What Is the Current State of Eastman-Kodak - Essay Example

? Eastman-Kodak What is the current of Eastman-Kodak? Eastman-Kodak is now in trouble. It has filed for bankruptcy protection a year ago on Jan19, 2012. It has free zed its payment and has lain off quite a huge number of employees. The workers are facing a hard time staying in the company. Under the bankruptcy plan, the lien note holders who owed $375 million would be entitled to get 85% of the common stock after Kodak gets restructured. It is assumed that Eastman-Kodak is worth $441 million when it applied for bankruptcy protection. At that time the bondholders would be entitled to get $ 374.85 million. The rest would 15% of the shares which is worth $ 66.15 million would go to unsecured creditors. It would also settle with Kodak’s UK pension plan. It would take control over the personalized imaging business of the company along with the document-imaging business to settle $2.8 billion claim. These include business like retail photo printing kiosks, scanners, photo paper and other products and services. It expects its revenue for 2013 to be roughly around $2.5 billion with slight growth through 2017. Hence the company is right now in trouble. How can an organization which had 80% of the market at a certain point, fail? In 1975, Kodak invented the first digital camera. Hence they didn’t miss the digital age. But Eastman Kodak didn’t market their new technology. They feared that it would hurt their own lucrative film business, in spite of the fact that the digital products were revolutionizing the market. Sony and Canon took this near-sightedness of Kodak and charged ahead with their own digital cameras (Mui, 2012). When Kodak ultimately realized what mistake it did, it was all but too late for them. They saw their market share plummeting. Kodak didn’t recognize the business which they were in. They focussed more on selling more products, instead of concentrating on the business they were in, sharing memories (Kotter, 2012, p. 1). They were more determined on earring revenues through selling film and they though the photography business didn’t fit their business model. Hence they ignored the coming tsunami of new technology in the market. As their film business went from being and essential business into old fashioned one, the company could never recover. What opportunities & why did Kodak miss them? For past 15 years, digital technology has changed the photography business drastically. But Kodak, champion of analogy film business, was left behind. Kodak missed the chance to grab the digital market thrice. First miss was Digital Cameras. In 1995 it launched its first digital camera in the market, DC40. But Kodak never took advantage of this situation. Their whole business model was involving the film and printing business. It was not until 2011, that the company came out with EasyShare line for the cameras. But by them they were too late. The Second Miss is the Photo Sharing business. Kodak in 2005 launched the world’s first Wi-Fi enable camera known as EasyShare-One. Figure 1: EasyShare-One But the camera didn’t earn much revenue for the company. Hence Kodak decided to kill this product. But if the company had to foresightedness of understanding that the photo sharing was going to be the way people interacted with the photo, they might had thought about it twice. The same year when Kodak killed it, a group of engineers’ launched Eye-Fi, which had the same concept as EasyShare-One and became hugely successful. Nowadays photo sharing app is a killer app earning millions of revenues for companies. The Third Miss is Photo Viewing. Kodak was working on digital printers and digital photo frames, though it couldn’t understand the demand of it in the market. But when Kodak started to push for the photo frames with distinguishing features like batteries, Wi-Fi, the prices of the technology were falling, and it resulted in thin margins for the company. What did the competition do differently? Kodak couldn’t enter into the digital market at right time when it should have entered. Rather it couldn’t understand the market sentiment and fell behind the competitors. When it did realise they were far too left behind as their competitors like Canon and Nikon already took the advantage. When Kodak entered into the market as a late entrant their margins were way too thin and hence they couldn’t earn much profit either. Hence the company slowly went into bankruptcy. Why did Kodak fall so far behind? Due to the emergence of the digital photography, the photo film industry was slowly losing its lustre. The cost of digital photography was also less compared to that of the analogous photography which made people switch to the new techniques. The industry was also at the maturity stage of the product life cycle. The competition in the market for films also intensified with the increasing number of players like Konica, 3M, Fuji and Agfa. In order to survive in the markets the companies would offer their products at a much lower rate compared to that of Kodak which took away the market share of the brand. Since the films are considered to be normal goods the decrease in price would result in the increase in the demand for the other brands. Thus the price sensitive customers preferred the other brands compared to that of Kodak. What caused Kodak's demise? The main reason why the company was not being able to offer a low cost product was that the technology that the company was using was outdated compared to the other players in the markets. Most of the brands produced films that were of homogenous quality but the prices were cheaper which managed to lure the customers away from the brand Kodak. The margin of profit that Kodak would provide to the dealers was much lower than what the competitors offered to the dealers. Thus more dealers were interested to push the other brands compared to that of Kodak. The company also could not formulate the global strategies to cater to the various markets like in Asia where there were other competitors who would produce the low price films and are price sensitive. Thus the main market for the company remained the US and it accounted for 85% of the revenue of the company. What role did Kodak's leadership play? It was claimed that the CEO of the company, Antonio Perez was to a large extent responsible for the drastic downfall of the company. The employment in the company has also gone down to a large extent. The company was not capable of changing the organisational culture along with the changes in the technology and the changes in the outside world. With the introduction of the digital imaging the companies could not cope up with the changes and the top management did not take proper measures in order to deal with the changes (Barney and Hesterly, 2011). The use of films started becoming redundant in the fast changing world platform. The human resources in the erstwhile Kodak were adept in the chemical technologies but could not upgrade themselves with the digital technology. The senior management also did not take enough measures to train or develop their skills. Though the digital photography was invented by Kodak the company did not take enough measures for the development of the products. What would you suggest Kodak have done? Kodak needs to find out an area of core competency that would provide the brand with a competitive advantage. Kodak should have grabbed the opportunity of introducing the concept of photo sharing in the social media by incorporating the Wi-Fi in the system. Though this technique was also an invention of Kodak the company did not do enough to make use of the strategy and to nurture it that would help the company to ensure a competitive advantage position in the industry. What would you suggest Kodak do now (2013)? The company has to gain a better market share in the industry compared to the competitors. For this the company has to provide more profit margins to the dealer so that the dealers are encouraged to promote the brand among the other retailers. Kodak has to make sure that it has a large number of products in its portfolio to offer to the customers. The company has to produce more innovative products in order to offer in the market some new products on a constant basis and has to upgrade the technology with the rapid changes. Each of the strategic business units of the company has to be developed like the graphics communication, the filming, photofinishing, and the entertainment group as well as the digital imaging group has to be developed and handled separately with extreme care so that each of these segments are able to generate the revenue for the company. This would be possible if the company introduces a thorough restructuring programme and major marketing strategies that would make the customers aware of the specialities of the product. References Barney, J. and Hesterly, W. (2011). Strategic Management and Competitive Advantage: Concepts and Cases. New York: Pearson Customs Publishers. Kotter, J. 2012. Barriers to Change: The Real Reason Behind the Kodak Downfall. Retrieved from: http://www.forbes.com/sites/johnkotter/2012/05/02/barriers-to-change-the-real-reason-behind-the-kodak-downfall/. [Accessed on: 9 December 2013]. Mui, C. 2012. How Kodak Failed. Retrieved from: http://www.forbes.com/sites/chunkamui/2012/01/18/how-kodak-failed/. [Accessed on: 9 December 2013]. Read More