Kodak Strategic Management (Strategic Blunder) Case Study
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Transcript of Kodak Strategic Management (Strategic Blunder) Case Study
KODAK STRATEGIC BLUNDER Strategic Management (MBC712) Prepared for: Dr Azni Zarina Taha Sharifah Khairin Syed Mohd Ali BGA140013 Zakiah Hanim Mohd Hamdan BGA140014
IntroducCon to 128 years of Kodak
By 1976 Kodak accounted for 90% of film and 85% of camera sales in America. UnNl the 1990s it was regularly rated one of the world's five most valuable brands.
Kodak's revenues peaked at nearly $16 billion in 1996 and its profits at $2.5 billion in 1999. The consensus forecast by analysts is that its revenues in 2011 were $6.2 billion. It recently reported a third-‐quarter loss of $222m, the ninth quarterly loss in three years. In 1988, Kodak employed over 145,000 workers worldwide; at the last count, barely one-‐tenth as many. Its share price has fallen by nearly 90% in the past year
Kodak poured billions into developing technology for taking pictures using mobile phones and other digital devices. But it held back from developing digital cameras for the mass market for fear of killing its all-‐important film business.
1880 founded by George Eastman
1888 Released first Eastman Kodak camera ($25)
1976 90% of film and 85% of camera
sales in America
Patents photographic film in a roll
1891 Open manufacturing site in Harrow, London suburb
1900 Launch Brownie camera for masses ($1)
1922 Produce 147,000 miles of moNon picture film/year.
1925 William Stuber takes over
1969 Apollo 11 Moon landing
1975 First to make digital camera
(23 secs)
1994 Apple launched first consumer
digital camera – QuickTake
Invest in digital
imaging products for
medical pracNce
2004 Abandons film
camera. Cut 15,000 jobs
2005 Revealed wifi consumer digital camera-‐Kodak easy share. Largest digital camera retailer in US ($5.7bn in sales)
2007 Falls to 4th
biggest digital retailer
2009 Stops selling 35mm colour
film
2010 Falls to 7th
biggest digital retailer.
Removed from S&P 500 index
2011 Shares fall more than 80% to meet pension costs
2012 Files for Chapter 11 bankruptcy protecNon. Delisted from NYSE
Known for its pioneering technology and innovaNve markeNng.
1935 Introduced colour film
1969 Introduced InstamaNc camera
1997 Restructuring eliminate 19,000 jobs, reduced $1bil annual cost
1999 Entered into radiography market
2001 Pushed into
China
2012 Exits from digital image market
1980 Fuji emerges as a compe3tor 1990s Decline of film photography
in 1975, long before the digital age. Mr Sasson and his colleagues were met with blank faces when they unveiled their device to Kodak's bosses. Even he didn't full see its potenNal. "It is funny now to look back on this project and realise that we were not really thinking of this as the world's first digital camera,"
So who invented the digital camera? Ironically, Kodak did – or, rather, a company engineer called Steve Sasson, who put together a toaster-‐sized contrapNon that could save images using electronic circuits. The images were transferred onto a tape cassene and were viewable by anaching the camera to a TV screen, a process that took 23 seconds.
What went wrong with Kodak’s FuncConal Strategy.
Strategies
Human Resource • Employed more than 145K staff aqer selling 90% of its film & 80% of its camera business • Injected $800 million into UK pension fund • Unable to cut unprofitable operaNons & cut back on pension obligaNons
Finance • Focused more in protecNng its exisNng cash flow than to look at what the market wanted • 2012-‐ Managed to obtain $615mill debtor in procession on $950mill commined facility
Research & Development, Technology, Product Development
• 1975 – Steve Sasson invented first digital camera – 23 sec from film to screen • 1990 – invested billions in technology to take pictures using mobile phones & devices but
held back in developing digital cameras for the mass market • Spend long Nme in research • DisconnecNon with upper Management • Before late 1980s -‐ Not aligned with business strategies
Supply Chain Management • Excess inventory • Lack of product-‐specific informaNon from client (hospital) and their distributors distorted
figures in inventory usage. • Only in 2002, Kodak developed lean logisNcs by establishing cross docks. • Also before 2002, shipping cost was very expensive because they didn’t use their own
truck.
in 1975, long before the digital age. Mr Sasson and his colleagues were met with blank faces when they unveiled their device to Kodak's bosses. Even he didn't full see its potenNal. "It is funny now to look back on this project and realise that we were not really thinking of this as the world's first digital camera,"
So who invented the digital camera? Ironically, Kodak did – or, rather, a company engineer called Steve Sasson, who put together a toaster-‐sized contrapNon that could save images using electronic circuits. The images were transferred onto a tape cassene and were viewable by anaching the camera to a TV screen, a process that took 23 seconds.
What went wrong with Kodak’s FuncConal Strategy.
Strategies
Group Planning • Buy ready made businesses instead of developing in house technologies • Take too long in first acquisiNon when it wanted to diversify the business • Inability to recognise consumer needs & trends • Inability to focus in soluNons & find new markets • Enable to predict the collapse of the pharmaceuNcal industry • Failure to focus on product diversificaNon
Sales, MarkeCng & DistribuCon
• Refuse to use its name in the development of QuickTake digital camera • Kodak was not interested to sponsor Los Angeles Olympics in 1984 and gave it to Fuji • Kodak refused to reduce prices and make room for compeNtor Fuji to gain bigger market
share • American consumers opt of compeNtor as long as it is cheaper • Kodak hoped to sNll be relevant in developing economies that sNll uses film and not
digital cameras.
Management • 1975 – failed to recognise Steve Sassons invenNon afraid to kill its film business • Unable to see an opportunity in creaNng the world’s first digital camera • To slow in changing & suffered a mentality of “Perfect Products” • Are not exposed to developments outside of Rochester – insular culture • Constant change of CEO & business strategy
Kodak Shares Takes a Plunge
By 1976 Kodak accounted for 90% of film and 85% of camera sales in America. UnNl the 1990s it was regularly rated one of the world's five most valuable brands.
Kodak's revenues peaked at nearly $16 billion in 1996 and its profits at $2.5 billion in 1999. The consensus forecast by analysts is that its revenues in 2011 were $6.2 billion. It recently reported a third-‐quarter loss of $222m, the ninth quarterly loss in three years. In 1988, Kodak employed over 145,000 workers worldwide; at the last count, barely one-‐tenth as many. Its share price has fallen by nearly 90% in the past year
1996 Revenue $16
Billion
1990s Decline of film photography
1999 Profits $2.5
Billion
Suffered 3rd quarter loss of $222 million (9th quarterly loss in 3 years)
How did Kodak’s FuncConal Strategy Affect its Business Strategy
Alliances
Research & Development, Technology, Product Development Apple • Develop QuickTake digital camera
• Late mover in the business segment
due to its tradiNonal and rigid culture
• No longer known as pioneering in technology & innovaNve markeNng
AcquisiCon Sterling Drug for $5.1 billion • Wrong investment & lack of risk management assessment
Expansion Sales, MarkeCng & DistribuCon Sale of film rolls and cameras into China Geographical limitaCon Rochester
• Failed to anNcipate market wants –
leapfrog syndrome • Limited exposure due to not having
internaNonal physical presence leading to Fujifilm taking over market share
• Not having an office in silicon valley prevents from further innovaNon and knowing new technology development
Management & Group Planning
Inability to see opportuniNes and new markets
• Missed opportunity to develop technology beyond digital cameras
• Prevented growth of in-‐house capabiliNes
Konica Minolta
Lower Cost
Overall Low-‐cost Provider Strategy 1900: Introduced the first Brownie Cameras. Sold for $1 and film is 15 cents.
Broad DifferenCaCon Strategy 1923:Kodak made amateur moNon pictures pracNcal with the introducNon of 16 mm reversal film on cellulose acetate (safety) base, the first 16 mm CINE-‐KODAK MoNon Picture Camera, and the KODASCOPE Projector 1928: The first microfilm system 1929:The company introduced its first moNon picture film
Focused Low-‐Cost Strategy
Focused DifferenCaCon Strategy 2000 : Kodak introduced 45 new products in digital imaging (dental radiography) 2004:Produced a mammography computer aided detecNon system design to assist with breast cancer. Focused on commercial prints and publishing applicaNons.
Kodak Generic CompeCCve Strategies.
DifferenCaCon
Broad cross secCon of buyers
Narrow buyer segment (or Market Niche)
• Core competency cause Kodak to be rigid • Lack of market research • Slow in entering the digital photography
scene • Failed innovaNon and transformaNon • Unwilling to change • Kodak acted like a stereotypical change-‐
resistant Japanese firm, while Fujifilm acted like a flexible American one.
The Reasons to Kodak’s Failure
Kodak Four Pillar Strategy (2000 – 2005)
Strategies
Managing the tradiNonal Film business
• Slow exit strategy from film business • Digital technology to support film business
Leading in distribuNon output
• Failed to see the migraNon from tradiNonal photography prinNng to digital imaging transfer/sharing
Growing the digital capture business
• Low profit in digital photography in comparison to tradiNonal photography
Expanding digital imaging services
• Expanded their products and services. E.g. Kioks that print image directly from mobile phone
• Kodak acquired Ofodo to boost Kodak Easy Share Gallery, an online service
Daniel A Carp CEO/Chairman
Kodak Strategy (2005 – Present)
Strategies
Outsourcing Manufacturing
• Did not achieve integraNon of external with internal knowledge
• Unable to compete in the high end spectrum of cameras
InvesNng in Digital Technology
• Shunering digital camera business
Build High Margin Printer Ink Business
• Ending home printer business – end of desktop printer line
• Focus on the use of prinNng technology as a form of manufacturing – commercial and packaging prinNng & serving the industry
Aggressive Patent LiNgaNon • Completed transacNon for the sale & licensing of its digital imaging patents for net proceeds of $527 million
Expand Brand Licensing Programme • Phase out dedicated capture devices business – digital cameras, pocket video cameras, digital frames
• Online and retail base photo prinNng & desktop inkjet prinNng
Internal Restructuring • Cut reNree dependency • Sold off & shut down business lines and assets • Reduced 20% of its workforce
Antonio M. Perez CEO