Background and Rise of the Eastman Kodak Company - Paper Example

During much of the twentieth century, the name Kodak was synonymous with the ultimate experience in photography. However, in this century, the name Kodak is a reminder of how rapidly evolving technology can be. It is also a reminder of how cruel technology can be to those who refuse to change with the times. Kodak insisted on selling film and declined to acknowledge the sweeping trend of digital cameras. In the end, change swept it aside and made it a lesson for the history books.

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The razors and blades model was crucial to Eastman Kodaks growth and its ultimate fall from glory. Using this model, Kodak would manufacture cheap cameras (razors) but would make most of their money from the sale of films (blades).

The Rise of The Eastman Kodak Company began in 1887 with its founders being George Eastman and Henry Strong. The main character in the story of Kodak is George Eastman. He was the brains behind the innovative technology that revolutionized photography. Eastman was a school dropout, but he had an ambition for photography. His goal was to make cameras that were easy to use, affordable, and accessible by the mass market. Eastman began experimenting with dry plate formulas while in Rochester, New York. His research finally led him to come up with the film roll. The film roll changed photography and formed the core product of the Eastman Kodak Company for the next century (Milestones, 2017).

In 1892, the Eastman Kodak Company began specializing in the manufacture and sale of films and cameras. Kodak relied on economies of scale. Hence, its strategy was directed towards producing widely affordable cameras. Even before the integration of the company in 1892, Eastman had already begun selling portable cameras in 1888. These devices were sold with a preloaded film that allowed people to capture up to 100 images. Kodak ensured that it capitalized on that market by offering image printing services to its clients. Kodak adopted the catchphrase you press the button, and we do the rest (Milestones, 2017).

In 1900, Kodak moved even closer to making cameras a mainstream product through the introduction of the Brownie camera which cost a dollar. The brownie camera created an amateur photographers market for Kodak. As Kodaks innovative successes rose, Eastmans health declined, and in 1932, he committed suicide as a result of his failing health (Milestones, 2017).

Eastmans demise did not dampen the growth of Kodak. Two years after he killed himself, Kodak introduced the Kodachrome film. This film transformed mass market photography by giving customers the ability to capture images in color format. Kodaks rise to market dominance was guided by two principles: the use of revolutionary technology and the production and sale of high-quality films. Other technologies that were developed by Kodak before the 1960s, where it controlled almost all of the photography industry, include microfilms and x-ray imaging (Milestones, 2017).

Eastman Kodaks Approach to Growth

The rise of Kodak can be attributed to its insistence on making mass market products. This meant that the company could capitalize on economies of scale to generate revenue while ensuring that a significant number of individuals get to access their products. Since Kodak was also involved in the production of film and photo printing, they had other ways of maximizing their profit margins. First, they got people to but their cameras. Second, Kodak encouraged the same customers to buy Kodak made films. Third, buyers had to rely on Kodak for the transformation of films to paper images.

Further, the Eastman Kodak Company invested in its employees. Eastman saw Kodak as an entity that had a responsibility to create value among the companys biggest assets. As such, employees were rewarded with bonuses when the company made profits. Also, the company was operated in an all-inclusive manner where the workers opinion was valued. This allowed for information to trickle freely up the management chain (Yeung and Berman, 1997).

It also meant that the company could be responsive in addressing problems since employees were motivated to feel like part of the organization. On top of that, Kodak made use of its internal human resource capacity to lead the company. This trend continued up to 1993 when the institution sought an outsider, M.C Fisher to take over the reins of the company. Kodaks employee-centric approach meant that even as other companies workers joined unions, the companys employees never formed any since they were being compensated at above market rates (Yeung and Berman, 1997).

Eastman Kodaks Weaknesses and Shortcomings

While having such an employee-centric human resource strategy created loyalty and motivation among employees, it meant that turnover was low and that new and disruptive ideas were less likely to be developed. People began to be complacent and comfortable (Yeung and Berman, 1997).

Kodak also had a very rigid and centralized structure that created limited space for innovation. Research and development activities were kept secret, and knowledge was not shared among departments. For instance, when Kodak developed the first digital camera, it was viewed as a danger to the companys core business. Instead of the organization investing in the new technology as a whole, they kept it hidden (Boudreau and Berman, 1992).

Kodaks rise to prominence can be attributed to the continuous research in its core business that comprised of films and cameras. Due to the significant demand for these products globally, Kodak continued to enjoy market leader status. However, the companys failure to realize the potential held within its research and development department held back its digital transformation. The company was heavily invested in one line of business which risked its future survival (Mendes, 2011).

The pre-1984 era of Kodak is characterized by a belief that the companys importance in society and its market share give it the luxury of continuous existence. One notices that Kodak ignores the factors that exist in the external environment that are responsible for driving their successes. Thus, Kodak ended up looking at its previous successes rather than looking at the specific elements of their success. If the company had looked at the specific factors pushing its growth, the management would have noticed the unsustainability of their business.

Kodak saw itself as the photography behemoth that could not be unseated. The organization perhaps viewed its dominance and investment in film as being way ahead of the competitions. Paul (1984) explains that when Kodak launched its printers, the device came with a 15-page instruction book. The author compares this to 3Ms printer that had a one-page manual. This level of customer inconvenience shows just how arrogant Kodak was to believe that they could deliver a basic product and nothing else and still maintain dominance.

Paul (1984) cites Charles Conroy who states that another failure by Kodak during the pre-1984 era was to overinvest in human resource training programs for a vast number of workers. These training programs did not yield any returns as they were not future-oriented. Instead, they added to the firms operational costs.

As noted earlier, Kodak displayed a degree of arrogance towards competition since the company held a significant market share of up to 90 percent in the pre-1984 period. This can be illustrated by the organizations choice of turning down the opportunity to promote the 1984 Los Angeles Olympics. This allowed their rival Fuji to take over the events promotion. By doing so, Fuji gained significant publicity and began its assault on Kodaks market share in the US (The last Kodak moment, 2012).

The growth of competition against Kodak did not come from Fuji alone. The development of print opened up a new business for companies to exploit and predictably, Kodak lagged behind as the likes of Xerox and Hewlett Packard carved out niches for themselves. Also, while Kodak may have come up with the first digital camera, Sony and Canon took advantage of the technology and made themselves market leaders in the 1990s and early 2000s (Mui, 2012).

Kodak was complacent. The company knew of the risks and the potential that existed within the emerging digital industry. Kodak had adequate time to turn around their strategy before the early digital cameras would develop to become serious competitors to the film camera. Instead, they focused on film. To Kodak, the film was the past, present, and the future (Mui, 2012).

As a restructuring strategy, Kodak began to cut down its workforce that had peaked at over 145,000 employees by 1988 (The last Kodak moment, 2012). At the end of the job cut strategy in 1990, over 30,000 employees had been laid off. The 1980s was a period where the digital camera was still developing. In the 1990s, the technology was beginning to show mass market potential. Kodak knew about this, but instead of jumping on the new technology trend, the company attempted to merge film and digital cameras.

The hybrid film-digital cameras by Kodak show the reluctance of the company to move towards the new era of filmless cameras. A hybrid camera made sense to Kodaks business model that relied on films and printing photos to generate revenue. In 1996, Kodak came up with the Advantix Preview camera. This device was designed to give the user a preview of their image and to allow them to choose the number of pictures that they wanted to be printed out (Mui, 2012).

However, as Mui (2012) states, such a design had one major flaw which is people do not buy digital cameras to use film. The Advantix Preview camera had a digital sensor and a film dock. A combination that did not make sense. In the end, Kodak had spent over 500 million dollars developing a product that could not sell and had to be written off (Mui, 2012).

Fujis Survival Strategy

Fuji was not aloof of the impending demise of the film industry in the 1980s. Realizing that they were under the threat of obsolescence, Fuji decided to adopt a three-faced strategy. The first objective was to generate the maximum amount of money possible from the film, while it was still viable. The second objective was to adopt digital technology, and the third goal was to diversify their business portfolio (The last Kodak moment, 2012).

Fujis choice to be the official film sponsor of the 1984 Olympics shows the companys intent on maximizing income from the film by generating widespread publicity for its products. This increased Fujis market share in the US and globally. On top of that, Fuji began diversifying its portfolio to include other products such as cosmetics (The last Kodak moment, 2012).

Fuji made use of its anti-oxidant chemicals and collagen that were used in the manufacture of film, to make skincare products which also use similar chemicals. Fuji then went on to market these products in the Asian and European market.

Aside from cosmetics, Fuji ventured into the manufacture of LCD screens. Fuji has developed many patents for this segment that continue to reap the rewards for the company (The last Kodak moment, 2012). On top of that, Fuji ventured into the film industry, made video cassettes, magnetic tapes and developed its office supply business for copiers through a partnership with Xerox (Anthony, 2016).

Eastman Kodaks Path to Downfall

One cannot fault Kodak for not trying to diversify, but their strategy failed in comparison to Fujis approach. Kodak purchased Sterling Drug Company in 1988 for over 5 billion dollars. Their assumption was that some of the chemicals developed for the use in film production could be utilized in the manufacture of cardiovascular and hormonal drugs (Mui, 2012). Unfortun...