A Kodak Moment

Kodak is an organization that had a good plan but that had something go wrong because of circumstances beyond their control; that is, technology was introduced, the market changed, an innovative competitor entered the market, and so forth.

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Kodak- good plan but something went wrong because of circumstances beyond their control

In 1884 patents for the photographic film were produced, and eight years later the company to be known as Kodak was founded by a high school dropout George Eastman (Elliott, 2012; Sparks, 2012).  In 1900, the “Brownie” camera was introduced at $1 each and film at $0.15, and it allowed for the general public to have access to a camera (Anthony, 2011; Elliott, 2012; Sparks, 2012). Quality was its major differentiator (Cohan, 2011). With time cameras got better, easier to use, and smaller to make the end-user experience as simple and welcoming as possible (Elliott, 2012). In the 1930s, Kodak had an IPO on the Dow Jones and in 1969 the film used to capture the Apollo 11 missions was from Kodak (Elliott, 2012; Sparks, 2012). In 1975 Kodak introduced the digital camera where pictures can be stored on cassette tapes (Sparks, 2012).

By 2004-2009, Kodak stopped selling film cameras and tape recorders to meet the new shift in the market for digital cameras (Elliot, 2012; Sparks, 2012).  As this new shift was occurring, 13 manufacturing plants and 130 processing labs closed, cutting over 47K jobs starting in 2003 (Strydom, 2012).  Therefore, Kodak started and kept losing their market share in 2011 and filed chapter 11 on 2012 as an attempt to transform the company into a pioneer in digital cameras (Sparks, 2012; Strydom, 2012). Today, they struggle to keep pensions and other benefits for their retired workers, while they are leaning out their processes and restructuring their costs (Strydom, 2012). Kodak to try to stay afloat, has sued Apple and Blackberry for stealing their patented technology (Anthony, 2011). The only thing that Kodak can do now sells its >1000 patents in cameras and video tapes (Anthony, 2011, Elliott, 2012).

Forces that adversely affected Kodak

Competition: From the 1900s, Kodak dominated the market shares with consumer photography (Elliott, 2012). However, competition is fierce. Sony, Canon, Apple, HP, and Fuji all began to specialize and develop faster than Kodak to chip away at its market share or create new markets as first movers (Anthony, 2011; Cohan, 2011; Elliott, 2012; Sparks, 2012).

Economical: Fuji specialized in film and was able to out price Kodak. Therefore Fuji film was able to quickly take away a cash cow product from Kodak, such that Kodak had to lay off 20K jobs just to offset (Cohan, 2011).  Fuji essentially was able to gain control of the market share in the film segment.

Ethical: In 1948, Polaroid came out with instant photography and Kodak copied that technology, lost a suit of $909M for stealing the technology from 1976-1986 (Cohan, 2011). Kodak to try to stay afloat, has fruitlessly sued Apple and Blackberry for stealing their patented technology (Anthony, 2011).

Technological: As Kodak moved away from the film, it tried to take some dominance in the digital camera market, but they couldn’t penetrate that market enough to be sustainable (Elliott, 2012). As it tried to gain market share in the digital camera realm, they were late.  The timing of Kodak entering into this market had allowed Sony and Canon to become the first movers and establish market control (Anthony, 2011). Kodak tried to work on digital camera personal printers, but HP was the first mover in that market and had a strong hold on the market share (Cohan, 2011).

Why it is relevant

There are many big companies out there today that has become comfortable and is now are seeing an introduction of competition, which is threatening to take away their market dominance and reduce the market share.  Though competition is great for consumers, which allows for pricing wars to exist, it is terrible for a company that is trying to drive down costs enough remain competitive while still turning over profit.

The story of Kodak is not different from other companies, and it does show that empires do fall.  It starts off with competition.  Fuji specialized in film and was able to out price Kodak (Cohan, 2011). Then it came with Apple that started to try to produce digital cameras, but it was then Canon and Sony that specialized in this new area and developed the technology much faster than Kodak that Kodak just couldn’t catch up (Cohan, 2011; Elliott, 2012; Sparks, 2012). Finally, when Kodak tried to dominate a space where they could gain a reasonable amount of market share by working on tangential technology, the digital camera printers, they were too late, and HP became the first mover in that technology space and held onto its dominance in the market (Cohan, 2011). Therefore, the story of Kodak should provide a cautionary tale to other companies.

References

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