Kodak filed for bankruptcy in 2012. What went wrong?

Kodak's filing for bankruptcy in 2012 despite being the biggest market player in the industry at one time, was not a
technological failure it was a strategic failure. Failure of leadership in understanding Market and Customer requirements
led to a wrong mindset which led to a series of decisions that ultimately paved ill mighty fait for company.

Pioneers in the market –

The Eastman Kodak Company, or Kodak as we know it today, was established by George Eastman in 1888. With
the launch of Kodak's #1 camera in 1888, Kodak brought a revolution in the photography and videography world.
Kodak enjoyed its first-mover advantage with increased brand recognition, customer loyalty, and higher sales.
Kodak’s initially followed the razor and blades business model wherein they were selling inexpensive cameras
at low margins and making huge margins of up to 70-75% in consumables- film, chemicals, and papers. With this
Kodak was able to increase market size thus leading to a remarkable sale of $ 1 billion in 1962. Furthermore,
because of continuous spending on research and development, Kodak launched new and innovative products
like the Instamatic camera – a point-and-shoot camera in the market, which further strengthened Kodak’s
market share. And by 1966 Kodak sales had reached upwards of $2 billion. And by 1976 Kodak had a market
share of 90% in film sales and 85% in camera sales in the U.S.

Laissez-Faire Mindset –
In 1975 Kodak research team developed the first digital camera. Kodak, however, disregarded the possibilities
of the digital camera and chose not to take any action, the reason being;

• Very less margin on sales of cameras, which will decrease their overall revenue
• Digital cameras would cannibalize sales of their profit-making film cameras
• Leadership was ascertain that digital technology would never surpass film cameras

Underestimated Competition –
By the 1980s other competitors entered the market like ‘Fuji Films’, a Japanese company, with extensive
marketing and selling cameras at comparatively low cost. But Kodak’s leadership was assured that they won’t
lose the market to the Japanese company as Americans will not entertain foreign products and remain loyal to
the company, so instead of understanding the threat and making strategic change, leadership-maintained status
quo and restrained from launching new innovative products like digital cameras.

Missed Opportunity –
In 1989 Fuji Films launched its first digital camera, these cameras were costly compared to traditional cameras
and were giving inferior picture quality as well initially. Because of this, very few digital cameras were sold at
that time. And this event further strengthened Kodak's leadership hypothesis that digital cameras cannot
replace traditional cameras.
Kodak also intended to develop an online service that would allow customers to store, share, and edit their
photos, but they were unable to successfully sell it and persuade customers to utilize it. Thus, eventually lost
the online battle to social networks like Facebook.

Funds Mismanagement and Diversification –

During the 1990s, with a huge available surplus, Kodak decided to diversify its company by investing in other
industries. For $5.1 billion, it acquired Sterling Drug in 1988, which was well known for producing Lysol cleaning
products. That transaction left Kodak with excessive debt, which by 1993 had grown to $9.3 billion.
By 1993, Kodak had invested $5 billion in digital image research 1993, but the money was being used for 23
different digital scanner projects instead. The funds did aid Kodak in gaining an early competitive advantage; by
1999, it held a market share of 27%. However, that dropped to 15% by 2003 and 7% by 2010, as Kodak lost
ground to rivals like Nikon, Olympus, Sony, and Canon.

Digital Revolution –
With continuous improvement in digital technology, digital camera sales were increasing gradually. The market
went from just 4.5 million sales of the camera in 2000 to 28 million units sold in 2007. Kodak’s new CEO Daniel
A. Carp also understood this trend and launched their series of digital cameras over the years but by this time
other brands like Olympus, Nikon, Sony, and Canon were already delivering many superior digital cameras.

Entering Highly competitive Market –

As Kodak's leadership realized the change in the market, they spent a huge amount of cash on marketing and
re-capturing market share in an already highly competitive cameras market. And by this time smartphones were
also launched with cameras which further made cameras as a whole a redundant accessory.
Because of this new trend Kodak’s sales were already noticeably down to $10 billion and continuously dropping
every quarter, their stock price was also decreasing at an alarming rate from a high of $90 in the 1990’s to $2 in
2007 and their market share also dropped from 85% to just 7% in 2010.

Succumbing to Bankruptcy –
With declining sales, free falling stock prices Kodak’s losses started surmounting to a grave situation for
company. Kodak’s operating losses increased from $28 million in 2009 to $642 million in 2012 and total liabilities
mounting to $7,998 million. With no foreseeable future growth in sales, On January 19, 2012, Kodak declared
bankruptcy and said that it would not produce digital cameras and other imaging products.