Eastman Kodak Company Analysis
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Eastman Kodak
Case Analysis
Eastman Kodak Company controlled clear dominance in the photo film industry. The emergence of competitors posed threat as they offered products at a lower price to consumers. Kodak watched its United States market share, where it held most of its dominance, decrease from 76% to 70%. With 70%, Kodak is still in control of the market by far as shown in Table A within the case. However, with the addition of competitors like Fuji Photo Co. and Konica Corp. wooing buyers with low prices raises a fair amount of concern for Kodak. Furthermore, “Kodaks stock had lost 8% in value on rumors of a price cut on film” within a week. Recognizing the beginning of depletion, CEO George Fisher along with analysts and investors, sought for a new strategy in Kodaks products. They sought for a new brand that would compete with their competitors products. Ultimately this brand would be priced lower than Kodaks existing products. In addition, it would be “available only in limited quantities during two off-peak selling seasons.” It would be priced 20% below Kodaks premium brand, GoldPlus. This new brand would be called Funtime.
Kodaks main competitor, Fuji Photo Film Co. saw steady growth beginning in the early 1980s. Headquarted in Tokyo, Japan, Fuji made a huge appearance in the United States market by becoming the official film of the 1984 Summer Olympics in Los Angeles. Viewed nationwide, they attracted a lot of potential consumers to their products. Furthermore, worldwide Fujis sales are already half of Kodaks @ 10 billion. In fact, Fujis United States “dollar sales grew at over 15% in the past year, compared with Kodaks 3% growth rate.” Fujis strategy included offering its products to consumers at “lower-priced versions” than the products of Kodak. In other words, Fuji was able to maintain a line on price, an area where Kodak struggled and was unable to do so. In addition to Fuji, private labels had grown 10% within the past year. Private labels include films produced by certain manufacturers and sold under store labels, for example Walmart or K-mart. Kodaks inability to sell film on a private label because of a 1921 consent decree kept the from exploring private label basis as an option to reach non-brand loyal and lower priced consumers. Moreover, Kodak was seeing increased competition throughout the 1980s and 1990s as customer enjoyed lower priced versions of film.
Due to the private labels 10% trend within the past year, other store labels may believe this to be a profitable move. For example, many other discount and department stores, camera shops, and supermarkets and convenience stores may private label their film in direct competition with Kodak. Another concern of Kodak may be price, their competitors ability to provide less expensive and higher quality film. For instance, three of the top six films of overall quality were Economy brands in price tiers in film market. They key reasons to Kodaks market share loss were: competitors, consumer behavior, and pricing.
Problem Statement
Kodak held a strong position in the U.S Photo Film Market, however the strategy for their competitors and their inability to capture consumer interest ultimately led to their market share loss. Kodak competitors included Fuji, Polaroid, and Private label. A growing popularity showed in Fuji and Polaroid products at a U.S dollar growth rate of 15% within the past year. Kodak, however, only grew 3% the past year. Private labels have also shown to be popular amongst consumers at 10% growth rate within the past year. Kodaks competitors were able to appeal to consumers by simply offering their products at a lower price. Kodak needed to respond with a strategy that would combine high quality with low prices. This could enable them to retain existing consumers as well as attract new ones.
Quite simply the photo film market consumer behavior was changing. Consumers were not photograph experts. They did not need high advanced film, but rather they would focus on price than on quality or brand. Consumer behavior was moving towards user-friendly, cheaper, on-the-go photo film. There is shown to be an increasing number in “price-sensitive consumers.” Kodak had conducted research that shown only 50% of buyers were “Kodak loyal”, 40% were samplers while the remaining 10% focus on price. I felt there was confusion where Kodak positioned their products and their pricing points. A report conducted by Consumer Reports revealed that Kodaks film products to be “no better or worse than their competitors of the same speed.” In fact, in a ranking of the top six ISO 100 films, in terms of overall quality, three out of the top six were all Economy Tier films. This indicates that other manufacturers and suppliers are able to provide less expensive, higher quality film specifically tailoring to the changing consumer behavior. Kodak lacked the ability and responsiveness to do so. Another Achilles heel that limited Kodaks ability to strategize better was the 1921 consent decree. This prohibited Kodak from selling film on a private label basis paralyzing any potential growth in that area.
Alternative (A): Product Line
Currently Kodak still has the market power to reach consumers and sale its product. However, Kodak must develop a cohesive product line specifically competing with their competitors Economy brands. Consumer behavior is moving in a different direction and Kodak must move along with it. This product line will enable them to reach the growing number of consumers who are not experts in film but prefer using something easy