Kodak Funtime_Ans2 and 3

2. Fuji, seeing that Kodak is trying to capture market share by launching a brand close to Fuji’s price can respond in the following manner: Fuji can enter into a price war with Kodak in this situation. Considering that Fuji is already well established in the economy segment, it will try everything possible to ensure that Kodak stays out of that segment. Market share of Kodak is the highest currently(70%) but their concern after seeing the growth rate of Fuji(18%) has made them think about launching Funtime to compete with economy brands. In terms of cost advantage, Fuji had an advantage over Kodak because of following reasons: Low advertising cost- Kodak spent close to $50 Million on advertising. This was four times that of Fuji’s advertising cost ($12.5 Million). The other cost advantage that Fuji had over Kodak was the margin advantage that Fuji got (55%) over a film of $2.91 versus the margin that Kodak got(70%) over a film of $3.49. If Kodak did decide to launch Funtime version, their margins would also be affected because of cannibalization and seeing the increase in

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Transcript of Kodak Funtime_Ans2 and 3

2. Fuji, seeing that Kodak is trying to capture market share by launching a brand close to Fujis price can respond in the following manner:Fuji can enter into a price war with Kodak in this situation. Considering that Fuji is already well established in the economy segment, it will try everything possible to ensure that Kodak stays out of that segment. Market share of Kodak is the highest currently(70%) but their concern after seeing the growth rate of Fuji(18%) has made them think about launching Funtime to compete with economy brands. In terms of cost advantage, Fuji had an advantage over Kodak because of following reasons:Low advertising cost- Kodak spent close to $50 Million on advertising. This was four times that of Fujis advertising cost ($12.5 Million). The other cost advantage that Fuji had over Kodak was the margin advantage that Fuji got (55%) over a film of $2.91 versus the margin that Kodak got(70%) over a film of $3.49. If Kodak did decide to launch Funtime version, their margins would also be affected because of cannibalization and seeing the increase in product lines that Kodak has to offer, we can assume that dealers could increase their margin on Kodak film from 20% to 25%, thus again hurting Kodak. Kodak historically focused on increasing advertising and focusing on marketing, however it is important that they also build in house strength and keep the price on line like Fuji did.3. Considering introduction of Funtime, we calculated the breakeven points in terms of increase in market share and breakeven units needed. As per the below calculations, Kodak would gain market share of almost 35% if it goes ahead with the introduction of Funtime. In terms of breakeven number of units, the number would be 70350000.Also, for cannibalization we assumed the rate to be 15%.Gold Plus

CurrentNew Price

Price3.492.9665

Gross Margin70%70%

Dealer Margin20%20%

Profit Markup0.6980.5933

Selling Price2.7922.3732

Profit1.95441.66124

Sales375200000441411764.7

Profit733290880733290880

Increase in Sales17.65%

Fun Time

Price2.792