The Nature of Change
In this module, we learned that  everything is in a state of constant change. This is a challenge of  strategic management, as the industry environment is driven by  technology, consumer needs, politics, economic conditions, and many  other influences.
Case 8 Eastman Kodak’s Quest for a Digital Future
Discuss the key factors that drove the evolution of the  photography industry, and how did these factors impact Kodak’s business  model?
Based on your understanding of the industry life cycle, discuss  the stage the photography industry was in during Kodak’s quest for a  digital future.
Discuss the strategies that Kodak employed to adapt to the  changing industry environment, and how effective were these strategies?
Discuss what strategies would have been most appropriate for Kodak to pursue at that stage?
How did Kodak’s organizational ambidexterity, or lack thereof,  impact its ability to manage strategic change and respond to disruptive  technologies?
Directions:
Discuss the concepts, principles, and theories from your textbook. Â Cite your textbooks and cite any other sources if appropriate.
Case8 Eastnian Kodak’s
Quest for a
Digital Future*
On January 19, 2012, the Eastman Kodak Company declared bankruptcy-it entered
“voluntary Chapter 11 business reorganization.” Its two-decade journey of transition
from traditional photography into digital imaging was effectively over. In 1990, Kodak
had launched its Photo CD system for storing photographic images; in 1991, it had introduced its first digital camera and, in 1994, its then CEO, George Fisher, had announced:
“We are not in the photographic business … we are in the picture business.”
With senior executives recruited from Motorola, Apple, General Electric, Silicon
Graphics, and Hewlett-Packard, Kodak’s digital imaging efforts had established
some notable successes. In digital cameras, Kodak was US market leader for most
of 2004-2010; globally, it ranked third after Canon and Sony. It was a technological
leader in megapixel image sensors. It was global leader in retail printing kiosks and
digital minilabs.
Performance metrics told a different story. In 1991, Eastman Kodak was America’s
18th-biggest company by revenues. Yet, by 2011, it had fallen to 334th. During the same
period its employment had shrunk from 133,200 to 17,100. Between 2000 and 2011, its
operating losses totaled $5.2 billion.
As CEO Antonio Perez prepared for his new role under the supervision of Kodak’s
court-appointed, chief restructuring officer, James Mesterharm, he reflected on Kodak’s
two decades of decline. How could a company that had been a pioneer of digital
imaging and had invested so heavily in building digital capabilities and launching new
digital imaging products have failed so miserably to profit from its efforts? And what
could he have done differently to have avoided this fate?
These same questions haunted the CEOs of other companies: if one of America’s
most successful companies could be destroyed by new technology, what did the future
hold for their own businesses?
Kodak’s History, 1901-1993
George Eastman transformed photography from a professional, studio-based activity
into an everyday consumer hobby. His key innovations were silver halide roll film and
the first fully-portable camera. The Eastman Kodak Company, established in Rochester, New York, in 1901 offered a full range of products and services for the amateur
photographer: “You push the button, we do the rest” was its first advertising slogan.
By the time George Eastman died in 1932, Eastman Kodak was one of the world’s
leading multinational corporations w ith production, distribution, and processing facilities throughout the world and with one of the world’s most recognizable brand names.
*This case was prepared by Robert M. Grant. ©2021 Robert M. Grant.
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CASES TO CONTEMPORARY STRATEGY ANALYSIS
After World War II, Kodak entered a new growth phase with an expanding core
business and diversification into chemicals Cits subsidiary, Eastman Chemical, exploited
its polymer technologies) and healthcare (Eastman Pharmaceutical was established in
1986). Kodak also faced significant competitive challenges. In cameras, Japanese companies came to dominate the world market; in film, Fuji Photo Film Company embarked
on an aggressive international expansion. In addition, new imaging technologies were
emerging. Polaroid pioneered instant photography; Xerox led electrostatic plain-paper
copying; while the advent of the personal computer ushered in new image management
and printing technologies.
Kodak was alert to the emergence of digital technology and introduced several
products that embodied new imaging technologies:
• The world’s first megapixel electronic image sensor 0986), followed by a
number of new products for scanning and electronic image capture.
• Computer-assisted image storage and retrieval systems for storing, retrieving,
and editing graphical and microfilm images.
• Data storage products included floppy disks (Verbatim was acquired in 1985)
and 14-inch optical disks 0986).
• Plain-paper office copiers (Kodak acquired IBM’s copier business in 1988).
• The Photo CD system 0990) allowed digitized photographic images to be
stored on a compact disc.
• Kodak’s first digital camera, the 1.3 megapixel DCS-100, priced at
$13,000 launched in 1991.
Committing to a Digital Future
Kodak’s commitment to a digital imaging strategy was sealed by the appointment of
George Fisher as CEO. Fisher had a doctorate in applied mathematics, 10 years of R&D
experience at Bell Labs, and had led strategic transformation at Motorola. To focus Kodak’s
efforts on the digital challenge, Fisher’s first moves were to divest Eastman Chemical
Company and most of Kodak’s healthcare businesses and to create a single digital imaging
division headed by newly hired Carl Gustin (previously with Apple and Digital Equipment).
Kodak’s Digital Strategy
Under three successive CEOs- George Fisher 0993-1999), Dan Carp (2000- 2005), and
Antonio Perez (2005- 2012)- Kodak developed a digital strategy intended to transform
Kodak from a traditional photographic company into a leader in the emerging field of
digital imaging. The scale and scope of this transformation was outlined by Antonio
Perez in terms of the “fu ndamental challenges” that Kodak was engaged in (Figure 1).
During 1993- 2011, Kodak’s strategy embodied four major themes:
• an incremental approach to managing the transition to digital imaging;
• different strategies for the consumer market and for the professional and
commercial markets;
• external sourcing of knowledge through hiring, alliances, and acquisitions;
• an emphasis on printed images;
• harvesting the traditional photography business.
CASE 8 EASTMAN KODAK’S QUEST FOR A DIGITAL FUTURE
FIGURE 1
Eastman Kodak’s “fundamental challenges”
The Scope of Transformation
TO
FROM
IAnalogue technology 1—~l IDigital technology
I Long design cycle
;
I Rapid prototyping
l_n_du_ s_t_ria_l_m_a_n_u_fa_c_tu_r_in_g_p_r_o_
c e_s_se_s_ ~ f – – – ~ l I Flexible manufacturing processes
~I
f—~l Value based on solutions (product+
I Value based on physical products
~.- – – – – – – – – – – – – – ‘
consumables + servi ces)
_:—l Just-in-time, just-in-place, customized
M
_ as_s_-p_r_o d_ u_c_e_d ,_l_ar_g_e_in_v_e_nt_o_r_ie_s _ _
~I
H
_i_g_h _m_a_rg_i_n_s,_h_ea_v_y_i_n f_ra_ s_tr_u_c_tu_r_e _ ~ f – – – ~ l
~I
I Lower margins, lean organization
Source: Based upon Bob Brust, “Completing the Kodak Transformat ion;’ Presentation, Eastman Kodak Compa ny,
September 2005. © Kodak.Used w ith permission.
An Incremental Approach
“The future is not some harebrained scheme of the digital information highway or
something. It is a step-by-step progression of enhancing photography using digital
technology,” declared Fisher in 1995.2 This recognition that digital imaging was an
evolutionary rather than a revolutionary change would be the key to Kodak’s ability
to build a strong position in digital technology. If photography was to switch rapidly
from the traditional chemical-based technology to a wholly digital technology where
customers took digital pictures, downloaded them onto their computers, edited them,
and transmitted them via the internet to be viewed electronically, the new digital value
chain make redundant most of Kodak’s core resources and capabilities. Moreover, most
of this digital value chain was already in the hands of computer hardware and software
companies.
Fortunately for Kodak, during the 1990s, digital technology made only selective
incursions into traditional photographic imaging. As late as 2000, digital cameras had
achieved limited market penetration; the vast majority of photographic images were
still captured on traditional film.
Therefore, central to Kodak’s strategy was a hybrid approach where by Kodak introduced those aspects of digital imaging that could offer truly enhanced functionality for
users. Thus, in the consumer market, Kodak recognized that image capture would continue to be dominated by traditional film for some time (digital cameras offered inferior
resolution compared with conventional photography). However, digital imaging offered
immediate potential for image manipulation and transmission.
If consumers continued to use conventional film while seeking the advantages of
digitization for editing and emailing their pictures, this offered a valuable opportunity
for Kodak’s vast retail network. Kodak had installed its first self-service facility for digitizing, editing, and printing images from conventional photographs in 1988. In 1994,
Kodak launched its Picture Maker, a self-service kiosk located in retail stores where
customers could scan conventional photographs and edit and print digital images in a
415
416
CASES TO CONTEMPORARY STRATEGY ANALYSIS
variety of formats. George Fisher emphasized the central role of retail kiosks in Kodak’s
digital strategy:
Four years ago, when we talked a bout the possibilities of digital photography, people
laughed. Today, the high-tech world is stamp eding to get a piece of the action, calling
digital imaging perhaps the greatest growth opportunity in the compute r world. And
it may be. We surely see it as the greatest future e nable r for people to truly “Take
Pictures. Further.” We start at re tail, our distributio n strongho ld . . . We believe the
w idespread photo-retailing infrastructure will continue to be th e principal avenue by
which people obtain the ir pictures . Our strategy is to build on and extend this existing
market strength w hich is available to us, a nd at the same time be prepared to serve
the rapidly growing, but relatively small, pure digital market that is developing .3
By the beginning of 2004, Kodak was the global leader in self-service digital printing
kiosks, with 24,000 installed Kodak Picture Makers in the United States and over
55,000 worldwide.
Despite the inferior resolution of digital cameras, Fisher recognized their potential
and pushed Kodak to establish itself in this highly competitive market. In addition to
digital cameras for professional use, in 1994, Kodak developed the QuickTake camera
for Apple: at $75 it was the first popular-priced digital camera. In March 1995, Kodak
introduced the first full-featured digital camera priced at under $1000.
The Consumer Market: Emphasizing Simplicity
and Ease of Use
Kodak pursued different approaches to consumer and professional/commercial markets. While the commercial and professional market offered the test-bed for Kodak’s
advanced digital technologies, the emphasis in the consumer segment was to maintain
Kodak’s position as mass-market leader by providing simplicity, quality, and value. In
the consumer market, Kodak’s incremental strategy provided an easy pathway for customers to transition to digital photography while also exploiting Kodak’s core brand
and distribution strengths. Consistent with its original vision of “You push the button,
we do the rest.” Kodak envisaged itself as providing security, reliability, and simplicity
for customers bewildered by the pace of technological change.
This encouraged Kodak to adopt a customer solutions approach to digital photography. “For Kodak, digital photography is all about ease of use and helping people
get prints-in other words, getting the same experience they’re used to from their
film cameras,” noted Martin Coyne, head of Kodak’s Photographic Group .4 A solutions
approach recognized that most consumers had neither the time nor the patience to
read instructions and to integrate different devices and software. Kodak believed that
its integrated system approach would have particular appeal to women , who made up
the major part of the consumer market.
The result was Kodak’s EasyShare system, launched in 2001. According to Willy Shih,
head of digital and applied imaging, EasyShare’s intention was to :
provid e consume rs w ith the first easy-to-use d igital photography exp e rie nce .. . Digital
p hotography is just the first ste p … Peop le n eed to get their pictures to their PCs and
the n want to sh are by printing or e-mail. So w e developed a syste m that m ad e the fu ll
experie nce as easy as possible. 5
CASE 8 EASTMAN KODAK’S QUEST FOR A DIGITAL FUTURE
FIGURE 2
Kodak’s EasyShare network: “Your pictures-anytime, anywhere”
Phone cam
Digital still camera
Consumer media
Mobile services
PC-based, online
services
Professional
printing
Retail kiosk printing
Home printing
Source: Based upon Bob Brust, “Completing the Kodak Transformation;’ Presentation, Eastman Kodak Compa ny,
September 2005. © Kodak.Used with permission.
Figure 2 shows Kodak’s conceptualization of its EasyShare system.
By 2005, most of the main elements of the EasyShare system were in place:
• Kodak’s range of EasyShare digital cameras had carved out a strong position in
a crowded market.
• EasyShare software allowed the downloading, organization , editing, and
emailing of images, together with the ordering of online prints. EasyShare software was bundled with Kodak’s cameras as well as being available for downloading for free from Kodak’s website.
• The EasyShare printer dock introduced in 2003 was the first printer that incorporated a camera dock allowing the “one touch simple” thermal-dye printing
direct from a camera. Antonio Perez’s arrival in 2003 reinforced Kodak’s push
into printers: “If a company wants to be a leader in digital imaging, it necessarily has to participate in digital output.”6
• Online digital imaging services: Kodak had been quick to recognize the
potential of the internet for allowing consumers to transmit and store their
p hotographs and order prints. Kodak’s Picture Network, launched in 1997,
allowed consumers to have their conventional photographs digitized by a
re tail photo store, then uploaded to a personal internet account on Kodak’s
Picture Network. In 1998, Kodak launched its online printing service,
PhotoNet, enabling consumers to upload their digital images and order prints.
Kodak also partnered with AOL to offer You ‘ve Got Pictures. By acquiring
Ofoto in 2001, Kodak became the leader in online photofinishing and
online image storage. In January 2005, Kodak renamed Ofoto “Kodak
EasyShare Gallery.”
By 2005, therefore, Kodak was present across the entire digital value chain- this
integrated presence was underpinned by proprietary technology at each of these stages
(Figure 3).
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CASES TO CONTEMPORARY STRATEGY ANALYSIS
FIGURE 3
Kodak’s technological position within the digital imaging chain
• Pioneer in both CCD and CMOS image sensors for digital cameras.
Image capture
u
f- •Technical and market leadership in OLED (organic light emitting diode) screens
w hich were displacing liquid crystal displays (LCDs).
Image storage
• Established presence through floppy disks, 14-inch optical disks, compact disks
(Photo-CD), and most recently flash memories.
Image
manipulation
• Kodak had developed algorithms for processing and manipulating digital images that
were used by its proprietary software for both commercial and consumer markets.
Image
transmission
• Kodak had algorithms for compressing image files while minimizing image loss.
They were used in proprietary systems but had not become industry standards.
Image
printing
Document
and image
management
• Technological strengths in thermal and ink-jet printing and color science.
• World leadership in photographic paper and other print media.
In commercial sector, Kodak offered systems to store, retrieve, edit, and print text and
graphics. In consumer sector, Kodak had built a strong on line presence through
Ofoto/ Kodak Gallery allow ing users to archive and organize digital images.
H
I
Professional, Commercial, and Healthcare Markets
The commercial and professional markets were important to Kodak for two reasons.
First, they were lead customers for many of Kodak’s cutting-edge digital technologies.
News photographers were early adopters of digital cameras. The US Department of
Defense pioneered digital imaging for satellite imaging, weather forecasting, and surveillance activities. NASA used Kodak cameras and imaging equipment for its space
missions and satellites. For commercial applications ranging from real estate brokerage
to security systems, digital imaging offered image transmission and linkage with IT
management systems for image storage and retrieval. The huge price premium of
commercial consumer products made it attractive to focus R&D on these leading-edge
users in the anticipation of trickle-down to the consumer market.
In commercial printing and publishing (which became the Graphic Communications
Group in 2005), Kodak assembled a strong position in commercial scanning, formatting, and printing systems for the publishing, packaging, and data processing industries. Kodak’s opportunity was to exploit the transition from traditional offset printing
to digital, full-color, variable printing. This opportunity built on two key strengths:
first, Kodak’s proprieta1y inkjet technology (including its technically superior inks)
and, second, its leadership in variable-data printing- printing that permitted individually customized output (as in personalized sales catalogues or bills). Kodak built its
commercial printing business on both internally developed technologies and acquisitions. These included Heidelberg’s NexPress and Digimaster businesses, and Scitex,
supplier of Versamark high-speed inkjet printers. Kodak also built a presence in prepress and workflow systems used by commercial printers.
In medical imaging, Kodak faced declining sales of X-ray film and related chemicals
and accessories. Through a series of acquisitions and internal developments, Kodak
established a portfolio of products for digital X-rays, laser imaging, picture archiving
and communications systems- including systems for digitizing and storing conventional X-rays. Kodak also built up a strong position in dental imaging systems comprising hardware, software, and consumables. However, Kodak sold its Health Group
to Onex Healthcare Holdings in 2007 for $2.55 billion.
CASE 8 EASTMAN KODAK’S QUEST FOR A DIGITAL FUTURE
Kodak’s capability in creating integrated imaging and information solutions was
of particular value in large public sector projects. Kodak’s digital scanning and document management systems were used in national censuses in the United States, the
United Kingdom, France, Australia, and Brazil. At the German post office, a Kodak team
achieved a world record, creating digitized copies of 1.7 million documents in 24 hours.
Hiring, Alliances, and Acquisitions
Kodak’s business system had been based upon vertical integration and self-sufficiency:
at its Rochester base, Kodak developed its own technology, produced its own products, and supplied them worldwide through its vast global network. In digital imaging,
not only did Kodak lack much of the expertise needed to build a digital imaging
business, but also the pace of technological change was too rapid to rely on in-house
development. Therefore, as Kodak transformed its capability base from chemical to
digital imaging, it looked outside for the knowledge it required.
Kodak recruited executives and technical specialists it needed for its new digital
strategy. Key executives were hired from a variety of technology-intensive companies
including Silicon Graphics, IBM, Xerox, Hewlett-Packard, Lexmark, Apple, GE Medical
Electronics, Olympus Optical, and Lockheed Martin. Table 1 shows the backgrounds of
Kodak’s top management team.
TABLE 1
Eastman Kodak’s senior management team, April 2012
Name
Position
Joined Kodak
Robert L. Berman
Senior Vice President
1982
Kodak veteran
Philip J. Fa raci
President and COO
2004
Phogenix Imaging, Gem plus
Stephen Green
Director, Business
Development, Asia-Pacific
200S
Creo Inc.
Pradeep Jotwan i
President, Consumer
Business
2010
Hewlett-Packard
Brad W. Kruchten
President Fil m and Photofi nishing Systems Group
1982
Kodak vetera n
Antoinette Mccorvey
CFO and Senior Vice President
1999
Monsanto/Solutia
Gustavo Oviedo
Chief Customer Officer
2006
Schneider Electric
Antonio M. Perez
Chairman and CEO
2003
Hewlett-Packard
Laura G. Quatela
General Counsel and
Chief Intellectual
Property Officer
1999
Clover Capital Management,
Inc., SASIB Railway GRS,
and Bausch & Lomb Inc.
lsidre Rosello
General Manager, Digital
Printing Solutions
2005
Hewlett-Packard
Eric H. Samuels
Chief Account ing Officer and
Corporate Controller
2004
KPMG, Ernst & Young
Patrick M. Sheller
Chief Administrative
Officer, General Counsel
and Secretary
1993
McKenna, Long & Aldridge,
Federal Trade Commission
Terry R. Taber
Vice President
1980
Kodak veteran
Note:
Includes corporate officers, senior vice presidents, and division heads.
Source: www.kodak.com. © Kodak. Used with permission.
Prior company experience
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CASES TO CONTEMPORARY STRATEGY ANALYSIS
Kodak acknowledged that the digital imaging chain already included companies
that were well-established, sometimes dominant, in particular activities. For example,
Adobe Systems dominated image-formatting software; Hewlett-Packard, Epson, and
Canon were leaders in inkjet printers; and Microsoft dominated PC operating systems.
Willy Shih, head of Kodak’s digital imaging products from 1997 to 2003, observed: “We
have to pick where we add value and commoditize where we can’t.”7
In many cases, this meant partnering with companies that were already leaders in
digital technologies. Kodak forged alliances with Canon, AOL, Intel, Hewlett-Packard,
Olympus, and IBM.
Kodak made acquisitions where it believed that a strong proprietary position was
essential to its strategy and in technologies where it needed to complement its own
expertise. Its major acquisitions over the period are shown in Table 2.
TABLE 2
Kodak’s major acquisitions, 1994- 2011
Date
Company
Description
1994
Qualex, Inc.
Provider of photo-finish ing services; acquired to
complement Kodak’s on line photofinishing service
1997
Wang Laboratories
Acq uisition of Wang’s software unit
1997
Chinon Industries
Japanese camera producer; majority stake acquired;
o utstand ing shares purchased in 2004
1998
Pictu reVision, Inc.
Provider of PhotoNet online d ig ital imaging services
and retail solutions; com plement to Kodak’s
Picture Network business
1998
Shantou Era Photo Mat erial, Xiamen
Fuda Photographic Materials
Strengthened Kodak’s position in photographic
film in China
1999
Imation
Supplier of medical imaging products and services
2000
Lum isys, Inc.
Provider of desktop computed radiography system s
and X-ray fi lm digitizers
2001
Bell & Howell
Imaging businesses only acq uired
2001
Ofot o, Inc.
Leading US online photofinisher
2001
Encad, Inc.
Wide-format commercial inkjet printers
2003
PracticeWorks
Digital dental imaging and dental practice
management soft ware
2003
Algotec Systems Ltd.
Developer of picture archiving syst em s
2003
Lucky Film Co., Ltd.
Acqu isition of 20% of China’s leading photographic
fi lm supplier
2003
LaserPacific Media Corporation
Provider of postproduction services for filmmakers
2004
NexPress
Acqu ired Heidelberg’s 50% of th is j oint venture,
w hich supplied high-end, on-demand color
printing syst ems and black-and-w hite variabledata printing systems
2004
Scitex Digital Printin g
A leader in hig h-speed variable data inkjet print ing
(renamed Kodak Versa m ark, Inc.)
(Continues)
CASE 8 EASTMAN KODAK’S QUEST FOR A DIGITAL FUTURE
TABLE 2
(Continued)
Date
Company
Description
2004
National Semiconductor
Acquisition of National’s imaging sensor business
2005
Kodak Polychrome Graphics LLC
Kodak acquires Sun Chemical’s 50% stake in the joint
venture, w hich is a leader in graphic communication
2005
Creo Inc.
Leading supplier of prepress and workflow systems
used by commercial printers
2008
Design2Launch
Developer of col laborative end-to-end digital
workflow solutions for transactiona l printing
2008
lntermate NS
Dan ish supplier of Intelligent Print Data Stream
software for managing high speed printers
2009
Bowe Bell & Howell
Acquisition of document scan ner division
2011
Tokyo Ohka Kogyo Co, Ltd.
Acquisition ofTOK’s relief printing plates business
Source: Based on Eastman Kodak 10-K reports, various years.
Emphasis on Printed Images
A consistent feature of Kodak’s digital strategy from 1993 to 2012 was the belief that
digital technology would not eliminate printed images. Kodak’s emphasis on printed
images was reinforced by its own capabilities: printing photographic and other images
onto paper and other media lay at the heart of Kodak’s chemical and chromatic knowhow. When Antonio Perez was appointed CEO in 2005, Kodak’s emphasis on inkjet
printers for the consumer market intensified. This reflected Perez’s own background as
former head of Hewlett-Packard’s printer division.
Yet, even with Kodak’s “treasure trove” of inkjet technologies, establishing Kodak in
the mature, intensely-competitive inkjet printer market was a struggle. By 2011 , Kodak
held just 6% of the US market, compared to 60% for Hewlett-Packard.
Harvesting the Traditional Photography Business
Based upon the premise that the transition to digital photography would be gradual,
Kodak anticipated that the transition period would allow it to generate cash from
its legacy film business while investing in digital imaging technologies and products.
Kodak’s prediction was initially correct. Through the 1990s, film sales continued to
grow in the United States, reaching a peak of 800 million rolls in 1999. However, by
2004, sales had halved to under 400 million and by 2011 were below 100,000.
Kodak’s forecasts proved wrong in relation to emerging markets. Kodak’s acquisitions of Chinese photographic film producers were based on the assumption that sales
of roll film in China would continue to increase into the 21st century. In reality, the
transition to digital imaging occurred at much the same pace in emerging markets as in
the mature industrialized countries.
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CASES TO CONTEMPORARY STRATEGY ANALYSIS
Eastman Kodak in 2012
By 201 2, Eastman Kodak’s business was organized around three business segments.
Exhibit 1 describes each of these segments.
Eastman Kodak’s Business Segments
CONSUMER DIGITAL IMAGING
GROUP (“CDG”) SEGMENT
GRAPHIC COMMUNICATIONS
GROUP (“GCG”) SEGMENT
CDG’s mission is t o enhance people’s lives and social
GCG’s strategy is to transform large graphics markets
interact ions t hrough the capabilities of digital imaging
with revolutionary technologies and customized ser-
and printing tech nology. CDG’s strategy is to drive prof-
vices that grow our customers’ busi nesses and Kodak’s
itable revenue growth by leveraging a powerful brand, a
bu siness w ith them.
deep know ledge of the consumer, and extensive digital
imaging and materials science intellect ual property.
•
Prepress Solutions is comprised of digital and t raditional consumab les, including plates, chemist ry,
Digital Capture and Devices includes digital st ill
?
and media, prepress output device equipment and
and pocket video ca meras, digital picture frames,
related services, and proofing solutions. Prepress
accessories, and branded licensed prod ucts. These
solut ions also include flexographic packaging solu-
products are sold direct ly to ret ailers or dist ributors,
t ions, which is one of Kodak’s four digital growt h
and are also available to customers through the
init iat ive businesses.
?
Internet . .. As an nounced on February 9, 2012, t he
high-vol ume commercial inkjet print ing equipment,
devices bu siness . .
consumables, and related services, as well as color
Retail Systems Solutions’ prod uct and service
and black-and-white electrophotographic pri nting
offerings to retailers include kiosks and consum-
eq uipment. .
ables, Adaptive Picture Exchange (“APEX”) drylab
?
?
Digital Printing Solutions includes high-speed,
?
company p lans to phase out it s dedicated capt ure
?
The Business Services and Solutions group’s
systems and consumables, and after sale service and
product and service offeri ngs are composed of
support . .. Koda k has t he largest installed base of
high-speed product ion and workgroup document
retai l photo kiosks in t he world.
sca nners, related services, and digita l cont rollers for
Consumer Inkjet Systems encompasses Kodak
driving digital output devices, and workflow soft-
All-in-One desktop inkjet printers, ink ca rtridges,
ware and solutions. Workflow software and solut ions,
and media..
w hich includes consulting and professional business
Consumer Imaging Services: Kodak Gallery is a
process services, ca n enable new opportunities for
leading online merchandise and photo sharing
our customers to transform from a print service pro-
service ..
vider to a marketing service provider..
CASE 8 EASTMAN KODAK’S QUEST FOR A DIGITAL FUTURE
FILM, PHOTOFINISHING AND
ENTERTAINMENT GROUP
(“FPEG”) SEGMENT
•
photographic paper, photochemicals, professional
output systems, and event imaging services.
Industrial Materials
?
FPEG provides consumers, professionals, and the entertain-
encompasses
aerial
and
industrial film products, fi lm for the production of
ment industry with film and paper for imaging and pho-
printed circu it boards, and specialty chemica ls, and
tography. Although the markets … are in decline … due
represents a key component of FPEG’s strategy
to d ig ita l substitution, FPEG maintains leading market
of extending and repurposing our materials sci-
positions for these products. The strategy of FPEG is to
ence assets.
provide sustainable cash generation by extending our
materials science assets in traditional and new markets.
Traditional Photofinishing includes color negative
?
Film Capture includes consumer and professional
photographic film and one-time-use cameras.
•
Entertaining
Imaging
includes
origination,
intermediate, and color print motion picture films,
Source: Eastman Kodak 10-K report, 2011 : pp. 5- 8.
special effects services, and other digital products
Reproduced by permission of Eastman Kodak Company.
and services for the entertainment industry.
Competition
In most of the markets where it competed , Kodak was subject to intense competition.
In digital cameras, phones incorporating cameras had decimated all but the quality
segment of the market. Online photographic services were also ferociously competitive. Although Kodak’s Gallery was the market leader, it competed with a host of
other online competitors, including: Shutterfly, Snapfish , Walmart.com’s Photo Center,
Fujifilmnet.com, Yahoo Photos, and Sears.com.
Kodak’s highest margins were earned on consumables, notably, photographic paper.
However, Kodak faced strong competition, mainly from Xerox, Hewlett-Packard, 3M,
and Oji, as well as from many minor brands. Its attempts to differentiate itself through
superior technology, particularly in inkjet printing paper, were only partially successful in resisting the tide of commoditization. Across all markets, Kodak suffered from
the growing trend for consumers to view their photographs on screens rather than in
printed form.
In commercial markets, competitive pressures were less severe than in the consumer
sector. Also, Kodak has greater opportunity to differentiate its offerings through packaging hardware, software, and services into customized “user solutions.”
Kodak’s Resources and Capabilities
Digital imaging was a classic “disrnptive technology.”8 For traditional photographic
companies, it was “competence destroying” 9- digital technology undermined the usefulness of many of their resources and capabilities. Yet, as late as 2011, Kodak still possessed some potentially valuable resources and capabilities.
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CASES TO CONTEMPORARY STRATEGY ANALYSIS
• Brand and distribution:
