distinctivecompetencies were film and Cameras and its sister concern for its chemical technology.
- Opportunity: The market of photography is changing. There is a paradigm shift to digital world.The competition is increasing and repercussion is there is price war involved this business.Kodak has also entered into digital world but because of overwhelming price, its market share isdecreasing. So, it can grab the opportunity to provide the diverse market.
Threat and Weakness of the resources of the company
Kodaks greatest traditional competitor has been Fuji. Through the 1970s and 1980s Fuji has been the Kodaks major competitor overseas, particularly in Asia where each have about one-third market share. In the United States, Kodak had held a strong, but declining market share of 80% in the beginning of 1997. Through aggressive marketing and developing strongrelationships with distribution outlets, Fuji has also established a worldwide reputation for price,quality and marketing which has allowed it to have a strong following amongst professional photographers and gradually with the traditional consumer. Other potential threats to acompanys well being are as follows:-Emergence of digital world (shift in buyers need)-increasing intensity of competition during late 90s-slowdowns in market growth-High bargaining power of customers due to availability of other manufacturing company.
Its core competency could be innovative digital imaging when digital age was first coming but ithad no well developed or proven competency to fit the emerging demand. It had weak productinnovation capabilities. Also, the market share was declining because the competitors were providing the market needs.During Whitmore’s leadership, Kodak diversified into life sciences.
While entering the market of healthcare imaging (diagnostic equipment) was a proper fit, entering healthcare activities(nutritional supplements) and pharmaceuticals was not a wise decision. For a company likeKodak which has a very strong association with photography, entering a market that does not fitin with its image would not benefit the company
From above analysis, it is clear that company should focus on ST Strategy.i.e capitalize thestrength and avoid threats. The companys current strength and capabilities matter for the future.The serious weakness of Kodak is inability to react to the changes in the photography industry. If not corrected, it would be fatal for its future. The nature of business is ever changing; thecapacity to adopt the change is the industrys key success factors. The gap between therevolution and evolution of the strategy should be minimized in order to be competitive.From above SWOT analysis, following actions are recommended for improving companys strategy and respond accordingly.
The product innovation capabilities has to be enhanced either by rigorous investment inR&D or should integrate with other companies/ joint ventures or alliance that providevaluable technology, sophisticated collaboration or competencies to gain competitiveadvantage. It should continually change the basis of competition and seek multiplesources of competitive advantage. Moreover, organize to achieve new levels of alertnessthat helps to cope with the change in the market.
In order to reduce competitive liabilities, the lost market share can be regained throughadvertising and promotion along with the delivery of better quality product at affordable prices. The nature of business keeps on changing so the revolution in the market placeand evolution of the strategy of the company to meet the expectation should match. Themajor weakness is the inability to sense the change in the market and take actions to thatchange. So, the management and R&D should keep itself updated. The printing should given priority since it has better prospect and offer best potential for securing competitive advantage.
Kodak fails to position itself as the indisputable solution between today‘s consumers and their need for connection. Therefore, Kodak must focus on delivering a clearer message, a differentiating promise, and products that meet such a promise. For example: Kodak is the premier provider of imaging solutions that bring your loved ones within arm’s reach.
Additionally, Kodak‘s marketing campaign should present one path within the imaging process that allows the consumer to process the company‘s offerings. For instance, prioritize marketing efforts according to the following process (1 = highest priority): (1) take great pictures with Kodak digital cameras, (2) print quality pictures for less with Kodak photo printers (3) store your pictures at the KodakGallery, where you can create unique keepsakes (4) display your pictures in our industry-leading Kodak digital frames. Instead of overwhelming the consumer with all the options Kodak has to offer, focusing the message on one product at a time can be more effective for Kodak‘s target consumer.
We feel that additional emphasis should be placed on digital cameras, with the other products—printers, frames, and Kodak Gallery—supporting digital cameras as complementary products that round-out the digital imaging experience. Kodak‘s 120-year history as the premier provider of photography products lends itself to this strategy of emphasizing digital cameras. This focused strategy can be accomplished through changes in each of the components of the marketing framework, while keeping in mind the desired positioning for Kodak‘s product-line.
Because Kodak is targeting the novice photographer segment, it is important that its products incorporate easy-to-use attributes and automatic features that deliver high-quality photos. Currently, Kodak‘s digital cameras compete well on the number of functions offered yet do not necessarily differentiate themselves. The same holds true for the printer category with complaints of complicated interfaces, cumbersome loader trays, and a lack of built-in networking capabilities. Kodak should strive to simplify its products across its entire product line and further educate customers of the easy-to-use features through its marketing campaign.
Thus, Kodak should demand similar prices for its products. Kodak should be able to increase its prices by at least 20% on the competitively ranked cameras to signal quality to the consumer without decreasing volumes, thus increasing profitability. This price increase will address the problem Kodak faces with poor gross margins in the CDG segment, and lead this segment towards profitability in the future. Success with an increased pricing strategy is dependent on Kodak effectively communicating the brand quality to the consumer.
Kodak is dependent on its resellers to increase awareness and educate the consumers about its products. Kodak should work closely with its main retailers to encourage promotion of its digital product suite consisting of cameras, printers, frames, and Kodak Gallery. Kodak must first educate the retail sales representatives on the features of its products, namely the differentiating features that will focus on the ease-of-use theme. In addition, the products should be placed strategically within the stores, to encourage bundling of the Kodak product-line.
In promotions, Kodak needs to improve the level of energy behind the Kodak brand. For this purpose, a celebrity spokesperson could be highly effective. Because Kodak‘s consumer is relatively low involvement and the market is already cluttered with many reasonable options (Canon, Nikon, Sony, Casio, etc.), a credible spokesperson should serve to hold the consumer‘s hand and guide them to buy Kodak products.
The current advertising budget may need to be revised, but an increase is not automatically necessary. Kodak should continue leveraging and improving its presence on the Internet through various digital initiatives. Kodak implementing these recommendations will lead to increased sales and margins and ultimately allow the company to regain its position as a world leader in its industry.