Kodak Industry Evaluation - Essay Example

? Industry Evaluation Introduction Evaluation of an industry begins by considering its objectives. A market, which is functioning well, will satisfy social, environmental, and economic needs of all the market participants. Out of the five firms, Kodak' market share is 67%, which show that the industry satisfy the needs of market participants. This is because there are four other firms offering the same services but Kodak takes the larger portion of the services that are rendered to the market participants (Greco & Wharton, 2007, p. 54). When there is a problem in the market, the immediate solution is regulation. The first step is to identify, analyze, and solve the problem. It will then be easy to solve because one will feature into the measures to solve the problem. In the situation of Kodak, there is no big problem as it dominates in the services offered to the market participants. Kodak industry should concentrate on advertising so that it can improve its market share to the customers. However, it is leading with the highest percentage of market share. In this regard, it needs to invest more on advertising so that it can improve beyond the level it is and maintain the market share. Advertising will make the services offered by the Kodak firm to be known by the customers. Consequently, the customers will shift from the other firms in the Kodak industry to get improved services as per the advert. Kodak should also concentrate on producing quality films and other products. This will persuade customers to shift from the other firms because they will be sure that they will get quality products compared to other industries (Parr & Hughes, 2005, p. 149). Another point, which should be considered by Kodak, is the price of the products. Kodak should consider various factors before fixing the prices. Prices of products offered by a competitor, this is particularly beneficial because if Kodak fixes higher prices of the products customers will shy away to other firms offering the same products with a fair price. Before fixing the prices, they consider production cost so that they will not make losses. This is because Kodak industry might embrace price reductions to compete with the other firms and not considering the outcome of the decision. They should weigh on both sides so that they will win more customers and at the same time making profits and not losses. As the market share of Kodak is higher at 67%, this shows that the demand of the products is also higher. This shows that Kodak should produce more products to meet the rising demand from customers and curb the shortages. To meet this target, Kodak should have qualified staff, reliable source of materials, and source of finance. Kodak will have to recruit more staff so that the existing staff will not work under pressure. In addition, they should organize seminars to train the staff so that they can acquire new skills, which will enable them to fit in the current situation (Greco & Wharton, 2007, p. 166). Having opportunities like promotion, and free training should motivate staff so that they will work hard enabling the industry to meet the target. The staff should be given rewards when they do a commendable job. This will motivate other employees and staff to work harder in that they will receive rewards. In doing this, the industry will meet its targets through spending on the rewards. Kodak should establish a reliable source of raw materials for use in the industry. The supply of the materials should be continuous to enhance the continuous manufacture of the films whilst sustaining the customer demand. This will make the customers rely on the industry in that they can get the products when they demand them. In addition, the industry should have enough funds for acquiring the raw materials, training staff, and paying the employees in this process. If there is a shortage in the funds, Kodak can borrow from financial institutions for stable flow of raw materials in the industry. The funds will be used in procurement and transporting raw materials to the industry and finished goods to the market. After stabilizing this, the customers will get Kodak anytime they demand. Employees and others professionals who may be called in the industry will be paid through the funds acquired from sources like borrowing (Parr & Hughes, 2005, p. 92). This is another effort to enable the industry to supply the products to customers without any shortage. According to the price elasticity of demand, which is -2.0, it shows that there was no negative effect when the price of Kodak films was changed. This is because the quantity of the products demanded will remain the same after the change of price or it can even rise slightly. In many situations, the price elasticity of demand is negative though sometimes it is positive in the goods that do not obey the rules of demand and supply. Kodak industry should maintain the price of products at the same comparing the prices with those of its competitors (Greco & Wharton, 2007, p. 82). This will enable Kodak to quote reasonable prices of products so that they will not over-price or under-price, which will affect the customers and the industry itself. When the price is increased to a certain level, it might affect the customers in that they will decide to go to the other firms if their prices are a bit lower. This will automatically affect the market of Kodak products. The industry will win more customers and will sell more products but they will not make any profit. This is because the production costs will be higher than the revenue received from the market. Kodak should venture into new strategies and tactics so that she might outweigh the serious competitor Fuji who owns 30% of the market share. This is because, if Kodak will relax and maintain the same level of the market and tactics, Fuji might overtake. This is true in that Fuji being behind Kodak, will try all efforts even it means spending some money to win more customers and outweigh Kodak on the market. I think the industry is different today because more efforts and steps will have been put in place to compete with competitors and make more profit. The industry will have expanded by employing more staff and putting in more capital. This will make the industry increase its profit by increasing the capital. This is through acquiring new assets, recruiting the human resource as well as training the existing staff (Parr & Hughes, 2005, p. 284). The market of the industry will expand when more capital is put on the business unlike when the capital is much smaller. This is because the industry will produce more products at once leading to market expansion and increase in profit. HHI=? (share) 2 = (67+30+1+1+1)2 = (130)2 =16900 When the firm is closer or almost being a monopoly, it will have a higher market concentration. This indicates that the firm will have a lower competition. As per Kodak, it has a higher market concentration in that its market share is double of that of the second firm. This indicates that it has lower competition and is almost being a monopoly (Greco & Wharton, 2007, p. 127). If Kodak was the only firm in the market, its market share would be 100%, and the HHI would be 10000 and would have been having a full monopoly in the market. In a situation where many firms exist in the market, the market share would be 0%, and the HHI would be almost zero. This would indicate that there is perfect competition in the market. Lerner index=Price-Marginal cost Price = 6.95-3.475 6.95 = 3.475 6.95 = 0.5 This Lerner index implies that Kodak has a greater market power. This is because the Lerner index is between 1 and 0. If the product’s price was equivalent to the marginal cost or the Lerner index is zero. The problem with Lerner index is that it is sometimes impossible to necessary information on costs and prices. Lerner index is describing the relationship between price margins and elasticity for profit-maximizing firms and it cannot be greater than one. Porter’s five forces are powerful and simple tool used in understanding where the power is lying in the business situation (Parr & Hughes, 2005, p. 159). It also helps an individual to understand the current position with respect to the encroaching market trends. One of the Porter’s forces is the existing competition between suppliers. According to Kodak’s situation, it does not have any serious competition from the other suppliers. The only supplier, which might pose some competition to Kodak, is Fuji. This is because it is the second according to the market share having 30% after the Kodak’s 67%. The other firms are having 1%, which does not pose any serious competition to Kodak. Another Porter’s force is the threat posed by new firms entering into the market. As per the current situation of Kodak, there are no new market entrants. Thus, Kodak should be well prepared, and armed to face any new market entrant (Greco & Wharton, 2007, p. 220). This is by ensuring that it has enough resources and competent staff who can assist in fighting against the market entrants who might pose some competition. The bargaining power of the buyers is another porter’s force. This whereby the buyers come together and exert pressure on the firms such that they can lower the prices of the products. Kodak should fix a reasonable price of the product, which can make the buyers to be comfortable, and not to mobilize themselves to pressurize the firms. This will enable Kodak to enjoy the market share it has and even increase above the current one If Kodak raises prices of products, the buyers might decide to come together and pressurize the firms affecting their market prices. The power of suppliers is another Porter’s force. This is whereby the ability of the input providers to come together and determine the terms of supply and prices of products. Suppliers can decide to exert some power on the firms and industries by reducing the quality of goods and services or raising the prices. This will affect the profitability of the firms. According to Kodak’s current situation, it does not have any power from suppliers, but it should be prepared such that can be able to offer the needed resistance if any power is posed by the supplier. The last Porter’s force is a threat of substitute products and change in technology. This is whereby the products, which act as the substitutes of the current products, are introduced in the market (Parr & Hughes, 2005, p. 425). This will affect the current products, which may lead to the firm’s downfall, if it is unable to resist the threat. Kodak should be well prepared to switch into production of items, which serve the same purpose as the substitutes introduced in the market but has more features to attract customers. Kodak might even decide to lower the prices a bit such that it can maintain its market share. Conclusion Before evaluating an industry or a firm, its objectives must be well known. This will enable smooth evaluation and detection of problems will be easy. After detecting the problems, it will be easy because the firm will embark on solutions directly. Firms should use HHI and Lerner index to determine their market concentration and market power. Through HHI and Lerner index, they can know their situation in market monopoly (Parr & Hughes, 2005, p. 254). In addition, firms should apply the Five Porter’s forces to determine the bargaining power of buyers, threat of substitutes, the power of suppliers, threat from new market entrants, and the existing competition from the suppliers. References Greco, A. N. & Wharton R. (2007). Culture and Commerce of Publishing in the Twenty-first Century, United States, Stanford University Press, 2007. Parr, A. & Hughes M. (2005) U.K. Merger Control, United Kingdom, Sweet & Maxwell, 2005. Read More