Company Management of Eastman Kodak and Fujifilm - Essay Example

? Lecturer: Eastman Kodak has been a pioneer and developer of photographic films for over 130 years.Although it invented the digital camera, the company was unprepared for changes in new technologies and filled bankruptcy protection in January 2012. Fujifilm, a Japanese competitor, has been successful in both US and global markets. Introduction History and core business Eastman Kodak Company was founded by George Eastman in 1892 to provide products for leisure, entertainment, commercial and scientific purposes. The company has been slow in responding to the digital revolution. George Eastman started commercial production of dry plates as early as 1888 in New York (Schaede, 2008). He formed Eastman Company in 1888 and later transformed it to Eastman Kodak in 1892. The first brownie Camera was introduced in 1900 while the first motion picture film was launched in 1929. The first digital camera was introduced in 1975 with the capability of capturing black and white images with a resolution of 10,000 pixels. Eastman Kodak ventured in the video market in 1984 with the Kodavision series 2000 8mm video system. In 2003, Kodak Easyshare printer dock 6000 was launched to produce borderless 4 by 6 inch prints. In 2011, the company began shopping its 1,000 digital-imaging patents and experienced a downgrading of its debt ratings. In January 2012, the company announced plans to realign its business operations in order to cut costs but later in the month it filled bankruptcy protection in order to boost cash position and stay in operations. The profits and sales of Eastman Kodak have been eroding since 1990s due to foreign competition from Fujifilm. Eastman Kodak core business is divided in to three business segments that include digital and filming systems for consumers, professionals and entertainment industry (Schaede, 2008). The second business segment is the commercial imaging group that consists of aerial, graphic, micrographic, inkjet printers, scanners and digital printing equipments that target industrial, banking and insurance markets. The third business segment is health imaging that caters for medical films, processing equipments and chemicals (Schaede, 2008). On the other hand, Fuji Photo Film Ltd was founded in 1934 and is headquartered in Tokyo, Japan. Fuji Film prides itself of continuous technological innovations since the company spends almost 7 percent of its sales towards research and development activities. Fuji Photo Film was established as part of the government plans of establishing a local photographic film industry. Ashigara factory began operations immediately by producing photographic print papers, dry plates and photosensitive materials. The company entered the US market in 1965 and diversified to Europe the following year (Schaede, 2008). In 1983, Fuji acquired 51 percent of the shareholding of Chiyoda medical company in order to boost its medical photography and imaging business segment. In the 1990s, the company made several acquisitions and entered markets such as Hong-Kong, China and German. In 2003, an Enovation Graphic system was established in the US and acquired Arch Chemical, Inc currently known as the Fujifilm Electronics materials Co, Ltd. The company acquired Avecia inkjet limited and Problem solving concepts, Inc in order to boost imaging information systems business segment in the US. The company entered in Dubai in 2010 and also acquired endoscopy products in Turkey to boost its sales promotions. FujiFilm launched light production color system for on-demand printing in 2012. Fujifilm core business is divided in to three business segments that include imaging solutions, information solutions and documents solutions. Imaging solutions segment consists of electronic imaging, color films, color chemicals and papers, labs and photofinishing equipments. Information solutions business segments consist of medical systems, graphic systems, industrial products, optical devices and recording media (Schaede, 2008). The document solutions business segment that is mainly run by Fuji Xeron Co, Ltd provides office copy machines such as multifunction devices like printers and other document production systems. The approach which each company management has pursued to embrace innovation Although Kodak was the first company to launch digital cameras, the company acted passively towards innovation. The company created innovative products but failed to commercialize the technology. In 1934, Kodak produced 35mm photography cartridges and began selling Kodachrome in 1941. Kodak research and development activities has enabled the company manufacture its own parts. Before the digital age, Kodak had already established brand recognition in film and cameras and chemical technology. The advent of photocopiers in the 1960s changed document creation approaches; Kodak did not commercialize the technology but allowed Xeron to dominant the document solutions industry. Kodak also patented an 8mm video recorder in the 1970s but failed to market it as they feared it would compete with conventional film market. The company introduced Manufacturing Assurance Process (MAP) in order to accelerate the innovation process and established joint ventures with HP and Microsoft. Kodak has been slow in commercializing innovations due to fear of change from the conventional film market (Saee, 2008). On the other hand, Fujifilm has consistently pursued aggressive product innovation. For instance, it launched color reversal and still cameras in 1948 and developed industrial x-ray film in 1954. Fujifilm has diversified its product portfolio in 1963 by producing videotapes for broadcasting and launching single 8mm motion picture system in 1965. In the 1970s, product innovation saw the launch of high speed color negative film and pressure measurement films. The company also developed floppy disks, recyclable cameras and digital still cameras in 1980s. The company developed digital x-ray imaging systems and volume analyzers to boost its information solutions business segment. Fuji Photo Film gained Kodak’s market share in the US by launching 400-speed color film that was cheaply priced (Schaede, 2008). Management differences between Kodak and Fuji Photo Film Kodak management approaches failed to respond to changing customer needs due to fear of cannibalizing the existing conventional business. Kodak has invested heavily in film technology and was afraid to abandon the traditional business model. The success of Kodak was mainly due to strong brand reputation and worldwide distribution network that involved film processors, stores and professional photographers. Some of the management differences that made Kodak lose competitiveness were the ineffective management of human resources since the company was forced to lay off thousands of talented personnel that could have aided in the research and development activities (Schaede, 2008). Kodak also responded late to competition and implemented defensive tactics like promotions of the traditional film industry instead of focusing on the changing consumer needs and new product development. The relative success of Fujifilm was mainly facilitated by aggressive product diversification and new market entrance (Hill & Jones, 2009). Fujifilm acquired several medical solutions manufacturing companies and other competitors in the US market. The low cost model of Fujifilm enabled growth in market share especially among the price-sensitive consumers (Hill & Jones, 2009). Kodak was reluctant to reduce its prices thus enabling Fuji to gain about 17 percent of the market share in 1980s. The relative success of Fuji was facilitated by innovation and product diversification since the company consistently allocated 7 percent of sales revenues to research and development activities (Saee, 2008). The company has focused on long term growth strategy by competing on prices, aggressive promotional campaigns like sponsoring Los Angeles Olympics in 1984 and building close working relationships with distributors in Japan. Through concentrating on digital imaging and diversifying in high growth potential countries such as China, India, Hong-Kong and Germany, Fuji finally acquired global brand recognition. Kodak and Fujifilm approaches to ethics and social responsibility and impact on profitability Eastman Kodak has faced numerous ethical issues and social responsibility challenges that have negatively affected its profitability. For instance, Kodak was fined $ 63, 792 by the US environmental protection agency due to non-compliance with environmental audits concerning ozone depleting substances. In 2004, the company also paid fines amounting to $ 4,300 due to underground water contamination. The company has numerous fines related to health, safety and environmental pollution (Saee, 2008). The company has also failed to completely eliminate work related injuries through education of employees. The company also has not achieved significant product energy efficiency in digital picture frames, battery chargers and inkjet printers (Hill & Jones, 2009). The company has also faced significant challenges in negotiating the balance between customer expectations and product environmental attributes especially in the use of PFOS from Kodak Thermal media. Although Kodak has implemented core corporate responsibility principles, the company has not attained energy efficiency and has not fully implemented product recycling programs. Kodak has been accused of employee harassment, and privacy violations (Schaede, 2008). On the other hand, Fujifilm is committed to ethical business principles and social responsibility initiatives. Fujifilm has fulfilled economic, social and legal responsibilities towards the society in environmental preservation. Fujifilm has continuously engaged in energy cost reduction initiatives in its product innovation and environmental conservation through avoidance of pollution. Fujifilm has been operating eco-driving program since 2008 in order to raise awareness on need of environmental protection. Fujifilm is geared at promoting and preserving biodiversity and product safety through skin sensitization tests. The company has reduced occupational accidents and injuries and ensured safe chemical substances in its business activities (Hill & Jones, 2009). Fuji Photo Film prohibits discrimination in employment, and treats all employees with dignity. Through establishing ethical principles in business operations and social responsibility initiatives such as supporting Olympic Games, Fujifilm was able to increase its market share and profitability (Saee, 2008). Extend to which Eastman Kodak and Fujifilm have adapted to changing market conditions Despite being the first to invent the digital camera, Eastman Kodak failed to embrace digital technology and respond quickly to changing market conditions. It feared changing to digital photography since it had invested heavily in conventional film photography. Although Kodak had the technical expertise, the executives were skeptical about changing to digital cameras due to fear of cannibalizing the traditional film business (Schaede, 2008). Kodak was unable to control costs of making design paper thus it definitely lost the market share to Fujifilm of Japan (Hill & Jones, 2009). Kodak failed to take advantage of new business opportunities presented by the technological revolution such as software and printers thus companies like Apple and IMB presented a lot of competition. Kodak also sold out its medical imaging business at a time when the demand was likely to increase due to many baby boomers retiring with age related diseases (Schaede, 2008). Kodak responded poorly to changing market conditions by cutting the workforce and outsourcing many of the production activities (Schaede, 2008). On the other hand, Fujifilm film responded to changing market conditions by increasing innovation in digital technology, diversifying in to electronics and cosmetics business. Fujifilm recognized the need to invest in photo printing and documents solutions in order to offer integrated photography services. Fujifilm was also able to remain competitive through localization of its products to the US market and making several acquisitions (Saee, 2008). Recommendations for improving decision-making in changing market conditions Eastman Kodak has failed to ensure flexibility to back-up its decision making process in order to adapt to changing market conditions. Eastman Kodak management should encourage brainstorming among the employees in the research and development activities. The company should continuously monitor changes in technology and the changing customer needs. The company should change the organizational structure in order to ensure flexibility in decision making (Saee, 2008). This can be done through eliminating the long chain of command and the flow of information through establishing flat structures. The company should allow participation of all employees in decision making since employees can come up with innovative ideas in cost cutting, safety issues and reward systems. The company should implement intervention and monitoring measures on the efficiency of production, quality of products, systems and processes in the organization (Saee, 2008). Conclusion Eastman Kodak failed to respond immediately to the digital revolution. The company lost considerable market to Fujifilm. Kodak has been accused of violating environmental protection laws and unethical business processes. Kodak should implement flexibility in decision making in order to respond effectively to changing market conditions like changes in digital technology. References: Hill, C.W & Jones, G. (2009). Strategic management theory: an integrated approach. Boston. Houghton Mifflin. Saee, J. (2008). Contemporary corporate strategy: global perspectives. New York. Routledge. Schaede, U. (2008). Choose and focus: Japanese business strategies for the 21st century. Ithaca. Cornell University Press. Read More