S3STR401 Kodak
Strategic Management
Session 13 Mini-Case
Kodak and technological paradox
In 2012, after many strategic disappointments, Kodak, former leader of camera manufacturers, announced that it
filed for bankruptcy to restructure. How can we explain this failure while Kodak had advanced technological skills
and relied on its strong identity and historical legitimacy?
Kodaks business model
Founded in 1880 in Rochester (New York State), by George Eastman, Kodak has managed to make taking pictures
easy and a good market, which was previously an expensive and complex activity. You Press the Button, We Do the
Rest", said Eastman. This has revolutionized the photography through numerous inventions. The company was first
defined as a chemist, ensuring the production of films and selling photo prints. Then, Kodak produced cameras
designed to use its films. These devices were small and cheap, like the Brownie sold for one dollar from 1900 and
especially the Instamatic, released in 1963, of which Kodak sold over 50 million copies.
But the originality of Kodak's business model is to focus not on cameras but on consumables (film and print) that
ensure the company comfortable income and high margins. Kodak also invested a lot in innovation and popularized
color, thanks to the invention in 1935 of Kodachrome a quality color film that changed the practice of
photography. Drawing on its chemist culture, the group refuse to acquire the technology of photocopiers, which
was later successfully developed by Xerox. Similarly, the company rejected the logic of Polaroid instant printing.
Instead, it invested in other promising technologies- in 1975, Kodak invented the digital camera ... But did not
really know what to do with it. Before its competitors, the brand released cheap digital cameras. The paradox is
that Kodak, which will die of the digital boom, was the first in this industry. Kodak was also the designer of the first
digital back for the reflex cameras, it developed electronic chips for many cameras and phones. Thereafter, it
launched materials and innovative services such as digital photo frame, photo printing kiosks, the first easy system
to transfer photos to computer or instant photo printing. It was also at the forefront of medical imaging and digital
video.
The digital missed turn
In the late 1980s, Kodak reached nearly $ 20 billion of revenue, and realized an operating margin of over 17%, far
from competitors figures in the industry. The company owned 90% of the US market and was well positioned in
terms of technology. Yet, its conception of photography based on film brought the company to consider the digital
as a gadget or as a peripheral technology to photography, used for storage, for example. Digital was considered as
a way to increase revenues from film. What Kodak missed was that value of the picture was not coming anymore
from the film but from the camera. In addition, the company considered digital technology as still uncertain and
costly.
Kodak also opted for a slow transition to digital, wrongly thinking that the emerging countries would slowly
migrate to digital cameras due to their high cost. Moreover, the brand, due to the strength of its expertise, its
market shares and its international reputation, has been neglecting Fuji for a long time. However, the Japanese
company managed to destabilize Kodak by combining innovation, price war and by penetration of multiple
distribution channels. Also, Kodak, as a reaction, mobilized its resources to counter Fuji and abandoned even more
the commercial development of digital technologies.
Audencia is accredited
Case translated by Emma AVETISYAN and Laurent NOEL
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S3STR401 Kodak
Strategic Management
Session 13 Mini-Case
In early 1990, the company was quickly passed by Sony, Canon and even the Fuji on digital market. The new CEO, a
former from Motorola, redirected the company to become an Imagin Company combining film, hardware and
digital. However, the results did not meet the expectations. The new CEO coming from Hewlett-Packard, arrived in
late 1990s and bet on printers and consumer electronics, but without success. In 2004, the yellow brand still
generated half of its turnover from films and photo prints. The company believed that film could endure, however,
the losses were accumulating. Between 2003 and 2011, the group, after abandoning the production of
Kodachrome in 2009, cut 47,000 jobs, closed 13 plants and 130 laboratories dedicated to film. In 2012, Kodak
weighs only 150 million euros on stock exchange, against 7 billion in 2007. The company went bankrupt and sold
its patents, some of which - ironically - attracted giants of IT and mobile telephony.
Questions :
1. How to explain the decline of Kodak despite its expertise and technological innovations?
2. According to you, what Kodak should have done? Which obstacles Kodak had to overcome?
Source: Mini business case, "Kodak and technological paradox," in Lehmann-Ortega, Leroy, Garette, Dussauge and
Durand, Strategor, 6th Edition, 2013, Dunod
Audencia is accredited
Case translated by Emma AVETISYAN and Laurent NOEL
Page 2/2
