“Market Cap $1.38 B As of May 2014
At a Glance
- Industry: Consumer Electronics
- Country: United States
- CEO: Jeffrey Clark
- Website: www.kodak.com
- Employees: 13,100
- Sales: $2.35 B
- Headquarters: Rochester, New York
#1603 Global 2000
- #329 in Profit
Eastman Kodak Co. operates as a technology company focusing on imaging for business. It serves customers with disruptive technologies and breakthrough solutions for the products goods packaging, graphic communications and functional printing industries. The company also offers products and services in entertainment imaging and commercial films. It operates through two segments: Graphics, Entertainment & Commercial Films segment and Digital Printing & Enterprise segment. The Graphics, Entertainment & Commercial Films segment encompasses graphics, entertainment Imaging & commercial films, and its intellectual property and brand licensing activities. Its products and services include; digital plates, CTP output devices, digital controllers, unified workflow solutions, and entertainment imaging and commercial films. The Digital Printing & Enterprise segment encompasses digital printing, including PROSPER equipment and STREAM technology, packaging and functional printing, enterprise services & solutions, and consumer inkjet systems. The company was founded by George Eastman in 1880 and is headquartered in Rochester, NY.”
From the company’s founding by George Eastman in 1888, Kodak followed the razor and blades strategyof selling inexpensive cameras and making large margins from consumables — film, chemicals and paper. As late as 1976, Kodak commanded 90% of film sales and 85% of camera sales in the U.S., according to a 2005 case study for Harvard Business School.
Rivalry with Fujifilm
Japanese competitor Fujifilm entered the U.S. market (via Fuji Photo Film U.S.A.) with lower-priced film and supplies, but Kodak did not believe that American consumers would ever desert its brand. Kodak passed on the opportunity to become the official film of the 1984 Los Angeles Olympics; Fuji won these sponsorship rights, which gave them a permanent foothold in the marketplace. Fuji opened a film plant in the U.S., and its aggressive marketing and price cutting began taking market share from Kodak. Fuji went from a 10% share in the early 1990s to 17% in 1997. Meanwhile, Kodak made little headway in Japan, the second-largest market for photo film and paper after the United States. Fuji also made headway into the professional market with specialty transparency films such as Velvia and Provia, which competed successfully with Kodak’s signature professional product, Kodachrome, but used the more economical and common E-6 processing machines which were standard in most processing labs, rather than the dedicated machines required by Kodachrome. Fuji’s films soon also found a competitive edge in higher-speed negative films, with a tighter grain structure.
In May 1995, Kodak filed a petition with the US Commerce Department under section 301 of the Commerce Act arguing that its poor performance in the Japanese market was a direct result of unfair practices adopted by Fuji. The complaint was lodged by the United States with the World Trade Organization. On January 30, 1998, the WTO announced a “sweeping rejection of Kodak’s complaints” about the film market in Japan. Kodak’s financial results for the year ending December 1997 showed that company’s revenues dropped from $15.97 billion in 1996 to $14.36 billion in 1997, a fall of more than 10%; their net earnings went from $1.29 billion to just $5 million for the same period. Kodak’s market share declined from 80.1% to 74.7% in the United States, a one year drop of five percentage points that had observers suggesting that Kodak was slow to react to changes and underestimated its rivals.
Although from the 1970s both Fuji and Kodak recognized the upcoming threat of digital photography, and although both sought diversification as a mitigation strategy, Fuji was more successful at diversification.
Shift to digital
Although Kodak developed a digital camera in 1975, the first of its kind, the product was dropped for fear it would threaten Kodak’s photographic film business. In the 1990s, Kodak planned a decade-long journey to move to digital technology. CEO George M. C. Fisher reached out to Microsoft and other new consumer merchandisers. Apple’s pioneering QuickTake consumer digital cameras, introduced in 1994, had the Apple label but were produced by Kodak. The DC-20 and DC-25 launched in 1996. Overall, though, there was little implementation of the new digital strategy. Kodak’s core business faced no pressure from competing technologies, and as Kodak executives could not fathom a world without traditional film there was little incentive to deviate from that course. Consumers gradually switched to the digital offering from companies such as Sony. In 2001 film sales dropped, which was attributed by Kodak to the financial shocks caused by the September 11 attacks. Executives hoped that Kodak might be able to slow the shift to digital through aggressive marketing.
Under Daniel Carp, Fisher’s successor as CEO, Kodak made its move in the digital camera market, with its EasyShare family of digital cameras. Kodak spent tremendous resources studying customer behavior, finding out that women in particular loved taking digital photos but were frustrated in moving them to their computers. This key unmet consumer need became a major opportunity. Once Kodak got its product development machine started, it released a wide range of products which made it easy to share photos via PCs. One of their key innovations was a printer dock, where consumers could insert their cameras into this compact device, press a button, and watch their photos roll out. By 2005, Kodak ranked No. 1 in the U.S. in digital camera sales that surged 40% to $5.7 billion.
Despite the high growth, Kodak failed to anticipate how fast these digital cameras became commodities, with low profit margins, as more companies entered the market in the mid-2000s. In 2001 Kodak held the No. 2 spot in U.S. digital camera sales (behind Sony) but it lost $60 USD on every camera sold, while there was also a dispute between employees from its digital and film divisions. The film business, where Kodak enjoyed high profit margins, fell 18% in 2005. The combination of these two factors resulted in disappointing profits overall. Its digital cameras soon became undercut by Asian competitors that could produce their offerings more cheaply. Kodak had a 27 percent market-leading share in 1999, that dwindled to 15 percent by 2003. In 2007 Kodak was No. 4 in U.S. digital camera sales with a 9.6 percent share, and by 2010 it held 7 percent in seventh place behind Canon, Sony, Nikon, and others, according to research firm IDC. Also an ever-smaller percentage of digital pictures were being taken on dedicated digital cameras, being gradually displaced in the late 2000s by cameras on cellphones, smartphones, and tablets.
In a critical essay, physicist Frank Duarte has argued that several major analog-era imaging companies (including Canon, Nikon, Leica, and Fuji) successfully transitioned from analog to digital, thus indicating that the switch to digital technology is not the only reason for Kodak’s decline. A significant factor, in addition to managerial ineptitude, he argues, was the transformation (begun in the early 1990s) from a widely diversified chemical manufacturer to a company mainly focused on imaging.
Kodak then began a strategy shift: Previously Kodak had done everything in-house, but CEO Antonio Perez shut down film factories and eliminated 27,000 jobs as it outsourced its manufacturing. Perez invested heavily in digital technologies and new services that capitalized on its technology innovation to boost profit margins. He also spent hundreds of millions of dollars to build up a high-margin printer ink business to replace shriveling film sales. Kodak’s ink strategy rejected the razor and blades business model used by the dominant market leader Hewlett-Packard in that Kodak’s printers were expensive but the ink was cheaper.As of 2011, these new lines of inkjet printers were said to be on verge of turning a profit, although some analysts were skeptical as printouts had been replaced gradually by electronic copies on computers, tablets, and smartphones. Home photograph printers, high-speed commercial inkjet presses, workflow software, and packaging were viewed as the company’s new core businesses, with sales from those four businesses projected to double to nearly $2 billion in revenue in 2013 and account for 25 percent of all sales. However, while Kodak named home printers as a core business as late as August 2012, at the end of September declining sales forced Kodak to announce an exit from the consumer inkjet market.
Kodak has also turned to litigation in order to generate revenue. In 2010, it received $838 million from patent licensing that included a settlement with LG.
In 2011, despite the turnaround progress, Kodak rapidly used up its cash reserves, stoking fears of bankruptcy; it had $957 million in cash in June 2011, down from $1.6 billion in January 2001. In 2011, Kodak reportedly explored selling off or licensing its vast portfolio of patents in order to stave off bankruptcy. By January 2012, analysts suggested that the company could enter bankruptcy followed by an auction of its patents, as it was reported to be in talks with Citigroup to provide debtor-in-possession financing. This was confirmed on January 19, 2012, when the company filed for Chapter 11 bankruptcy protection and obtained a $950 million, 18-month credit facility from Citigroup to enable it to continue operations. Under the terms of its bankruptcy protection, Kodak had a deadline of February 15, 2013 to produce a reorganization plan.
In April 2013, Kodak showed its first Micro Four Thirds camera, to be manufactured by JK Imaging.
On September 3, 2013, Kodak announced that it emerged from bankruptcy as a technology company focused on imaging for business. Its main business segments are Digital Printing & Enterprise and Graphics, Entertainment & Commercial Films.
On March 12, 2014, Kodak announced that Jeffrey J. Clarke had been named the new CEO.”
*Information from Forbes.com and Wikipedia.org
**Video published on YouTube by “MrSmithsART“