The Collapse of Kodak Australia - Case Study Example

The collapse of Kodak Australia Author Course Tutor Date Background According to (Grant, M. R 2005), Kodak Australia Ltd came into existence in 1908, when Thomas Baker and John Rouse formed a partnership with George Eastman, an American who was a camera pioneer by then. Kodak became a household name by 1884 when it started using roll of film that replaced glass photographic plates. According to Eastman, this was a success since the product was user friendly and convenient to use. He used the slogan “You press the button, and we do the rest” in his initial marketing campaign. The partnership embraced new technology, and in 1888 they invented a new Brownie camera which led to a reduction in the cost of photographing. Eastman later developed the Company’s guiding principles which emphasised mass production at reduced cost, distribution to international markets, focus on customer, and growth through research. It is the very embrace of technological advancements by the Australians that led to the collapse of Kodak Australia. The company started to realize reduced profit margins. In 2001, Kodak Australia’s saw a reduction in its profits by $15 million, but the dropped further to $615 000 the following year. The sudden drop in Kodak Australia’s sales was due to increased supply of digital cameras, and phones with in-built photos. In 2004, announcement was made that Kodak’s Coburg plant was going to close in November the same year losing 600 jobs. The introduction of the first digital cameras with high quality in the late 2005 eventually killed off film cameras which Kodak Australia was using. Eventually, Eastman Kodak cut off more than 12,000 jobs across the world which then led to its closure. The decision to close Kodak’s Coburg manufacturing plant was a result of Eastman Kodak’s failure to realize gradual change in technology. Kodak faces white-water rapids environments The demise of Kodak Australia was unavoidable given sudden change in technology. A number of factors explain the reason for its collapse: External appearance was deceiving Most businesses determine their effectiveness and success by only considering factors that market share, sales and profits. These external measures are often misleading, and may lead a company into a serious problem. According to (Nordfors, D 2004), initially Kodak’s fallen brands’ external indicators looked very well, and therefore it did not see the possibility of becoming irrelevant in the long run hence its collapse. Failure to embrace change Change is a factor that any business cannot overstate when carrying out its operations (Lundvall, B. A 2007). In a situation where change is faster than experienced before, companies and industries are required to remain relevant. Kodak underestimated the pace of change in the film industry, which was becoming very competitive. It predominantly failed to realign with technological changes and the evolving of the digital era. Overconcentration on Achievements Kodak Australia was blindfolded by its numerous achievements. Its prosperity prevented the company from taking necessary steps in order to keep up with changes. For instance, in 1992 Kodak feared to adopt the digital camera market arguing that it would reflect a cannibalization of film. (Richard, et al 2003) believes that Kodak became entranced in and greatly attached to the past success and failed to embrace what would work best in the future, and thus led to its collapse. Innovation in wrong areas It is often believed that businesses fall from greatness because of lack of innovation. However, too much innovation without clear strategies precedes decline (Richard, et al 2003). The fall of Kodak Australia was not due to lack of innovation, but it was due to innovation in wrong line of operation at inappropriate time. It did not understand the rising demands of new technology to produce digital cameras that would sell to the market at the time. Downsizing at Kodak Australia According to (De Meuse, K and Marks, M. L, 2003), downsizing is the process of reducing workforce with the intention to improve performance and efficiency of the organizations. Strapped by hardships in the photographing industry, Kodak was forced to lay off her employees in attempt to cut its costs. Moreover, in order to remain competitive in the increasing global marketplace, the company did not have any other option but to reduce the number of its employees. Kodak is known to have downsized four times during its operations. Another major contributing factor was continued loss in market share coupled with reduction in profitability. Important to note is that the initiative taken by Kodak to downsize did not realize its purpose. Even after lowering its labour costs, it could not meet the demands of the competitive market which had turned to digital. Models of Innovation Innovation models have been under debate since 1950s, with each purporting to guide innovation process within manufacturing industries. During the post-war regime, there was increase in technological innovation and corporate strategy evolution (Freeman, J and Engel, J. S 2007). These innovation models which developed from the 1950s to the late 1990s can be used to guide Kodak Australia in innovation and development of its new products and services in the competitive business environment. As much as the innovation models which are to be discussed below would be practically important in realizing benefits of innovation, it is necessary that Kodak considers caveats to the models: a) The appropriateness on a model varies among sectors, and between various categories of innovation. b) Processes that take place in organizations are to some extent contingent on external factors like technological change. c) The evolution of innovation generation does not mean automatic substitution of models; most of the models co-exist to each other in some situations. d) Every model always represents a complex process which rarely exist a clearly pure form. e) In most cases movement from one generation of innovation to another shows changes in perception of what is believed to be best practice and not the actual progress. Technology push Model of Innovation This was the first generation model developed between 1950s and mid 1960s. According to this model, innovation took place in discrete stages. The model assumes that it is the scientific discovery which led to technological innovation through Research and development, manufacturing, marketing and engineering (Saren, M. A 2007). The Kodak Australia should be able to intensify its R & D initiatives in more sophisticated and modern cameras that would appeal to the existing market. It is through research that Kodak will be able to identify what would best satisfy its customers, and then invest in the identified products. This would need additional spending by the company and therefore justifies side interventions like R & D credits and subsides. By accurately carrying out research, Kodak will be able to realize greater innovation which would eventually lead to the growth of the company. Demand pull Model of Innovation The Demand pull model followed the first generation model. In the late 1960s studies related to the processes of innovation focused much on market led theories of innovation. Under this model, marketplace and research on market play a major role in knowing and responding to the needs of customers and more so directing investments in R&D towards such needs. (Ali, Y and Wong, S. M 2006) argue that Kodak should be in a position to understand the behaviour of her market especially as technology continues to change. Even as competition intensifies in photo industry, Kodak should assess the market in order to know what to produce in terms of quality, at what time and in what volume so as to satisfy customer needs. It should also check on pricing of its products without compromising quality since some customers are price sensitive. Coupling or Interactive model of Innovation The model came into existence in the 1970s, and at this stage both market pull and technology push innovation models were at their extreme. Science and technology together with marketplace characterized innovation in this generation of innovation model (Kaufmann, A and Tödtling, F 2001). This model links the decisions of organizations to the environment of Science and Technology and the marketplace. In the case of Kodak Australia, it should interpret its decisions in a way that benefits the company. The decisions the company takes when investing in certain areas will determine whether it will gain or loss from such initiatives. The company should strike a balance between R&D and the marketplace as the model illustrates. Research on new products and services should be focused on what the market requires at the time so as to always remain relevant. Integrated Model of Innovation This model existed in the 1980s, and was not in line with feedback loops. It is however, naturally sequential. During this time Automobile companies used integrated models which involved overlap of functions between departments and different activities. According to (Saren, M. A 2007), the model is very much relevant to be used by Kodak Australia in carrying out innovation. The company should seek views from all departments within its operations on the way forward as a far as improving its market position in the industry is concerned. It should go ahead and integrate with activities in other related companies, not forgetting suppliers and customers. Generally, Kodak should understand the behaviours of all the parties in the photo industry when developing new products and services. System Integration and Networking Model of Innovation Under this model, learning takes place within the company and between other companies. Innovation was believed to be networking process. The model takes a broader approach to innovation (Saren, M. A 2007).When using this model to innovate, Kodak Australia would be required to form strategic corporate alliances and partnerships with its competitors, customers and suppliers in order to survive in the dynamic business environment. It should also involve other firms in R&D so that they can achieve common objectives and be able to survive in the future. How to implement Innovation Strategy Developing innovation strategy is one thing and implementing it is another thing. It is important that Kodak implements its innovation strategy so that it can enjoy benefits of innovation. The strategy need s to be actualized to specific activities and projects on the ground. The following actions according to (Dodgson, M, Gann, D. M and Salter, A 2008), should be considered in implementing the innovation strategy: Communicating the message of innovation. The intended innovation should be fully communicated to employees and stakeholders so as their views can be used to evaluate the viability of the innovation. It would also help the firm to make appropriate decisions on how to carry out the whole process of innovation. Understanding the company's priorities Kodak Australia should understand its priorities and be able to identify opportunities to utilize in the process of innovation. Its priorities for instance, should not overshadow the purpose of innovation. Newly developed products and services should be acceptable in the market for the company to continue existing. Innovation Commitments The company should show commitment to achieving innovation goals and objectives and provide appropriate leadership to drive the initiative through. It should develop concrete actions and projects that are in line with the innovation strategy. Management and tracking the progress of innovation In order to experience full implementation of innovation strategy, the whole process should be managed and tracked by authorized individuals. Reports should be produced at all levels of innovation in order build confident among the participants. Management could also hold meetings to discuss the way forward. Recommendations Although Kodak Australia still carries out its operation with less workforce, it needs to be careful not go back to where it was in the past years. The firm should embrace the following if it has to survive in the future. a) It should treat innovation seriously b) It should appreciate the fact that change is inevitable, and always be prepared to adopt to change c) It should move with technological advancements at all times d) It should manufacture products that can compete with products of other companies like Sony e) it should focus on market survival by emphasising customer satisfaction Conclusion It is evident that the collapse of Kodak Australia was due to failure to adjust to changes in technology. It is important for organizations and industries to embrace technology and change when carrying out business operations. Change in consumer tastes and preferences cannot be underestimated either. Satisfying consumer needs require firms to be creative and innovative when producing their products to the market. It is therefore prudent that Kodak operates smartly as it struggles to re-established itself in the existing dynamic business environment. References Grant, M. R. (2005). Eastman Kodak: Meeting the digital challenge. Cases to accompany contemporary strategy analysis, 93-116. Lundvall, B. Å. (2007). National innovation systems—analytical concept and development tool. Industry and innovation, 14(1), 95-119. Nordfors, D. (2004). The Concept of Innovation Journalism and a Programme for developing it. Innovation Journalism, 1(1), 1-14. Kaufmann, A., & Tödtling, F. (2001). Science–industry interaction in the process of innovation: the importance of boundary-crossing between systems. Research Policy, 30(5), 791-804. Freeman, J., & Engel, J. S. (2007). Models of Innovation. California Management Review, 50(1), 94. Saren, M. A. (2007). A classification and review of models of the intra‐firm innovation process. R&D Management, 14(1), 11-24. Dodgson, M., Gann, D. M., & Salter, A. (2008). The Management of Technological Innovation: Strategy and Practice: Strategy and Practice. OUP Oxford. Richard, O., McMillan, A., Chadwick, K., & Dwyer, S. (2003). Employing an Innovation Strategy in Racially Diverse Workforces Effects On Firm Performance. Group & Organization Management, 28(1), 107-126. De Meuse, K., & Marks, M. L. (Eds.). (2003). Resizing the organization: Managing layoffs, divestitures, and closings (Vol. 7). Pfeiffer. Ali, Y., & Wong, S. M. (2006). Can Kodak Survive the Digital Era?. Read More