Case Review
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    Case Review Case Review Presentation Transcript

      • Early 80s – Vertically integrated centralized monolithic hierarchy
      • Mid 80s – Intense competitive pressures forced Kodak to reorganize and restructure
      • 1990 – Kodak outsources its large in-house IT operation.
      • 1993 –CEO Fisher focuses on core photographic business (with a future in digital imaging and divests chemical and pharmaceutical businesses)
      • 2002 – CEO Carp emphasizes imaging (3 main segments, photography, health imaging, commercial imaging)
      Source: HBS case
    • Corporate strategy
      • Kodak’s original strategy
        • Large global and vertical scope
        • Limited product scope (photographic business)
      • Strategy evolution in product and vertical (expansion)
      • Contribution to business level strategy
        • Added value originally, control over production process, control over quality, profits reinvested in R&D – contributes to differentiation; volumes contribute to cost reduction
        • Global strategy - taking core skills and applying them worldwide
    • Changes
      • Growing competition from flexible competitors, foreign manufacturers with cheaper costs
      • Photographic industry – mature stage
      • Threat of substitutes - alternative technologies for imaging
      • Kodak’s problems
      • Inflexibility – due to commitment to silver halide technology (downside of vertical integration)
      • Large market share (protected position) creates complacency (vert. integ encourages inefficiency)
      • Lack of successful innovation on product front
      • Organization structure – multiple production facilities (high costs)
    • Diversification
      • Increasing product range in imaging – using JVs and alliances
      • Reducing dependence on slow growth industry
      • Diversification health and information systems – rationale leveraging competencies in imaging, creating economies of scope
      • Biotechnology, pharmaceutical, chemicals, floppy discs – moving further away into industries that require different competencies and are very competitive
      • Have money, will spend – does not work for diversification
    • Using acquisitions
      • Pros
      • Speed (lack of time to do internal ventures)
      • Required expertise in a broad set of imaging technologies (capabilities it did not possess)
      • Gaining entry into industries with well established competitors
      • Cons
      • Costs of acquisition (Kodak paid too much – Sterling Drug)
      • Problems in integrating cultures (Atex example)
    • Organization structure and control systems
      • Centralized (ivory tower) decision making – less open to innovative ideas, change
      • Conservative culture (from protected position)
      • Functional organization (heavy emphasis on technical orientation) but lack of cross functional integration
      • Reward systems – promotion geared towards seniority
    • Changing structure & culture
      • Creating profit centers within each group – accountability (improves efficiency and innovation) functional integration
      • Delegating decision making to lower levels – giving emergent strategy a chance
      • Internal venturing – not so successful
      • Control systems for costs and quality
      • Pay for performance (link to corporate performance, encourages sharing of ideas across business groups)
      • Doing away with duplicate manufacturing facilities
    • Kodak
      • Building networks of alliances to create a competitive position in the imaging industry
        • DocuCom Imaging – Canada’s largest provider of document imaging hardware
        • Adobe on PhotoCD software
        • HP on ink-jet printing solutions
        • IBM on optical storage products and Internet based image networking
        • Microsoft on computer imaging software
        • Sega on a PhotoCD compatible game system
        • Sprint on new network services for image storage and exchange
        • Wang on document imaging architecture
    • Kodak – last year
      • Kodak warning on earnings in fourth quarter – Slowing demand (sluggish film sales), retailer inventory reductions (in anticipation of slow Christmas season), higher raw material costs,increasing investment in digital imaging, currency effects (decline in euro).
      • Possible job cuts (continuing its restructuring efforts – in 1997, slashed work force by a fifth)
      • Still stands by its strategy of focus on digital imaging
      • Problems shared by Polaroid and Xerox
      Source: Financial Times, Wall Street Journal
    • Present
      • Currently has three segments - photography, health imaging (specialty products for oncology, dental fields), commercial imaging (microfilm, printers and scanners)
      • 2001 sales $13 billion (1991 -$19.4 billion)
      • Third quarter earning for current yr. beat expectations – cost cutting and productivity improvements
      • Long term sustainability still questionable – sluggish growth in traditional film business (still a big contributor to revenues), Income from digital products and services has not increased substantially (Sony and Canon dominate)
    • Transition to digital
      • Kodak’s foray into managing transition to digital photography
      • APS (Advanced Photo System) – backed by Canon, Fuji, Kodak, Minolta and Nikon
      • Better picture quality, product simplicity –klutz free film loading
      • Why didn’t it work – digital cameras hit the market faster and cheaper, higher costs of film cartridges, didn’t educate consumers about benefits, advertising fiasco