Eastman Kodak Company: Funtime Film
Brief Case Report
Diagnosis and analysis
There were several issues that Kodak had to face in 1990s and I will emphasize a few of them. First, Kodak’s market share fell from 76% to 70% over a period of 5 years. That happened primarily due to film’s consumers being price-sensitive and preferring lower-priced films of Kodak’s competitors. Fuji and Polaroid, for example, enjoyed 15% growth in one year, while Kodak’s growth rate was only 3% during that same year. It is easy to see that consumers were provided with more options when it came to choosing film and since quality differences amount films were unclear, buyers based their preferences on price alone. Also, as soon as speculation arose about lowering a price on film, Kodak’s stock fell by 8% in value. Kodak was used to high gross margins; therefore, market’s expectation of leader’s lower prices and decreasing profits had a negative effect on its stock price and possibly even brand image.
Second, Kodak faced stiff competition and the fact that Fuji was going after the US market. Fuji seriously differentiated itself from Kodak and grabbed consumers’ attention when it became the official film of the 1984 Summer Olympics in Los Angeles. Kodak’s response to Fuji’s move towards market domination has not been very timely or effective. It took Kodak 10 years to react and attempt to reposition itself in 1994 Olympic Winter Games in Norway. In my opinion, it was too little too late. Fuji’s campaign in 1984 was more successful because the games took place in the US and the games were Summer Olympics which are more popular than Winter Olympics. The winter games simply do not draw the same or as large crowd as summer games do.
Problem Statement I believe the reason behind Kodak’s slow growth rate is its own Funtime film. In theory and from an executive marketing standpoint, Funtime makes sense since it was introduced for 2 reasons: to win back consumers who have switched to Fuji or another lower-priced brand and to keep already loyal Kodak customers from switching to a lower-priced film. However, what Kodak has not foreseen was the challenge of keeping Funtime from acquiring Kodak’s Gold Plus customers. Even though Funtime was inferior to Gold Plus, most consumers were unaware of the differences in films’ quality. Funtime was perceived as simply another Kodak film which was offered at a lower price. Kodak failed to match Funtime’s low price with equally low perceived quality. That negatively affected Gold Plus sales and caused the slowed growth and decline in sales.
Also, judging the attitude about Kodak’s research and lack of action on its part, it appears that the company’s didn’t recognize a real threat in the competitors that were entering the market and offering lower prices. I think Kodak hoped that their customers’ loyalty and market supremacy would help it stay competitive and successful. However, new competitors mean lower market share for Kodak and those competitors’ lower prices mean loyalty of Kodak’s consumers was being quickly and easily challenged. Another reason for why Kodak found itself in those unfavorable situations above was the fact that the company was also not prepared to deal with the reality that the film industry was getting into a decline as the world started approaching the digital era. To summarize, Kodak was blinded by its original success in the industry and became too product-oriented. The company was also resistant to change. At the corporate level, it appears the executives were convinced that Kodak’s brand name and marketing strategy were so powerful that they undervalued the danger of digital.
Alternative # 1 One alternative is to keep Funtime film and come up with marketing campaign that emphasizes consumer education about photography and differences between quality of Kodak’s and competitors’ films. According to the case, “more than half of the picture takers in the US claim to know ‘little or nothing about photography.” How could Kodak possibly expect majority of its customers make smart decisions when selecting film?
A pro is that when consumers feel like the company wants to benefit and educate them, their loyalty and trust will be easier to capture. That builds the company’s image up. That will in turn contribute to improved market share. Another pro is a possible reverse of the damage Funtime did on Gold Plus sales. A con is advertising spending will increase significantly which will affect the bottom line on the income statement of the company. However, Kodak may be able to make up for increased costs with improved sales figures.
Alternative # 2 One of the alternatives for Kodak should be to withdraw Funtime from the market. Over time, Funtime will bring down Kodak’s stock price even lower. When price cut was just a rumor, the stock fell by 8%. Now when a price cut is not a rumor anymore, it is an actual product, the decline in stock price is inevitable.
A pro of this alternative is that Gold Plus and Royal Gold will not be cannibalized by Funtime and the stock price has a chance of being stabilized or even increase. A con is costs associated with discontinuing a product, pulling it from the stores and holding the inventory. These costs will eat their way into the company’s revenue.
Alternative # 3
Kodak should introduce digital cameras before everyone else. The company has to adapt to a new marketplace and study new consumer attitudes and needs.
A pro of this alternative is Kodak’s market share will increase as the digital imaging will become dominant. This alternative will make competitors like Fuji look obsolete and useless. Consumers appreciate innovation and Kodak can easily become a leader in the new digital era.
A con is that the introduction of new digital technology will most certainly put an end to Kodak’s film lines. This will have costs similar to the costs associated with the alternative # 1. Another con is the success may be short lived as the competitors enter and introduce similar products.
Solution
Kodak should market new digital technology and stop holding back for fear of hurting its currently profitable but short-lived film business.