Executive summary
The report looks at a brief history of Eastman Kodak. It then examines the external and internal factors affecting the Company using PEST analysis, Opportunities and Threats analysis and Porter’s five analyses. Besides this, the report looks at the new strategy to be adopted by Kodak under Perez and ends with a conclusion that supports the new move by the Company.
Introduction
Eastman Kodak was started in the year 1880 by an amateur photographer called George Eastman. He started with producing pre-coated glass plates for photographs. After a period of eight years, he produced the firs camera from Kodak. The main aim of his business was to simplify photography and to make it part of people’s everyday life. Kodak has come long way since then. It has mostly been associated with the production of and engagement in;
Radiographic films, Consumer photography, Printing, Professional photography and Photo finishing. (Kodak, 2007)
The Company has been doing fairly well in the photography industry. In the year 2004, the Company reported a market Cap of $7,000,000,000. It has also been listed in the Dow Jones Industrials. However, this does not men that the Company is not experiencing any challenges. Its major challenge has been the fact that the Company does not have a lot of recognition in the digital market. The Company has not incorporated strong marketing strategies that incorporate these technological advancements.
Mission
The Company’s mission is based on a number of principles. Fist of all the Company adheres to the belief that all individuals must be respected and treated with dignity. In addition, the Company also believes that there should be a recognition and celebration of achievements. On top of that, there should also be credibility when conducting business. Eastman Kodak holds the belief that it should always be striving to improve itself; in line with this, the Company trusts that there should be replenishment. The Company’s mission is also based on the fact that integrity should not be compromised at any one time. Lastly, the Company holds that trust is essential whether the Company is acting as a recipient or as a giver of trust.
Summary of analysis
The analysis will examine the macro environment through a PEST analysis of the photography industry. Then it looks at market penetration through the Porter’s five model and lastly the threats and opportunities facing the market today.
I agree with Kodak’s recent move to the digital market because of the following reasons; there is increased competition from suppliers of digital camera, there are new players in the industry, there is new competition from suppliers of printers, increased computer usage and decline of film use. (Business week, 2005)
Analysis and evaluation of Kodak
Mission statement
The Company strives at staying ahead of its competition by solving challenges in the following areas; capturing images, processing images and storing those images. This will also be enhanced by the effective communication with these customers and provision of methods that will be cost effective to them.
Porter’s five model forces
The porter’s five forces are used to gage the degree of market penetration. Porter (1985) held that there are five factors that must be addressed to establish market penetration. These factors are as follows;
Bargaining power of suppliers
Some of the suppliers to Eastman Kodak include Algotec. These Companies provide software to help Kodak manage its information systems more comprehensively. Other suppliers include printing manufacturers and radiographers. These suppliers do not have a lot of clout in the photography industry because there are so many Companies that provide the same services. For example software providers are numerous and so are Companies that make printers. This mean that Kodak has the option of expanding its business to other areas since there is adequate supply of raw materials in the photography industry. (Kodak, 2007)
Bargaining power of buyers
Buyers have high bargaining power in some sections of Kodak’s business, which means that the Company has little influence in some market segments. Consumers in the health imaging sector and also in the entertainment segment do not have a lot of bargaining power. This is because there are relatively few Companies that provide these services. However, customers in the printing segment and in the commercial imaging sector have a lot of bargaining power. This is especially in relation to the fact that raw materials for these latter services are cheap. Kodak has dealt with high bargaining power by reducing its prices and by providing efficient customers care so that clients can feel comfortable with them (Barney, 1997)
Risk of new entrants
The photography industry faces a serious risk of entry of new players. This is because the industry does not have very stringent rules and regulations about starting a business in photography. This is also aggravated by the fact that one can easily teach themselves tricks of the trade. Equipment required for the service is also not too expensive and can be acquired effortlessly. Eastman Kodak has dealt with this risk by the use of its well known brand. It uses the idea that most people are familiar with Kodak and should trust it when doing business rather than approaching relatively new players in the trade. (Porter, 1985)
Threat of substitutes
Initially, the Company was known for the processing of images. Therefore camera Companies were simply considered as complementary businesses. But in modern times, camera companies are now replacing film processing Companies like Kodak. Film processing Companies are now battling for business with camera companies because the sale of cameras is no longer proportional to the sale of films. This occurrence has been brought about by the technological era and the use of digital cameras that do not need films. Eastman Kodak deals with printing as one of its major services. However, this aspect of their production is facing serious threat of being substituted by Companies that deal with office machines.
Degree of rivalry
There is a high degree of rivalry in the photography industry. This is seen mainly in the commercial photography section and in the printing section. There are numerous Companies that provide the same services that Kodak does. This is in relation to digital photography. Eastman has dealt with this rivalry by buying out smaller companies, by engaging in business ventures like the recent move into digital photography under Antonio Perez’s leadership. It has also marketed itself as a trustworthy Company. (Business week, 2005)
Analysis of the macro environment
The Macro environment will be analyzed by examining the political, social, technological and social factors affecting the photography industry
The major technological factor affecting the photography industry is the introduction of PCs or as others may call them in full personal computers. This means that images can be captured by digital cameras and processed by PCS; therefore there will be no need for films. This implies that Companies dealing with film processing may become outdated.
Some social factors that affect the photography industry include the increased use of cameras in day to day life. This is a positive aspect for Kodak. The Company’s products are now becoming more and more relevant in people’s lives. Gone are the days when photographs were spared for conspicuous occasions. Instead, people now take photographs of their pets taking breakfast and many other day to day events. Another social factor is increased use of the internet where photographs are sent across to distant places. This is a challenge for Kodak because it has now ventured into digital business (Kodak, 2007)
One of the economic factors that affect the photography industry is the improved standard of living seen by the people in the US. This means that they have more purchasing power therefore Kodak should harness this. Besides this factor, there is also increased globalization; Photographic Companies from outside the US provide their services to members of the country, this means more competition for Kodak. The Company has to apply aggressive marketing to cope with this.
Among the political factors affecting operation in the photography industry is the fact that the government has passed laws that regulate the provision of media and news. This is an advantage to Kodak because there will be less entry into the entertainment sector B.
Threats and opportunities in Kodak’s environment
One of the major threats for the Company is the fact that the market in photography has changed. There is a shift from traditional photography that requires photofinishing to that digital world. So the need for films has really declined. If Kodak does not react accordingly, then it faces the danger of being phased out. Another factor is in regard to the supply of cameras and printers. These were initially considered as complimentary businesses but this has now changed to become direct competitors. Examples of Companies that pose a serious threat to Kodak include Epson, Hewlett Packard, Olympus and Nikon.
Some of the opportunities that Kodak can embrace include; increasing its business presence on Asian countries because film use is still in high demand in those areas. Kodak is on the right direction here because it has already bought 20% of China’s Lucky Film Company. The Company should also increase its digital business. It has already started doing this by locating substantial amount of its profits towards this area especially under the leadership of Perez. The Country should also solidify their market presence in entertainment and health imaging by increasing acquisitions. Kodak has already started doing this by acquiring Pacific Media Corporation and Practice Works. (Business week, 2007)
Evaluation of East man Kodak in its environment
Because there are numerous changes in the photography industry especially with regard to technological changes, then Eastman Kodak under the leadership of President Antonio Perez and Chief Executive Officer Daniel Carp are on the right track. This is because the Company has announced a move into the digital market. The Company’s strategy is that ‘going digital’ will be a cash cow financed by profits from traditional segments. Then as it grows, it can become self sufficient. This decision has even received back up from other investors like Mr. Ivan who has injected 500 million into the project. The will help Kodak to survive these changes. If it was possible for some Companies to change from typewriter supplies to computer experts then it is also possible for Kodak. (Business week, 2005).
Conclusion
Businesses that survive in today’s world are those ones that change with the times. Companies that insist in maintaining their traditional ways of doing business regardless of changes in the external environment are too rigid and have no place in the dynamic business world. Therefore Eastman Kodak’s decision to expand into the digital world is an informed decision and it will help them survive in the Photography industry.
Reference
Barney, J. B. (1997): Gaining and Sustaining Competitive Advantage. Reading, MA: Addison- Wesley.
Business Week (2005): A digital warrior for Kodak; New York: (Issue 3934).
Business week (2007); Kodak Launches a Printer Offensive. Web.
Porter, M.E. (1985): Competitive Advantage: The Free Press, New York, 1985.
Kodak (2007): About Kodak company. Web.