Reasons for Rising and Fall of Kodak and Fujifilm - Essay Example

Kodak and Fujifilm Kodak and Fujifilm Kodak and Fujifilm are both competitors in the photography industry, and both have enjoyed a successful time in the business of everything related to photography. However, in the recent years, Kodak has suffered a mighty blow to its successful, picture perfect world, because of its failure to adhere to business strategies that would enable it to put forward products that are desirable by the consumers. Fujifilm on the other hand has carefully adapted its business plans in response to consumer behavior, and this is one major factor that has allowed it to finally dominate Kodak in the photography industry. Fujifilm, a Japanese photofilm company, was established on 20th January 1934, and by February 1934 the Ashigara factory began its work on manufacture of "photographic film, printing paper, dry plate, and other photographic sensitive materials," (Company 7, Fujinon Corporation Section Index Page). In 1965, Fujifilm descended into the US, establishing its quarters in New York, in 1966 it set itself up in Dusseldorf to manage business in Europe, in 1987 it introduced itself to Germany, and so on until it had its industries scattered across the globe, from Japan, to the Middle East, to North America (Fujifilm Global, Corporate History). According to Shigetaka Komori and Shegehiro Nakajima, Chief Executive Officer and Chief Operating Officer respectively, of Fujifilm, "Once, our overwhelming core business was photographic film, but we have now evolved into a company which is continually growing in a number of new strong business fields." These "new" fields that Fujifilm is expanding into include studying the "fine chemistry which controls elaborate chemical reactions, mechatronics, optics, electronics, software and a wide array of manufacturing technologies." Fujifilm is not just a photofilm industry that deals with only camera related products, rather, as Komori and Nakajima contend, Fujifilm even caters to producing "highly functional materials such as LCD materials; medical/life sciences such as pharmaceuticals, functional skin care cosmetics and nutritional supplements; graphic arts such as printing materials and equipment; optical devices such as camera phone lens units; digital imaging such as digital cameras, digital printing, and Photobook." For Fujifilm, the ultimate goal is to "make a broad contribution to society through products and services using our leading-edge, proprietary technologies," and "aim to be a company which can respond to any changes with corporate excellence on a global scale," (Fujifilm Global, Message from the Chairman and President). Moving onto Kodak, American inventor George Eastman founded his photofilm company in Rochester, New York in 1982 (Sparkes, Kodak: 130 years of history). In 1900, Kodak launched its Brownie camera, bringing the camera into the hands of the masses of society, and in 1969, the Appollo 11 mission even made use of Kodak film. Sparkes also mentions that in 1975, Kodak was the first to build a digital camera and in 2005 it was "the largest seller of digital cameras in the US, with revenue reaching $5.7bn." Kodaks plan was to "make photography as convenient as the pencil," and the official US Kodak website further states that Kodak is "known not only for photography, but also for images used in a variety of leisure, commercial, entertainment and scientific applications. Its reach increasingly involves the use of technology to combine images and information--creating the potential to profoundly change how people and businesses communicate." Rupert Neate in his "Kodak falls in the creative destruction of the digital age," makes a very poignat statement that now "it is the end of the "Kodak moment." Michael Krigsman in his piece on "Goodbye Kodak, Hello Fujifilm," also makes a similar comment that "After 131 years great American photographic icon, Eastman Kodak, filed for bankruptcy while Japanese FujiFilm rises toward greatness." Clearly, there has been a sharp decline in the success of Kodak despite it making some remarkable leaps in the field of photofilm. Where it once "sold 90% of the film used in the US," was "regularly rated one of the worlds five most valuable brands," and " 85% of camera sales in America," Kodak is now facing very tough competition from Fujifilm. In my opinion, the reason for Kodaks failure is its lack of quick responses to changing consumer and market demands. As Krigsman states, "Kodak never made a successful transition from traditional film to digital cameras," and "Kodak had become a "complacent monopolist," enjoying its profitable film franchise and not keeping up with changing market trends." According to Simon Waldman in his article "Kodak: Why the Moment has Passed," because Kodak was so stubbornly holding onto the reels of film and chemicals that it had perfected, it completely failed to keep up with the advent of digital photography. He does state that "As a result, when digital technology challenged their perfect model, it was too easily dismissed by executives who had spent their entire career in the world of film, chemicals and paper." Analysts at Wharton, University of Pennsylvania, also agree that "Adapting to technological change can be especially challenging for established companies like Kodak, because entrenched leadership often finds it difficult to break old patterns that once spelled success," (Whats Wrong with This Picture: Kodaks 30-year Slide into Bankruptcy, Feb 2012). Kodak did invent many useful products, like the Brownie camera, and the first digital camera, but its failure lies in the way that its administrators became self-conceited and complacent with their initial success and did not feel the need to continuously work hard. There needs to be effort put in by the workers of an organization to keep coming up with new ideas and business plans, there needs to be a constant evolution of ideas, keeping in mind the current market situation. The Wharton analysts mentioned earlier also agree that "companies must also have a clear business strategy that can adapt to changing times. Without one, disruptive innovations can sink a companys fortunes -- even when the innovations are its own." This is exactly what has happened, since Kodak did invent the first ever digital camera but failed to develop it. Moving on to Fujifilms business strategy, in the Economists "The Last Kodak Moment?", it said that "whereas Kodak has so far failed to adapt adequately, Fujifilm has transformed itself into a solidly profitable business," and that "Fujifilm, too, saw omens of digital doom as early as the 1980s. It developed a three-pronged strategy: to squeeze as much money out of the film business as possible, to prepare for the switch to digital and to develop new business lines." Apart from this, "Fujifilm diversified more successfully," and Krigsman also contends that "While Kodak invested in marketing, Japanese competitor FujiFilm created even better films, diversified through acquisition, and changed its business model to attack digital photography directly and with strength." It is clear that Fujifilm enjoys more success than Kodak because of its constant work on new business strategies and its careful analysis of the current market situation while making new products. Other instances that demonstrate how Fujifilm triumphed over Kodak include how Fujifilm had a clear idea of what area to focus its innovation in (Whats Wrong with This Picture: Kodaks 30-year Slide into Bankruptcy, Feb 2012). The article quotes Christian Terwiesch, director of Whartons Strategic R&D Management program, as saying "Innovation is "the match between a solution and a need, connected in a novel way," and "Kodak had a choice in how it pursued innovation: If it focused on the need, it would have to find new ways to take and store photos. If it focused on the solution, it would have to find new markets for its chemical coating technologies. Kodaks competitor, Tokyo-based Fujifilm, focused on the solution, applying its film-making expertise to LCD flat-panel screens, drugs and cosmetics." Fujifilms success obviously lies in the innovative way in which it connects its business plan with the needs of the consumers. The article also goes on to quote what Wharton management professor Rahul Kapoor had to say about what Kodak did wrong; "The challenge is not so much in developing new technology, but rather shifting the business model in terms of the way firms create and capture value." Also, "for years, Kodak operated under the classic razor blade model: Like blades to razors, Kodak made most of its money off film, not cameras"; this was not a very good business tactic to follow since it shows that the industry has its own assumptions about consumer needs without really analyzing consumer demand at all. Wharton marketing professor George S. Day Kodak offers an explanation for this and says that Kodak "failed to build a strategy based on customer needs because it was afraid to cannibalize its existing business," and ""It succumbed to inside-out thinking, that is, trying to push forward with the existing business model instead of focusing on changing consumer needs. Accustomed to the very high film margins, the company tried to protect its existing cash flow rather than look at what the market wanted." Kodaks lack of analysis of consumer needs was an important reason to its downfall. Another issue worth looking at would be the fact that Kodak invested so much of its time developing film that switching from film to digital photography would mean all that effort would be wasted. "Kodak was invested so heavily in film technology that it became difficult to abandon," according to Robert Shanebrook, an employee at Kodak who wrote about his experiences there in "Making Kodak Film." He also states that "It would have been difficult to just give [film technology] up," and how it meant "abandonment of the entire capital structure." "Kodaks core competency was being a vertically integrated chemical manufacturer," he added, and that "The core competency of being a digital camera manufacturer is electronic.... Trying to convert from being a chemical company to making digital cameras -- which are like computers more than anything else -- you wouldnt expect [Kodaks expertise] to be there." Thomas A Kochan in his paper "Rebuilding the Social Contract at Work: Lessons from Leading Cases ," has stated that "Eastman Kodak has been one of the most important corporate citizens in the Rochester, New York, community. Over the 1900s, Kodak developed a reputation as one of the leading proponents of welfare capitalism, " and how it had a "reputation for paying high wages and providing lifetime job security into the 1980s." Also, it enjoys a "reputation for social responsibility earned through its community activities, its implied commitment to lifetime employment, and its high-wage and comprehensive fringe benefit policies." For instance, George Fisher, CEO of Kodak devised a new social contract with the employees at Kodak which "should lower workplace anxiety, close the chasm of fear and cynicism and rebuild trust—another one of our core values. Employees will be more marketable, more ‘in demand.’ They will become leaders in an environment where everyone is expected to be a leader. Each will become responsible for the success of the business. Each will learn to take risks, be innovative, and not be afraid of failure for taking reasonable risks." This will lead to better growth within the industry, since it will "create pay-for-performance cultures driven by a set of well-articulated company values and goals." Fujifilm also has developed its ethical and social responsibility to the people around it; on the Fujifilm Global website, it is said that it will "respond to societys demands by contributing as a corporate citizen to the development of culture and technology in society and environmental preservation." The most important step a business should take when deciding what goods to manufacture is that it must analyze the market situation and consumer demand as thoroughly as possible, since supplying goods that are no longer required by most of the consumers will result in lost profits. Secondly, industries must be prepared to diversify and adapt their production in response to changing market conditions; it would be a good idea to expand out into other areas and develop many new products instead of fixedly developing one product or one area of production only. Lastly, the industry administrators need to try to prevent themselves from becoming complacent with their success and thus, avoiding making new products and competing with other industries. In conclusion, it would be safe to say that the downfall of Kodak was one that was initiated solely by the activities of Kodak itself; its lack of interest in analyzing consumer demands, its failure to come up with flexible and innovative business schemes in keeping up with the current market situation, all contributed to its loss in the photography race against Fujifilm. Kodaks example is a clear demonstration of the strategies businesses should and should not follow. Works Cited ""Corporate History." Home. FujiFilm, n.d. Web. 25 Apr. 2013. "Fujinon Corporation Products Index Page." Company Seven | Fujinon Corporation Products Index Page. N.p., n.d. Web. 25 Apr. 2013. "History of Kodak." Http://www.kodak.com/ek/US/en/Our_Company/History_of_Kodak/Imaging-_the_basics.htm. Kodak, n.d. Web. . "Knowledge@Wharton Strategic Management Research Article." Whats Wrong with This Picture: Kodaks 30-year Slide into Bankruptcy. N.p., 1 Feb. 2012. Web. 25 Apr. 2013. . Krigsman, Michael. "Goodbye Kodak, Hello FujiFilm." ZDNet. N.p., n.d. Web. 25 Apr. 2013. . "The Last Kodak Moment?" The Economist, 14 Jan. 2012. Web. . "Message from the Chairman and President." Home. N.p., n.d. Web. 25 Apr. 2013. . Neate, Rupert. "Kodak Falls in the creative Destruction of the Digital Age" The Guardian. Guardian News and Media, 19 Jan. 2012. Web. 25 Apr. 2013. . "Our Approach to CSR and Related Policies." FujiFilm Global. N.p., n.d. Web. . "Rebuilding the Social Contract at Work: Lessons from Leading Cases." Rebuilding the Social Contract at Work: Eastman Kodak. N.p., n.d. Web. 25 Apr. 2013. . Sparkes, Matthew. "Kodak: 130 Years of History." The Telegraph, 2012. Web. . Waldman, Simon. "Kodak: Why the Moment Has Passed." The Guardian. Guardian News and Media, 19 Jan. 2012. Web. 25 Apr. 2013. . Read More