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The Rise and Fall of Eastman Kodak, an Emblem of American Business Excellence

Updated on October 6, 2011

Executive Summary

With the slogan "you press the button, we do the rest," George Eastman put the first simple camera into the hands of a world of consumers in 1888. In doing so, he made a complicated process easy to use and accessible to nearly everyone. Since that time, the Eastman Kodak Company has led the way with an abundance of new products and processes to make photography simpler, more useful and more enjoyable. Its reach increasingly involves the use of technology to combine images and information--creating the potential to profoundly change how people and businesses communicate. Kodak continues to expand the ways images touch people's daily lives. The company ranks as a premier multinational corporation, with a brand recognized in virtually every country around the world’’ (

However, despite numerous efforts in acquiring new competences and turn around its business model, Kodak has so far failed to impress consumers and stakeholders alike. Facing stiff competition and shrinking profit margins, Kodak seems not able to find its rightful place in the new digital age.

This report will shed some light as to why Eastman Kodak has been struggling for years and how it could overcome the challenges it currently faces.

kodak manufacturing plant around 1930
kodak manufacturing plant around 1930


Kodak being a centennial company, it was necessary to take as much distance as possible when trying to analyze its historical strategic choices.

Thus, this study will span 25 years of Kodak’s history without limiting itself on particular time-accurate events but rather by taking the bigger picture into account.

Having enjoyed a strong market leadership for decades, at the turn of the century Kodak started to see some intense competition build up in the form of Japanese companies combating to gain a share of the lucrative film market and trying to put an end to their dominance in consumer cameras.

Kodak replied in kind by aggressively acquiring firms that were seen as being able to broaden their competences and would help them cope with increased competition.

Being a chemical company at the core, Kodak had a long tradition industrial processes and innovation and during the better years leading to the 21st century, Kodak patented dozens of new ideas and concepts that were supposed to keep them ‘future-proof’ and prepare them for the impending digital revolution.

This report will put under light what caused Kodak’s failure to adapt to the digital age despite seemingly having all the competences and tools at their disposal to do so.

We will also see how Kodak still could turn the tide and reclaim its rightful position among the top companies currently active in the imaging industry by deeply altering its strategy, becoming leaner and more dynamic in its strategy implementation.


‘’The railroads did not stop growing because the need for passengers […] declined, but because they assumed to be in the railroad business rather than in the transportation business’’ (Levitt, 1925). The very same statement can be applied to Kodak’s vision of their own business. Eastman Kodak used to be one the flagships of the American industry and quickly became a household name globally. Historically Kodak’s business was based on the famous ‘razor-blade’ model where they would sell cameras cheaply and make huge profit margins on the consumables, the films.

This tried-and-true model was so deeply ingrained in Kodak’s company culture that it didn’t see itself as something else than a film-making company. Kodak was still in the film business and not in the imaging business, despite what former CEO George Fisher claimed. His tenure at the helm of the company is a testament to how an intended strategy doesn’t necessarily translate into a realized one.

The film business premise is no longer relevant in a world where people don’t even need films anymore and where cellular phones are today’s cameras with virtually unlimited ‘shooting’ capacity at virtually no cost.

Kodak’s huge assets were of little use when new entrants stepped into the arena armed with leaner, more dynamic competences and with an edge Kodak didn’t have: a genuine understanding of the nature of the business they were in and the preparedness for the inevitable competence-destroying, disruptive technology that digital photography embodied.

’A company with a strong position in an industry unthreatened by potential entrants will earn low returns if it faces a superior or a lower-cost substitute product’ (Porter, 1979). Kodak initially thought that the new entrants would try to compete for leadership in the film and photo finishing business whereas they were only positioning themselves for the incoming digital age, an age for which Kodak, despite its numerous acquisition efforts and its huge R&D spending budget (USD 4 billion invested in digital technologies since 1990) was still not ready for.

Figure 1.1 – the innovator’s dilemma (Christensen, 1997)
Figure 1.1 – the innovator’s dilemma (Christensen, 1997)

...When they realized that most of the competences needed to run a successful post-digital age imaging business were lacking, it was too late: most of the value-chain was already in the hands of competitors.


As said earlier, Kodak’s main competences lied in the chemical processes associated with the manufacture of rolled films. It has been Kodak’s bread and butter for decades and the executives at the wheel didn’t see or understand the need for a profound change.

Top executives at Kodak wanted a shake-up but they didn’t want to ’force pain on the organization’’ (Swasy, 1997). Kodak was sorely in need of a revolution in corporate culture but was torn between sticking to a still profitable, well-known and well-loved business and the unenviable prospect of being relegated to a follower’s position, constantly trying to catch up with the more dynamic competition.

The core rigidities – introduced by Leonard-Barton (1992) as the ‘’idea that the core activities of the firm can become so rigid that it cannot respond to new innovations’’ (Lucas & Goh, 2009) –afflicting Kodak would eventually prove strong enough to comfort them in the thought that their products were still vastly superior to new technology and that the threat of substitutes could be nullified by heavy marketing and a hybrid approach where analog and digital photography could harmoniously coexist.

The innovator’s dilemma approach was in full effect here as Kodak’s ‘’economic incentives are to continue developing evolutionary improvement in existing technology and to avoid sponsoring disruptive innovations’’ (Carpenter & Sanders, 2009). Why would Kodak’s chain of command approve, yet alone understand the necessity of a business model upheaval when the needs and wants of their core, most profitable clients weren’t met by this nascent technology?

Figure 1.1 shows how disruptive technology is wreaking havoc on well-run and profitable companies like Kodak and completely knocking the wind out of their sails. Invasive technology happens faster, it’s obviously performing much better than its predecessor but ironically, also overshoots the needs of mainstream customers because they are ‘not there yet’.

The mass consumers haven’t reached this point simply because the incumbent firms serving them have no interest in forcing on their customers a solution that would exceed their needs and question Kodak’s business very raison d’être.

Kodak’s competitive advantage would soon be made obsolete because it primarily resided in their distribution channels and film processing capabilities so the ‘natural’ – or at the very least – human knee-jerk reaction was to protect these assets as long as possible, even if for Kodak this meant corporate denial.

Kodak used to be in total control of its value chain and did everything internally, even to the extreme point where it ‘’raised its own cattle and used the bones for making photographic gelatin’’ (Hamm & Symonds, 2006). When they realized that most of the competences needed to run a successful post-digital age imaging business were lacking, it was obviously too late: most of the value-chain was already in the hands of competitors.

Figure 1.2 - Kodak’s value-chain pre-digital age (adapted from Gavetti, Henderson, Giorgi, 2005)
Figure 1.2 - Kodak’s value-chain pre-digital age (adapted from Gavetti, Henderson, Giorgi, 2005)
Figure 1.3 - Kodak’s value-chain post-digital age (adapted from Gavetti, Henderson, Giorgi, 2005)
Figure 1.3 - Kodak’s value-chain post-digital age (adapted from Gavetti, Henderson, Giorgi, 2005)


Value-chain analysis

No matter how fast Kodak bought out companies to fill voids in its value-chain, it was still insufficient to defy the odds stacked against them. Here are two figures illustrating Kodak’s value-chain before and after digital imaging made its business model redundant and its core competencies irrelevant.

From image capture, to film processing to its various cascading applications, we see that Kodak was in control of all the value-chain its business was built on.

However, as figure 1.3 shows, the post-digital value-chain ushered in new stages that Kodak had little control over and weakened its source value-adding asset and historical cash-cow, the image capture business:

As more and more firms entered the different businesses related to digital photography in the broad sense of the term, Kodak found itself in a position where it wanted to do at little bit of everything without ever committing to anything.

Being stuck in the middle is never an enviable position and Kodak has learned it the hard way.

Sony, Nikon, Canon, Olympus and to a lesser extent every existing mobile phone manufacturer in the digital imaging business and this mean slimmer margins for Kodak, plummeting rolled film sales and huge capital equipment becoming rapidly obsolete.

The ink war Kodak is waging against competitors such as Xerox, Ricoh or Hewlett Packard in its printing business is also very taxing for Kodak’s bottom line and overall performance.

Kodak’ stock has taken a huge nosedive since 1997, a period when the first credible threats started to manifest in the form of aggressive Japanese competitors and when the company was struggling to get its strategy aligned with the new realities of the market.

After having reached its peak early 1997 at USD 89 per share, Kodak’s stock rapidly eroded to reach the rock-bottom price of USD 2,83 today. Poor performance and investors’ tepid response to Kodak’s recent strategic moves led to the situation we see today.

Porter’s Five Forces Analysis

To better understand what is exactly pressuring Kodak’s business, Michael Porter’s Five Forces analysis has been chosen. The impact of the different forces on the company is presented as follows:

I. Rivalry among competitors

- Numerous competitors active in all segments of the imaging industry (rolled films, traditional photography, digital photography, traditional printing, and digital printing).

- Faster than expected consumer adoption of the new technology attracting new entrants.

- Decrease in sales for traditional products forcing incumbents to quickly release new digital solutions.

- Switching costs inexistent for consumers

II. Threat of substitutes

- The fast advent of digital technologies led to rapid switching and this new substitute is proving problematic to handle for Kodak.

- Modern cell phones are now boasting high definition photography capabilities up to 16 megapixels ( the attractiveness of existing cameras.

- High commoditization: digital image capturing devices are found in laptops, tablets, cell phones, televisions and cameras. This solution is hard to differentiate and thus consumers’ choices are driven by price.

- Free, cloud-based solutions (picasa, photobucket, flickr, etc…) offered in the management of pictures undermine the attractiveness of branded, paid solutions offered by major players.

III. Threat of new entrants

- High entry barriers due to development costs, distribution costs and R&D expenditure make this industry difficult to enter.

- Kodak’s aggressive expansion in emerging markets like China ( make it difficult for newcomers to establish a credible presence.

IV. Bargaining power of suppliers

- Cameras providers can develop their own manufacturing processes or turn to the numerous parts manufacturers without any prospect of economic retaliation.

- Primary materials like silver used in the manufacture of rolled film are becoming more expensive as demand has grown tremendously. Thus suppliers have the upper hand and can more easily choose who they sell to.

V. Bargaining power of buyers

  • - Wholesalers and individual dealers have a wide range of choices at their disposal to favor one brand over another depending on the business terms and profit margins offered.
  • - Individual buyers don’t have much leverage at their level but the trend could somewhat change given the tremendous importance and credibility of word of mouth through social medias. This might influence other potential buyers and thus has to be taken in consideration as well.

The different forces at play here make for a very competitive industry, characterized by slim profits margins and low profitability in the digital segment of the business.

In the case of Kodak, this is mitigated by the fact that their traditionally profitable business is growing rapidly in emerging markets where the demand for rolled films and traditional photofinishing solutions is still high.


The analysis below puts the finger on what Kodak is all about: a company that carries its former glory like a burden, unable to free itself from the shackles of Eastman’s legacy.

I. Strengths

  • - Century-long experience in the traditional photography business
  • - Household brand name
  • - Highly valuable brand equity
  • - International presence
  • - Strong distribution channels
  • - Huge financial resources

II. Weaknesses

  • - Lack of long term commitment to its SBU’s
  • - Core rigidities ingrained in the company
  • - Company culture hindering strategic changes
  • - Inability to translate innovation into marketable products
  • - Lack of digital culture and expertise
  • - Inability to integrate acquisitions

III. Opportunities

  • - High growth in digital imaging demand (products and services)
  • - Emerging markets are ripe for Kodak’s existing product portfolio

IV. Threats

  • - Industry saturating with new entrants and incumbents
  • - Shrinking profit margins in the digital SBU’s
  • - Consumers’ progressive abandon of analog photographic solutions
  • - More experienced competition in the digital field

Challenges are numerous for Kodak and it is currently not in an ideal position to overcome them.In the next segment we’ll see how Kodak could take a completely different path to success in differentiating itself and in leveraging its current competences to enter new markets.

Stubbornness allied with condescension produced a deleterious corporate climate...



Following the findings highlighted in the study above, one of the possibilities – as drastic as it might sound – would be to turn the company around by progressively exiting the silver-halide consumer business. Although this might seem like something unconceivable for Kodak’s management, it could well be a blessing in disguise for the firm.

Over the last century the company has amassed considerable capital equipment, specialized human resources, technical processes and competences. Theses assets are depreciating as fast as consumers are adopting digital technologies.

Taking that matter of fact into account, wouldn’t it be clairvoyant from the managing team to strategically divest those assets and sell them off unit by unit to companies in emerging countries?

It has been said and demonstrated that Kodak is profitable in China, notably due to the fact that this particular market has become much more affluent over the past twenty years and the huge potential customer base that couldn’t afford cameras, rolled films and printing paper is now ripe for Kodak’s offerings.

Instead of evaluating a strategy from a resource-based perspective where the company milks its distribution channels and kiosks, Kodak’s management could view it from a market-based perspective: it is self-evident that in the long term the consumer analog photography business is facing extinction and this business is no longer attractive in mature markets, so Kodak has to make choices.

Selling off its traditional imaging business would alleviate Kodak’s heavy operating costs, and getting rid of the dogs in its portfolio would relieve them and provide much needed resources to concentrate on their digital businesses.

This process could take years to complete but would yield benefits for Kodak immediately. Before the company’s assets become unsellable and the exit costs too high, Kodak would be well advised to reconsider their strategy in this regard. After numerous unsuccessful acquisitions and botched joint ventures, it is clear that the company has trouble integrating its acquisitions in its different SBU’s and has even more trouble working with others.

This stems from the fact that Kodak used to do everything internally and had been leading the way for too long without any credible threat crossing its path. This led to an insular company culture and business operations where Kodak would keep churning out the same kind of products while knowing that a disruptive technology was already undermining their efforts.

Stubbornness allied with condescension produced a deleterious corporate climate where innovation is hindered, old ways are favored over new methods and executive management is unable to foster change among the company.

Figure 1.5 – risks of the generic strategies (Porter, 1985)
Figure 1.5 – risks of the generic strategies (Porter, 1985)



Michael Porter’s generic strategies concept suggests that competitive advantage can be achieved in a number of ways. In the case of Kodak, the cost leadership strategy employed in its printing business for instance has shown its limits: the razor-blade model of selling printers cheaply and making large profit margins on consumables is being practiced by most of its competitors and this contributes to commoditize their products, reduce consumers’ engagement with the Kodak brand and position it as a low quality provider in the minds of its clients.

As figure 1.4 clearly demonstrates, the risks associated with following a cost leadership strategy have materialized for Kodak.

Competitors have applied the same business model for selling their printers and their ink but technology has drastically changed.

On the other hand, adopting a clear focus strategy would entice Kodak to release products in niche markets where its other historical competitors are absent or at least cannot rival it as efficiently as in its traditional business units, thus nullifying the threat of substitutes.

By focusing on the uniqueness and quality of its offerings, Kodak would appeal to a whole different range of consumers. It would become a giant Leica, with a much bigger reach and production capabilities. The only question mark present in this strategy is whether Kodak can migrate from its present strategy to this focused orientation. It would require tremendous assets in the form of competences, technology and marketing to successfully make the transition.

However, given its extremely wide distribution channels, imposing international presence and household brand, Kodak is already at an advantage if they were to tread this path.

Besides, Kodak’s all-important profits margins that are evaporating in its traditional business segments – and inexistent in the broad consumer market that they are currently serving – would perhaps reappear due to the new focused positioning of their products.

The risks inherent to a focus strategy are, once again, heavily dependent on the competition’s reaction to it. Moreover, due to its very narrow nature, it is more sensitive to change in consumer trends.

Competitors have applied the same business model for selling their printers and their ink but technology has drastically changed.


This study covered the historical strategy trajectory Kodak has followed for the past 25 years. Different models and theoretical concepts were applied to identify key factors that have led the company from where it was to where it stands today. On the back of the findings stemming from the analysis of those models, severe strategy flaws were identified.

Recommendations to correct these weaknesses were suggested and alternatives strategic choices were offered. The industry encountered a major technological discontinuity in the form of digital imaging. This disruptive technology posed a formidable threat to Kodak’s business model and at the same time, offered vast opportunities as a whole new industry was emerging.

Eastman Kodak’s response to this new challenge was a hybrid model in which the company would continue to actively support the traditional silver-halide technology while making inroads in the digital imaging business.

However, due to core rigidities deeply rooted in the company the evolution has been very painful and hectic. Kodak has yet to distance itself from its traditional product-centric perspective and truly revolutionize the way it envisages its future as a global player.

This upheaval has to originate from the bottom up as the past executives weren’t able to instill the necessary digital culture among middle managers to secure the top spot in the industry.

Kodak’s stock performance is a testament to the company’s lack of commitment and dynamic vision. Too little was done to foster real change and it was far too late for Kodak to successfully adapt to a new world in which it didn’t see having a rightful role to play. Even after having consolidated its business units and made thousands of workers redundant, Kodak seemed still unable to swallow the bitter digital pill.

It remains to be seen whether Kodak, despite still being a major competitor in this industry, can realize its full potential and maximize their tremendous assets and skill sets.

Only the fittest survive and thrive. Kodak has learned it the hard way.



2. Theodore Levitt (2004), Marketing Myopia, p.2, Harvard Business Review.

3. Michael Porter (1979), How competitive forces shape strategy, p.205, Harvard Business Review.

4.A. Swasy (1997), Changing Focus: Kodak and the Battle to Save a Great American Company, Times Business, Random House.

5. Henry C. Lucas & Jie Mein Goh (2009), Disruptive Technology: How Kodak missed the digital photography revolution, Journal of Strategic Information Systems 18 (2009) 46-55

6. Mason A. Carpenter & Gerard Sanders (2009),Strategic Management: A Dynamic Perspective, p.161, second edition, New Jersey, Prentice Hall.

7. Steve Hamms & William C. Symonds (2006), Mistakes Made On The Road To Innovation, Inside Innovation – In Focus, Business Week.



Figures :

Figure 1.1 - Mason A. Carpenter & Gerard Sanders (2009), Strategic Management: A Dynamic Perspective, p.162, second edition, New Jersey, Prentice Hall. Adapted from C.M. Christensen, The Innovator’s Dilemma, Cambridge, MA: Harvard Business Press, 1997.

Figures 1.2 & 1.3 – George Mendes, date unknown, What Went Wrong at Eastman Kodak?, Adapted from G. Gavetti, R. Henderson, S. Giorgi, Kodak and the Digital Revolution (A), Harvard Business Review School, Harvard Business Press, 2005.


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    • profile image


      5 years ago

      may i know who is the author of this topic ?

    • krosch profile image


      6 years ago

      Very well written and your points are very strong. Point by point you break down a company that couldn't move on from its dominant past and was left behind.

      And as a reply to Mr. Jones. I doubt they will anytime soon because even as Fossil Fuels run out whenever that maybe or they simply get so low that other forms of energy become more cost effective. Guess who puts more dollars into green energy research than anyone else including the federal governments of the world? Yep the Oil and gas companies.

      They understand they are energy companies and are working to control and compete in the next generation of power as well as the current one. So I don't see their power waning any time soon without something really crazy happening.

    • profile image

      Bryan Jones 

      6 years ago

      How Long before the OIL Companies & related business suppliers suffer the same $$$ FATE $$$ as the once World Business leader Eastman Kodak?


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