Kodak was super successful during 1960′s and 1980′s on the filming market, its sales increasing from $1 billion to $10 billion. Because of its leading status on the market, there was a dominating arrogant atmosphere in the company. The management team failed to predict the new trend of the filming industry and failed to recognise the power of its new rivals, such as Fuji. What’s worse, Kodak refused innovation because of the high cost. After it enjoyed the high profit margin for twenty years, finally it had to face to the fact that it felt behind in the electronic camera market. Although it tried very hard to catch up, time was too late and Kodak couldn’t control its production cost very well. Therefore, it lose market share and didn’t win the competition on digital technology.
What Kodak needs to do at the time when digital camera just come into the market is 1) to response actively to this radical technology change; 2) to do sufficient market research and predict the customer demand accurately; 3) stay calm and do internal cost control strictly; 4) to compose a strategic plan to surpass its competitor rather than chasing behind.
Response actively to technology change
Kodak did two wrong facing this technology breakthrough. First, it was not open-minded and ignored this change arrogantly. Second, it didn’t do any innovation for twenty years. One suggestion is to keep an innovative culture all the time. If a company can not make any progress on innovation, it should consider acquire companies which did good on innovation.
Sufficient market research and accurate customer demand prediction
Kodak wanted to earn back its market share by announcing the digital product Photo CD. However, apparently Kodak didn’t do sufficient market research and didn’t consider the purchase power and willingness to buy of the customers on this new product. We can speculate that this move is a gambling aiming to win by luck but without strong confidence.
Stay calm and do internal cost control
Kodak act quite flustered when it recognised the severity of the situation. It changed CEO, and new CEO was busy establishing alliance with other companies rather than explaining what was going on internally. Due to the unimproved production line, Kodak was at cost disadvantage when comparing with products of other competitors. In fact, Kodak should focus on the advantages it has and try to eliminate the disadvantage it has internally. Furthermore, it should make clear its blue print and strategy to its employees and enhance its unity and synergy between employees.
Compose a strategic plan to surpass its competitor
In 1996, there are 25 similar products competing each other. Kodak has no or little different products. This high similarity and low differentiation result in a price war or cost effectiveness competition. Since Kodak felt behind in the digital market, it should make more effort on developing even more advanced or different products. Following its competitors only leads Kodak to a failure.
In all, Kodak’s failure on digital market is because of internal and external reasons. The most important reasons are internal reasons: innovative culture, cost effectiveness, sensitivity to the market change and long-term strategic planning. External alliance would also help only if Kodak can see the future development trend clearly and accurately.
