Se ha denunciado esta presentación.
Utilizamos tu perfil de LinkedIn y tus datos de actividad para personalizar los anuncios y mostrarte publicidad más relevante. Puedes cambiar tus preferencias de publicidad en cualquier momento.
1
Eastman Kodak Company:
An Industry and Company Analysis
William Duncan
Todd Bailey
2
Table of Contents:
Brief History & Introduction…………………………………………………………………………….......3
External Analysis:
Industry Overvie...
3
Brief History & Introduction:
Eastman Kodak Company
At first, photography was a “studio-based activity,” mostly used by
...
4
External Analysis
Industry Overview
For the purposes of this analysis, Eastman Kodak will be classified under the
Digita...
5
Technology has allowed the Digital Imaging industry to have many fingers
and uses due to the wide array of applications ...
6
The General Environment
Economic:
The economic crisis of 2008 has continued to effect domestic and global
markets throug...
7
Socio-cultural:
Smartphones and cameras in smartphones have caused picture-sharing
social media to boom. Facebook, for e...
8
media sites have almost completely eliminated the need to carry portable cameras
and use image sharing platforms such as...
9
solutions such as in healthcare, which is why they closed a majority of that
department except for imaging products.
Int...
10
between Fujifilm and Eastman Kodak represents Fujifilm’s success. In 1992,
Eastman Kodak had $20,577 million in sales, ...
11
photographic papers, and electronic components that are used in the manufacturing
of commercial printers and other elec...
12
research efforts in imaging, and, during 2000-2005, its labs in the US, U.K., France,
Japan, China, and Australia had e...
13
compared to Hewlett-Packard’s 60% market share (Grant, 578). Lastly, the switch
from photography film to digital photos...
14
Eastman Kodak’s Current Strategies
Eastman Kodak’s strategy took a transformational change into digital
imaging. The co...
15
believed was essential to its strategy (Grant, 575-76). Eastman Kodak’s emphasis on
printed images was criticized of al...
16
awareness and increase sales by providing more diversified products to consumers.
It is unreasonable to think that goin...
17
Bibliography
Works Cited
"Digital Imaging: CE-Sales in the U.S. 2005-2012 | Statistic." Statista. N.p., n.d. Web. 14
Ma...
Próxima SlideShare
Cargando en…5
×

Eastman Kodak Case Analysis

14.709 visualizaciones

Publicado el

  • Sé el primero en comentar

Eastman Kodak Case Analysis

  1. 1. 1 Eastman Kodak Company: An Industry and Company Analysis William Duncan Todd Bailey
  2. 2. 2 Table of Contents: Brief History & Introduction…………………………………………………………………………….......3 External Analysis: Industry Overview…………………………………………………………………….……………4-6 General Environment……………………………………………………………………………..6-7 The Industry Environment: Porter’s Five Forces………………..….………………...7-8 Competitive Groups………………………………………………………………………….…….8-9 Internal Analysis: Financial Analysis……………………………………………………………………...…………9-10 Tangible & Intangible Resources…………………………………………………….…...10-11 Core Competencies……………………………………………………………………………….…11 SWOT Analysis………………………………………………………………………...…………12-13 Eastman Kodak’s Current Strategies……...…………………………….………………12-14 Major Problems…………………………………………………………………..…………………..15 Future Strategies………………..…………………………………………..…………………..15-16 Bibliography……………………………………………………………………………………………..............17
  3. 3. 3 Brief History & Introduction: Eastman Kodak Company At first, photography was a “studio-based activity,” mostly used by professions, that was transformed by George Eastman into a rapidly growing hobby that could be consumed by anybody (Grant, 568). The first fully portable camera and silver halide roll film sparked Kodak to start a company in Rochester, New York that “offered a full range of products and services for the amateur photographer. Kodak quickly became a leader in portable photography with “production, distribution, and processing facilities throughout the world and with one of the world’s most recognizable brand names” (Grant, 569). Kodak began to expand its brand by diving into chemicals and healthcare after the Second World War. The company was aware of emerging technologies and “as early as 1979 Kodak produced a remarkably accurate forecast of the evolution of digital imaging and it had been a pioneer of digital cameras” (Grant, 584). In 1980, Kodak’s R&D launched initiatives which “resulted in products that embodied several new electronic technologies” (Grant, 569). From 1993-2012, Kodak has been attempting to transform “from a traditional photographic company to a leader in the emerging field of digital imaging” (Grant, 570). During this stretch, Kodak embodied four themes, one of which most likely being the most detrimental strategy to the business: “harvesting the traditional photography business” (Grant, 570) and the belief that customers would be “bewildered by the pace of technological change” (Grant, 572). Kodak began to analyze their strengths and weaknesses and acknowledged that other companies had distinct competitive advantages and underwent multiple mergers and acquisitions to capitalize on their individual capabilities. Currently, Kodak is a digital imaging company who focuses on mostly imaging for commercial purposes, for example, 3D printing and motion picture and commercial films but has entered a bankruptcy plan as of January 2012.
  4. 4. 4 External Analysis Industry Overview For the purposes of this analysis, Eastman Kodak will be classified under the Digital Imaging industry, acknowledging that the industry contains sub-industries that, when combined, place a company in the Digital Imaging industry. Recent trends have not been friendly to the Digital Imaging industry. According to Statista.com, digital imaging unit sales in the United States have incrementally decreased each year since 2010 (Digital Imaging Sales in the United States 2009-2012 | Statistic). The sales of digital imaging in the United States parallels this trend, peaking in 2008 and, like many industries due to the economic crisis of 2008, has been consistently declining to an eight year low of $6,695 million (Digital Imaging: CE- Sales in the U.S. 2005-2012 | Statistic). 44 45 46 47 48 49 50 51 52 53 54 2009 2010 2011 2012 Total Unit Sales in Millions Total Unit Sales in Millions
  5. 5. 5 Technology has allowed the Digital Imaging industry to have many fingers and uses due to the wide array of applications for digital imaging. Uses range from personal photography to medical to commercial and film. The industry and sub-industries are full of “many players, low entry barriers, falling real prices, and commoditization” (Grant, 580). In the healthcare imaging market, or diagnostic imaging, which includes digital radiology, “is estimated at $9.7 billion in 2012 and expected to reach $13.3 billion by 2018, at a compound annual growth rate of 5.4 percent from 2012 to 2018.” North America holds the strongest segment of this market with about 41.9 percent of the market revenue share in 2012. “However, emerging economies, including China, India, Brazil, and Mexico, are expected to witness high growth rates in the next six years” (Digital Radiology Global Market to Reach $13.3 Billion by 2018). Commercial photography did see positive growth in 2012. According to Statista.com, revenue of commercial photography in the US grew from $1,532 million in 2011 to $1,699 in 2012 and is forecasted to almost reach $2,000 million in 2020 (Forecast: Commercial Photography Revenue United States 2020 | Statistic). 0 2000 4000 6000 8000 10000 12000 2005 2006 2007 2008 2009 2010 2011 2012 Sales in Millions US dollars Sales in Millions US dollars
  6. 6. 6 The General Environment Economic: The economic crisis of 2008 has continued to effect domestic and global markets through 2012. Technological: Smartphones are continually increasing putting cameras on phones and developing the technology for the smartphone cameras. Digital cameras have become the standard for commercial and personal photography as prices for cameras continue to fall as technology improves and becomes more available to the public. Political/Legal: Regulations such as the “Toxic substances control act, clean air and water act, etc. impact the way [the industry] manufactures products and process waste for proper disposal” (Lan, Tony). 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2008 2009 2010 2011 2012 Revenue of Commercial Photography in the United States Revenue in millions US Dollars
  7. 7. 7 Socio-cultural: Smartphones and cameras in smartphones have caused picture-sharing social media to boom. Facebook, for example, purchased Instagram, in 2012 for $1 billion (Lan, Tony). The Industry Environment: Porter’s Five Forces Bargaining Power of Buyers: The bargaining power of buyers is particularly high, especially regarding consumer electronics in digital imaging. Demand is extremely volatile while technology changes can cause well-established subsidiaries like GE’s and Kodak’s healthcare departments to be sold or shut down (Lan, Tony). Bargaining Power of Suppliers: Due to suppliers being located numerously around the world, supplier power is low. Most raw and finished materials needed for products in this industry can be commonly found, thus “Kodak has several supplier contracts spanning one to three years” (Lan, Tony). Threat of New Entrants: Research and development of new products and technologies to stay ahead of such a volatile industry would bring trouble to any new, inexperienced player looking to enter the industry. Not only that, the high capital needed to enter and succeed in this industry to purchase “printing equipment such as hardware, software, photographic paper and chemicals is estimated to be 45.7% of purchases versus wages at 26.8% of revenue, making the threat of new entrants low, but possible. (Lan, Tony). Threat from Substitutes: There is an extremely high threat from substitutes as the technology in mobile phones develops faster and faster. Cameras in mobile phones and social
  8. 8. 8 media sites have almost completely eliminated the need to carry portable cameras and use image sharing platforms such as Kodak’s Easyshare (Lan, Tony) . Rivalry from Existing Players: The rivalry from existing players in the digital imaging industry is also very high. Just in media sharing, Kodak’s Easyshare, Shutterfly, Snapfish, Walmart.com’s Photo Center, Fujifilmnet.com Yahoo Photos, and Sears.com all compete with social media sites like Instagram. Consumables also hold many strong players including Hewlett-Packard, Xerox, 3M, and Oji (Lan, Tony). Strategic Groups One thing that is unique about this industry is the wide variety of strategies used by the companies under this classification. Ultimately, all companies are science-focused with the application of the sciences being utilized in many forms. However, companies like Kodak, Fujifilm, and Hewlett-Packard are all focused on business solutions and products, rather than intensive scientific research. These companies do not have the strongest scientific research capabilities and know that companies such as 3M and Xerox have R&D capabilities that affect other industries. 3M and Xerox are examples of the next strategic group. This group is much more scientific and research based. Companies in this group focus more on creating technological solutions and improvements. For example 3M has divisions that work on creating efficient energy, mining, and automotive solutions as well as many more. Apple, Samsung, and other smartphone producers are a part of the third strategic group. These companies do not focus on digital imaging; however, with the new influx of demand for phone cameras and the popularity of photo-sharing social media outlets, these companies have essentially taken over the portable camera market. Digital single-lens reflex cameras (DSLR) are not as commonly seen on the streets as often as one sees people taking pictures on their phone. These companies are more focused on computer and software than digital imaging solutions. The difference between the two groups is recognition of capabilities and competencies. Kodak, for example, has acknowledged that they are inefficient at
  9. 9. 9 solutions such as in healthcare, which is why they closed a majority of that department except for imaging products. Internal Analysis Financial Analysis On January 19, 2012, Eastman Kodak Company had to declare bankruptcy (“voluntary Chapter 11 business reorganization”) after being a strong competitor in its industry (18th biggest company by revenues in 1991 and 34th biggest company by revenues in 2011). The Chapter 11 bankruptcy filing allowed Kodak the freedom to cut retiree health benefits. However, because the company had to file for bankruptcy, it could not escape its pension obligations; the UK pension fund required an additional $800 million top-up. Under the Chapter 11 protection, the company could not seek new sources of financing so Kodak would be constrained to strategic initiatives that required additional capital expenditure. By the end of the first quarter of 2012, Kodak’s financials showed improvements such as Selling, General and Administrative expenses down $84 million and investment in unprofitable business were cut, and Kodak’s cash balance was $1.4 billion, up $500 million from the end of 2011 (Grant, 582). Next, we calculated some profitability ratios for the company to see how they were performing. The first ratio we calculated was the company’s return on assets, which we calculated it to be around - 16%. Its negative net earnings and its larger amount of total assets caused such a calculation. Next, we calculated the company’s net profit margin, which we calculated it to be almost -13% because of its negative net earnings with high sales. The main financial comparison we can see is the comparison of Eastman Kodak and Fujifilm Holdings Corporation. Both companies had strong similarities, but the main difference was how the two companies responded to the digital revolution with different strategies that led to different financial performances. The big difference was Fujifilm’s diversity compared to Kodak’s diversity. Fujifilm was very successful in their transformation; the financial comparison in 1992 and 2011
  10. 10. 10 between Fujifilm and Eastman Kodak represents Fujifilm’s success. In 1992, Eastman Kodak had $20,577 million in sales, $1,146 million in net income, and 132,000 employees compared to Fujifilm who had $9,126 million in sales, $593 million in net income, and 24,868 employees. However, in 2011 the two companies saw different financial performances. In 2011, Eastman Kodak had $6,022 million in sales, $-764 million in net income, and 17,100 employees compared to Fujifilm who had $27,440 million in sales, $1,412 million in net income, and 35,274 employees. The comparison between the two companies proves how one company’s transformation strategy was better than the other. Tangible & Intangible Resources When analyzing the Eastman Kodak’s case, the internal analysis part required that we distinguish between the company’s tangible and intangible resources. Our first step was to determine its major tangible resources: property, plant, and equipment. Because of their recent financial performances, Eastman Kodak had declared bankruptcy and relied on transformational changes in order for it to regain its competiveness and performance within its industry. Ending 2011, Eastman Kodak had $895 million in property, plant, and equipment, a decrease from 2009, its lowest included on the balance sheet since 2006. The decrease in property, plant, and equipment is a result from its past performances where it totaled $3.8 billion in operating losses during the first decade of this century. In order to compensate for their financial position, Eastman Kodak had to transform its business and make cuts and changes, so it can reach its performance and gain a competitive advantage it once had. Since 2003, the CEO Antonio Perez said that it has “already effectively exited certain traditional operations, closing 13 manufacturing plants and 130 processing labs, and reducing our workforce by 47,000” (Grant, 568). Other raw materials that make up its tangible resources are lithographic aluminum which is the primary material used in the manufacture of offset printing plates, Silver is an essential material used in the manufacture of films and photographic papers, paper base is an essential material in the manufacture of
  11. 11. 11 photographic papers, and electronic components that are used in the manufacturing of commercial printers and other electronic devices (investor.kodak.com). The next step in our internal analysis of Eastman Kodak was to determine the intangible resources: technology, skills, brand, and reputation. The original strength of Kodak’s intangible resources was its brand and global distribution presence. Kodak’s brand has been its key strength, but the two decades of decline and technological changes weakened its image. In 2011, MPP Consulting had ranked Kodak the 77th most valuable US brand. Its distribution presence was unrivalled in its industry, but it was weakened from decline and technological changes; the declining demand for printed photographs will weaken its distribution presence. Another intangible resource is its technology. It maintained being one of the world’s biggest research efforts in imaging, and, in 2000-2005, Kodak’s research labs in the US, U.K., France, Japan, China, and Australia had employed over 5,000 engineers and scientists. Its technological efforts helped issue them 16,760 patents between 1975 and 2011, but the company sought to sell some of the patents in order to help raise capital (Grant, 581). Lastly, Eastman Kodak’s new product development struggled to transition into the fast-cycle world of electronics despite its strengths in basic and applied research and its long history of successful new product launches (Grant, 582). Core Competencies Eastman Kodak’s core competencies are fundamental towards their success and how they promote their business and gain competitive advantages over their rivals. The main core competency is Kodak’s brand. Even though they took a drastic financial downturn and had to file bankruptcy, MPP Consulting ranked Eastman Kodak the 77th most valuable US brand in 2011. The next core competency is its distribution system for its distribution system was still unrivaled in the industry (Grant, 581). The use of brand loyalty and its distribution system could have offered hybrid solutions during the transition period between traditional and digital imaging (Grant, 581). Lastly, their core competence lies within their R&D for technology. For two decades, Eastman Kodak had one of the world’s biggest
  12. 12. 12 research efforts in imaging, and, during 2000-2005, its labs in the US, U.K., France, Japan, China, and Australia had employed more than 5,000 engineers and scientist with more than 600 PhDs (Grant, 581). SWOT Analysis Strengths: Eastman Kodak’s strengths help distinguish what competitive advantages it has over other competitors within its industry. The main strength the company has is its strong brand name. Even at Eastman Kodak’s weakened state, they are still ranked in the top 100 for the most valuable US brand name. Next, their vast distribution system is unrivalled in its industry, but the declining demand for printed images can depreciate the asset that once was unrivalled. Kodak also has a strong R&D by focusing on technology. Its research efforts in imaging brings a lot of capabilities that Eastman Kodak could capitalize. Lastly, their portfolio of acquisitions and strategic alliances or joint ventures provided balance sheet strength that meant it was still one of the strongest firms financially in the industry (Grant, 576). Weaknesses: The key weakness to Eastman Kodak was its decision to transform its capability base from chemical to digital imaging. This ended up being a major weakness for Eastman Kodak because it required CEO George Fisher to launch a major hiring campaign to put in place the executives and specialists required for its new digital strategy. A major problem with the transformation was that Kodak was entering a new chain of digital imaging that already included well established companies (Grant, 575). Another weakness was its emphasis on printed images, Perez’s major investment to build Kodak’s presence in the market for consumer inkjet printers. This was most widely criticized of all of Kodak’s digital imaging initiatives because it was trying to establish itself in a very mature, intense competitive market, and by 2011, Eastman Kodak held only 6% of the US market
  13. 13. 13 compared to Hewlett-Packard’s 60% market share (Grant, 578). Lastly, the switch from photography film to digital photos was a questionable decision because they now are placed in a highly competitive and mature market. The main comparison we can see is by comparing Kodak with Fujifilm. Like Eastman Kodak, Fujifilm made major changes to adapt to the emerging markets. Unlike Eastman Kodak, Fujifilm was very successful with its diversity and enabled it to make selective acquisitions and its technical capabilities resulted in several discoveries (Grant, 585). Opportunities: Eastman Kodak’s opportunities provide insight for what it should do for the future in order to become competitive once again and bounce back from their poor financial performances. Opportunities such as continuing research for new technologies can help Eastman Kodak gain a competitive advantage over rivals in the industry. It can help the company better meet their customers’ needs and improve new products allowing them to diversify. Another opportunity would be for the company to tap into new emerging markets such as Brazil and India. Threats: Threats can cause Eastman Kodak and the rest of the industry to fail and have poor financial performances. In times of recession or poor economic times can cause a reduction in customers and decrease sales and revenues. Another threat is the intense competition because rivals within the industry can offer superior products that could attract customers away from Eastman Kodak. Substitute products such as the new smartphones can hurt the company from gaining sales and revenues. Because smartphones are becoming more widely available and more enhanced, people are able to capture quality images with the smartphone. Lastly, the transition into digital imaging is a huge threat because they entered a market where they did not strategize properly, and it drastically hurt their performance.
  14. 14. 14 Eastman Kodak’s Current Strategies Eastman Kodak’s strategy took a transformational change into digital imaging. The company developed a strategy to transform Kodak from a traditional photographic company into a leader in the emerging market of digital imaging. The fundamental challenges that they faced was the transformation from analogue technology to digital technology, long design cycle to rapid prototyping, industrial manufacturing process to flexible manufacturing process, value based on physical products to value based on solutions, mass-produced and large inventories to just- in-time and just-in-place inventories, and the transformation of high margins and heavy infrastructure to lower margins and a lean organization. Their strategy included four major themes: “an incremental approach to managing the transition to digital imaging; different strategies for the consumer market and for the professional and commercial markets; external sourcing of knowledge through hiring, alliances, and acquisitions; and emphasis on printed images; [and] harvesting the traditional photography business” (Grant, 570). The incremental approach theme was a hybrid approach where “Kodak introduced those aspects of digital imaging that could offer truly enhanced functionality for users” (Grant, 571). The consumer market strategy emphasis was to maintain its position as mass-market leader by providing simplicity, quality, and value. So, Kodak offered a variety of services that would allow customers to digitize conventional photographs, edit images, and obtain printed photographs in an array of formats. In 2001, they launched Kodak’s EasyShare system (Grant, 572-73). The company’s strategy for professional and commercial markets was very important because “they were lead customers for many of Kodak’s cutting-edge digital technologies” (Grant, 574). The company established a strong position in commercial scanning, formatting, and printing systems because of its proprietary inkjet technologies and its leadership in variable-data printing. The hiring, alliances, and acquisitions strategy implemented by George Fisher was intended to put in place executives and specialists needed for its new digital strategy. Eastman Kodak faced challenged where it can add value, so it partnered with companies in leading technologies and made acquisitions where it
  15. 15. 15 believed was essential to its strategy (Grant, 575-76). Eastman Kodak’s emphasis on printed images was criticized of all its digital imaging initiatives because it was entering a highly intense and mature market. Its strategy for harvesting the traditional photography business was because of its failed future forecasts to emerging market demand, so it accelerated its withdrawal from the film industry. It withdrew several film products and other unprofitable markets such as cameras and its Kodak EasyShare Gallery. Lastly, it had to accelerate its job cutting in order to accompany its recent financial performances (Grant, 578-79). Major Problem The main problem for Eastman Kodak was the transformation to digital imaging with the growing trend for consumers to view their photographs on screen rather than in printed form. It had invested heavily in building digital capabilities and launching new products, but it failed miserably to generate income, posing the main question of what the future holds for Eastman Kodak (Grant, 569). Future Strategies With Eastman Kodak’s recent financial performances being so poor, we hope our future strategies will help make a turnaround for the company. Our first main strategy would be to disband the Consumer Digital Imaging Group Segment of digital capture and devices, but keep its retail systems solutions, consumer inkjet systems, and consumer imaging services. We recommend they keep these services around because they have the largest installed base of retail photo kiosks in the world, their investment in technology provides numerous capabilities for their inkjet systems, and because they are a leader in online merchandise and photo sharing service. To go along with their Consumer Group, we recommend they create an optics division in the Consumables segment. With doing so, we also recommend they partner with a company such as Ray Ban Sunglasses or Costa del Mar since they are established as an industry leader in optics and style to help increase consumer
  16. 16. 16 awareness and increase sales by providing more diversified products to consumers. It is unreasonable to think that going into the optics industry against such strong, established competitors would be smart. However, partnering with an established brand would present opportunities to give those companies a competitive advantage and sell more products, thus selling more optic glass, and use the optic company as a platform for advertisement through partnership. Customers who buy glasses will notice the advantage of glasses with Kodak lenses and be intrigued to further look into other Kodak consumer products.
  17. 17. 17 Bibliography Works Cited "Digital Imaging: CE-Sales in the U.S. 2005-2012 | Statistic." Statista. N.p., n.d. Web. 14 Mar. 2016. <http://www.statista.com/statistics/191919/sales-of-digital-imaging- in-the-us-since-2005/>. "Digital Imaging Sales in the United States 2009-2012 | Statistic." Statista. N.p., n.d. Web. 14 Mar. 2016. <http://www.statista.com/statistics/247376/digital-imaging- sales-in-the-united-states/>. "Digital Radiology Global Market to Reach $13.3 Billion by 2018." Imaging Technology News. N.p., n.d. Web. 14 Mar. 2016. <http://www.itnonline.com/article/digital- radiology-global-market-reach-133-billion-2018>. "Forecast: Commercial Photography Revenue United States 2020 | Statistic." Statista. N.p., n.d. Web. 14 Mar. 2016. <http://www.statista.com/forecasts/409758/united- states-commercial-photography-revenue-forecast-naics-541922>. Lan, Tony. "Case Study: Eastman Kodak - Strategy Vault." Strategy Vault. N.p., 27 Jan. 2012. Web. 14 Mar. 2016. <http://www.strategyvault.com/2012/01/27/case-study- eastman-kodak/>. "Our Company." Our Company. N.p., n.d. Web. 14 Mar. 2016. <http://www.kodak.com/ek/US/en/About_Kodak_Top/Our_Company.htm>. Rusli, Evelyn M. "Facebook Buys Instagram for $1 Billion." New York Times. N.p., n.d. Web. 14 Mar. 2016. <http://dealbook.nytimes.com/2012/04/09/facebook-buys- instagram-for-1-billion/?_r=0>.

×