KODAK IN RUSSIA

Kodak entered Russia in the early 1990s. At the time, the

country was deep in the middle of a turbulent transition
from a Communist-run command economy to a fledging
democracy that was committed to pushing through the
privatization of state-owned enterprises and economic
reforms designed to establish competitive markets.
Kodaks entry into this market posed a number of
challenges. Russian consumers had little knowledge of
Kodaks products, and the consumer market for
photography was very underdeveloped. Also, apart from
state-run stores that are generally poorly run, little or no
infrastructure was in place for distributing photographic
equipment and films, and for processing films. To
compound matters, Russian consumers were poor and
unlikely to be able to afford all but the most inexpensive
cameras and films.

A decade later, Kodaks entry into Russia is widely
regarded as a major success. Russia accounts for a
significant proportion of the $2.59 billion in
international sales in emerging markets that Kodak
registered in 2004, and with a growth rate of 26 percent
over the previous year. Russia is the fastest growing
emerging market for Kodak, outstripping even China.
How did Kodak do it?

First Kodak had a clear and consistent marketing
message, which it communicated to Russian consumers
through a number of media, including radio, television,
and print media. The marketing message was based
upon the idea of saving memories by taking pictures in
a quick and easy way. You press the button and we will
do the rest, the ads stated. This was the perfect message
for a consumer market new to photography. To
complement the core marketing message, Kodak spent
heavily on promotional campaigns, exhibitions,
conventions, sponsored events, and the like, in an
attempt to educate consumers and raise awareness of
the Kodak brand name. For example, in addition to
standard media advertising, Kodak owns a traveling
photo park with a fleet of hot air balloons that have
become very popular in Russia.

Kodak has also invested heavily in promoting a
corporate image as a firm that takes a stand against
corruption and black-market practices. The company
has been very clear about its business practices, and
about its refusal to engage in shady dealings. In a
country where such practices were once common, and
still persists to a degree, this stance has been well
received by consumers and has helped to build the
companys brand image as an enterprise that can be
trusted which has been good for business. Kodak also
boosted its corporate image by opening a factory in
Russia to produce cameras, film and chemicals for film
processing. In addition to the public relations benefit,
this move also helped Kodak to lower its costs by
utilizing cheap Russian labor and by avoiding tariffs on
imports of photographic products into Russia.



Recognizing the limited income of Russian consumers,
Kodaks product strategy has been to sell lower-end film
and cameras in Russia, Kodak offers simple cameras for
about $20 to Russian consumers, something the
company can afford to do because the cameras are made
locally. It does not sell disposable cameras in Russia
because the cost would be too much. Instead of trying to
sell top-quality Kodak Gold Film, which is popular in the
West, the cheaper brand, Kodak Color Plus, is heavily
marketed in Russia.

Another of Kodaks marketing tactics has been to build
demand for its products by encouraging major
enterprises to give cameras to valued employees, rather
than the traditional bottle of vodka. Kodak has also
worked closely with travel agents, giving them cameras
to hand out to their customers. Kodak hopes that
customers will purchase Kodak films to use in these
cameras, and to a large degree that seems to have
occurred.



Finally, Kodak realized that it needed to build a
distribution channel for its products. Rather than invest
directly in its own stores, the company set up a
franchising program to open Kodak express more
throughout Russia to sell its products, and develop film.
These owner-operated stores adhere to strict business
guidelines set down by Kodak in its master franchise
agreement. The stores are clean, attractively designed
with a consistent appearance that helps to promote the
Kodak brand and staffed by friendly and polite
employees. These stores rapidly set a new standard for
retailing in Russia. Within three years, more than 350
Kodak Express outlets had opened up in Russia, and
today there are several thousand.

Sources: G.C. Anders and D.A. Usachev, Strategic Elements
of Eastman Kodaks Successful Market Entry in Russia,
Thunderbird International Business Review, March-April
2003, pp. 171-83; S. McNamara, Kodak Stores Set U.S.
Standards in Russia, USA Today, December 21, 1998,
p.128, and Making Foreign Policy Work with Kodak and
Norske Skog, Strategic Decision, November-December
2003, pp.27-30.