KODAK AND FUJIFILM
The film industry has undergone several changes over the years. Kodak was the pioneer in the industry dominating the United States market as well as many other parts of the world. Kodak specialized in the photographic film and camera market which enabled it to rapidly expand its operations. However, technological changes in the industry saw a shift from the film to digital photography. Kodak was slow in responding to the market which led to its loss of market share to Fujifilm, a Japanese company. This essay seeks to analyze the two companies and compare their respective management approaches.
Eastman Kodak is an American multinational company that deals with photographic and imaging equipment, services and materials. The company was established in 1889 by George Eastman. It was incorporated in New Jersey but the current headquarters are at Rochester in New York. Kodak is famous for photographic film products. Since its inception, Kodak applied the razor and blades strategy in the selling of cheap cameras as well as selling consumables such as film, paper and chemicals (Hammer, 1940). The company offers a wide range of products and services to its customers. These includes inkjet printers, ink cartridges, digital cameras, video cameras, digital picture frames, document imaging, flexo printing, image sensors, Kodak gallery, motion picture and TV production, photographic paper and film, photo kiosks as well as on-site service and technical support. Kodak also markets picture CDs, calendars, photo enlargements and photo books through its retail partners and the online Kodak gallery. The company`s retail partners include Walmart, Target and CVS.
Kodak has two major subsidiaries; Kodak Ltd. (UK) and FPC, Inc. The Kodak Limited (UK) is headquartered at Hemel Hempstead, Hertfordshire while the manufacturing plants are located at Harrow in kirkby and Annesley in Nottinghamshire (Gordon, 2003). The FPC is divided into two; FPC, US/Canada and FPC Italy. Kodak developed its research laboratories in 1912 with its main components being the imaging research laboratories and photographic research laboratories. This was later extended to include the corporate research laboratories. These laboratories enabled the company to produce many scientific publications and patents.
The company was dominant in the photographic film industry during the 20th century. According to 1972 statistics, Kodak accounted for 90% share of the total photographic film sales in the US. The company also accounted for 85% of the total camera sales in the United States (Gordon, 2003). Kodak had a strong brand name and a wide variety of products which enabled it to gain a competitive advantage. However, Kodak started facing financial difficulties in the late 1990s due to a significant decline in sales. Technological advancements led to innovation of new products that faced out old technologies. The introduction of digital technology in the film industry led to a major transformation. Kodak lost its market share due to its slow response to technological changes. The photographic film sales started declining in the late 1990s but Kodak was slow in transforming to digital photography despite the fact that it had invented core technology that is used digital cameras. This led to steady decline in the company`s profitability over time loosing most of its market share to the late entrants such as Fujifilm. The last year in which Kodak recorded a profit was in 2007.
The poor performance forced Kodak to develop a recovery strategy to s
alvage its business. The company was forced to change its focus to digital printing and digital photography as well as generating additional revenues through patent litigation. Kodak filed for bankruptcy protection under chapter 11 in January 2012. The company announced in February 2012 that it was planning to stop making pocket video cameras, digital picture frames and digital cameras and instead concentrate on the corporate digital imaging. The company also announced its intentions to sell the photographic film, kiosk operations and commercial scanners in August 2012. The main aim of selling these properties was to salvage itself from bankruptcy.
Kodak has over the years valued ethics and the corporate social
responsibility. The company donated its historic archives to Ryerson University, Toronto in the year 2005. They also donated an extensive collection of materials about the history of photography to the university. However, the company has been criticized by various researchers and environmentalists in the United States for being one of the worst polluters. Kodak was listed as the worst polluter within New York by scorecard.org having released a total of 4,433,749 pounds of chemicals to the environment. In 2002, the company was also ranked as the seventh largest polluter within the United States by the Political Economy research Institute in the University of Massachusetts Amherst. Kodak was also awarded by the Citizens` Environmental Coalition (CEC) based in New York one of the “Dirty Dozen” awards for consistently emitting high rates of pollution.
Fujifilm Holdings is a Japanese multinational company that deals with imaging and photography. The company was established in 1934 and its headquarters are located in Tokyo, Japan. This was the first Japanese company to produce photographic films. After its establishment, Fujifilm produced motion-pictures, x-ray films and photographic films for the next 10 years. The company entered into the optical glasses, equipment and lenses market in the 1940s. Fuji photo diversified after World War II entering into the medical, electronic imaging, magnetic materials and printing fields. Fuji Photo later entered into a joint venture with the UK-based Rank Xerox Ltd to form Fuji Xerox Company Ltd. Fuji film also acquired Serico Ltd. which specializes in screen, digital print and narrow web technologies. The core activities of Fujifilm are to develop, produce, sell and service the color photographic film, photofinishing equipment, photofinishing chemicals, digital cameras, color paper, medical imaging equipment, flat panel displays, photocopiers, printers, graphic arts materials and equipment as well as optical devices.
Fuji Photo started establishing oversea sales bases in the 1950s. By 1980s, the company had expanded the production and several other bases to foreign countries in an effort to globalize its business. Fuji Photo decided to develop the digital technologies for its medical, printing and photo-related businesses. The company enjoyed a near-monopoly status in Japan for a very long time just as it was the case for Eastman Kodak in the United States. Fujifilm started planning on how to expand its business into the United States. The company decided to sponsor the 1984 Los Angeles Olympics as a strategy of penetrating the US market. It also offered cheaper camera film and established a film plant in the US which enabled it to gain a considerable market share. Kodak was not pleased with the entry of Fujifilm and they filed a petition against it in 1995. In this claim, Kodak argued that the Japanese market was performing poorly as a direct result of the unfair practices that had been adopted by Fujifilm (Durling, 2000). This petition was lodged by the US government with WTO but it was rejected in 1998.
The technological advancements led to the rapid growth in the use of digital cameras across the world. Demand for the photographic films declined rapidly as the digital cameras became popular. This change in customer preferences forced Fujifilm to implement responsive management reforms with an aim of effecting radical transformation of its entire business structures. The company had already foreseen the possibility of people shifting from film to digital as early as 1980s. Following its early prediction, Fujifilm developed a three-pronged strategy consisting of; to prepare for the shift to digital technology, to squeeze as much money from the business as possible and to develop the new business lines.
Although both Eastman Kodak and Fujifilm recognized the change from photographic film to digital, Fujifilm was able to easily adapt to the shift as compared to Kodak. This gave a competitive advantage to Fujifilm depriving Kodak its dominance in the United States. The slow response by Kodak made it to loose its market share which forced it to file for bankruptcy in 2012. While Kodak is experiencing difficult financial times and closing down some of its businesses, Fujifilm is recording high profits and expanding its business across the world. Fujifilm announced on 19th September 2006 plans of establishing a holding company under which Fuji Xerox and Fujifilm would be subsidiaries.
Fujifilm was also able to adapt faster because its CEO managed to successfully break the longstanding Japanese corporate traditions but Kodak could not respond quickly to the changes because its executives had a rigid mentality (Larish, 2012).
The Kodak executives had believed in making perfect products instead of a high-tech mentality. Fujifilm also succeeded in its diversification efforts while Kodak failed. Kodak established a large digital camera business but the introduction of Smartphone cameras reduced its sales leading to low profitability.
Fujifilm entered into the United States market with low-priced supplies and film as compared to Kodak products. However, Kodak ignored the entry of Fujifilm thinking that American consumers would not desert the brand. Kodak failed to take an opportunity of sponsoring the 1984 Los Angeles Olympics which was taken over by Fujifilm. This enabled Fujifilm to gain recognition in the United States which enabled it to increase its market share from 10% in early 1990s to 17% in the year 1997. On the other hand, Kodak was making very little progress in Japan which was the second largest photo film and paper market after the US.
The Kodak`s results for the year ended December 1997 showed a decline in revenues from $15.97 billion the previous year to $14.36% billion. This represented a 10% decline. The net earnings also dropped from $1.29 billion to $5 million for that period. The Kodak`s market share in the United States also reduced from 80.1% to 74% (Larish, 2012). The observers blamed this drop on the firm`s slow reaction to changes in the market and underestimation of the competitors. Fujifilm has also maintained ethical business practices and corporate social responsibility which gives it a positive public image. There are cases of environmental pollution as it is the case for Kodak.
In order to back up their decision making process, it is essential that decision makers consider the dimension of operational flexibility. This way, the organization is able to adjust the volume of activities it does other than adjust the kinds of activities. It is easier to adopt to change through this option since the company could just outsource any business it’s not well versed with and its only role is to ensure that the contractor performs to the best of the market expectations. Additionally, structural flexibility could be another option in regards to how fast the management is able to respond to change in the market and how long it takes to make its decision. This can be demonstrated through development of new products or technologies for new markets. Lastly, another back up could be the strategic flexibility dimension which may involve the organization having to change its nature in order to respond quickly to a market condition, for example through carrying out promotions and advertisements.
Hammer, Mina Fisher (1940). History of the kodak and its continuations. The House of little books. p. 46.
Durling, J, P (2000), Anatomy of a trade dispute: A documentary History of the Kodak-Fuji Film Dispute, New York, Rouletdge.
Larish, J, J (2012), Out of focus: The story of how Kodak lost its Direction, New Jersey, Create space publishers
Gordon, John Steele (October 2003). "What digital camera makers can learn from George Eastman". American Heritage.