Kodak Strategy Essay Example for Free

Kodak Strategy Essay The first Kodak camera led to the creation of their first slogan: â€Å"You press the button – we do the rest†. He named the brand of camera Kodak because it was short, it would not be mispronounced, and the name was unique in the business. (Gartrell, n. d. ) By the late 19th century and early 1900’s, advertising played a major role in Kodak’s marketing and promotion strategy. As a result, Kodak became a household word. Today, the Kodak name has become entrenched in home town America. It is known for being very American since its photo spots can be seen at iconic patriotic hot spots like Disneyland. In addition â€Å"Kodak Moments† help make it a household name for photography and imaging. (Wikinvest, 2007) Kodak has always dominated the â€Å"holy trinity of film†; film, paper and chemicals. (Upbin, 2000, para #8) Kodak’s big concern is to remain competitive in the market place. The Eastman Kodak company had to take on some strong competition, such as Polaroid, who is famous for instant photography. Kodak began to sell their version of the instant camera in June 1976 to expand its market. The camera was called the Pronto which spit out a picture card which formed into a picture before the photographers eyes. The idea was successful and although Kodak’s ten picture pack of film was more expensive than Polaroid’s, several Japanese companies made cameras that used the new Kodak Film. (Time Magazine, 1976) Soon after, the disposable camera became popular. According to statistics, U. S. sales of disposable cameras grew 30% a year. Kodak sells more than anyone else, allowing Kodak to have sufficient cash flow to invest in a digital future. In the mid 1990’s Kodak’s innovators began to dabble with digital photography. In fact, they invented the first digital camera and realized that digital technology would transform their business. By the year 2000, Kodak had sunk more than $5 billion into digital investments during the 1990s, but received only $20 million in digital earnings in 1999 to show for it. Daniel Carp, the latest Chief Executive at Eastman Kodak stated that â€Å"digital can generate half of revenue and quarter of profits by 2005†. (Upbin, 2000, para. #3) So why wasn’t Kodak getting a return on their investment? One of the main issues that plagued the Eastman Kodak Company was not their innovation, but their timing in their marketing strategy and their assessment of the adaptability of its consumers. Kodak missed out on several holiday seasons where digital camera growth was high and failed to get a leg up on the competition back in 1996. The company was unable to â€Å"wean itself† from traditional film business. They have three major customer bases. The first is the Photofinishing Group which makes up almost 1/3 of sales. This group is made up of Kodak’s traditional film products and services that the average customer uses, plus products used by the film industry to reproduce and distribute motion pictures. The second group, not formed until 2003, is the Graphic Communications Group (GCG). It’s Kodak’s largest division which includes document imaging and digital printing services for businesses. The third group relates to healthcare services and is called the Health Group. This group specializes in healthcare imaging products such as x-ray devices and specialized films. To catch up to their competition, Kodak created a fourth group, the Consumer Digital Group, to change their main product line from traditional film to digital products. They turned their focus to digital cameras and printers, photo kiosks (like at CVS and Wal-Mart) and online photo sharing. Wikinvest, 2007) The problem was they did not react to the market until almost 2 years after their fierce competitors, such as Hewlett Packard, Canon, and Sony began to overtake the business. The irony is that although Kodak created many digital products that were ahead of their time, such as the Photo CD and high-end digital cameras, Kodak continued to focus their marketing strategy on the investor rat her than the customer. It is unfortunate because many of the digital imaging products that Kodak introduced, and that we still use today, did not get the commitment they deserved from their creators. Because of their own corporate reluctance to replace their main base of income (traditional film), many investors questioned whether it was too late for Kodak to join the digital age. (Nikondigital. org, 2007, para. #2) Timing was not the only problem. Kodak had digital competition from the evolution of the internet, the Sony Corporation, Hewlett Packard, and Canon, to name a few. Despite the invention of the digital camera, Kodak fell behind in efficiency profit margins and sheer sales. The company failed to market other media devices leaving Hewlett Packard and Lexmark to dominate the printer industry. Kodak is now trying to catch up in that area. Kodak needed to make several adjustments in their marketing strategy, develop their product line, promote their product, rethink their distribution efforts and develop a pricing strategy to steal market shares from industry leaders. With a new management philosophy and marketing strategy, Kodak realized the need to adjust its consumables. Most of Kodak’s traditional photography was based on their services, their paper and ink. With the addition of digital imagery, that had to change. Chemicals, to produce the photos were no longer needed for digital photography. How could Kodak compensate for the changing technology? Putting their innovators to the test, Kodak came up with the EasyShare family of cameras. It became one of Kodak’s biggest successes. Even today, it is still the â€Å"simplest way to get started in digital† photography. (Nikondigital. org, 2007, para. #7) Kodak developed this type of camera by studying how camera users take and print pictures and how it fits into their daily lives. Their research paid off. Kodak focused on low-priced, easy-to-use cameras that would appeal to women, who take the majority of snapshots. In 2004 the competition with Sony, the largest digital camera maker, paid off with a rise from a 5% market share in 2000 to a 19% share in 2004. (Hansell, 2004) In addition to the EasyShare system, category expansion has increased Kodak’s consumer base. One of the ways they accomplished this is by developing effective partnerships. To compete with some of the industry leaders, Kodak developed the â€Å"Kodak Gallery† an online photo sharing site which allows consumers to upload their photos and share them with friends and family. This competes with sites like Shutterfly and Photobucket. It recently partnered with Martha Stewart, Apple, Microsoft, and Amazon. com. (Wikinvest, 2007) Kodak has also planned investment in Lucky Film, Co. Ltd which will strengthen its position in Asia, and has increased its interest in medical markets. They have acquired PracticeWorks, a leader in digital dental imaging, and have improved their economic performance with Kodak Directview PACS System 5 for radiologists. (Eastman Kodak Company, 2004) To promote their products, Kodak has used the traditional advertising as well as some creative promotion techniques. Kodak wants to develop the customers of traditional cameras into future consumers of digital products. One of the ways they are doing this is donating 5,000 traditional cameras to those provinces in China that are not familiar with photography. As China’s rural areas become more economically independent, Kodak hopes to capture the market. This allows Kodak to continue its traditional (bread and butter) line of products to third world nations while focusing the digital sales to the United States, Canada and some European countries. (China Daily, 2004) One way to focus those sales in the U. S. is Kodak’s distribution to direct marketers who want to customize their flyers or retail changes that need variable posters. Digital technology makes it possible to economically print custom copies of anything and at almost any volume. They want to â€Å"elevate print and other visual communications for creativity and commerce†. (Sherburne, 2007, para. #3) Kodak is introducing the MarketMover Network, designed to focus on small business in a similar fashion that the Kodak Creative Network does, where the consumers create the photo books, calendars and flyers. Finally, Kodak’s pricing strategies had to be dramatic. One of the best things we hear about Kodak is the â€Å"quality of their service†. The problem is the competition is rapidly meeting Kodak’s quality standards. In 2007, Kodak developed KOS, the Kodak Operating System to streamline the production system and incorporate that into all aspects of Kodak’s operations. It changed their management philosophy. This had some effect on not only their marketing strategies, but their pricing strategies. In the past, companies were willing to sacrifice profits on the â€Å"durable† portion of their product – the printer, to make money on the â€Å"consumable† portion – printer cartridges. In February of that year, Kodak announced a new pricing strategy. It was a long term competitive dynamic disruption strategy. The strategy was aimed at reducing the cost of printing photos for the average consumer. Consumers will have to change their behavior to focus on printing costs instead of hardware costs. (Neff, 2007) In addition, the new printers will not have as many features as Hewlett-Packard printers currently have. This could corner an aging market that has not wanted to purchase â€Å"fancy† printers due to the challenge of technology. However, there is a growing share of private label recycled ink cartridges. Kodak will need to maintain their focus not only on the pricing of their ink cartridges, but they should reinforce the â€Å"quality† aspect of their product. During the past two decades, the Eastman Kodak has struggled with the advent of digital photography. What sets Kodak apart? Kodak is not a computer company, nor is Kodak a company which dabbles in several industries. They are focused on print products and photography.