| Eastman Kodak and Fujifilm | A Tale of two Companies | | | Roosevelt NickelberryAugust 12, 2013 | | |

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Introduction
Under examination is a tale of two companies; Eastman Kodak and Fujifilm. The ambitious topics under discussion are: the history and core business of each company, the approach to administration that each company has followed in order to grasp improvement, what management variances have impacted their comparative achievements, an evaluation of each business’s method to ethics and social accountability and the bearing those methodologies have had on each company’s cost-effectiveness. Also, there will be a dialogue on the extent to which the administration of both companies adapted to fluctuating market conditions, and personal recommendations any company could adopt in order to build up flexibility to back up its decision-making process in order to adjust to fluctuating market environments.
History of Eastman Kodak
One of the greatest inventions of the 19th century was the camera. Photography was quickly embraced by the world as it scrambled to accurately record history and family legacies. Before Kodak introduced its roll-film camera design in 1882, photography was decisively recognized as a specialized and commercial activity. When the public gained access to shooting their own photographs, through very astute marketing techniques, Kodak took advantage of the situation by “advertising promoted the roll-film cameras in ads that showed the spirit of ‘adventure’. Kodak encouraged people to go on vacation and bring back pictures of exotic peoples and places” (Munir & Phillips, 2005). This became Kodak’s primary strategy; to evoke the desire of the consumer to take his roll film camera everywhere to record events during vacations, special occasions and holidays.
Making photography accessible to the amateur also took innovation as the company separated photo development by introducing an easy to use push-button camera. “Cameras were sold preloaded with film. Upon completion of the roll, the user returned the camera with the film in it to Kodak, who took out the film, developed and printed it, loaded a new film into the camera and returned all this to the user. With the elimination of the need for knowledge about development, photography became feasible for the layperson, enabling him or her to perform this new role with ease” (Munir & Phillips, 2005).
History of Fujifilm In September 1919 Dainippon Celluloid Company Limited, with factories in Kanzaki, Aboshi, Sakai, and Tokyo, was created through the unification of eight celluloid manufacturers. In March 1926, a new division for motion picture ingredients, which later became the Motion Picture Products Division, was launched at the primary office. At first this business made no money, but in time Nagase became the leader in film sales in Japan and established a close relationship with Eastman Kodak. Later, Dainippon Celluloid Company (now Daicel Chemical Industries, Ltd.) was the first Japanese company to successfully manufacture movie film. In January 1934 Photographic film operations are spun off to form Fuji Photo Film Co., Ltd. According to the company website Fujifilm, (named after the famous mountain in Japan) “from its roots as a photographic film manufacturer, has steadily pursued innovative solutions in an increasingly broad range of fields, from imaging to medical systems” (© FUJIFILM Corporation). In the 1930’s their primary products were motion picture, plate-making and x-ray film. In the 1940’s color reversal film and still cameras were introduced. Each decade the company has continued to push the envelope of film photography innovation.

The Core Business Model The core businesses of Eastman Kodak as of January 2012 were: retail systems solutions, document scanners and digital plates. The growth businesses are: consumer inkjet, digital printing solutions, enterprise workflow software and services, and packaging solutions. During that time the company was trying to secure a $950m debtor-in-possession facility to provide liquidity and to re-finance its existing revolving loan, allowing it to restructure under Chapter 11 bankruptcy protection (Francis & Nias, 2012). The core business of Fujifilm is not film. Its latest endeavor is cosmetics. Cosmetics are a natural progression for a company whose origins begin with expertise in chemistry. As the digital age came upon us, “What Fujifilm did was to look further than simply moving to digital photography from analog. Instead, the company tapped its chemical expertise for broader uses, such as drugs and liquid-crystal display panels. Cosmetics, as well: It seems the process for stopping photos from fading can be used on skin, too” (Inigaki & Osawa, 2012). According to the Wall Street Journal, Fujifilm now makes only around 1% of its revenue from photographic film, down from nearly 20% a decade ago. Its health-care operation, which includes medical equipment, drugs and cosmetics, accounts for about 12% of revenue. Materials for flat-panel displays generate 10%.
Adaptive and Organizational Strategies It is obvious that Kodak had first mover advantage over Fujifilm and a 40 year head start as a company. It was known for its pioneering technology and innovative marketing. “You press the button, we do the rest,” was its slogan in 1888. By 1976 Kodak accounted for 90% of film and 85% of camera sales in America. Until the 1990s it was regularly rated one of the world's five most valuable brands. Reviewing Kodak’s early competitive advantage, it seemed invincible so long it embraced innovation and diversification. Eastman later identified Kodak’s guiding principles as; mass production at low cost, international distribution, extensive advertising, customer focus and growth through continuous research. Furthermore, he also articulated Kodak’s competitive philosophy; “Nothing is more important than the value of our name and the quality it stands for. We must make quality our fighting argument” (Kodak Website). With the advent of color technology, the success story continued as the company invested heavily in R&D and by 1963 Kodak had become the industry standard. Sales topped US$1bn by launching into new product lines such as cameras and medical imaging and graphical arts, and quickly rose to US$10bn by 1981. According to a Strategic Analysis by George Mendes, “how strategists should define or solve strategic issues so as to generate the best possible solutions is an area of great debate between two schools of thought; the Rational Thinking Perspective (RTP) and the Generative Thinking Perspective (GTP). Whereas the RTP approach emphasizes a rigid application of problem solving through a rigorous and highly structured analytical method, the GTP method emphasizes a much less formulaic style by using intuition and by challenging strategists to be creative and use a more innovative or even unorthodox approach to strategy”(Mackay, et al, 2005). From an early stage in the company’s history, Kodak used a strictly logical RTP approach to the production and sales of cameras and film. Kodak used a razor-blade strategy: it sold cameras at a low cost, and film powered Kodak’s development and returns. The business became severely reliant on this highly lucrative margin from film, and increasingly paid less attention to equipment (Gavetti, Levinthal & Rivkin, 2005). Gavetti goes on to relate that “Kodak’s lack of strategic creativity led it to misinterpret the very line of work and type of industry that it was operating in which was later devastated with a fundamental shift towards the digital age.” Whereas Fujifilm became a mammal, Kodak remained a dinosaur. Both firms realized that digital photography itself would not be very profitable. “Wise businesspeople concluded that it was best not to hurry to switch from making 70 cents on the dollar on film to maybe five cents at most in digital,” says Larry Matteson, a former Kodak executive. But both firms had to adapt; Kodak was slower (The Economist, 2012).
An Evaluation of each Company’s Approach to Ethics and Social Responsibility The Fujifilm code of conduct outlines its mission to be morally and socially responsible outside of the confines of its corporate responsibilities to its shareholders and stake holders. It realizes that in the wake of many corporate governance scandals, it must be obliged to create an environment for controlling corporate operations (internal controls), as well as responding to the demands of society that the compliance of social responsibility lies at the heart their every effort.
Fujifilm’s code of conduct has four main objectives; respect for basic human rights, open-fair-clear corporate activities, protection/preservation of corporate assets and information, and environmental conservation and protection (Fujifilm’s Holdings Website). Back in 2006, the Eastman Kodak Company established “Responsible Growth Goals” aimed at improving operational efficiencies, product stewardship, and social responsibility. The company’s social responsibility seemed to be more far-reaching that Fujifilm by expanding employee education and safety, ensuring product energy efficiency and improving their environmental attributes, as well as taking more control of supply chain performance by assessing their efforts against the performance expectations of the Electronics Industry Citizenship Coalition (Sarcini, 2009).

How Each Company Adapted to Changing Market Conditions According to our text, Eastman Kodak was the prevailing producer of photographic film worldwide. The brand was connected with superiority, convenience and value. The company maintained a sizable market share until Kodak invented the digital camera. At the same time “it was unprepared for the rapid acceptance of its new technology, and its managers watched film quickly become obsolete for the majority of camera users” (Williams, 2013). Our text goes on to say that Kodak attempted to adapt to the changing marketplace by “bolstering investments in its digital camera division; in the chemicals, paper and kiosks used for picture printing’ and in consumer inkjet printers (to print photographs) and fast digital inkjet printers for commercial use (Williams, 2013). Like Kodak, Fujifilm realised in the 1980s that photography would be going digital. Like Kodak, it continued to milk profits from film sales, invested in digital technologies, and tried to diversify into new areas. Fujifilm's success stems in part from a decision in 2000 to spend around $1.6 billion for an additional 25% stake in FujiXerox, the firm's joint venture with Xerox, when the struggling American firm was in need of cash. This allowed Fujifilm to control the joint venture's strategy and to consolidate its hefty earnings. When film began its swift decline, the company had a cushion of earnings. Fujifilm also focused on applying its technologies in new areas. Fujifilm's expertise in nanotechnology for placing chemicals onto film, for instance, was carried over to applying cosmetics to facial skin. Today, Fujifilm's medical-imaging equipment business is growing quickly, and it has acquired many firms in the sector, including paying $1 billion in December for SonoSite, an American ultrasound equipment maker (The Economist).

Ways a Company Could Build in Flexibility in Order to Adapt to Changing Market Conditions Using Kodak’s ineptitude as an example of inflexibility to adapt to change, or, at the very least, not change fast enough; the first dimension of flexibility would be how willing the decision makers are to change perspectives. It seems that Kodak did not examine its competition nor the external environment to a sufficient degree to warrant that there was a problem. This could have been accomplished with a SWOT analysis. Its primary strengths were a formidable supply chain, capital from film revenue (before digital took over), and prestigious name value. Its weaknesses were technological discontinuity and its failure by the decision makers to be open to new concepts, material bases and roles. Opportunities were immense because Kodak had first mover advantage by inventing the digital camera which it failed to capitalize on. Still when this technology took hold Kodak could have used its resources to open a one stop printing store like Kinkos and formed an alliance with UPS. Kodak is also a chemical company; it could spend millions of dollar on R&D to introduce pharmaceuticals products. Another concept that any company should have is versatility. Versatility is achieved through intraorganizational processes which are the collection of activities that take place within an organization to transform inputs into outputs that customer’s value. Kodak seemed to be on its own planet and never considered forming strategic alliances or joint ventures with other companies. Fujifilm consolidated its earnings through a joint venture with Xerox. Finally, flexibility is achieved through a constant gaging of the external environment and following the economic law of opportunity costs. Every decision made involves a giving up of some decision. If you pay your investors dividends on their investment, you are giving up retained earnings that could be used for another investment. The external environment is constantly evolving and a company’s decision makers should evolve with it. Also, companies should never ignore their competition because losing sight of the actions of your competitors may make you lose more market share and less agile in your ability to adapt.
Conclusion
It is sometimes very easy to criticize an entity that has made some costly judgments concerning the direction of it strategic focus. IBM could have made billions if it hadn’t allowed Microsoft to develop software for its personal computers. Kmart went bankrupt trying to compete with Wal-Mart in a price leadership strategy. On the other end of the spectrum RCA over diversified and ended up falling behind lower-cost consumer electronics manufacturers from Asia. Eastman Kodak developed the digital camera in 1975 but did not finance in the technology because it feared that it would undercut sales in its film business. They were right--as consumers moved to smart phones and tablets, Kodak watched its stock drop from $94 dollars a share, down to 65¢ cents. Kodak’s biggest problem was that it believed that it had a God given right for the complete market share. It counted on the fact that people would never miss that “Kodak moment” and would always buy that small yellow camera and record their memories. They forget to remember two things: business is very severe and nothing lasts forever.

References
Francis, J. & Nias, W. (2012, January 25). Kodak identifies core businesses as it pitches for $950m financing. Print Week, Retrieved from http://www.printweek.com/Business/article/1113856/kodak-identifies-core-businesses-pitches-950m-financing/
Fujifilm Holdings Corporation. (2013). Corporate history. Fujifilm Global, Retrieved from http://www.fujifilm.com/about/history/corporate_history/
Gavetti, G., Levinthal, D. A. & Rivkin, J. W. (2005, August). Strategy-making in novel and complex worlds: The power of analogy. Strategic Management, 26(8), 691-712.
Inigaki, K. & Osawa, J. (2012, January 20). Fujifilm thrived by changing focus. The Wall Street Journal, Retrieved from http://online.wsj.com/article/SB10001424052970203750404577170481473958516.html
Mendes, G. (2006). What went wrong at Eastman Kodak. The Strategy Tank, Retrieved from http://www.martinfrost.ws/htmlfiles/oct2011/What-Went-Wrong-At-Eastman-Kodak.pdf
Munir, K. A. & Phillips, N. (2005, November 26). The birth of the ‘Kodak moment’: Institutional entrepreneurship and the adoption of new technologies Organization Studies, Retrieved from http://oss.sagepub.com/content/26/11/1665.full.pdf html
Sarcini, M. (2009, June 8). Kodak announces new sustainability goals 2 Sustain, Retrieved from http://2sustain.com/2009/06/kodak-announces-new-sustainability-goals.html

Williams, C. (2013). Management: A student-tested, faculty-approved approach to teaching and learning. (5th ed., pp. 130-151). Mason, Ohio: Cenage Learning.
Tokyo, K. N. C. (2012, January 13). How Fujifilm survived: Sharper focus. The Economist, Retrieved from http://www.economist.com/blogs/schumpeter/2012/01/how-fujifilm-survived