1. What was Kodaks digital imaging strategy during 1992-2012?
Kodak was one of the companies that pioneered the digital imaging revolution era in 1992. The company foresaw the market shifting from analogue and had a plan to adapt fast. The problem started coming in when the market dynamics were changing too drastically for the company to keep up. Kodak decided on a niche strategy that was focused on providing products only for a selected market. For several years, the company used this strategy to limit threats from substitutes. Kodak also employed cost leadership and the company stuck on using razor and blades strategy (Barabba, 2011, p.143). This kind of strategy was simple, it advocated for selling one item at a lower price so that the complementary item to it would shoot up in terms of sales. This proved unsustainable after some time since other companies which were their main competitors such as Fuji also picked up on it. Soon after, it was noticed that the profit margin was being sustained by the sales volume. The opponents also picked up on this. It resulted to the clients perceiving the products to be of extreme low quality because it was inexpensive and all that ended up affecting the image of Kodaks brand. The next proposition that came with the strategy was to diversify and produce a number of products for the market. They had a challenge since they had a lot of debt.
The implementation of the digital strategy had a few major themes: First, an incremental approach that had focused on rebranding and building the presence of the firm by producing products that matched the technological advancements that were taking place at that time. They started out making a hybrid camera and then made their first digital cameras which were cheaper than other companies by over 600 US dollars (Anthony, 2012, p. 30). The first ones were DC-20 and DC-25. They were all released to the market in 1996. The executives of Kodak remained adamant about sticking to the film production since they did not see how photography and film making could be done without it. There was no permanent deviation and this made them remain on that course. By 2001, the films sales were dropping and people were opting for alternative sources of digitalized cameras from companies that were making them like Sony (Anthony, 2012, p. 30). A new CEO was brought in and he brought in a new series of digitalized cameras known as EasyShare. A new budget was put aside to study consumer behavior and a discovery was made that women hated transferring photos to computers since it was tedious so adjustments were made.
Second, a strategy of differentiation was also put in place. Different services and products were being offered to both the commercial and consumer markets. There were also price differentials. The third theme was the entry into alliances and partnerships to bring in added competitive advantages (Lanzolla & Anderson, 2010). However, Kodak was not ready to develop digital products that cannibalized its film business. The digital research and development team was in a dilemma on whether to fully develop digital products or combine both digital and film concepts in one product like the Advantix camera. In the process of deliberations, companies like Fujifilm produced digital cameras that reduced Kodaks market share in the US by 2% per annum.
2. Why did the strategy fail?
There were a lot of things that led to the failing of digitalisation of Kodak. Their first mistake was taking too long to adapt. Most of the executives of the company were reluctant to let go of the old ways since it was making a lot of money at the beginning. In 1988, the company had employed over 140, 000 people compared to today it only has 20, 000. The stock also declined gradually all within a decade from 80 to 3 USD (Hanson et al. 2014, p. 54). Not only were the directors too reluctant but they were completely comfortable as the loyalty of the clients had given them a false assurance of a monopoly in the industry. They had not taken into account the full implication of how much technology was taking over the world and the easiness the clients needed in order to keep using their products.
In addition, the company was not willing to let go off the old ways so it improvised and decided to form hybrid equipment such as cameras that were both analogue and digital. Some of their prototypes ended up being discarded. This only served as a waste of time but also used a lot of the companys money and they ended up releasing cameras that no one bought. There were not only cameras but compact disks as well that came with the package. They wanted to increase the value of the Kodak film which was a massive fail since companies like Sony offered better solutions leading to an automatic decline of the Kodaks products in the early 2000s (Barabba, 2011, p. 65).
Kodak also pursued the digital camera indecisively because the management was cautious of the market perception. In 1996, the firm invested $500 million in research and development to create the Advantix camera system (Kodama, 2018). The system allowed camera users to preview their pictures and decide on how many printed copies they wanted. The Advantix system had the capability because it used both digital and analog features. As a result, consumers could not get the essence of buying a digital camera that still used film. The strategy led to the flop of the Advantix camera system as consumers were not ready to spend extra cash buying film. Apart from the poor market research, Kodak failed because the management was resistant to change. The company did not consider replacing the film in its quest for a digital revolution. Therefore, the company did not fully understand the framework of digital photography and how to create products that represented the market needs leading to rival firms such as Sony to eat up its market share.
Their lack of instant diversification was also one of the roots of their problems. Their digital strategy would have worked if they diversified their products and services. Companies like Fujifilm diversified releasing a lot of products since they did not know which digital camera would be absorbed fast into the market taking the risk and as a result they knew very early what was prone to being rejected and stopped manufacturing them (Kodama, 2018, p. 154). Kodak also had no plan of preparing themselves for any kind of disruption. This left them open and vulnerable to any kind of damage that would come their way.
3. Was there a better alternative to the strategy?
Kodak could have merged the digital imaging strategy alongside other tactics in order for it to be effective. First they could have abandoned their main course of business and gone digital altogether. The transition is what plunged them to their downfall. The best thing they could have done is choose a specific line of business that rhymed with the future of digital photography and cinematography and specialize on that. The dumping of previous resources and the transition would have been hard to begin with but they could have saved themselves a lot of losses (Kodama, 2018, p.148).
Alternatively, the business could have merged with another business such as Fuji in order to sustain itself. Merging would have opened up their resources and brought a lot of innovation to the table (Anthony, 2012, p. 20). This would have automatically saved the business from failing. It would have also expanded on their diversification so incase pone thing failed they would have had other cushions to land on.
The company should have done its best to bridge the gap between the external and internal forces of the company. This would have materialized the foretelling of how the digital imaging strategy would work out. A company can do exceedingly well when it is at its peak but that does not mean that other companies are not cooking up new ideas that are more innovative. It is always advisable to have a 10 year plan but in extreme cases such as businesses dealing with technology, half a decade should be the cue. Kodak was too inwardly focused that it forgot about the massive revolution that was going on beyond its walls. Its strategy did not effectively scrutinize all the external disruptions that would serve as a hindrance. It was a pioneer in some aspects of the digital imaging but with time other companies beat it at lenses quality among other areas (Kodama, 2018, p.163). Their lacking in these key skills was due to their lack of insight and expertise in analyzing competition and disregard to the trends. A good strategy to add to their digital imaging would be focusing on quality of lenses.
A better approach for their digital imaging strategy would be to incorporate critical integration. Kodak did go a step further to outsource some of its manufacturing but what it did not do is pair up the internal knowledge with the external one. These unfortunately pushed them out of the market since they remained at the lower spectrum at a time where the world wanted better quality. The reason why it failed so miserably is the lack of good management. By 1990 the company had already had four CEOs which was not a good sign since in order to succeed consistency much be achieved (Hanson et al. 2014, p. 204). The CEOs had little experience and tenure working in that company so this made it difficult for them to make worthwhile long term decisions. They came in with new priorities and mindsets to a company that was struggling already and needed a lot of focus. There was a lot of technical expertise but what was lacking was the ability to convert it into any tangible product. An alternative would have to maintain old executives who had experience and could foretell how things would unfold.
4. What can other companies facing disruptive change in their core business (e.g. Microsoft, Sony, Walt Disney) learn from the experience of Eastman Kodak?
A lot can be learnt from Kodaks failure when it came to combating disruptions. Buying out a rival firm is the best way to maintain market share and avoid being automatically ran out by competition (Stacey, 2016). The digital imaging strategy of Kodak failed mostly because the dynamics of the market were changing and their competitors were keeping up with the changes at a faster rate than Kodak. This hastened their downfall. If they had bought out the competition they would have earned themselves a lot of time to catch up with new trends. A company can always use an idea and improve on it. This way, the intended disrupter will not end up benefiting off the companys client base. Partnering up with the competition is also a good move. Companies can join forces to make sure that they both thrive instead of watching one sink.
Another lesson that can be learnt from Kodaks ultimate failure is the need to diversify and refocus when faced with any potential threats of disruption. When it comes to facing the competition without any fear, the key thing to do would to examine whatever services the company provides, estimate its worth, then shift the focus to an area where the competition has not explored yet and might not have the resources to do so (Hanson et al., 2014, p. 67). For some companies, this strategy will not work for example a hotel with major chains all over but for businesses dealing with technology and provider of goods, this will be a good strategy to survive business disruption. The attention can also be shifted so that all the values of the clients are met so that one can rely more on their loyalty. If Kodak diversified its products and shifted their focus from filming, the company would be able to sustain themselves in the long run.
Digital transformation and agility are also the best ways to deal with disruption (Lanzolla & Anderson, 2010). A compa...
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