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

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. 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. 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. 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. 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. 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. 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. • 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. 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. 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