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Eastman Kodak pursue the following strategies: increase sales of digital cameras and utilize the Kodak kiosks for accessory sales. Implementing a corporate restructure that will positively change Kodak’s culture is a tremendous idea, but it time consuming and has historically failed to be successful. Decreasing dividend payouts is also a good idea, but not at this present time. Therefore, due to the intense need for performance, Kodak should focus on gaining market share and profit performance in 2006. Issues: Kodak focuses on building its presence in the document imaging industry with a focus on commercial digital imaging, photocopiers, and commercial inkjet printers. The challenges we face are how to keep costs down so that we can increase our profit margin and how to develop our core competencies even further to capitalize market share. Four alternate strategies are outlined below with an explanation of each option combined with their strengths and weaknesses: Strategic Alternatives: 1. Increase sales of digital cameras Digital cameras are in perfect alignment with our goal of building presence in the commercial digital imaging industry. Increasing sales of digital cameras will establish Kodak as a key competitor in the digital imaging industry. Pros: • • • • Kodak can gain market share in the industry. Marketability will make way for new product lines. An increase in production will lead to economies of scale; thus, lowering costs. “Old fashioned” film is phasing out to digital imaging – Kodak must adapt.
Cons: • Changing from pushing film photography to pushing digital cameras will decrease profits at first (because film has a higher profit margin). • Customers who enjoy film may feel abandoned. • Manufacturing buildings may become obsolete due to impossible adaptation to digital camera manufacturing. New buildings and equipment may be necessary. • Kodak will loose their core competency of film photography.
Kodak would just need to create related sales to the kiosk product. but that is what they do best. The sales team would have to push more products. • The trusted brand name will attract new customers that enjoy the convenience of the easy to use kiosk and available accessories. scrapbook supplies. it is a natural step to increase value even further. Kodak must enter the digital industry. Cons: • Convincing major retailers to buy more products and maintaining those commitments can be difficult. Implement a corporate restructure that will positively change Kodak’s culture. however. • Sales and profit will increase from little change. Their marketability is already established. This is a low risk strategy because of the already existent supply chain. • The increase in demand for the kiosk (due to the added convenience) would require more kiosk maintenance control.This option is a necessary change. Restructures have happened many times at Kodak. Once it is successfully implemented costs will decrease and with Kodak’s dominant brand name. • A contract to have the kiosk remain in the store is imperative to gain for this to be a success. The digital industry can be bettered by the traditional. The underlying culture consistently causes lowering . it just needs to be further exploited. • Kodak would enter the digital industry even further. Adding accessories to the kiosk keeps the customer in mind and Kodak’s sales up. Utilize the Kodak kiosks for accessory sales The Kodak kiosks are a vital component to Kodak’s success. If Kodak refuses to adapt to the needs of the market. • Customers are already buying Kodak kiosk products for the added value of their personal pictures. Kiosks create customized personal pictures and are virtually in every corner of every major retail store. Kiosks are a middle step from traditional film to digital. digital cameras are a necessary first step in the process and can become a core competency. and/or memory cards. Kodak will become a key player in the industry. we will eventually disappear along with the traditional film users. customers would then buy products that increase their picture’s value or are a convenience. This would be done by adding Kodak products next to the kiosks in the stores. it is a place where they can easily get physical copies from their personal digital cameras (hopefully that Kodak made) and get frames. physical “film-like” accessories that Kodak already has access to. 2. 3. none have been successful because of the underlying culture. Pros: • The supplies and supply chain is already established.
Changing the underlying culture of a company is incredibly difficult in any company. • The restructure. This time it must be done right. • Innovations from the lowest levels of Kodak are capable of success. • Analysts may criticize the restructure which will lower stock price. its success will cause innovation in an idle company and lower costs to better compete in the global market. is already in place – the unwanted culture just needs to be eliminated. • Stockholders will be weary of the changes necessary for success. in whole or in part. • Managerial costs will decrease and managerial value will increase since they will be able to use their time for better purposes (like analysis. The massive size of Kodak cannot have micromanaging if it wants to compete in the global market. • The intellectual property of our employees will be better utilized because they would no longer fear the culture’s disdain of change. • Productivity would increase because employees would go “above and beyond” because they see their potential importance to the company.). restructures have occurred many times and have been unsuccessful. cost saving initiatives. Cons: • The underlying culture is difficult to detect and change. etc. the unwanted culture may resurface and collapse restructure. As stated earlier. Kodak’s past history of success and profits has maintained their presence in the market. .cost initiatives to fail by stagnating innovation and lower-level decision making. a must in the digital industry. efficient processes. • Once everything is in place and seemingly successful. research and development. especially one (like Kodak’s) that has existed for 130 years. but it will not last in the long-run if we do not restructure successfully. Pros: • Leadership is more of a one-on-one relationship.
Over the past nine years (See Exhibit 1) we have paid out almost 4billion dollars in dividends where those funds could have been used for innovative or cost-lowering ventures. This is why we recommend that Kodak increase sales of digital cameras and Kodak utilize the Kodak kiosks for accessory sales because of their lowcost capabilities and good potential profit margins. Pros: • Decreasing dividends increases retained earnings that can be reinvested into the company. we must continue to decrease our dividend payout. • The reinvestment can be used toward developing and maintaining our focus goals. Decrease Dividend Payouts Decreasing dividend payouts would create an increase in retained earnings. . it would not be wise to implement another decline in dividends at this time. it would be practical to lower them in the future to aid in the competition of privately owned Fuji because dividends are a cost disadvantage to Kodak. • More cash on hand can easily be used toward new ventures. Summary: Kodak must develop its presence in the digital industry more than anything else. If Kodak creates a strong presence in the industry by creating core competencies. Cons: • Shareholders will not be pleased with lower dividends. Due to the market perception of Kodak. Therefore. it will gain market share from its competitors and increase profit.4. Many investors may be invested solely because of the historically high dividend. For Kodak to have as much financial challenges as it has had and still pay one of the highest dividends is unreasonable. • Analysts may criticize the decrease in dividends which will lower stock price. However.
76 1.949.986 $ $ $ $ $ $ $ $ $ 558.76 2.00 143.997.600.901.68 .638.559.50 324.880.151.885 286.75 143.08 570.56 555.Exhibit 1 Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 Eastman Kodak's Nine Year Dividend Payout Common Stock Dividend Shares Dollar Amount Paid 1.276 287.200.40 329.679.830.250 290.297.953.811 300.80 1.967.403.113 286.462.380.929.769.53 525.50 0.603.740.21 1.493.184.737.339.76 1.00 642.293 291.00 Total Paid Out: $ 3.36 528.475.15 0.707.439 323.573.681 315.169.72 1.438.