Introduction
George Eastman founded Eastman Kodak Co. in 1892. The company is presently a global purveyor and a developer of digital imaging products and services. Over the years, the company has created a strong customer base with the traditional imaging products for commercial, leisure and scientific purposes.
Among the products that the company deal with include home printers, photographic processing chemicals, digital cameras, scanners and films. They also offer a wide array of services that include wholesale finishing services, digital imaging as well as online photo storage and sharing services. The company also creates calendars, photo books, requested prints and frames that it ships.
The company is generally organized into 3 divisions dealing with separate sets of products and services. These are the Graphic Communication Group (GCG), the Consumer Digital Imaging group (CDG) and the Film, Photofinishing and Entertainment Group (FPEG).
Kodak Co, is traded in the New York stock exchange and reported revenue of $9 billion last year and is believed to has assets to the tune of $9billion in FY08. The story of the company has been one of innovation over the years.
However, there was laxity in embracing the digital revolution and this slackened the growth of the company which has made it struggle for a long time in trying to cover the lost ground. The company has realized that in order to be profitable, it should not solely rely on sales.
Therefore, it has embarked in other ventures including selling of assets like the intellectual property rights and the OLED arm of business which is a potential platform for next-generation flat display technology. This technology has been steadily developed by the company in the last couple of decades (Kodak, 2009).
The company is assuming to establish itself as a maker of user friendly imaging products that are primarily crafted with amateurs in mind. The problem with this strategy is that most of the products end up having lower prices in the market which creates an illusion that they may be of inferior quality than those of the competitors. The way the company markets its products does not emphasize on a single product but rather promotes a range of products.
The company’s rise to global acclaim began when George Eastman advanced a dry plate technology that allowed for the amateur pursuit of photography. This led to the issue of about 19,000 patents from 1900 up to 1999. The greatest success was from the development of the Kodachrome which was the first colored film and was used by NASA in the maiden flight to the moon to take photographs and relay them to earth.
However, with such a strong background, the company failed to capitalize on its strengths during the rise of the digital age and this saw it revenues plummet form $15 billion to $ 9.4 billion (Butcher, 2009). There has also been a major operation by the company to cut its work force considerably which has seen around 50,000 job cuts (Dobbin, 2009).
Porter’s five forces
Porter’s five forces are usually those factors that prevent the entry of a company into a market or those that prevent an established business from expanding. Kodak is in crisis having lost a large share of its market due to competition and the shift from film photography to digital one (Pham-Gia, 2009). The company unveiled a plan that was aimed at investing a large sum in the expansion into new markets.
This plan of action infuriated investors who were going to loose out on dividends in order to fund this endeavor. Over the last couple of years, the company has experienced a dip in profitability which has increased concerns about the company’s strategy going forward.
The first force that prevents Kodak from expanding into new markets is the threat of competitors. In the digital imaging business, there are other companies that have a large market share including Canon and Sony who are renowned for their electronics’ manufacturing. Other companies like Hewlett Packard and Facebook also compete with Kodak on multiple fronts.
The second force is the threat from new entrants. Whereas the company has been in operation for the last century, new ideas are constantly born and as such there is no guarantee for continued prosperity. As technological advances are made, the needs of consumers change.
Companies that realize the needs fastest are the ones who benefit most. In the last couple of years, for example, Facebook was conceived out of the need for people to communicate by sharing pictures. Thus, when Kodak rolled out its Kodakgallery, the market had already been swayed towards the social networks.
The third force is the presence of substitutes. Since electronic products are now being produced by a large number of companies, there has been an increase in the number of cheap products that have entered the market. Most of these are counterfeited and do not go through the set licensures and hence they are cheaper.
The fourth force according to Porter is the action of suppliers. This includes the suppliers of raw materials and capital. Certain raw materials are very costly and thus they deter the production of a certain product.
There is also the fact that there are patents that work against the company and that is a deterrent as the purchase of these patents may be very expensive. The final bit of this point is that investors might withhold their input if they do not buy into a certain venture the company is looking to undertake.
The final force that may hinder the expansion of the company is the customers. The market is already saturated with a wide array of similar products as those of Kodak. This may mean that the company might take a long time to break even in new markets.
Kodak’s corporate strategy
The market strategy adopted by the company is customer focused. Specifically, the company targets people between the ages of 25 and 40 years and those that are active, in relationships and love to take photographs, have basic skills in photography, and those that care about family and friends and are fascinated by the prospect of freezing time and sharing those moments with others online.
The company is positioning itself in a way to fight off the competition by allowing users to take, share and store images on the internet and also engage a keepsafe feature unlike its competitors Canon, Nikon, and Fujifilm.
There is also focus on improving the products that the company offers. However there is a popular notion that although the company uses words like “easy” meant to insinuate that the products have user-friendliness, there are no features to support the claim.
The only thing that the products have is a long battery life like the Kodak Easy Share M1033 digital camera. The Kodak Easy Share 5300 printer is accompanied by a very unfriendly user interface that is cumbersome to use and lacks a networking capability.
These facts discredit the company’s repeated promotional campaigns that suggest that all its products are user-friendly. However, there is reprieve as the products are created within a very short time frame in order to fend off the competition and can be improved over time as the technology improves and the needs of the customers change. The products that the company develops present different market scenarios (Keegan and Greene, 2005).
For example, the digital camera is the same as that of the competitors. In an attempt to improve the product, the revenue from the original product is reduced and this projects a certain element of cannibalism on the products. On the contrary, the development of the printer has given rise to one that has a high initial cost but reduces the costs of ink needed.
Kodak strives to provide products that demand price differentiation from those of the competitors so as to make profit. Comparing the primary Kodak products like digital cameras and inkjet printers, and its secondary products like Kodak Gallery and digital picture frames with those of its competitors, a trend emerges.
According to the Consumer’s Union of the United States (2009), Kodak cameras retailed between $80 and $160 while those offered by the competitors ranged from $110 to $500. It is possible to deduce that Kodak suffers from a negative price differential.
While lower products attract a large proportion of the price sensitive consumer, it also serves to create an image that the products are of a lesser quality than those of the competitors to the more critical customer whereas in reality, Kodak products hive the same results as those of these competitors if not better.
In a ranking that was done to reflect the top 26 spots point and shoot category of the digital camera, Kodak was found to hold four of these spots only bettered by Canon which had nine. Others like Fujifilm held two and Nikon had none.
Kodak, like its competitors, markets its products through individual websites. There is also placement that is done in major and local retailers in stores and also on the internet. Photo storage products are exclusively offered on the internet.
Kodak has aggressively been involved in promotional activities for its products. In 1988, the famous catch phrase associated with its products was “you press the button we’ll do the rest” (Kodak, 2009). Others included “the Kodak moment”, “share moments, share life” in 2001 and “it’s time to smile!”
The communication today between friends and families is easier. This is because of the numerous channels that have opened up. Among the most significant is the development of the social networks where people share pictures and other images.
Cell phones are also contributors to these increased interactions. The use of these networks has not been used by the company to a meaningful level.
Compared to the number of followers that competitors of Kodak have, it is clear that the company has still not embraced technology and its effects on marketing of products. Charlene Li (2008) presents a scenario that helps to better understand the impact of the social media on a company’s profitability.
Assume that the ideal Kodak consumer spends $200 per year for 20 years in a variety of products totaling $4,000. Also, assume Kodak‘s contribution margin stays at nearly 25% so each customer is worth $1000 to the company. If an integrated digital campaign of the magnitude that Kodak is implementing costs nearly $10 million per year to maintain, the company will need 10,000 of these consumers to break even.
Kodak’s promotional strategy has not been in line with that of its competitors. While the company relies too much on its brand strength, its competitors have engaged the services of celebrities who are worshipped wildly, world-wide.
Nikon engages the services of Ashton Kutcher, a movie star whereas Canon has Maria Sharapova who is a sports icon, to energize their brands. Kodak therefore needs to improve on its initiatives so as to build on its community of fans and in turn stir growth in revenues and image.
SWOT Analysis
Kodak will be analyzed according to its perceived strengths, weaknesses, opportunities and threats.
Strengths
The existence of the company since 1892 has led to cultivation of a very strong brand image. The company’s brand name is recognized world wide and this helps to increase sales margins as the company charges premium prices for its products (Pringle and Field, 2008).
A strong brand name always attracts a brand loyalty that helps the customers to perceive a high quality different from that of recent entrants. A strong brand is always associated with strong stock and this ensures trade in the stock market for its products.
Another strength for the company is the intellectual property rights that it has. This gives it the edge over the other products as its portfolio is associated with innovations and thus keeps customers anticipating their products and other companies buying the rights to the developed products.
Weaknesses
Over the years, the company has missed some great opportunities that have led to missed profits. This misses were occasioned by the presence of a weak management that did not take enough risks (Al-Ali, 2003).
However in today’s environment, the company has many initiatives that it hopes hold the keys for future technology advancement. The excessive risks taken by the company could lead to decreased profits occasioned by wasted resources on projects that fail to bear any fruits.
The company is in the process of a restructuring that has seen a massive loss of jobs over the past couple of years. If this transition is not managed carefully, then the company is set to loose its footing in the market which could affect its image and in turn revenue.
Another weakness is the fact that the company has shifted its focus from film photography to digital photography. This is unhealthy for the company as there are still many areas in the world where people are still reliant on films for photography especially in third world nations.
Opportunities
Kodak has a number of opportunities mostly stemming from advances in technology. Technology has occasioned the improvement of products and services offered and also introducing new platforms that could increase profitability. This may also assist in building competitive barriers against competitors.
Emerging markets also present an opportunity to increase the business prospects especially in markets that are opening up around the world especially in Africa and Asia.
New products that are built constantly present a great opportunity for expansion of the markets in which Kodak operates. New products can stem from the increased research in new technologies or can be developed out of the realization of a need gap in the consumer behavior.
New markets are also an opportunity for Kodak to capitalize on. While emerging markets insinuate spreading into new frontiers, new markets connote a diversification of the range of the products and services that the company offers.
Threats
The biggest threat is posed by the deteriorating economy occasioned by the global economic crisis. This has greatly reduced the consumer purchasing power and in turn is destined to affect the revenue the company rakes.
Intense competition is also a major threat to the profitability of Kodak. The competitors can attract customers and persuade them that their products are superior to those of Kodak. Therefore, the company needs to keep aggressively marketing its products.
The presence of substitute products is also a major threat to the sales recorded by Kodak. The major threat posed by substitutes is that they can affect the company in case of an increase in the prices of products since they are cheaply available.
Competition for Kodak is not only in the imaging companies like Nikon and Canon but also the social networking sites like facebook that give users the same experience as that which Kodak promote involving storing pictures on the web.
Recommendations
There are a few recommendations that would be very helpful to the improvement of Kodak’s position in the market.
Availing products to the markets for sale to customers is very vital. Kodak, although avails the products, does not inform the consumers of the locations where the products can be easily accessed. When one visits the company’s website, it is difficult to get a location from where one can purchase a Kodak product. As such, the company should improve on its communication to the customers about the nearest outlets to them that stock their products.
The company should consider revising its prices upwards so as to increase its price differentiation (Kavajecz, 2009). According to the market survey discussed in the preceding segments, it is clear that competitors of Kodak make profits from the sale of their products that are of a similar quality as that of the company.
An increase in price will not necessarily decrease sales and in turn revenues since the competitors charge higher prices for the same quality. In fact, this move would increase the revenues generated by the company.
The market strategy that the company has adopted overwhelms customers as it’s presented as a process. For example, Kodak tells customers to take pictures with their digital cameras, print them with their printers, share them on KodakGalley, create keepsafe and display the pictures on their frames. This process is tedious for the customer.
Thus, the company should focus on promoting one product at a time. The recommendation here is that the company should focus on a primary product like digital cameras and then choose the others as supporting products. This will ultimately increase sales in comparison to the adopted strategy.
As a result of the target market that the company has adopted, there should be focus on the production of more user-friendly products. The company attempts to sell its digital cameras to the novice photographers. As such, the product should integrate an easy to use interface and should have most of the other function automated.
This should not however compromise the quality of the end product. Currently, the company’s products compete well with the others but do not go out of their way to differentiate themselves. The same case applies to their printers.
References
Al-Ali, N. (2003). Comprehensive intellectual capital management. New Jersey: John Wiley & Sons Ltd.
Butcher, D. (2009). Mobile Marketer. Web.
Charlene Li., J. B. (2008). Talking with the Groundswell. Boston, MA: Harvard Business School Publishing Corporation.
Consumer’s Union of the United States (2009). Consumer Reports. Web.
Dobbin, B. (2009). The Huffington Post. Web.
Kavajecz, K. (2009). Module 5, Risk, Returns and the Capital Asset Pricing Model. Madison: WI.
Keegan, W. J. and Greene, M. C. (2005). Global marketing. London: Prentice Hall.
Kodak, E. (2009). About Kodak. Web.
Pham-Gia, K. (2009). Case Study Kodak at a Crossroads. Norderstedt: Auflage.
Pringle. H & Field, P. (2008). Brand Immortality: how brands can live long and prosper. London: Kogan Page Ltd.