Situation AnalysisA. Internal EnvironmentReview of Marketing Goals and Objectives Although proclaiming itself as the world’s foremost imaging innovator, Eastman Kodakhas attempted to adapt its marketing strategy to the growing demands of digital technology. Thefirm is divided into three separate segments, each with its own marketing goals and objectives.The Consumer Digital Imaging Group (CDIG) segment’s mission is to enhance people’s livesand social interactions through digital imaging and printing technology with the objective todrive profitable revenue growth by leveraging a powerful brand, a deep knowledge ofconsumers, and extensive digital imaging & materials science intellectual properties . TheGraphic Communications Group (GCG) segment offers innovative, powerful solutions thatentice production efficiency, open new revenue opportunities, and improve return on marketinginvestment (ROMI). Kodak has developed a wide-ranging portfolio of digital products,workflow, equipment, media & services to create value-added complete solutions. The finalsegment, the Film, Photofinishing, and Entertainment Group (FPEG) has an objective to providesustainable cash generation by exceeding materials science assets in traditional & new markets. Providing support for the company’s marketing objectives, CEO Antonio Perez has setthe goal to end the year with at least $1.6 billion in cash . Perez also forecasted consumerprinter sales will break even in 2011. With the need for digital growth, the company has a goal todouble revenue in the digital business by 2013. Facing intense competition in the digital cameraindustry, the company created a digital strategy that is centered on exploiting competitiveadvantage at the intersection of materials science and digital imaging science . With a vision to be the “World Leader of Imaging” Kodak faces strong challenges tofulfill its primary goals to increase revenue from digital growth initiatives and drive positive cash
generation (net cash) . The aforementioned objectives bring attention to key components ofthe company’s mission statement including: “building a results-oriented culture” as shown in itsrevenue growth initiatives, “bring[ing] differentiated cost-effective solutions” demonstrated in itsaim to sustain cash generation by utilizing its assets in new & traditional markets, and displaying“world-class talent and skills” as shown in its employees’ abilities to communicate solutions . Each of Kodak’s three segments has a specific strategy to ensure company goals areachieved. The Consumer Digital Imaging Group heavily emphasizes customer contact with in-store presentations, aggressive social media, CRM and PR techniques. Social media is one of theareas where Kodak has excelled as an early adapter, involving its customers in the naming ofsome of its products and providing an interactive environment with valuable content.Specifically, Kodak has had great success with some of its corporate blogs, receiving acclaim forits “A Thousand Words” blog which features content about the “soul” of Kodak . Another oneof its segments, the Graphics Communications Group, focuses on reaching direct & indirectchannels, including but not limited to: creative, data center, packaging, and newspaper segments.This group specifically communicates how Kodak products are superior to competitors intechnology, solutions, and price. The third segment, FPEG, emphasizes the quality andavailability of traditional photofinishing & film offerings, looking for ways to combat alternativedigital entertainment and foreign companies that have taken away market share.Review of Current Marketing Strategy and Performance Kodak has experienced successes and failures in the various aspects of its marketing mix.With respect to product, Kodak, the company that originally invented the digital camera but didnot choose to produce it for years, is now trying to gain market share in the very competitivedigital camera market. The company is implementing actions to provide multifunction products
that create solutions. For example, its line of HERO all-in-one printers demonstrates one productfrom Kodak’s portfolio of tools that creates these value-added solutions. With a new businessmodel developed in the last five years, Kodak’s product element is a work-in-progress, and itsvalue will take time to measure under the current company strategies. One of Kodak’s strengths is its distribution. Kodak provides convenient access to itsproducts for both consumers and commercial businesses through online channels including thecompany website and social media outlets. These outlets successfully reach the varied segmentsKodak pursues. The company sustains its relationships with suppliers and vendors including USGovernment agencies, small-business startups, and universities. Kodak products are already soldby the largest, carrier-of-top-brand, retailers in the world, such as Best Buy and Wal-Mart. Oneof Kodak’s aims is global expansion, specifically in the Chinese, Indian, and Southeast Asianregions, which have projected growth in consumer electronics expenditures greater than 8% andup to 18% in India . In a product category that is the primary focus for Kodak in their marketing objectives,ink jet printing, the firm emphasizes its low-cost pricing strategy. With a belief that consumerswill save money long-term because Kodak provides the cheapest ink, the company has the abilityto charge more up front for its printers. Even by cutting prices last year, its unit cost per printerwas on average 14% higher than HP’s machines . With printing as the future of theorganization, the company’s marketing strategy in relation to price appears to be risky, but isbacked by research that states the consumers’ largest dissatisfaction with printers is the cost ofthe ink. The Kodak brand has strong equity throughout the world, which has aided a variety ofsuccessful advertising campaigns and promotions. Within its Consumer Digital Imaging Group,
the company is targeting younger consumers ages 18-34, emphasizing urban areas. To reach outto this age group, Kodak uses what Vice President of Brand Communications, Leslie Dance,refers to as a powerful “media cocktail” . Says Dance, “We let each consumer tell us whichingredients to use. And then we add our own twist to make the cocktail memorable. In otherwords, we need to go beyond reaching our consumers. We need to engage them.” In its “SoKodak” campaign for the EasyShare line of digital cameras, the company successfully engagesits target market with the use of hip-hop artists Drake, Pitbull, and Trey Songs, who combinedhave over ten million Facebook followers, bringing great appeal to this market . Thecampaign effectively integrates email, print, online, social media, and radio in key urban marketsto create personal marketing programs for its consumers . The other segment where promotional efforts have been effective is the GraphicCommunications Groups. A recent effort from 2009, “It’s Time for You and Kodak,” centers onthe brand as the focal point, instead of products, to reach the commercial market. The campaignemphasizes Kodak as “solution-centric” with the tagline “The perfect connection takes more thantechnology” . Like the “So Kodak” campaign, this campaign also utilizes the company’ssocial media strengths and provides an interactive experience for its B2B suppliers andcustomers to visualize the benefits Kodak offers its commercial partners through its productsused in everyday life. This is demonstrated in the airport situation of the advertisements. Topromote this campaign, Kodak utilized its blog, twitter, and online testimonials among othermeans to spread the word. With Kodak entering the digital market later than the competition, but still holding awell-known brand name, the company currently produces mixed performance results. This yearrevenue from sales of consumer ink jet printers and ink grew by 48% in the second quarter. On
the other hand, losses in the commercial group swelled to $45 million from $17 million a yearearlier, due to unanticipated costs of adapting technology to customers’ environments . Thebusiness has increased its share in consumer printers to 5% from 3.5% last year, but still ranksfifth, behind HP, Cannon, Epson Seiko, and Brother International . In relation, PC Worldranked Kodak’s ESP 9250 Printer number nine on its list of Top Ten Ink Jet MultifunctionPrinter. Consumers prefer competitors’ printers over Kodak because they are faster and createdwith better quality. Kodak’s performance will ultimately be determined by its fourth quarter results with thecompany usually generating the bulk of its revenue leading up to the holiday season. Revenue inthe line of inkjet printers grew 13% combined, but the company is quickly losing money in theconsumer digital-imaging group. In this group sales tumbled 38 percent to $408 million .This poor performance is a reflection of Kodak’s shift to pricier camera models. There is agreater preference for smartphones and video cameras, and the public correctly perceives thebrands of these devices to have a competitive advantage over Kodak. As a whole, U.S. based Copier & Optical Machinery Manufacturing, which is Kodak’sprimary NAICS classification, is expected to experience slight growth over the next five years.The risk of the industry is medium-low with the overall demand expected to increase at a slowrate. Also, multifunction devices have cut away from the profit of standalone copies. Kodak mustfind additional strategies to overcome the digital disadvantage it has with the majority of its filmproducts reaching maturity.Review of Current and Anticipated Organizational Resources The largest issue Kodak faces is its lack of cash reserves. The company continues to loseconsumer confidence as cash dwindles, which has affected all of its operations. At the end of the
second quarter, the company had $957 million in cash reserves, which still falls significantlyshort of its goal to end the year with at least $1.6 billion in cash. As of the end of the thirdquarter, the company has lost an additional 10% of its cash reserves, posting a $222 million lossfor the year thus far . The company does not appear to be turning around its debt any timesoon, expecting to pay off $50 million in debt due this year and another $350 million by 2013. To combat this lack of cash, CEO Perez has put up 1,100 of the company’s patents on thetrading block with potential to generate as much as $3 billion in revenue . As of November2011, Kodak has yet to make a sale of its patents, which must range in the billions because theclock is ticking for the company to avoid bankruptcy. The company is looking to raise $500million in debt as a short-term alternative. Kodak, which generated $1.9 billion in licensing itspatents from 2008-2010, has recently reached a licensing deal with IMAX for $50 million, butthis in no way resolves its cash crisis . Patents continue to be Kodak’s greatest resource withover 11,000 registered company patents. The company is also looking to gain $1 billion from apending lawsuit against Research in Motion and Apple Inc. As a result of its struggles to produce a profit, Kodak has cut back its workforcesignificantly in the past decade. In 2004 Kodak employed 16,300 workers in Rochester, NewYork alone and 54,800 employees worldwide. Now those numbers have shrunk to 7,100 in itsRochester headquarters and 18,800 employees worldwide . Kodak must leverage itsinnovative resources to find unique market opportunities with new technologies to create morejob opportunities within the company instead of reducing the company’s workforce. The outlookis not positive for turning around these numbers with the company’s current situation in the nearfuture.
Even with a large network of suppliers, Kodak’s commercial printing business has stalledeven more than its consumer ink jet printing due to a lack of demand. The company is trying toincrease business for its room-size machines that can print thousands of pages per minute, butonly has a few dozen interested customers for these machines that must be built by hand. Thecompany needs to utilize its strong network to reach out to more potential customers who havelarge printing needs such as publishers and marketers. As the company continues to shownegative financial results, more businesses are wary to create long-term relationships withKodak. Perez says most commercial printers still use old-fashioned gear and will have to godigital in coming years, but relying on the future, instead of the known present, with a primaryfocus on digital products may jeopardize the existence of Kodak’s current structure andnegatively affect the opinions of its stakeholders . Kodak has always excelled at being a very innovative company on the cutting edge ofdeveloping many new competitive products. However, it seems Kodak does not always manageto capitalize on its own ideas as well as some of their competitors. Even though Kodak has woncountless awards for innovation with a host of new products, they have also continued to losemoney over the last few years. Kodak has been pushed up against the wall and they are desperateat this point. However dire things might look for the future of Kodak from a financial aspect, thecompany certainly still leads the way in the industry by developing many new products eachyear. For instance, this year Kodak has developed and released a smartphone app, which allowsconsumers to print photos directly from their phone . This same software also enablescustomers to send photos wirelessly to a Kodak Digital Picture Frame, another innovation ofKodak from the last 10 years. Also, Kodak is now implementing a new line of Google Cloud
print-ready printers that will enable customers to print documents or photos from anywhere inthe world directly to their home printers . Kodak has not been limited to only developingtechnologies for the private sector though, because employees also developed the technology thatis being used by NASA to capture images of Jupiter with a spacecraft that was launched for thepurposes of exploration and the charting of said planet . These are all technologies Kodakhad before any other company, but these innovations do not seem to directly result in any morerevenue for Kodak. While Kodak has not seen a significant rise in revenue from its latest efforts in theresearch and development field, Kodak still continues to offer a wide selection of photo andimage related products to assist customers in capturing their memories. Kodak’s problem doesnot seem to lie in research or development, because they have certainly been ahead of thecompetition and an industry leader in this field for a long time. Instead, the area in which Kodakappears to struggle is finding a way to market their products to their consumers, whereas theircompetitors are doing this effectively.Review of Current and Anticipated Cultural and Structural Issues Kodak has a very isolated corporate culture which causes a variety of problems. Manyemployees believe there are too many mid-level managers and have concerns about the vision ofupper management. In fact, according to Glassdoor.com CEO Antonio Perez has a 32% approvalrating from employees. One of the contributors to this lower rating is the constant downsizing thecompany has experienced as well as Perez’s decisions to put former HP employees inmanagement positions at Kodak, using connections from his career at HP. Kodak is backed byambitious employees with new ideas, but a lack of opportunity for growth has lowered theseemployees’ morale and determination to succeed. Internally employees are as worried if not
more worried about the future direction of the company as its external stakeholders. With regardsto its long-term objectives, many employees feel the company should focus on its criticalelements and cut those items that do not have a foreseeable bright future. The positive aspects of the current culture come from its openness to minorities andwomen as well as being named one of the Best Places to Work for LGBT Equality by the HumanRights Campaign . Generally employees enjoy working with their co-workers in anenvironment that is very accommodating and as one employee put “40 hours means 40 hours.”The marketing function itself has been a positive and effective aspect of the current culture, butthe issue is with the product and solutions being marketed, not the effectiveness of the marketingitself. The firm’s current structure is not fully supportive of the current market strategy. Therehas been slight improvement, as the focus is not to cut costs as much as it is to expandproduction to reach new markets, thereby increasing profits. The company emphasizes providinginnovative solutions, but has yet to provide an outstanding new technology in the digital market,and the demand for its products are not as great as the demand for its competitors’ offerings.Often projects are judged by their completion with many projects cut short when they should bejudged by their effectiveness and added value to the organization. Kodak is a company that isreputable for its past successes but needs to use its current resources effectively to create futuresuccesses. With regards to the resources available to Kodak, the company has success withintellectual resources. Unfortunately, with its current cash flow situation, the company hasdecided to curb funding new ventures at a point it definitely needs to continue its culture ofinnovation. The company’s legal status is up in the air right now with the possibility to gain a
much needed billion dollars as a result of a lawsuit with Research in Motion and Apple that willreconvene December 30th. Kodak’s secondary strength is its reputation. The Kodak brand hasbeen very strong and thus holds value in the minds of the company’s target market with a veryrecognizable symbol, but that reputation has been tarnished by the changing needs of this marketthat Kodak has not been able to accommodate in the 21st century. Kodak has excellent relationalresources with a variety of distributors and partners in many different industries. As a result thecompany has been able to grow its inkjet commercial printer business. The challenge remains forKodak to produce first, a competitive advantage and second, sustain that advantage.