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Kodak Strategic Management (Strategic Blunder) Case Study

Kodak Strategic Management (Strategic Blunder) Case Study, slice and dice Kodak's functional strategy, competitive strategies and their main four pillar general strategy.

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Kodak Strategic Management (Strategic Blunder) Case Study

  1. 1. KODAK  STRATEGIC  BLUNDER   Strategic  Management  (MBC712)   Prepared  for:  Dr  Azni  Zarina  Taha     Sharifah  Khairin  Syed  Mohd  Ali      BGA140013   Zakiah  Hanim  Mohd  Hamdan    BGA140014  
  2. 2. IntroducCon  to  128  years  of  Kodak   1880   founded  by   George   Eastman   1888   Released  first   Eastman   Kodak   camera  ($25)   1976     90%  of  film  and   85%  of  camera   sales  in  America   Patents   photographic   film  in  a  roll   1891   Open   manufacturing   site  in  Harrow,   London  suburb   1900   Launch  Brownie   camera  for   masses  ($1)   1922   Produce   147,000  miles   of  moNon   picture  film/ year.   1925   William  Stuber   takes  over   1969   Apollo  11  Moon   landing   1975   First  to  make   digital  camera   (23  secs)   1994   Apple  launched   first  consumer   digital  camera  –   QuickTake     Invest  in  digital   imaging   products  for   medical   pracNce   2004   Abandons  film   camera.   Cut  15,000  jobs   2005   Revealed  wifi   consumer   digital  camera-­‐ Kodak  easy   share.  Largest   digital  camera   retailer  in  US   ($5.7bn  in   sales)   2007   Falls  to  4th   biggest  digital   retailer   2009   Stops  selling   35mm  colour   film   2010   Falls  to  7th   biggest  digital   retailer.   Removed  from   S&P  500  index   2011   Shares  fall  more   than  80%  to   meet  pension   costs   2012   Files  for   Chapter  11   bankruptcy   protecNon.   Delisted  from   NYSE     Known  for  its  pioneering   technology  and  innovaNve   markeNng.     1935   Introduced   colour  film   1969   Introduced   InstamaNc   camera   1997   Restructuring   eliminate   19,000  jobs,   reduced  $1bil   annual  cost   1999   Entered  into   radiography   market   2001   Pushed  into   China   2012   Exits  from   digital  image   market   1980   Fuji  emerges  as  a   compe3tor     1990s   Decline  of  film   photography  
  3. 3. What  went  wrong  with  Kodak’s  FuncConal  Strategy.   Strategies       Human  Resource   •  Employed  more  than  145K  staff  aqer  selling  90%  of  its  film  &  80%  of  its  camera  business   •  Injected  $800  million  into  UK  pension  fund   •  Unable  to  cut  unprofitable  operaNons  &  cut  back  on  pension  obligaNons   Finance   •  Focused  more  in  protecNng  its  exisNng  cash  flow  than  to  look  at  what  the  market  wanted   •  2012-­‐  Managed  to  obtain  $615mill  debtor  in  procession  on  $950mill  commined  facility   Research    &  Development,   Technology,  Product   Development   •  1975  –  Steve  Sasson  invented  first  digital  camera  –  23  sec  from  film  to  screen   •  1990  –  invested  billions  in  technology  to  take  pictures  using  mobile  phones  &  devices  but   held  back  in  developing  digital  cameras  for  the  mass  market   •  Spend  long  Nme  in  research   •  DisconnecNon  with  upper  Management   •  Before  late  1980s  -­‐  Not  aligned  with  business  strategies   Supply  Chain  Management   •  Excess  inventory     •  Lack  of  product-­‐specific  informaNon  from  client  (hospital)  and  their  distributors  distorted   figures  in  inventory  usage.   •  Only  in  2002,  Kodak  developed  lean  logisNcs  by  establishing  cross  docks.     •  Also  before  2002,  shipping  cost  was  very  expensive  because  they  didn’t  use  their  own   truck.  
  4. 4. What  went  wrong  with  Kodak’s  FuncConal  Strategy.   Strategies       Group  Planning   •  Buy  ready  made  businesses  instead  of  developing  in  house  technologies   •  Take  too  long  in  first  acquisiNon  when  it  wanted  to  diversify  the  business   •  Inability  to  recognise  consumer  needs  &  trends   •  Inability  to  focus  in  soluNons  &  find  new  markets   •  Enable  to  predict  the  collapse  of  the  pharmaceuNcal  industry   •  Failure  to  focus  on  product  diversificaNon     Sales,  MarkeCng  &   DistribuCon   •  Refuse  to  use  its  name  in  the  development  of  QuickTake  digital  camera   •  Kodak  was  not  interested  to  sponsor  Los  Angeles  Olympics  in  1984  and  gave  it  to  Fuji   •  Kodak  refused  to  reduce  prices  and  make  room  for  compeNtor  Fuji  to  gain  bigger  market   share   •  American  consumers  opt  of  compeNtor  as  long  as  it  is  cheaper   •  Kodak  hoped  to  sNll  be  relevant  in  developing  economies  that  sNll  uses  film  and  not   digital  cameras.   Management   •  1975  –  failed  to  recognise  Steve  Sassons  invenNon  afraid  to  kill  its  film  business   •  Unable  to  see  an  opportunity  in  creaNng  the  world’s  first  digital  camera   •  To  slow  in  changing  &  suffered  a  mentality  of  “Perfect  Products”   •  Are  not  exposed  to  developments  outside  of  Rochester  –  insular  culture   •  Constant  change  of  CEO  &  business  strategy  
  5. 5. Kodak  Shares  Takes  a  Plunge   1996   Revenue  $16   Billion   1990s   Decline  of  film   photography   1999   Profits  $2.5   Billion   Suffered  3rd   quarter  loss  of   $222  million     (9th  quarterly  loss   in  3  years)  
  6. 6. How  did  Kodak’s  FuncConal  Strategy  Affect  its  Business  Strategy   Alliances     Research    &  Development,  Technology,   Product  Development     Apple   •  Develop  QuickTake  digital  camera           •  Late  mover  in  the    business  segment   due  to  its  tradiNonal  and  rigid  culture   •  No  longer  known  as  pioneering  in   technology  &  innovaNve  markeNng   AcquisiCon   Sterling  Drug  for  $5.1  billion   •  Wrong  investment  &  lack  of  risk   management  assessment   Expansion   Sales,  MarkeCng  &  DistribuCon   Sale  of  film  rolls  and  cameras  into  China     Geographical  limitaCon   Rochester       •  Failed  to  anNcipate  market  wants  –   leapfrog  syndrome       •  Limited  exposure  due  to  not  having   internaNonal  physical  presence  leading   to  Fujifilm  taking  over  market  share   •  Not  having  an  office  in  silicon  valley   prevents  from  further  innovaNon  and   knowing  new  technology  development   Management  &   Group  Planning     Inability  to  see  opportuniNes  and  new   markets   •  Missed  opportunity  to  develop   technology  beyond  digital  cameras   •  Prevented  growth  of  in-­‐house   capabiliNes    
  7. 7. Lower  Cost   Overall  Low-­‐cost  Provider  Strategy   1900:  Introduced  the  first  Brownie  Cameras.   Sold  for  $1  and  film  is  15  cents.       Broad  DifferenCaCon  Strategy     1923:Kodak  made  amateur  moNon  pictures   pracNcal  with  the  introducNon  of  16  mm   reversal  film  on  cellulose  acetate  (safety)   base,  the  first  16  mm  CINE-­‐KODAK  MoNon   Picture  Camera,  and  the  KODASCOPE   Projector   1928:  The  first  microfilm  system   1929:The  company  introduced  its  first  moNon   picture  film     Focused  Low-­‐Cost  Strategy       Focused  DifferenCaCon  Strategy     2000  :  Kodak  introduced  45  new  products  in   digital  imaging  (dental  radiography)   2004:Produced  a  mammography  computer   aided  detecNon  system  design  to  assist  with   breast  cancer.     Focused  on  commercial  prints  and  publishing   applicaNons.     Kodak  Generic  CompeCCve  Strategies.   DifferenCaCon   Broad  cross   secCon  of   buyers   Narrow   buyer   segment  (or   Market   Niche)  
  8. 8. •  Core  competency  cause  Kodak  to  be  rigid   •  Lack  of  market  research   •  Slow  in  entering  the  digital  photography   scene   •  Failed  innovaNon  and  transformaNon   •  Unwilling  to  change   •  Kodak  acted  like  a  stereotypical  change-­‐ resistant  Japanese  firm,  while  Fujifilm   acted  like  a  flexible  American  one.   The  Reasons  to  Kodak’s  Failure  
  9. 9. Kodak  Four  Pillar  Strategy  (2000  –  2005)   Strategies   Managing  the  tradiNonal  Film  business     •  Slow  exit  strategy  from  film  business   •  Digital  technology  to  support  film  business   Leading  in  distribuNon  output     •  Failed  to  see  the  migraNon  from  tradiNonal   photography  prinNng  to  digital  imaging  transfer/ sharing   Growing  the  digital  capture  business     •  Low  profit  in  digital  photography  in  comparison  to   tradiNonal  photography   Expanding  digital  imaging  services     •  Expanded  their  products  and  services.  E.g.  Kioks  that   print  image  directly  from  mobile  phone   •  Kodak  acquired  Ofodo  to  boost  Kodak  Easy  Share   Gallery,  an  online  service   Daniel  A  Carp   CEO/Chairman  
  10. 10. Kodak  Strategy  (2005  –  Present)   Strategies   Outsourcing  Manufacturing     •  Did  not  achieve  integraNon  of  external  with  internal   knowledge   •  Unable  to  compete  in  the  high  end  spectrum  of  cameras   InvesNng  in  Digital  Technology     •  Shunering  digital  camera  business   Build  High  Margin  Printer  Ink  Business     •  Ending  home  printer  business  –  end  of  desktop  printer   line   •  Focus  on  the  use  of  prinNng  technology  as  a  form  of   manufacturing  –  commercial  and  packaging  prinNng  &   serving  the  industry   Aggressive  Patent  LiNgaNon   •  Completed  transacNon  for  the  sale  &  licensing  of  its  digital   imaging  patents  for  net  proceeds  of  $527  million   Expand  Brand  Licensing  Programme   •  Phase  out  dedicated  capture  devices  business  –  digital   cameras,  pocket  video  cameras,  digital  frames   •  Online  and  retail  base  photo  prinNng  &  desktop  inkjet   prinNng   Internal  Restructuring   •  Cut  reNree  dependency   •  Sold  off  &  shut  down  business  lines  and  assets   •  Reduced  20%  of  its  workforce   Antonio  M.  Perez   CEO  

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