Managing Strategy, Operations, and Partnerships
Uchenna Chiboka Sixtus
User 11843206
Strategy and Partnership Module
UEL-SG-7001-33549
May 22nd, 2022
Abstract
A long time ago the phrase, "Kodak moment," meant something that was worth saving and
enjoying. Today, however, the once-heralded term can be substituted to describe a corporate
disaster that cautions top executives of different organizations of the need to act decisively
when disruptive improvements are introduced in their market. Although Kodak is forsaken
for the failure it encountered, it has taught various other businesses some major lessons.
This report will focus on one of the poorest strategic decision-making and leadership of the
20th century that played a prominent role in Kodak’s decline and bankruptcy much later in
the coming years.
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Table of Content
Abstract…………………………………………………………………………………1
Introduction…………………………………………………………………………….3
Methods…………………………………………………………………………………3
Discussion……………………………………………………………………………….4
Financial Summary……………………………………………………………...4
Glory days of Kodak…………………………………………………………….5
Failure of Kodak………………………………………………………………...5
Impact of Kodak’s Decision…………………………………………………….6
Conclusion……………………………………………………………………………...8
References………………………………………………………………………………9
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Introduction
Kodak was founded in 1880 and incorporated in 1901. It was registered with its trademark
“Kodak”. The primary aim of its services is to offer photographic and imaging materials
and equipment to its customers and corporations all over the world
The core focus was to set a production budget at a much lower cost, prioritize advertising,
and target distribution internationally. The ‘you press the button we do the rest’ slogan was
very popular during the early days of Kodak, Janeneel (2012). Approaching the early
eighties, Kodak was the market leader accounting for over 85 percent of the market share for
photographic film and 80 percent of camera sales in the United States of America. These
statistics confirmed Kodak’s status as one of the leading companies and brands at the time.
At a time during the early 90s, they were rated amongst the top 5 most valuable brands with
peak revenue of 16billion dollars in 1996. They continued to enjoy year on year success up
until the early 2000s when they began to diminish because of a culmination of several
strategic decision errors that were made which resulted in the ‘Kodak fall’
It is important to highlight that the early successes that Kodak enjoyed were because of the
business model they followed, ‘the razor and blades business model’ which is defined as a
model where one item is sold at a low price (or given away for free) to increase sales of
another complementary good. This model was a key growth driver for Kodak early on but
proved not to be sustainable as other competitors made entrants into the market segment.
Kodak’s inability to act on a technology they were supposed to pioneer bears semblance to
many organizations today who have suffered fate. Kodak made a digitized camera,
channeled resources into the innovation, and even posed that photographs would be shared
on the web. They did this as a complementary approach to extend their business without
realizing the disruption that was to envelope the market.
The objectives of this report are listed below:
1. To identify the risky decisions and the effects of emerging global trends that resulted
in the fall of Kodak
2. The implication of some of these decisions on the stakeholders of Kodak
Methods
The research methods adopted for this report will be based on secondary data analyzed over
different periods.
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Discussion
Financial Summary for the Past Three years.
According to [Link] The 2019- Eastman Kodak Company reported financial
results for the full year 2019, including revenues of $1.2 billion, continued growth in key
product areas, and net earnings of $116 million, including the gain on the sale of the
Flexographic Packaging Division.
Key product lines achieved strong year-over-year growth for the full year of 2019. Volume
for KODAK SONORA Process Free Plates grew by 22%. Annuity revenues for the KODAK
PROSPER inkjet platform grew by 5%. The company ended the year with a cash balance of
$233 million, flat compared with year-end 2018.
2020: For the year ended December 31, 2020, revenues declined by $213 million compared
with the same period in 2019.
• Consolidated revenues of $1 billion
• A cash balance of $196 million at year-end
Kodak ended the quarter with a cash balance of $196 million, down from December 31,
2019, cash balance of $233 million. GAAP net loss was $541 million for the year
ended December 31, 2020, which included a charge of $416 million to reflect the increased
value of the derivative liability embedded in the convertible notes immediately before
conversion during the third quarter of 2020 and expense of $167 million related to the
increase in deferred tax valuation allowances for locations outside the U.S. during the first
quarter of 2020. Operational EBITDA was negative $1 million for the year ended December
31, 2020, compared with $13 million in 2019.
2021: For the full year ended December 31, 2021, revenues were $1.150 billion, an
improvement of $121 million compared to the same period in 2020
• Consolidated revenues of $1.150 billion, compared with $1.029 billion for the full
year 2020
• GAAP net income of $24 million, compared with a net loss of $541 million for 2020
• Operational EBITDA of $11 million, compared with a negative $1 million for 2020
• A year-end cash balance of $362 million, compared with $196 million at the end of
2020
GAAP net income was $24 million for the full year, compared to a net loss of $541 million in
2020. The prior year included a charge of $416 million to reflect the increased value of the
derivative liability embedded in the convertible notes immediately before conversion and an
expense of $167 million related to the increase in deferred tax valuation allowances for
locations outside the U.S. Operational EBITDA for the year ended December 31,
2021, was $11 million, compared to negative $1 million in 2020. The increase was primarily
the result of improvement in revenue and manufacturing costs from volume increases
partially offset by ongoing global cost increases in 2021.
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Glory days of Kodak
The glory days of Kodak were characterized by a connection they had established with the
market from churning products that meet the needs of customers, to convenient pricing
which was another convenient factor that drove market adoption and increased their
popularity as well. They were the sole determinant of what product to be sold and the
quantities in which they will be produced. The competition was practically nonexistent, and
the market was heavily reliant on the (Pham Gia 2009) market.
In addition, to Kodak’s marketing strategy the company also made sure that they offered a
product of great quality to their customers, and this ensured they protected their market share.
that its products were of high quality, something which aided it to enhance and protect its
market share. With a diverse network of operations in several countries, economies of scale
favored Kodak without much strain on its finances. This meant that the large share held by
the company had ensured that the company could reduce the prices of some of its products
to enhance the sales of others without affecting its financial capability. (Black, 2010)
According to Deborah [Link] 2015, two pillars led to the early successes that Kodak enjoyed.
Kodak had established itself as a brand even though it slowly lost hold of the market.
Product range: Kodak diversified its product portfolio moving from camera films to its first
foray into digital cameras as well, which were recognized through the brand name.
Technology: The depth of their technology team was heralded as the best in class and similar
to the household names in technology today Kodak was a pioneer in technology advances
early on.
With all these successes that Kodak enjoyed in their early days, they failed to realize the
changing perspective and dynamic shift that was going to hit the market. It is interesting to
note that they even had the first shot at re-inventing themselves and leading the entire
industry to a new wave of photography.
It is important to stress that Kodak’s management aversion to change can first be traced to
1945 when they first rejected a certain Chester Carlson and his assistant Otto Kornei, who
pitched the idea of the photocopying machine to Kodak and were rejected before the
invention became mainstream some years later. They also rejected an engineer who had
come to present the instantaneous photography process, the Polaroid to them in 1950 before
embracing it themselves some years later which later got them entangled in a lawsuit for the
same invention.
Failure of Kodak
The failure of kodak can be attributed to the lack of a series of bad decisions when it was
very clear that the world was going digital. They completely missed out on taking advantage
of the digital age and remained embedded in their existing products and services.
It is a no-brainer that kodak invested a lot of money into digital cameras. However, they
failed to follow through with the processes to ensure they remain at the top of the market
pyramid. The emergence of cameras with phones made it easier for users to post pictures on
social media and this made the printing of pictures decline.
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Kodak created a digital camera and invested in the technology while having a full
understanding that photos would be shared online. However, their failure was in realizing
that online photo sharing was the new norm and not just another regular way to grow the
printing business. Kodak missed the opportunity to identify with growing market trends.
Some of the reasons attributed to the failure of Kodak are listed below.
1. Emergence of New Technology
Kodak saw that their existing business would become irrelevant, but they failed to adapt to
the emerging technology and market trend. Kodak’s unwillingness to adapt to change and
its inability to develop and sell the film in developing digital technologies made them lose
out on its chance to retain its position as the top player in the market.
2. Disruptive Innovation and new market trends
The CEO of Kodak from 1993 to 1999, George Fisher, decided to produce digital cameras
and offered users the opportunity to post and share the pictures online. Albeit Kodak made
a profitable business out of digital cameras with revenue reaching $5.7 billion in 2005, it did
not last long as camera phones began rolling into the market, thereby disrupting the current
market trend. Making an early entrant would have solidified their mainstay in the business
before this disruption
3. Failure to integrate with external and internal knowledge
Kodak identified a gap in its expertise and made efforts to outsource its camera
manufacturing to fill this vacuum. However, the outsourcing management team failed to
achieve full integration of the internal and external knowledge which is further essential for
Innovation. This knowledge gap prevented Kodak from competing with rivals in the digital
market.
4. Pride and Self Confidence
Pride also played a part in Kodak’s failure. Despite Kodak’s large investment in research
and development, as well as good relations with customers, Kodak showed off so much pride
and although they identified the rapid changes in market trends and new technologies, they
failed to adapt to these changes adequately and promptly.
5. Poor Leadership
As Kodak changed its CEOs, its strategies and business models changed as well. The
company went through a series of re-strategizing and restructuring whenever there was a
change in the leadership. With each new CEO came new plans, strategies, deliverables, and
goals. Antonio Perez, the latest CEO, had started focusing more on the printing business
which was already controlled by Hewlett Packard instead of focusing on upgrading the
digital camera business which was their core business.
The Impact of Kodak’s indecision
To discuss the implication of the impact of Kodak’s indecisions it is important to mention
the entrants of then smaller companies like Sony and Canon who exploited the innovation
that Kodak invented and each with their differentiating strategy they gained mastery of the
market before Kodak thought of making its entry.
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Sony broke into this space first and release its first digital camera in 1988, Dubbed the Mavica, it
worked with a TV screen display. The Mavica accounted for $1.1 million of the estimated $12
million in point-and-shoot photographs sold in the United States in 1998 and helped Sony
gain prominence as a brand name in digital cameras and as a major player in photography.
Their differentiation strategy gave them a long-term competitive success as the firm invests
continuously to offer customers differentiated features that provide value to them. While
Canon and Nikon also solidified their market entry before Kodak entered the market.
Analyzing key reason for Kodak’s Downfall: Poor Decision Making, Not Digital
Technology
Kodak had created a profitable business with significant margins on the consumable side of
its flagship film photography business and made the mistake of applying the same to the
emerging digital imagery business. They intended to extend all the materials to support a
new form of emerging photography failing to realize that perception was shifting, and
people’s perspective of photography was beginning to change with the emergence of digital
photography. (Gavetti et al., 2005) They banked on the traditional norm that they pioneered
where photography was first made and processed.
The photography market was heavily consumer-driven early on as it was recorded that after
Kodak made its late entrant in 1995 the digital market was flooded with 25 new entrants.
There are no specific recorded reasons as to why Kodak might have held up the decision to
expand and expand its strategy for digital photography, in fact, according to Owles (2012)
the key reason why Kodaks management stalled on going full out on digital photography
was more cultural than technological as the management first reacted to Sasson’s the filmless
digital camera by saying it was a beautiful invention and not to tell anyone about it’ Lucas
Jr. and Goh (2009) The culture as imbibing across several management teams then avoided
the pursuit of any innovation or venture that had a high-risk commitment. Utmost value was
placed on the Film business and improvement strategies were the core focus at most of its
executive management meetings (Lucas Jr. & Goh, 2009)
This fixation on film was the primary reason the migration to digital photography was rather
slow expectations. Kodak had not achieved its usual market dominance with Easy Share’s
bundled offerings of cameras, software, and a website that connected the consumer with
online photofinishing (Grant, 2010).
Even Kodak’s highest margin photographic paper business suffered. Kodak pioneered
technological advances in this area, such as Kodak Colorlast technology, which was
designed to preserve photographs for 100 years (Grant, 2010). Not only were consumers not
printing their photos, but digital camera sales also began to decline by 2006, as more
consumers took digital photos with cell phones (Grant, 2010).
Overconfidence bias: The Ultimate Cause of Bankruptcy?
This refers to a biased way of looking at a situation. When people are overconfident, they
misjudge situations, opinions, beliefs, abilities, and objective parameters of given situations.
According to Bazermore & Moore, 2013, p.15,) Overconfidence bias has been blamed for
wars, stock market bubbles, strikes, unnecessary lawsuits, high rates of entrepreneurial
bankruptcy, and the failure of corporate mergers and acquisitions. Failure to perform and
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assess the risk associated with the business is often associated with Overconfidence bias, and
the management of Kodak ignored the emerging threat even to the film business which they
anchored their entire strategy on.
The adverse effect of this bias also led to over precision for the management team of Kodak
as they were all too certain that what they knew was accurate and representative of the truth.
The road to bankruptcy for Kodak in 2012 was a long tumultuous one as several CEOs that
came onboard tried to revive Kodak and take it back to the old glorious days it enjoyed, but
it was a string of one poor decision to another as one of the CEOs even switched their focus
to printing materials at a point to cater for the digitally evolving world, while this was not a
bad strategy in itself Hp and others had since dominated the market and kodak was once
again a late entrant into the market. The final nail to the coffin would come later in the mid-
2000s as half of the Kodak business plan-the film, processing, and printing “blades”-
collapsed. Then cell phone cameras arrived, and the market for low-end digital cameras-the
“razors”-imploded.
Conclusion
The importance of moving with market trends cannot be overemphasized. It has been
identified that with flexible business plans, strategies, and extreme potential to predict
market trends, disruptions, and the market future, we can move with the market and latest
innovations based on research and development.
In the case of Kodak, they relied on outdated business plans and strategies which hindered
their growth success and market position. What happened to Kodak was completely
avoidable considering they had pioneer privilege, being the company that initiated digital
cameras and already had the highest market share with a wide customer base. They should
have seen the potential for such a further development and upgrade and invested in the same,
but they realized late when Kodak had already started losing its markets while other
companies were making massive progress and investment in digital camera markets.
Kodak had the potential, knowledge, customer base, brand advantage, and resources but had
no planning for the transition that the future presented for them and therefore ended up
becoming a lesson to others.
Kodak’s actions projected the importance of marketing, research, and market creation when
handling disruptive market trends. Because Kodak failed to leverage these market trends,
things became complicated as Kodak was not equipped to handle the technology they had
created and pioneered.
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References
Janeneel, (2012) ‘The success and failure of Kodak’, WordPress, 23 November. Available
at:
[Link]
Kashyap.S. (2021) ‘Failure of Kodak’, An investigation with the application of the paradox
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investigation-with-the-application-of-the-paradox-of-strategy
Kodak Investors (2021) Kodak Reports First-Quarter 2021 Financial Results. Available at:
[Link]
2021-financial-
results#:~:text=Kodak%20ended%20the%20quarter%20with,in%20the%20prior%2Dyear
%20quarter. (Accessed: 22 May 2022).
Mui.C. (2012) ‘How Kodak Failed’. Available at:
[Link]
Nazik, H., and Muhammed, A.T. (2014) ‘Kodak Stunning Journey of Fortune to Misfortune;
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