Kodak - Shifting Focus from traditional Film to Digital Revolution

The first Kodak camera was launched in 1888, more than 120 years ago, with the simple slogan “You press the button. We do the rest.” Kodak launched its famous Brownie camera in 1900 and priced it at $1.00. With this, the photography market was opened to millions of people. They introduced the first pocket camera called Instamatic in early 1960s and smaller 110mm cameras in 1970s.

Kodak dominated the photography business throughout the 20^th century. By 2000, Kodak was one of the most recognized and trusted brands in the world and many people referred to the company as “Big Yellow”.

Negative impact after 2000

Daniel Carp who became the CEO in 2000, saw the new challenges the company was facing that would require it to rethink and redesign its business strategy. The company’s stock market price started coming down from the previous highest levels and the company began to lay off workers.

The problems

• Kodak was the first company to produce a digital camera in 1976. But they were reluctant to develop the technology because the company thought consumers would be slow to adopt digital technology. Most importantly, the company thought that every sale of digital cameras would gradually kill the core business of the company i.e. producing film, photo-developing chemicals and light sensitive paper.

• Despite Kodak’s dominance in traditional photography, many competitors such as Fuji were exposing flaws in Kodak’s marketing and stealing market share.

• The attack on World Trade Centre on September 11, 2001severely depressed vacation travel and the associated picture taking.

• Competition from an unexpected source that is cellular phone manufacturers surprised Kodak. Nokia introduced the first cellular phone with built-in camera in November 2001. Although many people initially considered camera phones as something like toys, sales of camera phones in 2003 from all manufacturers topped 84 million units.

• People who owned digital cameras or cell-phone cameras were increasingly using their PCs to download and then print their own pictures on their printers.

Problems with photo processing labs

When consumers wanted to develop pictures, they handed over their film rolls to local drug stores, departmental stores or photo shops. They were then sent to regional labs run by Kodak and others who produced the prints and returned them to the store for pick up. This process took several days. With the development of the self-contained photo lab, retailers were able to place a machine directly in their store to do everything related to photo processing. These labs allowed the retailers to offer a faster service. Fuji’s machines, in addition to handling traditional film, also allowed consumers to make prints from their digital camera memory devices. Since Kodak’s machines did not have this facility, Kodak began selling kits to allow its minilabs to handle digital prints but this gave a low quality print.

New strategies

In 2003, Kodak decided to re-evaluate its strategy and the company recruited a new COO, Antonio Perez who was responsible for HP’s rise to dominance in inkjet printers. He believed that Kodak’s future was in digital imaging business for consumers, businesses and healthcare providers. As a result, the company announced in September 2003 that the company would reduce its dependence on traditional film, boost investment in non-photographic markets and pursue digital markets such as inkjet printers and high end digital printing. This was a historic shift in its strategy. These moves have put the company in direct competition with entrenched competitors such as HP, Canon, Seiko, Epson, and Xerox. With this change in strategy, Kodak indicated that it would not make any long term investment in traditional consumer film. At the time of this announcement, traditional film and photography accounted for 70% of Kodak’s revenue and whole of its operating profit. The company estimated that by 2006, its traditional business would fall to 40% of revenues and 50% of earnings. As part of the shift in strategy, Kodak announced in early 2004 that it would abandon it APS camera business and stop selling reloadable film cameras in the U.S., Canada and Europe.

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