11-05-2011, 09:37 AM
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CASE ANALYSIS FUJI Vs KODAK
Introduction to the Case
Kodak’s revenues were down from $15.97 bn in 1996 to $14.36 bn in 1997 and net earnings fell from $1.29 bn to just $5 mn
More than 5 percent points decline in the US marketshare (from 80.1% to 74.7%)
Analysts felt that Kodak had underestimated its competitors especially Fuji Photo Film
Fuji entered the market in the mid- 1990s with 10% marketshare and increased it to 17% in 1990s
Aggressive marketing by Fuji brought down prices significantly
Contd…
In the late 1990s, the rivalry between Kodak and Fuji further intensified
Analysts felt that Kodak should not take its home market for granted as Fuji had become the world’s second largest manufacturer of photographic film and paper after Kodak
Fuji was not just winning over cost-conscious consumers but also steadily eroding Kodak’s lead in the professional photography market
Background
George Eastman founded Eastman Kodak Company in Waterville, New York
Existing photography methods were cumbersome
Photographic images were made on heavy, fragile glass plates that had to be coated with a wet emulsion just before picture was taken
Pioneered and patented the dry plate process
About FUJI
Founded in 1934, with its headquarter at Tokyo, Japan
Entered the US market in 1964 as a supplier of private label films
Focused on providing quality and innovative products at cheap price
Was the market leader in Japan, world’s second largest market for photography products
Reasons for Success
Built a reputation for quality and innovative products
Gained market share by offering products at prices lower than that of Kodak’s
Consumers viewed the company as Customer-oriented
Regular introduction of new products, promotions and slashing of prices
Kodak’s defensive strategy vs. Fuji’s offensive strategy
FUJI STRATEGY
Fuji appears to price its product much higher in the domestic market
Gives Fuji cash flows
Allows them to price low in the export market
Fuji’s Strategy
Established a Production plant in US
Cost Efficiency
Reactive Follower
Customer & Quality were the prime focus
CLV & CRM
Distribution Strategies
Compatibility with Kodak Cameras & Films
Aggressive Marketing
FUJI’S PROS
Fuji’s chances for future growth-
Fuji is attacking market leader by out innovating Kodak in almost every sphere.
Fuji looks to be more in line with customer needs and have a great distributor network.
The high spending on R&D has reaped results in the past and might do the same in future.
Digital technology seems to be the future of photography. Fuji will do well to concentrate on this.
FUJI’S CONS
Fuji has to overcome following disadvantages
They have concentrated on long term strategy and their profits are low as of now.
Their market share might stagnate because of counter offense by Kodak with much higher profits.
Might result in low performance in the eyes of stakeholders
It is still not seen at par with Kodak in US market.
KODAK
1884- Roll of film
1887- Manufacturing cameras and started operations in London
Mid 1890-Company owned distribution outlets
1900-Entered Japan and set up its first distribution outlet in 1905
1924-Eastmen retired and became the Chairman of the Board of Directors
Decreased Brand Loyalty in the early 1970s. Growth rate slowed by 2%-4% for Kodak
1981-Sony Launched Mavica, a filmless electronic camera which would display pictures on a TV screen
Kodak reduced the price of its films
In 1980s, Japanese players developed 35 mm autofocus cameras. In response Kodak launched small disk cameras, which used film disks instead of film rolls.
Kodak in Japan
Kodak entered Japan in 1905
Never took market seriously
1977
Strengthened distribution and marketing system
Joint venture (Kodak – Nagase)
Created Subsidiary (Kodak – Japan)
Increase employee from 12 to 4500
Access to camera stores went up – 30k to 60k
Kodak in Japan
Large no of Fuji Exclusive stores
Late 1970s
Joint venture Bandai (Toy Mfg) – single use camera
Setup own R&D and support center
Kodak Symposium
Improved Kodak image
Kodak in Japan
1980’s
Concept of Minilabs
Got advantage over Fuji
Introduced “Panoramic Disposable Camera”
Increase control on S & D system
Bought Kusuda Business Machines
Controlled 150 labs against 250 by Fuji
Kodak in Japan
Late 80’s
Advertised heavily
Introduced waterproof disposable camera
Introduced Print film – Ektar
In all company spent around $500 million
Despite, Company failed to attract consumer
Kodak in Japan
1994
Introduced single use Camera – Falcon
Advertised this product unconventionally
Became one of the best photographic product of the year in Japan
KODAK DIVERSIFICATION
Kodak is more diversified than Fuji
Revenue% and ROS per segments
Revenue ROS
87-89 90-92 87-90 90-92
Imaging 40.0% 36.9% 16.9% 15.3%
Information 23.5% 20.8% 1.9% -6.9%
Chemicals 18.7% 19.2% 17.6% 14.5%
Health 17.8% 24.5% 16.3% 1.5%
Has Diversification been a good thing for Kodak?
DISTRIBUTION NETWORK
JAPAN
In 1977 KODAK tied up with the distributor Nagase & co in Japan
Increased its workforce from 12 to 4500
Neglected the Japanese market earlier
JV with Bandai a leading Japanese toy manufacturer - co branding agreement
Conducted annual Kodak symposiumps in which the audience included university professors & researchers, customers & its partners
This was done to project itself as a technology intensive company
In 1980 introduced the concept of “minilabs” at certain retail outlets where the film can be processed much faster than other labs
Fuji products were sold through 216000 retail outlets
15% of them gave 75% of the total sales.
Fuji owned a controlling interest in 3 of the 5 major wholesalers
In response kodak bought Ksuda Business Machines a local distrubutor there
DISTRIBUTION STRATEGY
DIFFERENCE IN DISTRIBUTION
In US manufacturers sold directly to retailers & photofinishers
In Japan distributors acted as intermediaries
Fuji had strong ties 4 main distributors Asanuma, Misuzu, Kashimura and Ohmiya
Whereas Kodak had only 1 distributor – Nagase
Kodak claimed that the tie up of fuji with major distributors prevented other brands entr
Japanese government was supporting such monopolistic distribution set up
Fuji gave high commission to the distributors
FINANCIALS
THE DISPUTE
Higher market share of Fuji in US but lower market share of Kodak in Japan
Kodak alleged Japanese government of favoring Fuji
Kodak filed a petition under Sec 301 referring to unfair trade practices
Allegations were
- Price fixing, bribing retailers and wholesalers (Huge rebates), association with photo labs.
FUJI’S STAND
Kodak was unsuccessful majorly because of its
- Poor marketing
- Negligence
- Bad management
- Short term vision and priorities
It talked of not being involved in any kind of unfair trade practices
ROLE OF WORLD TRADE ORGANISATION
US favored Kodak in WTO by saying that punitive action should be taken against Japan and stated “ Its not just Kodak but it can crate problems for any foreign player and the ultimate losers would be Japanese consumers”
In 1997 WTO ruled out all allegations by Kodak in absence of substantial proof.
Challenge faced by historical business model due to transformational change in the technology, i.e. Theory of Disruptive technology.
Kodak has experienced a nearly 80% decline in its workforce, loss of market share, a tumbling stock price, and significant internal turmoil as a result of its failure to take advantage of this new technology.
Integration of market and nonmarket strategies in a setting, involving market competition and international trade policy where governments serve as bargaining agents for firms.
CHANGING TRENDS
Changing customer
- More accepting towards foreign brands
- Found a bona fide competitor in fuji
- Changing landscape for retail
The New Players
- Especially Non Traditional competitor like Sony, HP, Casio
Global Market share Battles
US Market share Battles
Price wars
- Initiated by Fuji, but no after effects from Kodak
Sponsorship Battles
- Fuji, the Event Sponsor while Kodak, the Broadcast Sponsor (80’s)
Court Battles
- Had to go ahead because of weak Trade & Investment Ombudsman (Japan)
VARIOUS MODELS OR STEPS
Market Model incorporates structure of the market, demand & supply
Enforcement of International Trade Agreement, i.e. Sustainable Concessions
Preference based bargaining
Non Market Model e.g. Common Agency
Kodak can anticipate market changes faster
Steps Kodak can take to protect its strategic advantage are -
Full line strategy – Kodak should devote resources for digital cameras and film processing.
It is currently following counteroffensive defense. It can try flank defense where it can use revenues from high end products to attack low end products.
Mobile defense – Kodak can look for new emerging markets.
Since photo processing forms the largest chunk of revenues, Kodak might do well concentrating on this segment besides high growth OTUCs.
CASE ANALYSIS FUJI Vs KODAK
Introduction to the Case
Kodak’s revenues were down from $15.97 bn in 1996 to $14.36 bn in 1997 and net earnings fell from $1.29 bn to just $5 mn
More than 5 percent points decline in the US marketshare (from 80.1% to 74.7%)
Analysts felt that Kodak had underestimated its competitors especially Fuji Photo Film
Fuji entered the market in the mid- 1990s with 10% marketshare and increased it to 17% in 1990s
Aggressive marketing by Fuji brought down prices significantly
Contd…
In the late 1990s, the rivalry between Kodak and Fuji further intensified
Analysts felt that Kodak should not take its home market for granted as Fuji had become the world’s second largest manufacturer of photographic film and paper after Kodak
Fuji was not just winning over cost-conscious consumers but also steadily eroding Kodak’s lead in the professional photography market
Background
George Eastman founded Eastman Kodak Company in Waterville, New York
Existing photography methods were cumbersome
Photographic images were made on heavy, fragile glass plates that had to be coated with a wet emulsion just before picture was taken
Pioneered and patented the dry plate process
About FUJI
Founded in 1934, with its headquarter at Tokyo, Japan
Entered the US market in 1964 as a supplier of private label films
Focused on providing quality and innovative products at cheap price
Was the market leader in Japan, world’s second largest market for photography products
Reasons for Success
Built a reputation for quality and innovative products
Gained market share by offering products at prices lower than that of Kodak’s
Consumers viewed the company as Customer-oriented
Regular introduction of new products, promotions and slashing of prices
Kodak’s defensive strategy vs. Fuji’s offensive strategy
FUJI STRATEGY
Fuji appears to price its product much higher in the domestic market
Gives Fuji cash flows
Allows them to price low in the export market
Fuji’s Strategy
Established a Production plant in US
Cost Efficiency
Reactive Follower
Customer & Quality were the prime focus
CLV & CRM
Distribution Strategies
Compatibility with Kodak Cameras & Films
Aggressive Marketing
FUJI’S PROS
Fuji’s chances for future growth-
Fuji is attacking market leader by out innovating Kodak in almost every sphere.
Fuji looks to be more in line with customer needs and have a great distributor network.
The high spending on R&D has reaped results in the past and might do the same in future.
Digital technology seems to be the future of photography. Fuji will do well to concentrate on this.
FUJI’S CONS
Fuji has to overcome following disadvantages
They have concentrated on long term strategy and their profits are low as of now.
Their market share might stagnate because of counter offense by Kodak with much higher profits.
Might result in low performance in the eyes of stakeholders
It is still not seen at par with Kodak in US market.
KODAK
1884- Roll of film
1887- Manufacturing cameras and started operations in London
Mid 1890-Company owned distribution outlets
1900-Entered Japan and set up its first distribution outlet in 1905
1924-Eastmen retired and became the Chairman of the Board of Directors
Decreased Brand Loyalty in the early 1970s. Growth rate slowed by 2%-4% for Kodak
1981-Sony Launched Mavica, a filmless electronic camera which would display pictures on a TV screen
Kodak reduced the price of its films
In 1980s, Japanese players developed 35 mm autofocus cameras. In response Kodak launched small disk cameras, which used film disks instead of film rolls.
Kodak in Japan
Kodak entered Japan in 1905
Never took market seriously
1977
Strengthened distribution and marketing system
Joint venture (Kodak – Nagase)
Created Subsidiary (Kodak – Japan)
Increase employee from 12 to 4500
Access to camera stores went up – 30k to 60k
Kodak in Japan
Large no of Fuji Exclusive stores
Late 1970s
Joint venture Bandai (Toy Mfg) – single use camera
Setup own R&D and support center
Kodak Symposium
Improved Kodak image
Kodak in Japan
1980’s
Concept of Minilabs
Got advantage over Fuji
Introduced “Panoramic Disposable Camera”
Increase control on S & D system
Bought Kusuda Business Machines
Controlled 150 labs against 250 by Fuji
Kodak in Japan
Late 80’s
Advertised heavily
Introduced waterproof disposable camera
Introduced Print film – Ektar
In all company spent around $500 million
Despite, Company failed to attract consumer
Kodak in Japan
1994
Introduced single use Camera – Falcon
Advertised this product unconventionally
Became one of the best photographic product of the year in Japan
KODAK DIVERSIFICATION
Kodak is more diversified than Fuji
Revenue% and ROS per segments
Revenue ROS
87-89 90-92 87-90 90-92
Imaging 40.0% 36.9% 16.9% 15.3%
Information 23.5% 20.8% 1.9% -6.9%
Chemicals 18.7% 19.2% 17.6% 14.5%
Health 17.8% 24.5% 16.3% 1.5%
Has Diversification been a good thing for Kodak?
DISTRIBUTION NETWORK
JAPAN
In 1977 KODAK tied up with the distributor Nagase & co in Japan
Increased its workforce from 12 to 4500
Neglected the Japanese market earlier
JV with Bandai a leading Japanese toy manufacturer - co branding agreement
Conducted annual Kodak symposiumps in which the audience included university professors & researchers, customers & its partners
This was done to project itself as a technology intensive company
In 1980 introduced the concept of “minilabs” at certain retail outlets where the film can be processed much faster than other labs
Fuji products were sold through 216000 retail outlets
15% of them gave 75% of the total sales.
Fuji owned a controlling interest in 3 of the 5 major wholesalers
In response kodak bought Ksuda Business Machines a local distrubutor there
DISTRIBUTION STRATEGY
DIFFERENCE IN DISTRIBUTION
In US manufacturers sold directly to retailers & photofinishers
In Japan distributors acted as intermediaries
Fuji had strong ties 4 main distributors Asanuma, Misuzu, Kashimura and Ohmiya
Whereas Kodak had only 1 distributor – Nagase
Kodak claimed that the tie up of fuji with major distributors prevented other brands entr
Japanese government was supporting such monopolistic distribution set up
Fuji gave high commission to the distributors
FINANCIALS
THE DISPUTE
Higher market share of Fuji in US but lower market share of Kodak in Japan
Kodak alleged Japanese government of favoring Fuji
Kodak filed a petition under Sec 301 referring to unfair trade practices
Allegations were
- Price fixing, bribing retailers and wholesalers (Huge rebates), association with photo labs.
FUJI’S STAND
Kodak was unsuccessful majorly because of its
- Poor marketing
- Negligence
- Bad management
- Short term vision and priorities
It talked of not being involved in any kind of unfair trade practices
ROLE OF WORLD TRADE ORGANISATION
US favored Kodak in WTO by saying that punitive action should be taken against Japan and stated “ Its not just Kodak but it can crate problems for any foreign player and the ultimate losers would be Japanese consumers”
In 1997 WTO ruled out all allegations by Kodak in absence of substantial proof.
Challenge faced by historical business model due to transformational change in the technology, i.e. Theory of Disruptive technology.
Kodak has experienced a nearly 80% decline in its workforce, loss of market share, a tumbling stock price, and significant internal turmoil as a result of its failure to take advantage of this new technology.
Integration of market and nonmarket strategies in a setting, involving market competition and international trade policy where governments serve as bargaining agents for firms.
CHANGING TRENDS
Changing customer
- More accepting towards foreign brands
- Found a bona fide competitor in fuji
- Changing landscape for retail
The New Players
- Especially Non Traditional competitor like Sony, HP, Casio
Global Market share Battles
US Market share Battles
Price wars
- Initiated by Fuji, but no after effects from Kodak
Sponsorship Battles
- Fuji, the Event Sponsor while Kodak, the Broadcast Sponsor (80’s)
Court Battles
- Had to go ahead because of weak Trade & Investment Ombudsman (Japan)
VARIOUS MODELS OR STEPS
Market Model incorporates structure of the market, demand & supply
Enforcement of International Trade Agreement, i.e. Sustainable Concessions
Preference based bargaining
Non Market Model e.g. Common Agency
Kodak can anticipate market changes faster
Steps Kodak can take to protect its strategic advantage are -
Full line strategy – Kodak should devote resources for digital cameras and film processing.
It is currently following counteroffensive defense. It can try flank defense where it can use revenues from high end products to attack low end products.
Mobile defense – Kodak can look for new emerging markets.
Since photo processing forms the largest chunk of revenues, Kodak might do well concentrating on this segment besides high growth OTUCs.