Case Study: Kodak
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International business trade theories
Foreign direct investment (FDI)
Porter generic Strategies
Kodak was established in 1879, and for years, it was the major player in the graphics communication industry until Japanese companies such as Fujifilm and Sony. Despite its past success, Kodak has been struggling because of new technological innovations supported by financial difficulties. The report paper evaluates Kodak through the use of key international business strategy frameworks. The frameworks employed to evaluate policies and strategies used by Kodak are international business trade theories (which explores Legal, political, cultural, economic factors), foreign direct investment (such as Greenfield investments, joint investments and franchising), marketing (which entails the 4ps), and strategy such as SWOT analysis, Value Chain, Bowman clock, Porter generic, and Ansoff strategy.
International business trade theories
Legal and political factors such as US copyright laws usually require release of digital images after having a copyright release. To amateur photographers, this may reduce the printing sales and purchase of Kodak products by retail consumers (Gavetti, Henderson & Giorgi 2005)
Increased demand for digital cameras in 2002 reduced the sales of Kodak by 2.6 percent in the traditional segment (Grant 2005). Moreover, print for traditional films also declined which affected the sales and revenues of Kodak. Decline of the price of digital cameras as a result of new technology has increased demand for Kodak’s products. Lastly, Kodak had $2.96 billion USD for digital camera sales, which represented a considerable portion of the company’s total revenue (Grant 2005).
Men and women use digital cameras often, and as such, the demand for digital cameras has increased. Moreover, change in technology has resulted to the culture of sharing photos and pictures through electronic mail and World Wide Web. Most of digitally produced images are stored and used for onscreen viewing (Management Paradise 2010). Buyers in the U.S have become used to the purchase of technology based products which are enhanced with photo-capable cell phones and digital cameras (Gavetti et al. 2005).
Foreign direct investment (FDI)
There are different types of foreign market entry strategies that are viable for companies investing in foreign markets. The major strategies are Greenfield investments, franchising, and JVs (Katsioloudes & Hadjidakis 2007; Pan & Tse 2000). Franchising/licensing entails contractual agreements between business partners. In reference to the case study, Kodak entered into a cross- licensing agreement with Olympus and Sanyo with the objective of sharing digital camera technologies, in addition to joining forces to develop a common approach towards web-based printing and storage of photographs (Grant 2005).
Kodak has been forging alliances and joint ventures since its inception to increase its presence in the photography market (Yan & Luo 2001). For example, the company formed alliances and joint ventures with biotech and pharmaceutical companies in the 1980s to enhance research and development (Grant, 2005). Moreover, it entered into joint ventures with Sanofi to expand its medical imaging products. The company also entered into a joint venture with Hewlett-Packard (HP) to form Phogenix Imaging.
Greenfield investment is part of wholly owned subsidiaries (Peng 2013). Greenfield investments are “are favoured when no-buy alternative is available and more control is needed, due to either technological concerns or market structure limitations” (Katsioloudes & Hadjidakis 2007, p. 261). In this perspective Kodak has been engaging in Greenfield investments to control technological and innovative concerns as part of remaining relevant in the market (Peng 2011). For example, Kodak adopted an incremental approach to promote digital imaging strategy. For instance to remain relevant in the photography market, the company aligned with other companies such as Olympus, Sanyo, HP, Toshiba, Compaq, and Dell among others. Other partnerships that fall under this strategy include partnership with Heidelberg, AOL, Lexmark, and Canon (Grant 2005). Kodak also collaborated with companies such as Microsoft and Live Picture Inc and Intel Corporation to encourage digital transformation in its operations (Grant 2005).
This is composed of price, product, promotion, and place/distribution. Kodak produces a variety of products such as projectors, cameras, photographic chemicals, photographic papers, and films among others. The products are provided at competitive prices as part of enhancing its competitive advantage. Under place and distribution, Kodak has well established supply chain. Moreover, it uses its huge retail presence to provide its products to its consumers. Kodak’s retail acts as its distribution stronghold and it has a wide photo-retailing infrastructure (Grant 2005). Branding and advertising are the major promotional tools employed by Kodak to reach its consumers.
§ Kodak has a strong brand supported by huge retail presence
§ It has acquired companies and entered into joint ventures to enhance its presence
§ Kodak produces quality products and services
§ Kodak has a strong distribution channel
§ It has invested heavily in research and development and able human resource.
§ Kodak has strong presence in biotech, medical and pharmaceutical markets.
§ Has more than 100 patents
§ Huge staff cuts and restructuring to reduce costs of operations.
§ Strong administrative and management team.
§ Invested heavily on digital imaging but with poor return on investment.
§ Poor sales over the years
§ Lack of adequate modern technology
§ High investment on the traditional photography segment.
§ Its investment in research and development has little benefits to show.
§ New technology creates a market for high-tech and sophisticated products.
§ Presence of 3D imaging and changes in medical imaging provides Kodak with opportunity to invest heavily in medical and pharmaceutical markets.
§ Expected growth of the digital photo industry.
§ Kodak faces competition from new players such as Fuji Film, Canon, Nikon, and Minolta.
§ New technology is a threat to Kodak
§ Emergence of perfect substitutes and alternative products (Foley 2011).
§ Economic forces
This evaluates the current key activities as well as the effectiveness of these activities. Based on the value chain analysis, Kodak core competencies entail an agile supply chain incorporated with modern technology, superior logistics systems, a strong and unique culture, effective management practices, and routines, close knit management style (Macmillan & Tampoe 2000), elaborate connection between individual retail stores and its headquarters, and the capability to generate high sales (Grant 2005). The diagram below represents the value chain of Kodak as provided by Richard (2012).
From the figure, the modern value chain entails image capture (such as digital camera, video camera, and online), digitalisation which involves digital cameras software, scanner at home, digital mini-labs, and online services. Storage entails hard disk, floppy disk, and removable storage. All these processes are aligned to retrieval, transmission, printing, manipulation, and projection.
Porter generic Strategies
Entails price leadership, differentiation, cost leadership, and cost/price focus (Johnson, Scholes & Whittington 2011; Johnson, Scholes & Whittington 2008). Cost leadership is the major strategy for Kodak as it is used to develop and supply products at low cost (Kodak 2004). Under differentiation, Kodak use modern technologies such as infoimaging to differentiate itself from its competitors. This new strategy has assisted Kodak in developing new products and systems for emerging markets. Kodak has also invested highly on research and development which makes it possible to produce unique and innovative products. On cost focus, Kodak has reduced the number of employees and sold some of loss making business to reduce costs. As such, the company focuses on the most productive business divisions. To promote price leadership, Kodak uses cost effective ways enable by economies of scale to produce quality products which are sold at lower prices (Grant 2005; Porter 1980).
The 8 different strategies of the Bowman clock as provided by Johnson, Whittington, and Scholes (2011).
Low price/low added value: based on the case study, Kodak was forced to operate in this category because their products lacked differentiated value because of technological change (Schilling 2010)
Low price: Kodak was faced with stiff decline in sales of its products between 2001 and 2003 which was as a result of steep price reduction (Grant 2005) promoted by intense competition in the market. Besides, Kodak reduced its prices and increased its advertising costs to compete with Fuji Films and other players in the industry.
Kodak’s digital imaging strategy revolved around the use of a hybrid approach. From the case study, the company introduced different aspects related to digital imaging to provide enhanced functionality (Grant 2005). Moreover, the company concentrated on the provision of facilities to its retail facilities so as to enhance editing and digitising of images to digital images. By 2000, Kodak had supplied Picture Maker to over 30,000 retail outlets.
From the case study, the major strategies that Kodak depends highly on are differentiation and focused differentiation. Under differentiation, Kodak has aligned with other companies in the industry to produce high perceived value through production of quality products (Johnson, Scholes & Whittington 2005; Lynch 2003). Additionally, the company has been using branding as a tool to make it synonymous to the targeted consumers. After selling Sterling to SmithKline Beecham, Kodak concentrated on ways to concentrating on its core competencies and resources. The company in collaboration with Canon was able to produce a series of new but sophisticated digital cameras, laser printers among others as part of remaining relevant in the market. Under focused differentiation, Kodak has focused on new technologies such as infoimaging (Kodak 2004).
The Ansoff matrix is made of market penetration, product development, and product development and diversification strategies (Watts, Cope & Hulme 1998). Below is a figure of the Ansoff matrix as provided by Ansoff (1957).
Under market penetration, Kodak has over the years improved its existing products and engage in alliances and joint ventures to achieve growth and increase its market share. In reference to market development, the company has used its existing products to emerging markets in biotech, pharmaceutical, and medical industries. Product development has been the core of Kodak. For example, Kodak has been developing new products such as digital cameras, photo processing equipment, mini-labs, new health imaging products, high speed scanners, and narrow-format inkjet printers among others (Grant 2005). Under diversification, Kodak develops new products such as health imaging products for new markets.
The paper has evaluated Kodak through the use of international business trade foreign direct investment (such as Greenfield investments, joint investments and franchising), marketing (which entails the 4ps), and strategy such as SWOT analysis, Value Chain, Bowman clock, Porter generic, and Ansoff strategy.
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