On the issue of Kodak no longer doing further research, it raises another question: do they wish to abandon the film market altogether? This does not appear to be so since later in the article it is mentioned that Kodak is going to hold onto as much of its film business as it can by actively making film under non-Kodak brand names. It doesn’t make much sense for Kodak to do this. Why not sell the film under the Kodak name and start the new digital lines under new brand names that do not include the word Eastman or Kodak?
This strategy appears to be an attempt by Kodak to slowly phase out the Kodak association with film, associate film with other brand names and then associate the company name with the new digital technology. The Kodak name still holds much power in the mind of the consumer and this is one of their greatest assets but only in the area of film. Management has misunderstood the way it can use the brand and is using it to the company’s detriment.
Another issue raised is how much of a risky move this is by entering very competitive markets. One question that comes to mind is why in the world would you bet the future of the company on a market such as inkjet printers where there are so many competitors that are already aggressive price cutting. The focus of Kodak as mentioned in the article has shifted from high profit products such as high end film to instead simply increasing market share.
A second line extension that management has chosen to put the Kodak name on is high end printing where there are already juggernauts such as Xerox and HP to contend with. No mention is made in the article on how they are going to be competitive with the contenders are in control of these markets. Instead the only strategy mentioned is they are going to take the competition head-on. This will result in a failed product if there is no innovation.
I imagine there would be many questions that would go through the mind of a customer on hearing Kodak was making inkjet and high-end printers. Why would customers want to try Kodak’s new brand when they already have a proven brand in Xerox, HP, Canon, or Epson in these different segments? Isn’t Kodak a film company and what would they know about printers? But a different brand name for these new products in new segments would solve this problem. Why wasn’t this route chosen? The most likely reason is that management is in love with the brand name and fears losing it by keeping it with the old generation product and assigning new names to the new generation products. They think it is riskier to assign a new name to the next generation products and keep the proven name with the old product. Most likely, their logic (which makes sense to them) may include assigning the proven name to the new product and thus increasing the chance of the product’s success. But, unfortunately this strategy will most likely meet the fate of all line extensions: product failure.
One other major issue that the article raises is past management’s track record of rosy forecasts that never seemed to come true. Instead of the 8-12% annual growth, there was a drop in revenue in every year. Current management is making the same kind of outlandish claims. More specifically, the film business is slated to drop 7% every year and it is projected that digital revenue will increase 26% yearly!!! This is a higher percentage rate of growth than many of the current veteran technology companies are able to produce. The one question that comes to mind is why you would ever make such a drastic prediction for growth which will most likely never happen. The only answer that makes sense is that Kodak feels its back is against the wall, it must move out of the film market as its core business, and validate the $2 billion investment it will take to enter these competitive markets. The scary thing is from the inside of a company such as Kodak that these moves seem to make sense.
An evaluation of the Kodak strategy from the perspective of our class yields many insights. Overall the Kodak strategy is a workable one but needs certain modifications. First of all, it appears that Kodak has given up on its core film business to provide continuing growth into the future which is fine but is not fully prepared to let go of the business immediately. It is putting one foot into a couple new camps and then keeping the other in the old film business. The “old” core business is being used to finance the new. Another revealing point is Kodak’s focus. When I think of Kodak, my first response is film. The responses that don’t come to mind are digital imaging, digital cameras, photo ready inkjet printers or high end printers. It’s ok to go into all these lines of business, but they should use a different brand name for each like Honda did for Acura in order to increase chances of brand success, not only from a national standpoint but internationally as well. Also, they should take advantage of the powerful brand image of Kodak in the mind of the consumer and keep this on the film. Putting non-Kodak brand names on their film will most likely result in further loss of market share to other companies that specialize in consumer film. Finally, moving into a couple already saturated markets with no attempt to innovate and instead taking head-on the segment leaders is a sure strategy to product suicide.
