Eastman Kodak – Case Analysis
Problem
The problem in this case is concerned with Eastman Kodak losing its market share in film products to lower-priced economy brands. Over the last five years, in addition to being brand-aware, customers have also become price-conscious. This has resulted in the fast paced growth of lower priced segments in which Kodak has no presence.
Kodak plans to address this issue by introducing a new brand, “Funtime” in the economy brand segment. Kodak also proposes to replace their Superpremium brand by launching “Royal Gold” which would target a broader audience.
Solution
If I were responsible for solving the problem, in addition to Kodak’s repositioning strategy, I would do the following: * While the
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Increasing dealer margins to 25% is not a possibility in the case of Kodak Gold Plus since this would lead to a yearly loss of $77 million considering Kodak Gold plus unit volume in 1993.
Advertising Support
As Kodak is introducing Funtime to target the fast-growing Economy brands market and since it will be available only in off-seasons and in limited quantity, it should be supported by advertising. Kodak Gold Plus being the flagship brand will receive 60% of the dollar advertisement support. As Royal Gold has a larger profit margin ($0.96 per unit), it will receive 30% of the dollar advertisement support. The remaining (10%) of the dollar advertisement will be used for supporting Funtime. The distribution of the marketing budget can be justified from the break–even analysis given in next section.
Break Even Analysis
Funtime:
Advertising Budget for Funtime: $5 million
Break-Even volume =Advertising budgetUnit Contribution =$ 5 million$0.44 =11.36 million units
Cannibalization (only during off-season)
Assuming that Kodak Gold Plus sells about 20% of its yearly sales during off-seasons, the resulting cannibalisation will amount to:
454 million units x 0.2 x 0.84 x 0.05 = $3.8 million
Hence, Break-Even volume =$3.8 million$0.44 = 8.6 million units
Based on Exhibit 5, we will be able to realise break even sales within a year.
Royal Gold:
Profit
Companies having the highest ratios of production costs to net revenues are likely to be caught in a profit squeeze, with margins too small to cover delivery, marketing, and administrative costs and interest costs and still have a comfortable margin for profit. Production costs at such companies are usually too high relative to the price they are charging (their strategic options for boosting profitability are to cut costs, raise prices, or try to make up for thin margins by somehow selling additional units). The percentage of delivery costs for cameras to net sales revenues. This ratio is calculated by dividing total delivery costs by net revenues (where net revenues represent the dollars received from camera sales, after exchange rate adjustments and any promotional discounts). A low percentage of delivery costs to net revenues is preferable to a higher percentage, indicating that a smaller proportion of revenues is required to cover delivery costs (which leaves more room for covering other costs and earning a bigger profit on each unit sold). The percentage of total marketing costs for cameras to net sales revenues. This ratio is calculated by dividing total marketing costs by net revenues (where net revenues represent the dollars received from camera sales, after exchange rate adjustments and any promotional discounts). A low
The most suitable costing method Yeltin should adopt is the practical capacity in order to remove the factor of uncertain budgeted sales figure. For this approach and the practical capacity of 65000-22000 units, then the revised overhead costs come out to be $30. With the inclusion of material and labor costs, the cost of the cartridge stand at $52 and the additional royalty expense of $10 raises the overall per unit cost to $62. The selling price of the cartridge is fixed at $150. With this selling price, the gross margin is equal to $88. The gross margin percentage is equal to 59%. In comparison to the budgeted volume, the gross margin has increased by 14%. See below
Kodak is known for providing the quality services, innovative products offering the best quality to customers. It developed competitive advantages and satisfied its customers during many years. Kodak has evolved different strategies in the field of traditional photography where it brought innovations and modification. Kodak has a successful history in the industry. According to the case study, the main reason behind the success of Kodak in the industry is its quality.
The problem in this case is Kodak's steadily eroding market share and shareholder value in the film rolls market. This is especially undesirable given the fact that the market has been growing at a tepid 2% annual rate and the steadily increasing threat from competition. Kodak needs to come up with a strategy for corrective action so as to arrest this decline, regain market share and increase share holder value. Kodak's strategy is to reposition itself by targeting a new segment of price sensitive customers and re-segmenting the super premium customers’ space by including a wider segment of special occasion customers.
George Eastman is an influential and well-known entrepreneur and photographic enthusiast. The household name and the name of his legacy, Kodak, is familiar and accepted within both the art and professional world. Eastman’s work with the camera process and development of the flexible film we know today transformed the realm of art and photography, making it easier and allowing regular people the chance to use this form of art in their everyday lives. As Eastman is reforming the art world, his modification of the photographic process leads him to create a business out of it and by doing so he impacted how the professionals did business. By turning photography into something to be mass marketed, George Eastman changed photography and the professional
In 1881 the dry plate and film company was established, in 1883 I came out with the film roll. In 1888 I launched the first black and white Kodak camera that was pre-loaded with 100 shots. This camera cost 25 dollars. Once all the film was used you could have it developed for 10 dollars. In 1892 I renamed the company the Eastman Kodak. I chose the name Kodak because products should have their own identity and not associated with anything else. My company slogan was “you press the button we do the rest”. In 1900 I launched the brownie camera. This camera was designed for children, military and
“Things changed dramatically in 1888 when George Eastman introduced the Kodak camera. A small hand-held box, it cost only $25--about the price of a higher-end iPad in today’s money, which put it in the range of the well-off middle class. And it offered simplicity: It arrived with 100 shots preinstalled, and when they were taken you shipped the entire camera back to Eastman’s factory in Rochester, New York, where workers developed the photos and mailed them back to you along with your reloaded camera. “You press the button, we do the rest,” as the Kodak slogan rang” (Thompson, Clive, 2012). This was the start of the Kodak monpoly of the film and photography industry.
That is a huge saving for Pacific Healthcare. Pacific Healthcare can save money as well as keeping the same high quality as Kodak.
3. The advantages of staying with Kodak are that Pacific Healthcare not only has a proven quality product, but a cost saving benefit for using Kodak as a single source provider. The disadvantage is Kodak has a position of power over Pacific Healthcare because of the prior agreement in place. Because of this, Kodak can set prices above the market. A change in suppliers may give Pacific Healthcare a savings in X-ray film, but at what cost. The decision to change would upset prior agreements with Kodak and potentially affect product quality. Not to mention the overall total cost of changing suppliers.
This attention to detail and ability to out pace Kodak technology had endeared Fuji to its professional market, and serve as a bridge to build credibility on all of Kodak’s markets. It had taken its market share now, and was edging out Kodak on lower price and even lowers profits just to get ahead. Fuji’s most advertised success in Kodak’s market happened in the 1984 Olympics in Los Angeles and every year since. Kodak tried to come back by getting the TV contract, but Fujifilm had surpassed Kodak.
Company Eastman Kodak is currently the market leader in the photo film market. The company has continued its domination of the photo film market, but in the past 5 years its market share has eased from 76% to 70%. Reason mainly being the competitors like Fuji Photo Film Co. and Konica Corp. lured consumers with their lower-priced versions. In 1993, Kodak spent an estimated $50 million on camera and film supply advertising in the United States; this was about 4 times
Kodak Corporation is one of the film organizations that have obtained a bigger piece of the overall industry in the United States. It is prestigious for the generation of
When we think about players in the market of photographic films, digital cameras, supplying various products for the photography sector, and medical imaging equipment two key players come to mind, Kodak and Fujifilm.
The roll out of new technologies can often be met with scepticism, which is the problem that Kodak are faced with, a new technology that they need to make sure the public will view it in an optimistic light, throughout history multiple advances in technology both and a minor and major scale have been met with scepticism, a prime example being a respected French military commander Ferdinand Foch who concluded in 1904, “Airplanes are interesting toys but of no military value.” This of course was not the case, and is an example of why it is important that the public are presented with the product in the right way. Market orientation can be viewed in two different One school of thought on marketing orientation is that it is behaviourally orientated, described as “organization-wide generation of market intelligence pertaining to current and future customer needs” (Kohli and Jaworski, 1990). Market orientated companies tend to build anticipation for new releases which is something that can Don has touched on during his pitch to Kodak. During the pitch he highlighted the opportunity to take advantage of nostalgia to “take us to a place where we ache to go again” the idea of being able to relive moments that had sentimental value to a customer is a way to build anticipation and highlights behavioural market orientation tendencies in the way that a personal feeling like nostalgia can be manipulated in a way that can influence customers.
One of the things Kodak worked on implementing in this time period was the Kodak I. Lab system, which offered a photofinisher that offered better quality photos while fixing common photograph problems. The next concept is that the company introduced different strategies for the consumer market, professional market, and the commercial market. Their goal for this concept was to provide the consumer with simplicity, quality, and value, while providing the professional and commercial market by integrating imaging and informative solutions in public sector projects. The third concept was that external sourcing of knowledge through hiring, alliances, and acquisitions. Kodak was known for being self-sufficient, and the company developed their own products and technology. Kodak made a change during this time period to hire more qualified CEOs, and worked on building relationships with digital imaging companies. The fourth concept is that Kodak put an emphasis on printed images, which developed because the company believed that no matter the amount of digital imaging, the printed image would never be obsolete. The fifth concept was harvesting the traditional photography business, which was created for the transition period. According to the case study,