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Strategic and Change Management

George H. Papadakis, PhD

MEDITERRANEAN UNIVERSITY

COLLEGE

TEESSIDE BUSINESS SCHOOL

Dr. A. R. Morden

Case study 5: Eastman Kodak Company

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Kodaks core competencies:

Image of pioneer: established in 1982, Kodak is the first producer ofphotographic equipment worldwide.

Brand: Kodaks brand enjoys global awareness and recall and has become

an asset of enormous commercial value.Quality: Kodak enjoys a reputation for high film quality.

HRM: George Eastman was a pioneer in HRM, lavishing generous healthcare and retirement benefits for its employees.

Marketing: satisfying customers, product differentiation and aggressivemarketing through promotion and sponsorship stands at the heart of thecompanys philosophy and is repeatedly emphasized by Fisher in his reports.

Innovation: the company is a major introducer of new technologies andproducts in the industry with a traditionally clear focus on R&D.

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Competitor analysis for Kodak:

Who are Kodaks competitors?

indirect competitors: other leisure goods and services (e.g. videotechnologies, personal computers, etc.).

potential entrants: companies with expertise in digital technologies (e.g.

Hewlett-Packard, Microsoft, Adobe, etc.).

direct competitors: private labels (e.g. Boots in the UK, K-Mart in the USA).

direct competitors: producers of photograph equipment (e.g. Fuji, Polaroid,Sony, Agfa, 3M, Konica, etc.).

What does Kodak compares against its rivals?

the company outperforms its rivals in reputation, quality and innovativeness

however, it lacks operation efficiency, especially when compared to theJapanese firms

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Kodaks strategy:

Competition strategy:

differentiation: based on the strong brand and high quality.

however, intense competition from cost-efficient rivals (Fuji sets its priceabout 10% below Kodaks and private labels are 30% cheaper than Kodak)forced Kodak to work intensively towards reducing operating costs.

there is evidence suggesting that this effort to achieve simultaneously adifferentiation low cost position did not work well, and the company wasstuck in the middle.

critics from FT and Fortune described the company as expensive andinefficient.

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Kodaks strategy (cont.):

Product market strategy:

diversification: entrance in product markets outside its traditional lines bybuying up companies varied as pharmaceuticals, computer systems and

household cleaners. the move towards diversification is justified by taking in consideration thecontinuing stagnation of the imaging sector in Western markets and theincreasing competition by Japanese manufacturers.

the strategy paid of with new revenue sources.

however, it also saddled the company with heavy debts (in financing theacquisitions) and inefficiencies as it introduced the company in businessesabout which it knew nothing.

this necessitated several SBUs (e.g. clinical diagnostics) to be sold and a

return to the core (films and cameras).

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Kodaks strategy (cont.):

Business development strategy:

i) strategic alliances and joint ventures with companies outside the industryto gain know-how in digital technologies (e.g. with Hewlett-Packard, Apple,

IBM and Microsoft in software).

ii) acquisitions with which the company diversified in new product markets.

iii) aggressive internationalization, especially in Asia in order to strengthenthe companys presence in a booming region which accounted for less than

10% of its sales.

this cooperative strategies were a dramatic break in Kodaks history thecompany has typically been doing everything in-house, a fact that helped inbuilding an unparallel global brand identity.

however, being a loner is a liability when trying to break in unknown product markets such as multimedia.