Introduction
Kodak Company was founded by George Eastman 133 years ago. It replaced the glass photographic plates with a roll of film that was simple to use. The Kodak Company was guided by principles of mass invention at a low price, quality, continuous innovations, thorough marketing and global supply (Rupert, 2011).
Eastman worked hard towards firm establishment of the company by coming up with the operation strategies and business guiding principle which was, “nothing is more important than the value of our name and the quality it stands for” (Gavetti, Henderson & Giorgi, 2005).
This was a strong pillar which Kodak Company has been standing on and has seen its success through marketing of quality products. By 1963, Kodak company had became the industry standard and by 1981, it had invented other products such as cameras, medical imaging and graphical arts which made the profits to rise to US$10bn in 1981 (Gavetti, Henderson & Giorgi, 2005).
Kodak operates in three segments; digital and film imaging segment which provides customer oriented traditional and digital products as well as photographic services, health segment which provides analogue products such as chemicals, processing equipments, medical films and digital products.
Graphic communication segment manufactures inkjet printers, document scanners and digital image systems. All the products were aimed at the commercial print market (Gavetti, Henderson & Giorgi, 2005). This paper will assess what went wrong in the Kodak company that led to it’s under performance to appoint of filing for bankruptcy protection.
The evaluation will concentrate on the Kodak case study based on article “Kodak falls in the creative destruction of digital” (Rupert, 2011). The paper will give an analysis of what affected the Kodak Company by considering the political, economic, social and technological factors.
The paper will conduct the SWOT analysis so as to determine the current state of the company as well as the opportunities that the company can venture into in order to expand both locally and internationally.
What went wrong?
For years Kodak Company had dominated in photography industry but it has not managed to stay at the top due to the current market trends. It failed to invent its own innovations of digital cameras which are dominating in the market today.
Kodak stocks have continued to fall for the last ten years by 95% and it has continued to be listed low as it shares traded at $47 (Gavetti, Henderson & Giorgi, 2005). The company has experienced losses for the last three years with the latest been $222 million in the third quarter of 2011.
It failed to invest in digital market and instead focused on traditional film and clinical supplies. It also ventured into printers where it ranks fifth among the major suppliers with a 2.6% market share.
Kodak was the first company to invent digital camera but it failed to invent in its innovations which made it to succumb to the digital revolution. This made its products lack market and was overtaken by other companies. Kodak failed in innovating digital cameras and assumed that people would continue to print photos (Gavetti, Henderson & Giorgi, 2005).
Kodak Company failed in its strategic planning when it failed to research on the current market opportunities and customers’ needs. Instead it reinvented in manufacturing of printers in order to “capitalise on its reputation as the best company for film printing”.
This was due to lack of creativity and flexibility of its executives to move with the current market demand. They feared that the digital cameras would overtake their main product that is, chemicals. This has left the company with no option but to file for bankruptcy protection.
Today Kodak’s company assets are worth $5.1bn while its debts totals are $6.8bn thus the company is already operating at a loss.
The Kodak competitors invested in the digital cameras and even advanced in technology such that Kodak’s digital cameras were as not as good as for competitors. This made the company lose its reputation as the best one in the photography industry (Gavetti, Henderson & Giorgi, 2005).
Though Kodak had enough staff, it failed to invest and uphold technology thus it is to be blamed for its own down fall. It was “unable to adopt transition into the 21st century” because it was caught up in storms of technology, economic and social change.
Today, people have resulted to use of cell phones in taking photos and videos. Many mobile phones have a 5-megapixel resolution which has dominated the market by becoming the key factor in customers’ decision making. The society has changed from using photos for personal memories to photo sharing through social networking (Guardian, 2011).
PESTEL Analysis
Political
Kodak was impacted by some political issues concerning the organisational change. The US copyright law has put in place strict rules that hinder photo printing and their sales. The law states that all photo businesses should not print or release digital images without a copyright release.
This has hindered the Kodak Company which specialises in photography more than digital images from thriving because images taken by amateur photographers may not have their professional images in print. This affects Kodak which embarked on photo printing to maintain its reputation (Gavetti, Henderson & Giorgi, 2005).
Economic
Kodak has faced increased competition due to an increase in the number of substitute products Such as smart phones and Iphones. Other factors that determine competition level include the presence of global distribution system, prices charged on various products and facilities and any other innovation that may come into the industry.
Over the years, the photo and image industry has been undergoing a considerable change. This has been due to increase in competition internationally and the change toward global supply sequence. The end users play a major task in terms of choice of suppliers and in decision making of products which is changing from being operational to being strategic (Tan & Tiong, 2005).
For instance, increasing demand for digital cameras caused a decline in traditional film camera sales in 2002. Also photo prints made out of traditional films reduced by 700,000. Digital camera sales dominated the market due to its declined prices which made it more affordable for the consumers.
This resulted in high demand for digital cameras thus Kodak had no market for its products. The world is under recession out of the financial crisis which hit it at the end of 2007 (Campbell & Craig, 2005).
This affected most industries especially those who were not stable financially for example, Kodak since the more economically developed a nation can be, the more helpful it is in making the industry to achieve its objectives behind attaining direct marketing (Tan & Tiong, 2005)
Social change
Lifestyle trends and consumer preferences affect the business’s performance. For instance, men have been shown to purchase digital cameras more than women. To ensure that all customers are satisfied, the company has to provide extraordinary services that match with the society demands (Neild & Carysforth, 2004).
Consumers are using digital cameras to send images to electronic mail for social net working and thus Kodak Company should have moved with the social trend. This ensures that it is able to retain its customers and attract new ones.
Kodak failed to move with the society change from traditional photos which were used for personal memories to digital images used for social networking. Kodak retained the tradition of printing photos while society has changed to storing digitally taken images on-screen viewing.
The demographic composition changes with time and so the industry has to keep on revising its strategies to ensure that all customers are satisfied. For instance, the increased number of youths and teenagers are for digital cameras which the Kodak failed to invest in. This makes the company miss the rising market for digital cameras thus low revenues in return (Griffin, 2011).
Technology
The world is adopting technology in its processes of doing things. There is development of computers in different sectors of business (Campbell & Craig, 2005). Imaging industry has not been left behind as it has come up with digital cameras.
Kodak was the first to innovate the first digital camera but they failed to invent it because they feared it would not thrive. Technology is a critical aspect of the business environment for the industry. Use of internet has led to high demand for digital cameras. All the electronic companies are developing their own technologies with advance means for attracting global customers.
This has posed a great competitive pressure on the electronic retail market and same on the retail companies such as Kodak (Gavetti, Henderson & Giorgi, 2005). Internet has contributed greatly in making cameras communication devices as many people are using phones that have cameras.
Technology development in cameras brought about increase in operational costs as it requires highly skilled staff for production of equipments and marketing.
Kodak felt threatened with development of digital technologies because of its core chemical processing business. Kodak failed to venture into digital cameras and this has contributed greatly to its down fall (Gavetti, Henderson & Giorgi, 2005).
Environmental
Environmental factors have also affected the performance of the Kodak Company. This is because the company has been affected by the green issues due to its production of chemicals that are a hazard to the environment. This has affected construction of digital products by the Kodak Company (Gavetti, Henderson & Giorgi, 2005).
Legal
Joint-ventures have helped in the attempt to minimise its exposure in being a multinational company to the influences of national legal environments (Campbell & Craig, 2005).
SWOT Analysis
Strengths, weaknesses, opportunities and threats of Kodak Company.
Conclusion
Kodak Company had dominated in photography industry but it has not managed to stay at the top due to the current market trends. It failed to invent its own innovations of digital cameras which have dominated in the market today.
This was caused by poor strategic planning for future market opportunities and poor management. Kodak Company also experienced storms of technology advancement in the industry because many companies developed superior digital cameras that made the Kodak digital cameras loss market.
Political environment also contributed to the down fall of Kodak as it emphasised on regulations of printing images. Kodak failed to embrace the digital technology as society trends changed to digital images and social networking.
Reference List
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