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A Case Study On Kodak Downfall - PDF: September 2019
A Case Study On Kodak Downfall - PDF: September 2019
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Kounteyo Roychowdhury
Symbiosis International University
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Introduction:
The first pocket Kodak camera ($5 Pocket Kodak) with the tagline “You press
the button; we do the rest” was introduced in 1895. In the 1970s, it acquired 90% of US
film market. It made many remarkable contributions in the field of film, rolls and
camera. Kodak even invented the first digital camera in 1975. But, instead of
marketing the new technology, the company held back for fear of hurting its lucrative
film business, even after digital products were reshaping the market. Due to factors
like disruptive technology and inability to anticipate the wave of incoming digital era
and other wrong management decisions (like focussing on film making even when new
digital era is ushering, etc) Kodak failed. Also, inability to compete with the nearest
rival Fuji Film was one of the defining factors for its downfall. The net sales declined
sharply from 2005 onwards and the company was ultimately filed for bankruptcy in
2012.
Methodology:
Annual reports were collected for Kodak for the years 1992-2012.
Using the concept of Inflation, the profits and net sales over years (1992-2012)
were converted to the monetary value of 2012.
The net sales and profit were plotted to have an overview of the business
performance of Kodak from 1992-2012.
The pair of years which marked the steep downfall was identified and a
comparative study was done on how Kodak performed in the previous years as
compared to this year.
The objective functions and corresponding constraints were then identified and
analysed.
How Kodak could have stopped or countered this rapid fall had also been
discussed.
Data-set and analysis:
Below is the data from 1992-2012 (Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934) of Kodak’s gross profit and net sales:
Years gross profit(in Gross profit w.r.t Net Sales(in Net sales w.r.t
million $) year 2012 million $) 2012(in $)
1992 8527 34443.34 16545 66830.67
1993 6016 22500.55 16364 61203.28
1994 8301 28577.1 13557 46671
1995 7,018 22070.24 14980 47109.18
1996 7,642 21909.85 15968 45780.75
1997 6,562 17039.62 14,538 37750.98
1998 6,113 14934.93 13,406 32752.76
1999 6,102 12927.26 14,089 29847.95
2000 5,619 11848.77 13,994 29509.12
2001 4,568 9308.57 13,229 26957.76
2002 4,610 8933.46 12,835 24872.23
2003 4,158 7807.84 12,909 24240.35
2004 3,935 7124.14 13,517 24471.93
2005 3,651 6368.92 14,268 24889.54
2006 2,409 3980.76 10,568 17463.12
2007 2,516 3902.77 10,301 15978.72
2008 2,169 3188.75 9,416 13842.93
2009 1,768 2369.36 7,606 10193.07
2010 1823 2125.04 5,993 6985.92
2011 793 844.44 5,148 5481.92
2012 591 591 4,114 4114
Figure 1:
Graph representing the gross profit over the years (1992-2012) with respect to
monetary value of 2012 (this is because of inflation).
35000
30000
25000
20000
15000
10000
5000
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Figure 2:
Graph representing the Net sales over the years (1992-2012) with respect to monetary
value of 2012 (this is because of inflation).
Net Sales(in million $)
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
From figure 2, we can observe that the company’s sales remained between 13000-
16500 million $ (approx.) but since 2005, there was a steady fall in net sales. From
1992-2005, we can see that the company recovered its losses every time after a fall in
sales. But, after 2005 the company could not recover their sales revenue and it reached
an all-time lowest sale of 4000 million $ in 2012, when they were filed for bankruptcy.
So, we study the Annual report of (2005-2006) to know the reasons of their fall.
The mean net sales of (1997-2005) i.e. before Digital era was $28800.39m as
compared to $12368.65m in Digital Era (2006-2012).
Mathematical perspective:
If the objective function of Net sales is denoted by
max y = f (x , x , x , x )
( , , , )
KHG includes the following: Laser imagers, digital print films, computed and
digital radiography systems, dental radiographic imaging systems, dental
practice management software, advanced picture-archiving and communications
systems (PACS), and healthcare information systems (HCIS).
Others includes the following: Company’s display business, business
development and other small, miscellaneous businesses.
Constraints is a limiting factor/cause which affects(decreases) the overall efficiency of
a system or process. Here the constraints for each of the choice variables(x1,x2,x3,x4)
are identified which ultimately affects the Net sales. Then it is dealt with to increase
the profit. The following steps are followed to maximize any objective function with
constraint(s)
Identifying the constraint (i.e. sub variables) for each of the variables
(x1,x2,x3,x4):
Fujifilm disrupted the imperfect competition which was set up by kodak. So,
Kodak was forced to sell their products at prices lower compared to existing
market products. Due to this unfavourable price/mix, the sales decreased by
approximately 3.8 percentage points. (External constraint)
Lessons learnt:
Disruptive technologies have massive potential to bring down even the most
successful of empires. A business is not about the existing products, but the
consumers’ needs, which changes with time. So, management and marketing
decisions can go a long way in deciding the fate of a particular business.
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