Kodak Company’s New Corporate Strategy

Abstract

Kodak has experienced numerous challenges, which have cumulatively contributed to its decline. Notable challenges are stiff competition, increased operating costs, and inefficient management. Analysis of the case study shows that the advancement of technology, enhancement of productivity, globalization of businesses, expansion of marketing, and reduction of operating costs are the five key objectives that Kodak requires to succeed in the cloud service industry. The appropriate corporate-level strategy is horizontal integration because it reduces operating costs, enhances differentiation of products, reduces competition, increases bargaining power, and promotes efficiency. Moreover, the appropriate implementation strategy is the innovation strategy for it enables Kodak to perform important activities such as generating novel products, designing the organizational structure, and streamlining operations. These functions are central in promoting competitive advantage, reducing operating costs, and enhancing efficiency. The implementation of horizontal integration and innovation strategy does not violate business ethics.

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Introduction

The history of Kodak dates back to the late part of the 19th century when it succeeded Eastman Dry Plate. Jones (2012) argues that the invention of portable cameras and silver halide photography gave a competitive advantage to Kodak during the early part of the 20th century. The emergence of digital imaging technology gave overwhelming competition to Kodak in the 1970s and prompted it to adopt the new technology to remain competitive and relevant in the photographic industry. At the beginning of the 21st century, Eastman Kodak experienced immense competition in the imaging markets. In a bid to boost competitive advantage, Kodak’s chief executive officer, Antonio Perez, strategized to invest billions of dollars in creating novel digital products and reducing the operating costs significantly. However, the strategies did not yield a significant competitive advantage because rival companies were introducing advanced digital products, which outcompeted Kodak’s digital products. Therefore, the research paper recommends a new corporate strategy that Kodak needs to employ in augmenting declining sales, improving profitability, and venturing into the cloud service industry.

Five Key Objectives

Five key objectives that Kodak needs to succeed in the cloud service industry are the advancement of technology, enhancement of productivity, globalization of businesses, expansion of marketing, and reduction of operating costs. Advancement of technology is the first key objective that Eastman Kodak should undertake to boost its operations in the competitive global markets. The history of Kodak indicates that it did not adopt digital imaging in time to gain a competitive advantage over its rivals such as Olympus, Canon, Nikon, Sony, and Fuji. Jones (2012) argues that Kodak monopolized the silver-halide technology, but failed to adopt digital imaging technology because of complacency. In this view, for Kodak to keep in tandem with technology operations of the cloud service industry, it must perform extensive research and develop technology products. Enhancement of productivity is the second key objective, which Kodak should employ for it to remain competitive in the cloud service industry. Fundamentally, productivity encompasses the mass production of cheap and quality products that meet the diverse needs of customers (Hill & Jones, 2012). Mass production would enhance Kodak to produce cheap products, which can penetrate competitive markets easily and increase sales volume considerably. Moreover, the production of quality products would enable Kodak to attract customers in competitive markets.

The third key objective, which would boost the success of Kodak in the cloud service industry, is the globalization of business operations. Since the target customers of the cloud service industry are spread globally, expansion of operations into diverse markets across the world would give Kodak a competitive advantage in terms of the size of market share and sales volume. The fourth key objective that Kodak needs to become successful in the cloud service industry is extensive marketing. Jones (2012) notes that what lead to the decline of Kodak is that the management concentrated on research and development of novel technology products, but failed to market these products globally. Therefore, Kodak should undertake extensive marketing of its products in the cloud service industry for the customers to realize their existence and purchase them. The fifth key objective is that Kodak should undertake cost reduction strategies such as reducing the number of employees, streamlining the management system, and employing technology. Jones (2012) cites the high number of employees, the inefficient management system, and the manual operations as some of the setbacks that contributed to the fall of Kodak. Therefore, cost reduction strategies would significantly reduce costs and boost investments, which Kodak direly needs in the expansion of its operations globally.

Integration Strategies

Kodak applied both vertical and horizontal integration strategies in boosting its operations across the world with a view of increasing its market share and augmenting sales. Essentially, vertical integration entails backward expansion into a given industry to generate inputs or forward expansion into a certain industry to distribute products. Kodak employed vertical integration because it generated its supplies such as plastics and chemicals, and distributed its products through stores such as Walmart (Jones, 2012). The vertical integration enabled Kodak to reduce the cost of production and enhance the distribution of products. Horizontal integration is a corporate level strategy that enables companies to acquire or merge with competitors with a view of gaining mutual competitive advantage due to the benefit of large-scale operations. During the past decades, Kodak made several mergers and acquisitions that made it gain a competitive advantage in the photographic markets. For example, Kodak merged with Chinon and acquired Sterling Drug (Jones, 2012). Through merging and acquiring, Kodak was able to penetrate new markets, expand market share, and undertake its operations efficiently.

Horizontal integration is the suitable corporate-level strategy that Kodak should employ in venturing into the cloud service industry and gaining competitive advantage. Analysis of the case study shows that stiff competition, increased operating costs, and inefficiencies in management are major challenges that contributed to the decline of Kodak. Hill and Jones (2012) explain that horizontal integration is advantageous because it reduces operating costs, enhances differentiation of products, reduces competition, increases bargaining power, and promotes efficiency. In this view, the advantages of horizontal integration address the challenges that have contributed to the decline of Kodak. Therefore, Kodak needs to apply horizontal integration for it to gain a competitive advantage in the cloud service industry.

Multibusiness Model

Pursuing a multibusiness model by diversifying into mobile imaging, printing, health imaging, business graphics, and computer industry are five ways in which Kodak can increase its profitability. The first way in which Kodak can venture into and increase its profitability is by diversifying into mobile imaging. A mobile market is very huge because a significant proportion of the population can afford to own smartphones, which have advanced digital cameras. Mobile phones are versatile gadgets that allow users to perform multiple tasks such as taking photos, creating a gallery, sharing photos through social communities, and printing them remotely. Diversifying into the printing industry is the second way in which Kodak can increase its profitability because the printing industry has a massive market. The printing industry requires printing materials and advanced printers, which Kodak can offer if it ventures into it.

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The third way in which Kodak can employ in diversifying its products and increasing profits is health imaging. Computerized tomography scans, ultrasound, and magnetic resonance imaging scans are health-imaging techniques that are necessary for the realm of health. Diversification into the graphic industry is the fourth way in which Kodak can augment their profits because businesses rely on graphics in making adverts. As businesses require graphics such as placards, posters, billboards, and banners, Kodak can easily diversify into the graphic industry and offer quality and competitive products. Given that the cloud industry relies heavily on computer technology, diversifying into the computer industry is the fifth way, which would enable Kodak to increase its profits in the competitive markets. Across the world, computer technology is central in virtually every aspect of human activities. In this case, diversification into the computer industry ushers Kodak into the world of the cloud service industry, where the computerization of processes increases the efficiency and reduces the operating costs.

Nikon and Sony are two examples of companies that employ a multibusiness model in diversifying their products to increase profitability. Suppapanya and Boonkert (2010) argue that differentiation and diversification have enabled Nikon and Sony to develop products, which earn brand loyalty among consumers. Nikon has diversified its products into analog cameras, digital cameras, sport optics, photo scanners, film scanners, and electronic flash units. Comparatively, Sony is the most diversified company, which makes considerable profits owing to its multibusiness model. Sony offers digital cameras, video cameras, televisions, smartphones, tablets, and speakers amongst other products. The diversification has enabled Nikon and Sony to stabilize their revenues and spread the risk of declining sales in a certain line of products.

Implementation Strategy

Given that Kodak operates in a competitive environment, the implementation strategy that is appropriate for it to gain a competitive advantage is the innovation strategy. Verweire (2014) argues that innovation strategy is a powerful implementation strategy that makes companies produce innovative products in certain industries or markets, hence, increasing their competitive advantage. To increase efficiency and reduce operating costs, Kodak needs to create an innovative organizational design. Fundamentally, the nature of organizational design determines the costs and efficiency of operations. The innovative organizational design must define the relationships that exist among businesses in Kodak’s multibusiness model. Innovative strategic control systems are necessary for Kodak to manage its logistics well and increase the efficiency of operations.

Since centralized organizational structure contributed to the fall of Kodak, the application of innovative strategies in streamlining organizational structure does not only reduce the operating costs but also improves the efficiency of operations. To encourage innovations among employees, Kodak needs to cultivate an innovative organizational culture among its employees by creating an environment that fosters research and development. Verweire (2014) asserts that innovative organizational culture is central in the production of innovative products, which offer a competitive advantage in the global markets. Hence, innovation strategy is an appropriate implementation strategy that allows Kodak to convert consumer needs into innovative products, which effectively in the global markets.

Ethical Business Behaviors

Horizontal integration and innovative strategy recommended for Kodak would support ethical business behaviors because mergers and acquisitions reduce rivalry among companies. The existence of rivalry among companies contributes to unethical business practices such as price warfare, false advertising, trading of substandard products, copyright infringement, and patent infringement. According to Hill, Jones, and Schilling (2014), horizontal integration is advantageous because it allows competing companies to cooperate and work together in a competitive industry, and thus, reduces the occurrence of unethical business practices brought about by rivalry. In this case, Kodak would cooperate and work with other competitive companies in the cloud industry in implementing innovative strategies through mergers and acquisitions.

The implementation of horizontal integration and innovation strategy is favorable since it adheres to business ethics, supports corporate social responsibility, and promotes environmental sustainability. Business ethics would ensure that the companies involved in mergers and acquisitions coexist peacefully and gain competitive advantage fairly. Given that Kodak operates in diverse geographic environments, it has a corporate social responsibility of ensuring that it does not only pollute the environment, but also contributes to the welfare of its employees, communities, and the environment. Moreover, Kodak should ensure that its raw materials are environmentally sustainable to avert the depletion of natural resources. Hence, business ethics do not hinder Kodak from implementing the recommended strategies such as horizontal integration and innovative strategy.

Conclusion

The case study of Kodak indicates that the company faces numerous challenges that have led to its decline. Basing on the history of Kodak, the advancement of technology, enhancement of productivity, globalization of businesses, expansion of marketing, and reduction of operating costs are the five key objectives that it needs to succeed in the cloud service industry. To achieve its objectives, Kodak needs to employ horizontal integration as a corporate strategy because it reduces operating costs, enhances differentiation of products, reduces competition, increases bargaining power, and promotes efficiency. Regarding the aspect of implementation, Kodak should employ innovation strategy in creating innovative products, increasing efficiency of operations, and reducing operating costs. The implementation of horizontal integration and innovation strategy complies with business ethics.

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References

Jones, G. (2012). The Rise and Fall of Eastman Kodak: Will It Survive Beyond 2012?

In C. Hill & G. Jones (Eds.). Strategic Management Cases: An Integrated Approach (pp. 375-389). New York: Cengage Learning.

Hill, C., & Jones, G. (2012). Strategic Management: An Integrated Approach. New York: Cengage Learning.

Hill, C., Jones, G., & Schilling, N. (2014). Strategic Management Theory: An Integrated Approach. New York: Cengage Learning.

Suppapanya, P., & Boonkert, S. (2010). Comparing Brand Equity of Digital Single Lens Reflex (DSLR) Camera. KKU Research Journal, 15(78), 768-777.

Verweire, K. (2014). Strategy Implementation. New York: Routledge.

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