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What Went Wrong for eastman Kodak - Essay Example

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What Went Wrong for eastman Kodak

Thirdly, Kodak was unable to make the new digital technology to fit coherently with its other capabilities as a core competency. In the subsequent paragraphs in this discussion, Kodak’s approach in these three strategies is compared with IBM’s in order to highlight the ultimate failure of the former and the success of the latter. Kodak rise to dominance in the imaging industry was characterised by it use of a razor-edged strategy. This strategy was implemented by selling cameras at a very low cost, and earning profits from the sale of expensive films. The high margins on film fuelled the company’s profitability and growth to the extent that the company became too dependent on its film business. The problem with this is that the company concentrated on acquiring core competencies on film technologies while it continued to pay less attention to equipment. In spite of pioneering in the field of digital cameras, the company discarded the idea of pursuing future competitive advantages in that field because of the fear that this would cannibalise its film business (Nate, 2012). According to the resource-based view of strategy, firms that have superior systems and structures are profitable not because they engage in strategic investments that may deter entry and raise prices above long-run costs, but because they have markedly lower costs, or offer markedly higher quality or product performance. However, this strategy is often not enough to sustain significant competitive advantage for long. According to Teece, Pisano and Shuen (1997), winners in the global marketplace have been firms that can demonstrate timely responsiveness and rapid and flexible product innovation, coupled with the management capability to effectively coordinate and redeploy internal and external competences. Kodak’s failure arose from its management’s comfort with its present huge resources and core competencies which prevented them from developing dynamic capabilities. In 2011 IBM marked its 100 year milestone. As two centenarians, it would be appropriate to compare IBM’s continued success against Kodak’s demise. IBM, like Kodak, has faced the full force of disruptive change on its core business as faster, cheaper and nimbler competitors rapidly ate away its market leadership. In the early 80s IBM introduced the IBM PC that created the first truly mass market for the personal computer (Koehn, 2011). However, within a decade IBM had fallen behind in this market that it had created so much that in the 1992 financial year the company recorded a US$8.10 billion loss (Denning, 2011). Knowing customers intimately In the early 90s when IBM was performing its worst the financial analysts believed the company’s best bet for survival was to break it up and sell it. However, the newly appointed CEO Lou Gerstner overcame that pressure and instead focused on interacting with customers and industry experts in order to understand IBM’s value-proposition from the customer/market perspective. This exercise enabled the new CEO to identify IBM’s greatest strength to be its ability to provide customer with integrated solutions. As such the organization dropped the earlier desire to split the company. Splitting IBM would have destroyed its unique competitive advantage. Armed with this knowledge Lou Gestner changed IBM strategy to be an enterprise that could understand and provide its customers wide-ranging IT needs. Today, IBM’s Global Services provides the largest share of the company’s revenue (Koehn, 2011). On the other hand, Kodak acted as if it were not affected when Sony introduced the Mavica digital camera. ...Show more
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Kodak’s demise is an example of repeat strategic failure in the three ways. To begin with, the company was slow in understanding the future of digital imaging. …
What Went Wrong for eastman Kodak
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