The Strategic Position and the Competitive Environment of Kodak - Essay Example

Strategic Analysis Content Summary 2. Analysis of Strategic Position of Kodak a. Analysis of External Environment i.Competitive Environment of Kodak ii. Introduction of Directional Policy Matrix iii. Apply Directional Policy Matrix to Kodak iv. Conclusion b. Internal Resource Audit i. Physical Resources of Kodak ii. Human Resources of Kodak iii. Financial Resources of Kodak iv. Intangibles of Kodak c. Analysis of Competence i. Introduction of Threshold Competences and Core Competences ii. Identify the Competences of Kodak iii. Conclusion d. Analysis of Expectations of Stakeholders i. Introduction of Stakeholders and their Expectations ii. Introduction of Stakeholder Mapping - Power/Interest Matrix iii. Identify Stakeholders of Kodak and Apply Power/Interest Matrix to its Stakeholders iv. Conclusion 3. Conclusion and Recommendation 4. Reference and Bibliography Executive Summary This essay attempts to analyse the strategic position of Kodak through different models/tools of strategic management. Four steps analysis are described in the first section to analyse the strategic position of Kodak: Directional Policy Matrix is applied to analyse the competitive environment of Kodak; Different types of resources of Kodak are audited and listed in detail; Two kinds of competences are introduced and to identify Kodak's competences; and stakeholders and their expectations are briefly described and Power/Interest Matrix is selected to analyse them. Through above four steps, we can acquire a clear understanding of Kodak's strategic position. In the last section of this essay, it summarises the application of different models/tools of strategic management, and points out the disadvantages of these models/tools as well as the recommendation of further application of them. Analysis of Strategic Position of Kodak The strategic position of Kodak consists of three parts: - 1) Kodak regards Digital Imaging as its key business. 2) Kodak maintains its progress in Traditional Imaging business. 3) Kodak concentrates on combining Digital Imaging and Traditional Imaging as a whole. In this essay, we will analyse the strategic position of Kodak through four aspects and attempt to understand different parts of its strategic position. a. Analysis of External Environment Success in modern world requires constant innovation and change - things most of the organisation are not known very well. This environment changes so rapidly that even the best idea can fade fast. Perhaps this is the reason that environment is so important to an organisation. Competitive Environment of Kodak The external environment of Kodak is complex. As Kodak is focusing on imaging business, this market is the vital market for it. In digital age, more and more activities are related to digital means, same as more and more business are derived from digital technologies. Digital trend, indeed, represents a long-term threat to Kodak's core business - silver print. Although experts disagree over how long it will take for digital imaging to start shrinking the worldwide traditional imaging market, that day is surely coming. According to Lyra Research, a market research company in US, the worldwide film sales will grow only 1% annually through 2003 and slowly shrink after that, whilst digital imaging business will expand 20% annually in next five years (Kodak internal marketing article, 2001). Introduction of Directional Policy Matrix One way to consider the competitive position of Kodak is by means of the Directional Policy Matrix (Thompdon, L. J. 1993: 470). This matrix is constructed above two axes: the Industry Attractiveness in horizontal axis and the organisation's competitive position in vertical axis. By evaluating relevant factors of these two dimensions we can place appropriate positions for discussed organisation. Traditional Imaging Digital Imaging Industry Attractiveness Market Growth Low High Supplier Pressure Low Low Customer Pressure High High Substitute Products Medium Low Government Action Constraint Support Entry Barriers High High Competitive Pressure High High Competitive Position Competition High High Relative Market Share High Low Production Capability High Medium Research and Development Record and Strength High Medium Market share High Low Financial Success Medium Low Apply Directional Policy Matrix to Kodak With detailed evaluation factors list in Table 1, we will find that Kodak has strong competitive strength in its core business of traditional imaging but this industry is around unattractive and average. On the other hand, digital imaging business is a promising market though Kodak is under intense competitive pressure every step of its way to the digital world. Based on aforementioned factors, we can draw up two pie charts in the matrix representing the Traditional Imaging market and Digital Imaging market as well as Kodak's market share (Refer to Figure 1). Consequently, we can draw out the professional comments on these markets from the Directional Policy Matrix. For Digital Imaging market, Kodak should "invest to retain market share as industry grows " or even set it as "priority products and service". While for Traditional Imaging market, "invest selectively to maximize cash generation" perhaps is the best choice to be selected. Conclusion As mentioned above, it can be easily understood why Kodak selects Digital Imaging as its key business in present and in future (Part 1 of Kodak strategic position) whilst maintain its investment on the traditional Imaging market (Part 2 of Kodak strategic position). It is apparent that Directional Policy Matrix provides a useful method to direct managers' attention to key forces in the competitive environment, and bring forward questions about appropriate strategies for different business units and the portfolio as a whole. However, It should be kept in mind that the effectiveness of this approach depends on the precise information of a competitive nature between competitors in the market. Moreover, the procurement of the information in depth is not always straightforward. b. Internal Resource Audit Successful strategies depend not only on the analysis and understanding of external environment, but also the internal resources the organisation owns. Analysing the internal resources of the organisation involves both drawing up a list of the main resources and developing of the way the organisation operates. According to G. Johnson & K. Scholes' classification (1999), internal resources can be grouped as following: - Physical Resources Human Resources Financial Resources Intangibles As a multination company, Kodak owns huge resources to support its worldwide operation. According to above classification, we can identify the resources separately. Physical Resource of Kodak Kodak has its physical resources spread all over the world which include factories, laboratories, offices, land, building and equipments etc. These physical resources can hardly be listed detailedly but we can draw out some figures from Kodak's annual report - in 2000, Kodak has a total value of US$ 5,919M of net properties (Kodak website, 2001: www.kodak.com/US/en/corp/annualReport00/). Human Resource of Kodak In Year 2000, Kodak has 78,400 employees all around the world (Kodak website, 2001: www.kodak.com/go/aboutkodak). Within these staff, there have great majority of excellent experts and skilled technicians as well as experienced marketers, salesmen, accountants and the repository of many kinds of professionals. Financial Resources of Kodak With annual revenue of US$13,994M and net earning of US$ 1,407M in Year 2000 (Kodak website, 2001: www.kodak.com/US/en/corp/annualReport00/), Kodak had the ability of investing about US$ 1,000M to its research and development operation (Kodak internal article, 2000). Intangibles of Kodak Kodak is one of the most famous brands in the world. This brand, come through more than one century's worth of innovations, known by most of the customers and considered as the representation of picture. Besides this, Kodak also holds thousands of image and chromatology patents as well as its good alliance and co-operators. c. Analysis of Competence To a certain extents, the resources of an organisation are different to quantify, but they are fundamental for organisation to determine its strategic position. Indeed, how the organisation using its resources competitively is the key point of building up the competences of an organisation. Introduction of Threshold Competences and Core Competences The relationship between resources and competences is hard to assess in absolute terms, but there still have some guidelines to organise resources according to different levels of competences. G. Johnson & K. Scholes proposed a model (1999: 153) to identify the relationship between resources and competences as Figure 2. Identify the Competence of Kodak As discussed above, Physical Resources and Financial Resource work as Necessary Resources and provide Threshold Competence for Kodak. Meanwhile, the Intangibles and Human Resources, as Unique Resources, help Kodak building up its Core Competence in its business environment. Conclusion To making the best use of the strengths and negate or counter the weaknesses, it is a reasonable decision for Kodak to maintain its progress in Traditional Imaging business (Part 2 of Kodak Strategic Position) and concentrate on combining Digital Imaging and Traditional Imaging as a whole (Part 3 of Kodak Strategic Position). Moreover, Intangibles and Human Resources operate as unique resources and build up Kodak's Core Competences: Reputation and Core Strengths & Key Skill in the markets Kodak operates. d. Analysis of Expectations of stakeholders An organisation operates inside its environment, which has an influence on organisation's activities and on the other hand, organisation can also has its effect on the environment. This interaction, however, also shapes strategic position of the organisation. Introduction of Stakeholders and their Expectation Stakeholders, in academic term, are "those individuals or groups who depend on the organisation to fulfil their own goals and on whom, in turn, the organisation depends" (Johnson, G & Scholes, K. 1999: 213). Stakeholders can be classified into meaningful groups by different criteria. Identifying and prioritising of key stakeholders, assessing their expectations and collecting ideas from these stakeholders are much more important for an organisation in determining its strategic position. Introduction of Stakeholder mapping - Power/Interest Matrix "Stakeholder mapping identifies stakeholder expectations and power and helps in establishing political priorities" (Johnson, G & Scholes, K. 1999: 215). This mapping can be carried out by means of Power/Interest Matrix (Johnson, G & Scholes, K. 1999: 215), which classifies stakeholders in relation to the power they hold and the degree of interest they show to the organisation (Refer to Figure 4). Identify Stakeholders of Kodak and Apply Power/Interest Matrix to its Stakeholders According to J. S. Harrison & C. St. John's idea (1994), the stakeholders of Kodak can be defined as following: - Internal Stakeholders: Owners, Top Managers, Operation Managers, Employees etc. External Stakeholders: Competitors, Customers, Partners, Suppliers, Creditors, Local Communities, Unions, Government Agencies and Administrators etc. Refer to Figure 4. Power/Interest Matrix, we can identify the key stakeholders and their expectations as following: - Segment A: Local Communities, Unions etc. With the expectations of protecting Environment, increasing employment rate etc. Segment B: Operation Managers, Employees etc. With the expectations of security of employment, opportunities for development, higher salary etc. Segment C: Customers etc. With the expectations of better value for money, more choice on products etc. Segment D: Owners, Top Managers, Creditors etc. With the expectations of capital growth, good payback and dividends etc. Considering the comments of Power/Interest Matrix for each group, we can ignore Segment A because it only has minimal effort on Kodak. As to Segment C and D, they are all key stakeholders and their expectations should be satisfied continuously. While for Segment B, it has high interest in Kodak and should be properly addressed through informing information to it. Indeed, stakeholders of Segment D (Owners, Top Managers, Creditors etc) have the expectations of good payback and dividends which require Kodak maintains its profit generation in its strength business - Traditional Imaging. On the other hand, these stakeholders also seek for capital growth in somewhat more potential business - such as Digital Imaging. Stakeholders of Segment C (Customers) always expect better value for money, and they also enjoy the alternatives and value-added products Kodak provided, which ask Kodak to integrate Traditional Imaging with Digital Imaging to generate more innovation. Conclusion Generally, the expectations of stakeholders of Kodak are diversely and variously. It is clearly that we should find out the key stakeholders and balance their expectations. Here, Owners, Top Managers, Creditors and Customers are identified as key stakeholders of Kodak and in particular their expectations are assessed separately. These expectations suggest following strategic position for Kodak: Maintains its profit generation in its strength business - Traditional Imaging (Part 2 of Kodak Strategic Position), Capital growth in somewhat more potential business - such as Digital Imaging (Part 1 of Kodak Strategic Position) and Integrate Traditional Imaging with Digital Imaging to generate more innovation (Part 3 of Kodak Strategic Position). Obviously, Power/Interest Matrix points out the type of relationship which the organisation need to establish with every stakeholders group. Thus it is helpful in assessing the political ease or difficulty of particular strategic as well as in planning the political dimension of strategic changes. Nevertheless, there still have several difficult ethical issues for managers in deciding the role they should play in the reality. Furthermore, managers need to balance the generality and diversity in describing stakeholders - too generally will hide the diversity of stakeholders, while much subdivision will make the map confusing and difficult. Conclusion and Recommendation Based on the available information of Kodak, this essay attempt to analyse its strategic position by means of strategic management. There have several models/tools of strategic management be selected to approach Kodak's strategic position. These models/tools, applied in different sections separately, provide comprehensive analysis to Kodak's strategic position. However, there still have some problems in using these models/tools. Firstly, almost all the model/tools require as sufficient as possible information to support further analysis. In fact, there have no way to exploit all the information to provide overall influence factors for the analysts. Furthermore, the information is changing all the way. To acquire accurate information we need continuous track, which will cost many resources and can not be used frequently. Secondly, these models/tools sometimes overlap each other, even interlink to a certain extents. How to identify these models/tools and distinguish them appropriately is the key point before we attempt to apply them into reality. Finally, some models/tools are more descriptive than prescriptive, or more equivocal than distinct. It requires the analyst to have good understanding of these models/tools and experienced in coping with complicated environment. This requirement, as a limitation to the using of these models/tools, is not without its potential risks. In a sense, no single model/tool along will give a full understanding of the organisation, but a combination of several analysis models/tools will be more useful. When applying a combination of models/tools to reality, an important point to bear in mind is that in reality there has no perfect analysis to an organisation but only a satisfied one. 1. Reference and Bibliography References 1. Harrison, S. J. & St. John, C., (1994), Strategic Management of Organizations and Stakeholders: Concepts, West Publishing Company, St. Paul. Minneapolis. 2. Johnson, G. & Scholes, K., (1999), Exploring Corporate Strategy: Text and Cases, 5th Edition, Prentice Hall, London. 3. Kodak internal article, (2000), Why Kodak Win, Eastman Kodak Company, Rochester. 4. Kodak internal marketing article, (2001), Defining Moment: Digital Age, Eastman Kodak Company, Rochester. 5. Kodak website, (2001), www.kodak.com/go/aboutkodak 6. Kodak website, (2001), www.kodak.com/US/en/corp/annualReport00/ 7. Lynch, R., (1997), Corporate Strategy, Pitman Publishing, London. 8. Thompson, L. J., (1993), Strategic Management: Awareness and Change, 2nd Edition, Chapman & Hall, London. Bibliography 1. Braund. L. S., Clannachan. S., Murry. P. & Fewson. R. V., (2000), Strategic Management: An MBA Study Guide, University of Hull, Hull. 2. Harrison, S. J. & St. John, C., (1994), Strategic Management of Organizations and Stakeholders: Concepts, West Publishing Company, St. Paul. Minneapolis. 3. Johnson, G. & Scholes, K., (1999), Exploring Corporate Strategy: Text and Cases, 5th Edition, Prentice Hall, London. 4. Kodak internal article, (2000), Why Kodak Win, Eastman Kodak Company, Rochester. 5. Kodak internal marketing article, (2001), Defining Moment: Digital Age, Eastman Kodak Company, Rochester. 6. Kodak website, (2001), www.kodak.com 7. Lynch, R., (1997), Corporate Strategy, Pitman Publishing, London. 8. Thompson, L. J., (1993), Strategic Management: Awareness and Change, 2nd Edition, Chapman & Hall, London. 9. Stacey, D. R. (1996), Strategic Management & Organisational Dynamics, 2nd Edition, Pitman Publishing, London. Read More