Assignment 1

KODAK CASE

Pravet Singh Kanwar

216821001
In accordance with the Schulich honor code, I, Pravet Singh Kanwar, certify that
the answers here are entirely my own work.

Question 1
During the 20th century, Kodak was a household name. The company’s famous
tagline ‘Kodak Moments’, which first appeared in 1961, was trade marketed and
was interchangeably used for any memory worth capturing. During its peak,
Kodak was one of the most valuable brands in the world, capturing 90% of the US
film market.
Despite generating a consumer perception that it was a brand that
captured memories, the senior management at Kodak firmly believed that it was
rather in the film business. This belief led them to focus on the digitising the films
instead of diverting the required attention and resources to digital cameras. It is
evident from facts presented in the case and online sources that despite Kodak’s
invention of the first ever digital camera in 1975, it failed immensely at
capitalising the opportunity.
Although the invention placed Kodak in the ‘innovator’ section of the
Technology Adoption Lifecyle, the company was clearly in the midst of an
innovator’s dilemma. Kodak was enjoying the success of its existing products to its
existing customers without accepting the paradigm shift towards digital cameras.
It did not want to invest in the change that was coming, nonetheless. The
argument is further strengthened by the fact that even though Kodak was first to
introduce an image sensor in 1986, which is a crucial element for digital cameras,
Photo CD was its first widely announced digital product. Adding to the extreme
ignorance of the senior management, in 1991 they referred the Photo CD as an
‘innovate offering’ in their annual reports instead of the digital camera. Even with
digital, the company’s end goal was to digitise film-based imaging implying that it
had failed to embrace the technological change that it had invented.
While the shift towards digital cameras was on the rise, Kodak also failed to
acknowledge the competition from the Japenese film maker, Fuji. As we can see
in Exhibit 3, Kodak’s worldwide film market share dropped from 60% in 1990 to a
mere 36%, which was similar to that of Fuji, in 2001. Fuji was heavily investing in
new digital technology and by 2003, while Kodak had less than 100 digital
processing labs, Fujifilm had 5,000.
As the saying goes, if you don’t disrupt yourself, somebody else will do it for
you. This is exactly what happened to Kodak as the likes of Sony, Panasonic and
Fuji overtook the market share, while Kodak declared bankruptcy in 2012. Kodak
needed to do what Apple did to its iPod by launching the iPhone in 2007.

Pravet Singh Kanwar 216821001 1

Question 2
During its peak, Kodak enjoyed high competitive advantage and brand value.

Porters Five Forces Model

Threat of New Entrants
Due to the nature of the industry, it was capital intensive and hence
difficult to enter. In addition, it was difficult to match Kodak’s experience in the
industry, hence there was less motivation for companies to enter this segment.
This meant a low threat from new entrants, leading to an extremely high market
share for Kodak for an extended period. However, this eventually changed as Fuji
entered the market and started gaining market share with the shift away from
traditional films and towards digital. At the same time, the likes of Sony had also
launched its first digital camera.
Buyer Power
As Kodak enjoyed close to monopolistic markets during the traditional film
era, buyers had limited options and hence very low bargaining power. This is
reinforced by the fact that during that era when stand-alone photo printing
studios started opening, Kodak started including the price of printing within its
film role price. This compelled customers to use photo printing services of Kodak
studios. This was eventually stopped when the regulators stepped in, and the
price of the films dropped drastically, slightly increasing buyer power as buyers
could now opt for other studios for printing.
Supplier Power
For the most part, Kodak was faced with low supplier power during the
traditional film era. This is because Kodak controlled majority of the market share
and this meant that his suppliers had no business reason to supply to a
competitor as they lacked volumes. This changed eventually during the 90s and
the 2000s with a shift in market share and a more competitive industry.
Threat of Substitutes
For most of the 20th century, traditional film did not have any substitutes
and even when there was a technological change in traditional film, Kodak was at
its forefront. This meant that there was extremely low threat from substitute
products during that time; however, with the invention of the digital camera this
equation changed altogether.
Rivalry from Competitors
With its huge market share and control over traditional film segment,
Kodak faced very little rivalry from any of its competitors. However, the scenario

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changed with the advent of new technology and Fuji gaining market share
consistently. Before Kodak knew, it was competing with Fuji. Kodak’s worldwide
film market share had dropped from 60% (1990) to 36% (2001), while Fuji’s
market share exceeded that of Kodak for the first time in 2001. (Case Exhibit 3)
Let’s analyse the in-house resources available to Kodak to establish
whether its resources contributed to the company’s competitive advantage. The
resource-based view can be analysed by establishing whether Kodak’s resources
had VRIO. Some of Kodak’s most valuable resources were its experience and
expertise in the industry spanning more than a century; patents and licences;
well-established distribution network such as the 19,000 picture-maker kiosks;
research and development efforts; and talented human capital such as the
inventor of the digital camera. All these resources are valuable, rare, not easily
imitable and well-organised. However, there are also resources such as
investments and organisation culture of Kodak that countered the VRIO attributes
towards the later part of the 20th century as Kodak was diverting its funds and
human capital to the wrong technologies when the technology advanced. The
culture of the organisation was such that the senior management was not ready
to accept the change and the fact that it was a company that captured moments
and not a film company. These two factors were sufficient to lead to the
company’s downfall.
If we consider the BCG Growth Matrix, the traditional film business would
initially be a star business with high market share and high growth; however, over
the years its growth decreased to become cash cow business. Kodak,
unfortunately, had turned a blind eye to this change and in no time the traditional
film business became a dog business with low market share and low low growth,
only to eventually become irrelevant. On the other hand, the digital camera
business went from being a dog business (low growth and low market share) to
emerge as a question mark for Kodak and a star business for its competitors such
as Fuji.

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Question 3
During its peak, Kodak was used interchangeably with a traditional camera.
It practically controlled the traditional camera market for a significant part of the
1900s. Photographs in that era were shared via physical prints. To analyse Kodak’s
external environment, lets take a look at the threats and opportunities.
Threats
Although, during the peak, Kodak enjoyed a market with almost negligible
threats; however, during the latter part of the 20th century the following two
threats had emerged to begin with -
- The growth of Fuji was a major threat to Kodak; however, the company
ignored it for quite a while
- The launch of the digital camera by Sony in 1981 implied the advent of
newer technology away from traditional printing

Opportunities
- The invention of the digital camera was also an opportunity as Kodak was
the first to come out with the invention following up with the invention of
image-sensor technology

Kodak had several products that it had pioneered. In the 1990, 848 million rolls
of film were sold in the US. Assuming that Kodak sold at least 60% of those
(Kodak’s worldwide market share) and a dollar each for the rolls, the company at
the least captured a value of $500 million for film sales.
In today’s world, traditional film in near non-existent, hence lets analyse the
external environment of the digital images and sharing camera market: -
Threats
- Growth and technology improvement of cellphone cameras
- Photo share applications such as WhatsApp, Instagram, Facebook and
Snapchat

Opportunities
- Growth of social media such as Instagram
- Pioneer new sensor technology for phones

The reason that I mention Instagram-like applications as an ooportunity is

because Kodak missed the bus with the opportunity to pioneer and conquer this
segment. In 2001, Kodak had acquired Ofoto, a photo sharing website, and

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renamed it EasyShare Gallery. The company’s aim even at that point was to get
people to share pictures to ultimately print more photographs. An alternative
could have been to capitalise the concept of ‘Kodak Moments’ and invest in the
technology to eventually conquer the social media boom after 2010.
The demand for capturing moments in picture form has drastically increased
over the years because of the easing of taking pictures through mobile phones. In
addition, in this era of social media and a fast-paced world people don’t have the
time to interact with each other, hence users find comfort in posting pictures
about their lives. The value of this economy is exponential as photo sharing
applications have become a platform for bloggers and social media influencers to
promote themselves. As of 2018, Instagram’s platform alone was valued at $100
billion.
Kodak’s initial ideology was to make camera as convenient as the pencil
and the consumer just needs to press the button and Kodak would do the rest. If
Kodak had stuck to this ideology, we might have been living in a different world
with Kodak valued alongside the likes of Apple, Google and Facebook.

Question 4
The issue at hand in case of Kodak is not something unheard of; however,
due to the size of the company and a near bankruptcy situation, it gained
exponential hype. Senior executives at Kodak knew that the digital age was
coming – but they anticipated that the growth of the digital camera would be
slow, gradual and linear. The rapid growth and subsequent adoption by other
companies of the digital camera came as a surprise to Kodak management.
In an ideal world, Kodak would have embraced the technology that it had
invented and devoted resources to develop the technology. New inventions might
take longer to be accepted in the market due to the time involved to cross the
chasm and be accepted by the masses. Despite the invention by Kodak in 1975,
Kodak did not invest into the technology until much later. Even when Kodak did
divert resources towards it was always hoping to achieve something for the film
business.
While Sony launched its first digital camera in 1981, it took Kodak ten more
years to launch the first professional digital camera in 1991. Even during that
year, Kodak’s annual report mentioned the Photo CD as the company’s most
innovative product of the year. This was because of the lack of interest to make it
a revenue generating product so soon. Ideally, Kodak should have at least tracked
Sony for its advancements in digital camera and if not be the first mover, at least

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could have followed closely. In 1998, Sony controlled 59% of the US digital camera
market, while kodak only had 17% share. Kodak management was struggling with
the innovator’s dilemma with the digital camera with added vested interests for
film.

Question 5
Why fix something, if it isn’t broken? Kodak is a classic case of failure to
embrace change coupled with the innovator’s dilemma and poor judgement. It
has, in fact, very little to do with technology per se because in terms of the
technology it was the first to invent the digital camera and the first to invent the
sensor. This meant that the problem was not in the invention but in the
organizational culture. The management at Kodak had a rigid view that it was in
the film business. This combined with a strictly hierarchical structure meant that
even if someone in the entire organization could foresee the paradigm shift
occurring, that person would not have voiced that opinion or would have been
refuted instantly.
We have witnessed the biggest organisations go bankrupt either because of
their inability to foresee change or because of their inability to adapt the change.
We as humans more often than not detest change. This is because we get
comfortable in the status quo and anything different would require effort.
Consider the former leaders in the movie rental business - Netflix and Blockbuster
– one filed for bankruptcy, while the other is seeing a surge in its multi-billion-
dollar business even in these times of a pandemic when all other companies fight
to stay afloat. While Blockbuster continued to rely on its physical stores to
provide movie rentals, Netflix went from offering home delivery of movie rentals
to now online streaming of content. Most changes in business models fuel from
innovation in technology. While Netflix adapted the shift of consumers to online,
Blockbuster went bankrupt because it couldn’t make the timely change according
to consumer preferences.
Kodak did not acknowledge that it was in the business of capturing pictures
and moments or as the tagline goes – ‘Kodak Moments’. The world is evolving and
if companies do not remain relevant, they eventually fade off. Just like
Blockboster, Yahoo, Nokia and Xerox, Kodak was short-sighted, and it did not
embrace the problem that it was solving for its consumers. The sooner an
organisation foresees and embraces change, the longer it remains in business.

‘Acceptance is the road to all change’

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Bibliography
https://medium.com/toyota-ai-ventures/driving-disruption-2682ddb023cf

https://hbr.org/2016/07/kodaks-downfall-wasnt-about-technology

https://www.linkedin.com/pulse/kodaks-invention-digital-camera-paolo-landoni/

https://www.forbes.com/sites/avidan/2012/01/23/kodak-failed-by-asking-the-wrong-

marketing-question/#70a0ca6a3d47

https://www.investopedia.com/news/without-facebook-instagram-valued-100-billion/

https://www.iedp.com/articles/end-of-competitive-advantage-how-to-keep-your-strategy-

moving-as-fast-as-your-business/

https://www.forbes.com/sites/chunkamui/2012/01/18/how-kodak-failed/#189537476f27

Kodak Case – Course Kit

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