KODAK  STRATEGIC  BLUNDER  Strategic  Management  (MBC712)  Prepared  for:  Dr  Azni  Zarina  Taha    Sharifah  Khairin  Syed  Mohd  Ali      BGA140013  Zakiah  Hanim  Mohd  Hamdan    BGA140014  

IntroducCon  to  128  years  of  Kodak  

By  1976  Kodak  accounted  for  90%  of  film  and  85%  of  camera  sales  in  America.  UnNl  the  1990s  it  was  regularly  rated  one  of  the  world's  five  most  valuable  brands.  

Kodak's  revenues  peaked  at  nearly  $16  billion  in  1996  and  its  profits  at  $2.5  billion  in  1999.  The  consensus  forecast  by  analysts  is  that  its  revenues  in  2011  were  $6.2  billion.  It  recently  reported  a  third-­‐quarter  loss  of  $222m,  the  ninth  quarterly  loss  in  three  years.  In  1988,  Kodak  employed  over  145,000  workers  worldwide;  at  the  last  count,  barely  one-­‐tenth  as  many.  Its  share  price  has  fallen  by  nearly  90%  in  the  past  year  

Kodak  poured  billions  into  developing  technology  for  taking  pictures  using  mobile  phones  and  other  digital  devices.  But  it  held  back  from  developing  digital  cameras  for  the  mass  market  for  fear  of  killing  its  all-­‐important  film  business.  

1880  founded  by  George  Eastman  

1888  Released  first  Eastman  Kodak  camera  ($25)  

1976    90%  of  film  and  85%  of  camera  

sales  in  America  

Patents  photographic  film  in  a  roll  

1891  Open  manufacturing  site  in  Harrow,  London  suburb  

1900  Launch  Brownie  camera  for  masses  ($1)  

1922  Produce  147,000  miles  of  moNon  picture  film/year.  

1925  William  Stuber  takes  over  

1969  Apollo  11  Moon  landing  

1975  First  to  make  digital  camera  

(23  secs)  

1994  Apple  launched  first  consumer  

digital  camera  –  QuickTake  

 Invest  in  digital  

imaging  products  for  

medical  pracNce  

2004  Abandons  film  

camera.  Cut  15,000  jobs  

2005  Revealed  wifi  consumer  digital  camera-­‐Kodak  easy  share.  Largest  digital  camera  retailer  in  US  ($5.7bn  in  sales)  

2007  Falls  to  4th  

biggest  digital  retailer  

2009  Stops  selling  35mm  colour  

film  

2010  Falls  to  7th  

biggest  digital  retailer.  

Removed  from  S&P  500  index  

2011  Shares  fall  more  than  80%  to  meet  pension  costs  

2012  Files  for  Chapter  11  bankruptcy  protecNon.  Delisted  from  NYSE    

Known  for  its  pioneering  technology  and  innovaNve  markeNng.    

1935  Introduced  colour  film  

1969  Introduced  InstamaNc  camera  

1997  Restructuring  eliminate  19,000  jobs,  reduced  $1bil  annual  cost  

1999  Entered  into  radiography  market  

2001  Pushed  into  

China  

2012  Exits  from  digital  image  market  

1980  Fuji  emerges  as  a  compe3tor    1990s  Decline  of  film  photography  

in  1975,  long  before  the  digital  age.  Mr  Sasson  and  his  colleagues  were  met  with  blank  faces  when  they  unveiled  their  device  to  Kodak's  bosses.  Even  he  didn't  full  see  its  potenNal.  "It  is  funny  now  to  look  back  on  this  project  and  realise  that  we  were  not  really  thinking  of  this  as  the  world's  first  digital  camera,"  

So  who  invented  the  digital  camera?  Ironically,  Kodak  did  –  or,  rather,  a  company  engineer  called  Steve  Sasson,  who  put  together  a  toaster-­‐sized  contrapNon  that  could  save  images  using  electronic  circuits.  The  images  were  transferred  onto  a  tape  cassene  and  were  viewable  by  anaching  the  camera  to  a  TV  screen,  a  process  that  took  23  seconds.  

What  went  wrong  with  Kodak’s  FuncConal  Strategy.  

Strategies      

Human  Resource   •  Employed  more  than  145K  staff  aqer  selling  90%  of  its  film  &  80%  of  its  camera  business  •  Injected  $800  million  into  UK  pension  fund  •  Unable  to  cut  unprofitable  operaNons  &  cut  back  on  pension  obligaNons  

Finance   •  Focused  more  in  protecNng  its  exisNng  cash  flow  than  to  look  at  what  the  market  wanted  •  2012-­‐  Managed  to  obtain  $615mill  debtor  in  procession  on  $950mill  commined  facility  

Research    &  Development,  Technology,  Product  Development  

•  1975  –  Steve  Sasson  invented  first  digital  camera  –  23  sec  from  film  to  screen  •  1990  –  invested  billions  in  technology  to  take  pictures  using  mobile  phones  &  devices  but  

held  back  in  developing  digital  cameras  for  the  mass  market  •  Spend  long  Nme  in  research  •  DisconnecNon  with  upper  Management  •  Before  late  1980s  -­‐  Not  aligned  with  business  strategies  

Supply  Chain  Management   •  Excess  inventory    •  Lack  of  product-­‐specific  informaNon  from  client  (hospital)  and  their  distributors  distorted  

figures  in  inventory  usage.  •  Only  in  2002,  Kodak  developed  lean  logisNcs  by  establishing  cross  docks.    •  Also  before  2002,  shipping  cost  was  very  expensive  because  they  didn’t  use  their  own  

truck.  

in  1975,  long  before  the  digital  age.  Mr  Sasson  and  his  colleagues  were  met  with  blank  faces  when  they  unveiled  their  device  to  Kodak's  bosses.  Even  he  didn't  full  see  its  potenNal.  "It  is  funny  now  to  look  back  on  this  project  and  realise  that  we  were  not  really  thinking  of  this  as  the  world's  first  digital  camera,"  

So  who  invented  the  digital  camera?  Ironically,  Kodak  did  –  or,  rather,  a  company  engineer  called  Steve  Sasson,  who  put  together  a  toaster-­‐sized  contrapNon  that  could  save  images  using  electronic  circuits.  The  images  were  transferred  onto  a  tape  cassene  and  were  viewable  by  anaching  the  camera  to  a  TV  screen,  a  process  that  took  23  seconds.  

What  went  wrong  with  Kodak’s  FuncConal  Strategy.  

Strategies      

Group  Planning   •  Buy  ready  made  businesses  instead  of  developing  in  house  technologies  •  Take  too  long  in  first  acquisiNon  when  it  wanted  to  diversify  the  business  •  Inability  to  recognise  consumer  needs  &  trends  •  Inability  to  focus  in  soluNons  &  find  new  markets  •  Enable  to  predict  the  collapse  of  the  pharmaceuNcal  industry  •  Failure  to  focus  on  product  diversificaNon    

Sales,  MarkeCng  &  DistribuCon  

•  Refuse  to  use  its  name  in  the  development  of  QuickTake  digital  camera  •  Kodak  was  not  interested  to  sponsor  Los  Angeles  Olympics  in  1984  and  gave  it  to  Fuji  •  Kodak  refused  to  reduce  prices  and  make  room  for  compeNtor  Fuji  to  gain  bigger  market  

share  •  American  consumers  opt  of  compeNtor  as  long  as  it  is  cheaper  •  Kodak  hoped  to  sNll  be  relevant  in  developing  economies  that  sNll  uses  film  and  not  

digital  cameras.  

Management   •  1975  –  failed  to  recognise  Steve  Sassons  invenNon  afraid  to  kill  its  film  business  •  Unable  to  see  an  opportunity  in  creaNng  the  world’s  first  digital  camera  •  To  slow  in  changing  &  suffered  a  mentality  of  “Perfect  Products”  •  Are  not  exposed  to  developments  outside  of  Rochester  –  insular  culture  •  Constant  change  of  CEO  &  business  strategy  

Kodak  Shares  Takes  a  Plunge  

By  1976  Kodak  accounted  for  90%  of  film  and  85%  of  camera  sales  in  America.  UnNl  the  1990s  it  was  regularly  rated  one  of  the  world's  five  most  valuable  brands.  

Kodak's  revenues  peaked  at  nearly  $16  billion  in  1996  and  its  profits  at  $2.5  billion  in  1999.  The  consensus  forecast  by  analysts  is  that  its  revenues  in  2011  were  $6.2  billion.  It  recently  reported  a  third-­‐quarter  loss  of  $222m,  the  ninth  quarterly  loss  in  three  years.  In  1988,  Kodak  employed  over  145,000  workers  worldwide;  at  the  last  count,  barely  one-­‐tenth  as  many.  Its  share  price  has  fallen  by  nearly  90%  in  the  past  year  

1996  Revenue  $16  

Billion  

1990s  Decline  of  film  photography  

1999  Profits  $2.5  

Billion  

Suffered  3rd  quarter  loss  of  $222  million    (9th  quarterly  loss  in  3  years)  

How  did  Kodak’s  FuncConal  Strategy  Affect  its  Business  Strategy  

Alliances    

Research    &  Development,  Technology,  Product  Development    Apple  •  Develop  QuickTake  digital  camera  

 

     •  Late  mover  in  the    business  segment  

due  to  its  tradiNonal  and  rigid  culture  

•  No  longer  known  as  pioneering  in  technology  &  innovaNve  markeNng  

AcquisiCon   Sterling  Drug  for  $5.1  billion   •  Wrong  investment  &  lack  of  risk  management  assessment  

Expansion   Sales,  MarkeCng  &  DistribuCon  Sale  of  film  rolls  and  cameras  into  China    Geographical  limitaCon  Rochester    

 •  Failed  to  anNcipate  market  wants  –  

leapfrog  syndrome      •  Limited  exposure  due  to  not  having  

internaNonal  physical  presence  leading  to  Fujifilm  taking  over  market  share  

•  Not  having  an  office  in  silicon  valley  prevents  from  further  innovaNon  and  knowing  new  technology  development  

Management  &  Group  Planning    

Inability  to  see  opportuniNes  and  new  markets  

•  Missed  opportunity  to  develop  technology  beyond  digital  cameras  

•  Prevented  growth  of  in-­‐house  capabiliNes  

 

Konica  Minolta    

Lower  Cost  

Overall  Low-­‐cost  Provider  Strategy  1900:  Introduced  the  first  Brownie  Cameras.  Sold  for  $1  and  film  is  15  cents.      

Broad  DifferenCaCon  Strategy    1923:Kodak  made  amateur  moNon  pictures  pracNcal  with  the  introducNon  of  16  mm  reversal  film  on  cellulose  acetate  (safety)  base,  the  first  16  mm  CINE-­‐KODAK  MoNon  Picture  Camera,  and  the  KODASCOPE  Projector  1928:  The  first  microfilm  system  1929:The  company  introduced  its  first  moNon  picture  film    

Focused  Low-­‐Cost  Strategy      

Focused  DifferenCaCon  Strategy    2000  :  Kodak  introduced  45  new  products  in  digital  imaging  (dental  radiography)  2004:Produced  a  mammography  computer  aided  detecNon  system  design  to  assist  with  breast  cancer.    Focused  on  commercial  prints  and  publishing  applicaNons.    

Kodak  Generic  CompeCCve  Strategies.  

DifferenCaCon  

Broad  cross  secCon  of  buyers  

Narrow  buyer  segment  (or  Market  Niche)  

•  Core  competency  cause  Kodak  to  be  rigid  •  Lack  of  market  research  •  Slow  in  entering  the  digital  photography  

scene  •  Failed  innovaNon  and  transformaNon  •  Unwilling  to  change  •  Kodak  acted  like  a  stereotypical  change-­‐

resistant  Japanese  firm,  while  Fujifilm  acted  like  a  flexible  American  one.  

The  Reasons  to  Kodak’s  Failure  

Kodak  Four  Pillar  Strategy  (2000  –  2005)  

Strategies  

Managing  the  tradiNonal  Film  business    

•  Slow  exit  strategy  from  film  business  •  Digital  technology  to  support  film  business  

Leading  in  distribuNon  output    

•  Failed  to  see  the  migraNon  from  tradiNonal  photography  prinNng  to  digital  imaging  transfer/sharing  

Growing  the  digital  capture  business    

•  Low  profit  in  digital  photography  in  comparison  to  tradiNonal  photography  

Expanding  digital  imaging  services    

•  Expanded  their  products  and  services.  E.g.  Kioks  that  print  image  directly  from  mobile  phone  

•  Kodak  acquired  Ofodo  to  boost  Kodak  Easy  Share  Gallery,  an  online  service  

Daniel  A  Carp  CEO/Chairman  

Kodak  Strategy  (2005  –  Present)  

Strategies  

Outsourcing  Manufacturing    

•  Did  not  achieve  integraNon  of  external  with  internal  knowledge  

•  Unable  to  compete  in  the  high  end  spectrum  of  cameras  

InvesNng  in  Digital  Technology    

•  Shunering  digital  camera  business  

Build  High  Margin  Printer  Ink  Business    

•  Ending  home  printer  business  –  end  of  desktop  printer  line  

•  Focus  on  the  use  of  prinNng  technology  as  a  form  of  manufacturing  –  commercial  and  packaging  prinNng  &  serving  the  industry  

Aggressive  Patent  LiNgaNon   •  Completed  transacNon  for  the  sale  &  licensing  of  its  digital  imaging  patents  for  net  proceeds  of  $527  million  

Expand  Brand  Licensing  Programme   •  Phase  out  dedicated  capture  devices  business  –  digital  cameras,  pocket  video  cameras,  digital  frames  

•  Online  and  retail  base  photo  prinNng  &  desktop  inkjet  prinNng  

Internal  Restructuring   •  Cut  reNree  dependency  •  Sold  off  &  shut  down  business  lines  and  assets  •  Reduced  20%  of  its  workforce  

Antonio  M.  Perez  CEO