Kodak and Fujifilm

Kodak and Fujifilm

History of the two Firms

Kodak came into existence in 1889 under the guidance of the pioneer business magnate George Eastman. With its headquarters in Rochester, New York, Kodak grew rapidly to become a multinational company in imaging and photographic equipments, materials, and services. The immense growth of Kodak was based on selling its cameras at relatively cheap prices while making substantial margins from films, chemicals, and paper. A study undertaken for the Harvard Business School in 2005 showed that, in 1976, the company had a commanding control of the U.S market with 90% sales in films and 86% in camera sales (Pride & Ferrell, 2006, p. 34).

However, the monumental growth and strength of Kodak created a platform for complacency and unimaginative culture within the company (Pride & Ferrell, 2006). In 1998, Kodak was experiencing declining sales. To avoid making losses, the company dismissed about 16,000 workers (Em Publication, 2012). Moreover, being a market leader for a long time, Kodak developed a mindset of invincibility. The management became rigid and unresponsive to the changing situation in the industry. As a result, the company’s prospects have dwindled in the last 15 years because of declining sales in the photographic film segment (Pride & Ferrell, 2006). Additionally, although Kodak was the brains behind the digital technology, it has nonetheless witnessed a sluggish transition to digital photography. In several years, the company has witnessed massive losses, with 2007 being the most recent year in which Kodak made some profit. To turn its fortunes around, Kodak has focused on digital photography and printing. In addition, it has made significant efforts to raise revenues through patent litigation. However, in January 2012, the company filed for bankruptcy protection. In February, Kodak announced that it would stop the production of “digital cameras, pocket video cameras, and digital picture frames and focus on the corporate imaging market” (Em Publication, 2012, p. 4).

On the other hand, Fujifilm was incorporated in 1934. The purpose of establishing Fujifilm was to make it the first Japanese producer of photographic films. Fujifilm made considerable strides in a span of 10 years after its inception. It is during this time that the company achieved domestic production of “photographic films, motion-picture films, and X-ray films” (Johnston & Bate, 2003, p. 146). During the early 1940s, Fujifilm entered a different market by producing optical glasses and lenses. Fujifilm started the manufacturing of colour film before the start of the Second World War. Although this project was disrupted during the war, Fujifilm recovered fast and was able to reengineer its services. After the war, Fujifilm started to export its products to South America and Asia. However, the company was not well placed to compete globally with other manufacturers, especially those in America and Europe.

Fujifilm benefited a lot from the post-war boom as the world population grew, and demand for its products for its products went up significantly. Moreover, the company’s strength increased substantially after Kodak allowed Fujifilm to make “black-and-white amateur roll film with the same quality as those manufactured in the Western world” (Em Publication, 2012, p. 1008). This led Fujifilm to become a leading manufacturer of films in Japan.

Because of the increased demand of its products, Fujifilm entered into export agreements with other players across the world. However, the company faced serious challenges in its operations. The first challenge was on the quality of its products as they were deemed to be of low quality (Em Publication, 2012). The second challenge was competition posed by other companies, especially Kodak. To address the first challenge, Fujifilm made concerted efforts to make film and paper that was compatible with other systems used in the developed world. The second challenge proved to be quite difficult. However, Fujifilm managed to enter the U.S and battled to grab a lion’s share in the market.

Innovation

According to Johnston & Bate (2003), innovation is “a process of exploring your emerging future, understanding the changing needs of your customers, and using insights gained in those explorations to identify new business opportunities for your company” (p. 3). Innovation is a critical aspect in the growth of any firm. Innovation allows a company to develop competitive products that meet the objectives of the customers. To achieve this, a company should look at the environment in which it is operating in and work hand in hand with its customers so that risks of disruptive product innovation are minimized. An innovative company is always ahead of the competitors. However, as has been highlighted above, the approach of the two companies in terms of innovation went in different directions. Kodak’s failure emanated from complacency in embracing change. Although Kodak invented the digital technology, the company failed to switch from film-based photography to the digital (Em Publication, 2012). From the 1970s, the company’s top managers were aware of the impending disruptions in the digital technology. Despite this knowledge, “they tried to do new things with familiar capabilities at the exact moment they needed to be hungrier to do truly new, unfamiliar things” (Keeley, 2012, par. 5). Instead of the management looking for new markets, Kodak spent a fortune in legal battle with Fujifilm. The sad story is that, although the company invented the digital technology, the managers were afraid to launch the “digital camera because they did not want to alienate their market or change their market strategy and focus” (Em Publication, 2012, p. 2047).

Fujifilm has committed a lot of resources in its innovation strategy. The company has consistently sought new solutions to meet the needs of customers in diverse fields. From a photographic film developer, the company has entered into a broad range of industries, including the development of medical equipments. The focus to change and enter into different industries has made Fujifilm a success story. The company commits itself to researching and developing technologies that will dictate the shape of the industry in the years to come. Indeed, with over $ 2 billion budget dedicated to research and development, Fujifilm is set to lead others in the years to come (Johnston & Bate, 2003).

Management techniques that have affected success

Management culture is extremely critical in the success of any company (Gillespie, Jeannet & Hennessey, 2010). The culture employed by Kodak did little to help the company succeed in the face of stiff competition. Despite the company’s strengths, Kodak grew to become a complacent monopolist. In addition, the managers were slow to change with the changing trends. The executives suffered from a “mentality of perfect products, rather than the high-tech mindset of make it, launch it, fix it” (Pride & Ferrell, 2006, p. 138). Moreover, the leadership style adopted by Kodak has been inconsistent. For instance, George Fisher, who was the boss at the firm from 1993 to 1999, focused on imaging instead of chemicals. Mr. Fisher failed to capitalize on outsourcing of production, which could have made the company look creative. On the other hand, Antonio Perez, who became the CEO of Kodak in 2005, focused his attention in turning Kodak into a powerhouse of digital printing (Em Publication, 2012). Although predictions for the shift from film to digital were made many years earlier, nothing meaningful was done to address this imminent change. Kodak has failed to capitalize on its resources and capabilities. This reflects the poor leadership style adopted by the top managers (Johnston & Bate, 2003). For instance, Kodak did not change its price in the face of stiff competition from Fujifilm. Many clients shifted to Fujifilm since they were looking for a company offering quality products at reasonable prices. In this technologically fast-changing world, Kodak must use its resources to achieve a competitive advantage in the photographic industry. Fujifilm, on the other hand, did a lot about the impending technological change. Fujifilm reconstructed its business model to match the needs of its clients in the digital world. The drastic change in its model helped the company edge Kodak to become the leading player in the industry.

Approach to ethics and social responsibility

Fujifilm and Kodak understand the role of corporate social responsibility (CSR) and operate in an ethical manner (Pride & Ferrell, 2006). CSR is a concept whereby companies take cognizance of the needs of the society (Gillespie, Jeannet & Hennessey, 2010). A responsible company understands that its operations can be harmful to the customers, suppliers, employees and other stakeholders as well as the environment. CSR extends beyond the statutory obligation to adhere to the country’s set laws. To align their policies to CSR, the companies switched from disposable cameras to recyclable ones (Em Publication, 2012). Disposable cameras are popular with their size and convenience, and they account for about 45% of film sales (Gillespie, Jeannet & Hennessey, 2010). Fujifilm has the patent for disposable cameras. However, Eastman Kodak received the licence to make its own single camera. However, despite their convenience, disposable cameras add to the ever-growing amount of waste to the environment (Johnston & Bate, 2003).

Because of harm to the environment caused by industrial waste, companies have devised strategies of minimizing environmental degradation in a socially responsible manner. To respond to the environmental concerns, Fujifilm initiated a program to recycle the QuickSnap camera in the early 1990s. The big challenge that the company faced was to convince its clients to stop thinking about disposable cameras to change to recyclable ones. On the other hand, Kodak also started a recycling program as part of its efforts to adhere to environmental concerns (Pride & Ferrell, 2006).

Adaptations to changing market conditions

The major key to succeed in any market is the ability of a company to adapt to changing trends (Gillespie, Jeannet & Hennessey, 2010). However, it is not only the adaption to change, but a company should adapt faster than the competition, otherwise, it will suffer the financial consequences. The biggest challenge for the managers is how quickly they can steer a company to conform to consumer needs in the face of current conditions. When Fujifilm entered the market, Kodak’s strategy of doing business did not change. For years, the sales and profits of Kodak increased as the managers simply refined existing products instead of creating new ones. Kodak also gave little attention to competitions. For instance, the company refused to lower its prices after Fujifilm entered the market in the 1970s. They believed that consumers would continue to buy their products. This was not the case, and many customers left for Fujifilm. On the other hand, while Fujifilm invested millions of dollars in developing digital cameras, Kodak decided to stick with the proprietary photo system (Pride & Ferrell, 2006). Kodak was sceptical of changing into the digital market, although the company had invented the technology. Indeed, Kodak demonstrated a rigidity that seriously affected its operations. However, Fujifilm was able to capitalize on such weaknesses and tailor their products to meet the needs of the market (Johnston & Bate, 2003).

Recommendations to adapt to changing market

As discussed above, Kodak refused to embrace change and adapt to changing market condition, while Fujifilm took the opportunity to align its products with needs of the market (Em Publication, 2012). Indeed, for any company to succeed, it must embrace flexibility in its operations. There is a need to keep focused on what one is doing currently while at the same time keeping a keen eye on emerging trends. Another strategy is to invest in research and development. For example, the market share of Kodak was affected because of limited knowledge after the company expanded its core product business. Another area that a company should work on is its targeting strategy (Pride & Ferrell, 2006). A flexible company is one, which understands the needs of the market and fulfilling those needs. If a company does not meet this goal, the consumers will shop elsewhere, which mean loss of revenue to the company. In addition, a company should try to put its resources on specific areas. For instance, Kodak can divert its attention to specific areas, such as the medical filed, and completely change from its competitive areas with Fujifilm (Em Publication, 2012). This means Kodak should not be focused on catching up with the competitors, but should instead put more resources in improving their operations. Finally, a company should offer pioneer products that can justify high prices than the competitors. For Kodak, this can be achieved by outsourcing of its manufacturing facilities in China and other Asian countries where production costs are low (Johnston & Bate, 2003).

Conclusion

The above discussion has provided insights on Kodak and Fujifilm have faired in the market. As highlighted, Kodak has been complacent in maintaining their market share in the face of stiff competition from Fujifilm. Kodak has been a global leader in the imaging industry for a long time. As a result, the top managers did not realize that a new comer could push them out of the lead so fast. Fujifilm was able to adapt to changing needs of customers fast than Kodak and hence gained a foothold in the U.S market. In addition, Fujifilm offered low prices compared to Kodak, thus gaining more share in the market. A set of recommendations has been made that can help each of the two companies continue to reengineer their services and adapt to the changing environment. Indeed, a key recommendation is that Kodak should focus on the digital revolution and change their global perspective. If the company does not give innovation priority, then its efforts would come to nothing. In addition, the company should re-evaluate its pricing strategy.

 

 

 

References

Em Publication. (2012). Kodak: The Rise and Fall of a Historic Company. New York: Em Publication.

Gillespie, K., Jeannet, J. P., & Hennessey, H. D. (2010). Global Marketing. New York: Cengage Learning.

Johnston, E.R. & Bate, J. D. (2003). The Power of Strategy Innovation: a new way of linking creativity and strategic planning to discover great business opportunities. London: AMACOM

Keeley, L. (2012). The Kodak Lie. Retrieved from  http://tech.fortune.cnn.com/2012/01/18/the-kodak-lie/

Pride, M. W. & Ferrell, O.C. (2006). Marketing: concepts and strategies. New York: Cengage Learning

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