Eastman Kodak Company - Case Study Example

?Kodak Case Table of Contents Q 3 Q. 2. 4 Q.3. 5 Q. 4. 6 Q. 5. 6 Works Cited 8 Q Eastman Kodak Company is regarded as one of the leading multinational photographic and imaging component, services and materials company which is holding a major market share amid the retailers in photofinishing industry. There are two decrees that are affecting actions of Kodak which include the case of 1921 or 1921 consent decree, which prevented Kodak from stopping dealers from freely making sales of goods manufactured by competitors. It was observed that Kodak aimed to create a monopoly in the market which violated the Sherman Act’s Section 2 guidelines. The company also attempted to impose varied types of exclusive dealing based contracts upon different retailers. The decree includes licensing of processes for photofinishing as well as assistance of technology for anyone eager to start the business of photofinishing. The main objective of the decree was to ensure a healthy competition among the varied business entities in the photofinishing industry (Baye & Scholten, “Kodak Appeals to Court to Terminate 1921 and 1954 Decrees that Restrict Pricing Policies”). It can be stated that Kodak became the solitary leader in the industry with the development of film based product. The company sold its color film through processing aspects. It is also noted that through bundling the prices of photofinishing as well as processing, Kodak monopolized the market of the photographic industry. This resulted in the emergence of 1954 antitrust decree, which is considered as the second decree affecting the actions of Kodak. The decree was initiated by the court in order to enact restrictions to Kodak against bundling photofinishing process effectively. Hence, it can be stated that both the decrees i.e. 1921 and 1954 had resulted in the creation of enhanced market competition in the global market context for selling the products of photo films as well as processing. The decrees had restricted Kodak’s monopoly business in the global market context (Baye & Scholten, “Kodak Appeals to Court to Terminate 1921 and 1954 Decrees that Restrict Pricing Policies”). Q. 2. The competitors of Kodak can be considered as Konica, Fuji, 3M and Afga. It can be observed that the quality of the films produced by Kodak is very different from its rivals. Moreover, the prices of the products are also quite high as compared to its competitors in the market. According to the information provided by the court it can be stated that Kodak sells 75% of the films in the United States. There are about 241,000 main retailers in the US, carrying the products of Kodak, which is considered as the market share of Kodak in the US. On the other hand, there are about 71,000 stores of Fuji around the country. The prices of Fuji products are lower as compared to Kodak by 10% in the level of wholesale market. As far as the other competitors are concerned, it can be observed that the market shares of Konica, Agfa and 3M are relatively lower as compared to Kodak in the global market context (Baye & Scholten, “Kodak Appeals to Court to Terminate 1921 and 1954 Decrees that Restrict Pricing Policies”). The market share or sales for Konica is around 4% , Afga 3% and 3M accounts for 8% of sales in the US market (Scribd Inc., “Kodak Case Study”). One of the major acquisitions made by Kodak was of Qualex during 1994, which enabled their dominance in the wholesale market for macrolab photofinishing in the US by 70%. Moreover, presently, three companies which entail Qualex, Konica and Fuji possess a considerable amount of business in wholesale category i.e. around 95% (Baye & Scholten, “Kodak Appeals to Court to Terminate 1921 and 1954 Decrees that Restrict Pricing Policies”). The competitive advantages of Kodak are considered to be consumer loyalty or preference and belief. It has been observed that 50% of the consumers prefer only Kodak films irrespective of price (Baye & Scholten, “Kodak Appeals to Court to Terminate 1921 and 1954 Decrees that Restrict Pricing Policies”). Q.3. The relevant geographic based market is relatively restricted for Kodak. According to an observation, it is identified that around 50% of the consumers in the US prefer Kodak products, irrespective of prices along with other 40% of consumers are attracted towards Kodak’s products due to their branded value in the global market. There are various views related to relevant geographic product market related with reference to the case study of Kodak. According to district court ruling, Kodak accounts for merely 36% in terms of market share in world-wide scale, which includes the United States, Japan and Western Europe. This is not evident for Kodak to maintain its dominance and sustainable feature in the global market context. Although the market share of Kodak is comparatively higher than its competitors in the US market, there is not much dominance or market power for the company, despite having 67% of share in terms of units along with 75% share in terms of dollars. It has been observed that if the prices of the products are elevated by 5%, the sale of the products decreases to 10%. The other crucial consideration related to Kodak’s geographic product market is that despite providing quality products in the market it has been observed that Kodak faces the elasticity of 2, having sold the products at higher prices irrespective of customers. The demand elasticity of 2 suggests that the pricing of the product is double the marginal costs of the products. Hence, it can be stated that in order to maintain the demand elasticity of the prices, it is necessary for Kodak to maintain the range of prices to a balanced mode in order to sustain its position in the global markets (Rausch, “Quantitative Demand Analysis”). Q. 4. In the context of evidences provided by the government in terms of maintenance of Kodak’s sustainability in the global market, the evidence of discrimination of prices is vital. This signifies the elasticity of demands for the Kodak’s products (Philips 3). In this regard, it can be stated that despite charging higher prices by Kodak in the US, the preference for consumers’ increases day-by-day, where 50% of the consumers were prepared to purchase only the Kodak products and 40% of customers effectively prefer them. Moreover, the competition in the foreign market as well as from foreign market players is limited that could result in benefitting Kodak to maintain its market power in the US (Baye & Scholten, “Kodak Appeals to Court to Terminate 1921 and 1954 Decrees that Restrict Pricing Policies”). Q. 5. In relation to terminating the decrees, the risks entail the aspect that the court could eliminate the rights of processing of bundling as well as tying. As there is less dominance of Kodak in US market, the court could sue the rights of performing business activity (Eastman Kodak Company, “Radiography in Modern Industry”). The facet of market power is considered to be an important factor for maintaining the preferences of customers related to prices as well as behavior of business in the market. With no market power, it would put pressure on Kodak for maintaining its sustainability (Baye & Scholten, “Kodak Appeals to Court to Terminate 1921 and 1954 Decrees that Restrict Pricing Policies”). It can be stated that after the termination of the decree with the assistance of technology licensing as well as the aid of unparallel technologies, Kodak could unfairly hurt competitors by providing significant effects and entering into newer markets. Moreover, by decreasing the prices of offered products by a considerable extent, Kodak could generate greater sales and revenues (Baye & Scholten, “Kodak Appeals to Court to Terminate 1921 and 1954 Decrees that Restrict Pricing Policies”). Works Cited Baye, Michael, & Patrick Scholten. “Kodak Appeals to Court to Terminate 1921 and 1954 Decrees that Restrict Pricing Policies”. Managerial Economics and Business Strategy (1994): 1-11. Print. Eastman Kodak Company. Radiography in Modern Industry, 1980. Web. 14 Apr. 2013. Philips, Louis. The Economics of Price Discrimination. United States: Cambridge University Press, 1983. Print. Rausch, S. Quantitative Demand Analysis. The Elasticity Concept, 2012. Web. 14 Apr. 2013. Scribd Inc., Kodak Case Study, 2013. Web. 14 Apr. 2013. Read More