As a profession and a hobby, photography has seen a lot of interest in recent times. I'm sure many of you have used a camera. And I'm sure, if you're old enough, you've heard of a brand called Kodak - the name that every other photographer would utter at the very mention of a film camera.
Eastman Kodak, or more popularly referred to as Kodak, has seen it all over the years - the consistent growth, the rise, the fall, the bankruptcy, and the recovery. This makes it an excellent candidate for a strategic analysis of its business.
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Events:
A look at the timeline reveals most of the factors that led to the rise and fall of this great company:
1880 - Company started by George Eastman
1885 - Kodak introduces the first film role.
Eastman believes that success comes from user-friendly products - make photography "as convenient as the pencil."
1888 - Kodak camera is marketed with the slogan, “You press the button, we do the rest.” (see picture above)
1890's to 1960's - The company focuses on mass production, extensive advertising, customer focus, and continuous research.
It employs a razor blade strategy - sells cameras for low cost while films drive growth and profits.
Barriers to entry become exceedingly high because of the knowledge that Kodak holds.
1962 - Reaches $1 billion in sales.
1976 - Kodak commands 90% of film sales and 85% of camera sales in the U.S., according to a 2005 case study for Harvard Business School.
Fuji introduces 400-speed color film, which cost 20% less than Kodak's.
1981 - Reaches $10 billion in sales.
Fuji becomes the official sponsor of 1984 Olympics.
Sony launches its first digital camera.
1983 - Kodak CEO Colby Chandler decides to move Kodak from tradition business to digital.
1986 - Kodak introduces the world's first 1.4MP image sensor.
1989 - Focus on image acquisition, storage, software, and printer products.
1991 - Introduces Photo CD (a film substitute, intended to set standards in the digital industry).
1993 - George Fisher, former CEO of Motorola, hired as the CEO (first outsider).
Fisher believes Kodak's strength lies in imaging - image capture, processing, storage, output, and delivery.
1995 - Introduces DC40, a point and shoot digital camera. Only two other models priced less than $1000 in the market.
1996 - 25 different brands of digital cameras under $1000 in the market.
1997 - Kodak separates business into consumer and commercial segments
1998 - Ventures into Chinese retail film market with a $1.1 billion deal.
Fuji slashes color film prices by as much as 30% in the United States to gain market share.
1999 - Kodak's focus changes from film, paper, and chemicals to image capture, services, and image outputs.
2002 - Kodak ventures into digital processing for photos taken by analog cameras.
2003 - digital cameras remain unprofitable.
2012 - Kodak files for Chapter 11 bankruptcy protection.
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Analysis:
So what made a company that was, at one time, a leader in its industry to file for bankruptcy protection in 2012?
In one word - changing times. The photography and imaging industry moved from traditional film-based to digital. Kodak, however, was not able to transition as quickly as the market did.
1. Industry leaders in film to average competitors in digital:
Kodak was the frontrunner in the film-photography industry having introduced the film cameras itself.
Thus, there was a huge barrier to entry for its competitors as they didn't have the know-how of the production and development. But in the digital age, Kodak had not yet established itself. So its competitors had a lot of scope to enter and capitalize the rising market.
2. Early entry in film to late entry in digital:
Kodak had a lot of time to create, develop, and establish its brand and products in the film era. In the digital age, however, the pace of development was extremely high and the company failed to stay ahead in the race.
3. Focus:
In the traditional business, Kodak had a solid focus. It would sell cameras at a cheap price and drive its growth and profit from film sales. With the advent of the digital age, this focus was lost and replaced by ever-changing business strategies that focused on digital photography at one point and digital imaging at another.
4. Replicating the business model:
Kodak created the concept of film-based photography and being the frontrunner of the industry, its competitors followed suit. In the digital age, Kodak thought that it could do the same (even though it was not the industry leader) and introduced the Photo CD, which would replace the film and would allow Kodak to retain its razor-blade business model.
5. Profitability:
The digital photography industry was not as profitable as the film-based industry was. This caused the company to sell digital cameras at a loss, thereby driving the revenues down and costs up.
6. Price wars:
Fuji slashed the price of its films to gain market share. Kodak's investments at this time were going towards developing digital imaging products, which were not profitable. This meant Kodak would lose out on both fronts - digital and film-based.
The above 6 factors together brought a once shining company to its rather sad fall.
Had Kodak adopted the digital technology as openly and rapidly as its competitors, it would not be out of the race.
Digital photography, then, is a disruptive technology, the success of which depended on the fall of film-based photography. And with disruptive technology, however superior it may be, comes downfalls.
With that, I end this post.
Adios,
Ganesh
"Patience, persistence, and perspiration make an unbeatable combination for success." - Napoleon Hill
Eastman Kodak, or more popularly referred to as Kodak, has seen it all over the years - the consistent growth, the rise, the fall, the bankruptcy, and the recovery. This makes it an excellent candidate for a strategic analysis of its business.
-------------------------------------------------------------------------
Events:
A look at the timeline reveals most of the factors that led to the rise and fall of this great company:
1880 - Company started by George Eastman
1885 - Kodak introduces the first film role.
Eastman believes that success comes from user-friendly products - make photography "as convenient as the pencil."
1888 - Kodak camera is marketed with the slogan, “You press the button, we do the rest.” (see picture above)
1890's to 1960's - The company focuses on mass production, extensive advertising, customer focus, and continuous research.
It employs a razor blade strategy - sells cameras for low cost while films drive growth and profits.
Barriers to entry become exceedingly high because of the knowledge that Kodak holds.
1962 - Reaches $1 billion in sales.
1976 - Kodak commands 90% of film sales and 85% of camera sales in the U.S., according to a 2005 case study for Harvard Business School.
Fuji introduces 400-speed color film, which cost 20% less than Kodak's.
1981 - Reaches $10 billion in sales.
Fuji becomes the official sponsor of 1984 Olympics.
Sony launches its first digital camera.
1983 - Kodak CEO Colby Chandler decides to move Kodak from tradition business to digital.
1986 - Kodak introduces the world's first 1.4MP image sensor.
1989 - Focus on image acquisition, storage, software, and printer products.
1991 - Introduces Photo CD (a film substitute, intended to set standards in the digital industry).
1993 - George Fisher, former CEO of Motorola, hired as the CEO (first outsider).
Fisher believes Kodak's strength lies in imaging - image capture, processing, storage, output, and delivery.
1995 - Introduces DC40, a point and shoot digital camera. Only two other models priced less than $1000 in the market.
1996 - 25 different brands of digital cameras under $1000 in the market.
1997 - Kodak separates business into consumer and commercial segments
1998 - Ventures into Chinese retail film market with a $1.1 billion deal.
Fuji slashes color film prices by as much as 30% in the United States to gain market share.
1999 - Kodak's focus changes from film, paper, and chemicals to image capture, services, and image outputs.
2002 - Kodak ventures into digital processing for photos taken by analog cameras.
2003 - digital cameras remain unprofitable.
2012 - Kodak files for Chapter 11 bankruptcy protection.
-------------------------------------------------------------------------
Analysis:
So what made a company that was, at one time, a leader in its industry to file for bankruptcy protection in 2012?
In one word - changing times. The photography and imaging industry moved from traditional film-based to digital. Kodak, however, was not able to transition as quickly as the market did.
1. Industry leaders in film to average competitors in digital:
Kodak was the frontrunner in the film-photography industry having introduced the film cameras itself.
Thus, there was a huge barrier to entry for its competitors as they didn't have the know-how of the production and development. But in the digital age, Kodak had not yet established itself. So its competitors had a lot of scope to enter and capitalize the rising market.
2. Early entry in film to late entry in digital:
Kodak had a lot of time to create, develop, and establish its brand and products in the film era. In the digital age, however, the pace of development was extremely high and the company failed to stay ahead in the race.
3. Focus:
In the traditional business, Kodak had a solid focus. It would sell cameras at a cheap price and drive its growth and profit from film sales. With the advent of the digital age, this focus was lost and replaced by ever-changing business strategies that focused on digital photography at one point and digital imaging at another.
4. Replicating the business model:
Kodak created the concept of film-based photography and being the frontrunner of the industry, its competitors followed suit. In the digital age, Kodak thought that it could do the same (even though it was not the industry leader) and introduced the Photo CD, which would replace the film and would allow Kodak to retain its razor-blade business model.
5. Profitability:
The digital photography industry was not as profitable as the film-based industry was. This caused the company to sell digital cameras at a loss, thereby driving the revenues down and costs up.
6. Price wars:
Fuji slashed the price of its films to gain market share. Kodak's investments at this time were going towards developing digital imaging products, which were not profitable. This meant Kodak would lose out on both fronts - digital and film-based.
The above 6 factors together brought a once shining company to its rather sad fall.
Had Kodak adopted the digital technology as openly and rapidly as its competitors, it would not be out of the race.
With that, I end this post.
Adios,
Ganesh
"Patience, persistence, and perspiration make an unbeatable combination for success." - Napoleon Hill
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