Case Study on "Kodak"

Case Study 6 pages (1933 words) Sources: 0

[EXCERPT] . . . .

Kodak

The five forces model includes the threat of entry by new competitors, the intensity of rivalry among existing competitors, pressure from substitute products, the bargaining power of buyers, and the bargaining power of suppliers. For photography equipment, the threat of entry by new competitors is very real and even quite strong, given that this includes not just new digital cameras but cell phones and other devices that can now take pictures and so serve as an alternative product in competition with traditional photography equipment and digital photography cameras alike. The widespread production and use of faster computer chips capable of storing larger amounts of data in a smaller location means cameras can be made quite small and so can be sold as consumer items attached to everything from an i-Pod to a penlight. This makes it possible for competitors to emerge on the basis of a number of existing types of product adaptable to photography. High-end photographic equipment offers more barriers to entry, but the consumer market is more open and easier to enter. This also means more pressure from substitute products, in this case cameras placed in a variety of devices other than a normal camera. Kodak has already seen new products and new firms entering the field, though it takes a much larger company to be dominant in the field. Rivaly among existing competitors has also been strong and will continue to be so, with the major competitors being companies in the computer field and now adapting to the need for photographs, the manipulation and printing of photographs, and the ability to send photographs by digital means from one place to another. The power of buyers is clear in the industry as the buyer shows a preference first for digital over traditional photography even when the cost is higher for the camera needed. In terms of making prints, the home market is considerable but has not yet become at all standard. The power of vendors is healthy but not so much as to affect the market. Faster and higher-storage chips serve the needs of the market and are widely available.

2. The problems facing Kodak are problems precisely because the photographic equipment industry is changing so greatly with the advent of digital photography as a consumer product. The introduction of digital methods for this industry is only a little more than a decade old, and yet the market penetration has been so great that traditional photography is all but dead at the home level. Consumers were attracted to a number of more convenient types of equipment in the eighties and nineties, such as the disposable camera that could take snapshots and be processed though the system developed by Kodak to allow for a relatively inexpensive method of getting photographs and making prints. Digital cameras do cost more as an initial outlay, but after that, processing costs disappear complete, the cameras can be used over and over again without the need to purchase film, and the only expense is for making paper prints. Kodak worked to introduce methods of doing this in a drugstore by downloading data from the camera into a kiosk allowing for instant printing, or by sending the data to Kodak for more elaborate prints.

The industry today is dominated by companies already established in the computer industry and by companies that recognized the changes taking place so that they prepared by creating equipment for digital photography. This also includes new devices that now include photographic capabilities where they might not have done so in the past, such as the cell phone that can take pictures. The possibilities opened by this technology has introduced a number of opportunities that are only beginning to be addressed by various companies, including Kodak. A company like Kodak can continue to serve that segment of the home market that does not choose to print its own pictures, though the process is becoming easier all the time so that more and more people will take advantage of it.

Success in the digital segment of the industry is dependent to a great extent on the features provided by camera manufacturers as well as the growing ubiquity of cameras in other products, like the cell phone. With more features, more customers can be attracted to the market. Price is also a key element, and if the camera follows the pattern of other technology in recent years, prices will drop considerably over the next few years so that cameras that may seem out of reach today will be much more available to more and more users in the future. Prices on computer-related products tend to drop rather rapidly after introduction, a rend also seen with much video equipment even before the digital era. There are also a large number of companies working to create new features and new products for taking, printing, saving, and transferring pictures. Some of the speculation about the future of the industry has included wireless systems allowing for the transfer of an image from the camera to an electronic picture frame, thus reducing the need for prints on paper. How much this idea becomes accepted by the consumer would determine how much the market for photo printing paper would be affected as well as companies that specialize in making prints. It would also affect the degree to which home users would print out their own photos on the various devices now appearing to make that possible and much easier. It would affect Kodak and the kiosks it has set up to print from the camera in a store. Inventors can produce such devices, but only the consumer can decide that it is worth using. This means that the consumer has considerable power in deciding what course the industry takes in the future, just as the consumer has decided these issues in the past.

Kodak's strategy to compete in the digital photography industry has been successful to a degree, but the company started later than it should and has not managed to gain the sort of market share it needs to be dominant in the industry. The company fist sought to get into the market by creating the kiosks at which consumers could print out their pictures in drugstores and other stores and also offered a service whereby the customer could send in his or her storage unit from the camera and get back pictures in the mail. This is only effective as long as the consumer is not ready to print his or her own pictures at home, but as this becomes more viable and is undertaken by more and more consumers, or as seeing prints on a compute or similar device becomes sufficient for many more people, Kodak will only lose more ground. That appears to be the direction being taken by many consumers today, so Kodak will begin to lose both in making prints and in selling photo printing paper to the home market. Other segments of Kodak's business seem healthy, but the vast majority of its business has been in the home photography market, in which it is losing ground. The strategy now is to develop new digital methods and even new digital equipment, though for this task, the company is behind already established manufacturers and the inventive power of established computer and technology companies. Kodak has had a strong market with disposable cameras, and this segment continues to be used by many people, at least for certain situations. That market is also likely to diminish as the immediacy of digital photography, along with the fact that disposability is no longer a selling point, becomes a key issue for the consumer. Kodak may still have a market for specialty printing, though that segment is also diminishing in the face of widespread use of programs like Photoshop that allow the consumer to make his or her own prints with considerable leeway as to what is produced. Kodak's approach overall has thus not been effective as the company continues to lose ground, and even to the degree that the company has reduced losses, it has not done so sufficiently to gain the dominnat position it needs to survive in the long-term.

5. Strengths:

Kodak has a powerful name in the photographic industry, and that can be used to keep customers and to put a certain imprimatur on new approaches taken by the company. The company has a large infrastructure in place that also widens its reach and that can mean any decision it makes can be implemented quickly and effectively, though how well the idea works depends on what the consumer really wants. The company has several other business segments that remain healthy, and it is largely the consumer market that is facing a problem at the present time. The company may be able to survive on the other segments alone, but revenue will be much reduced.

Weaknesses:

The Kodak name is also a weakness in that it has long been associated with a type of photography and… READ MORE

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