Porter’s Five Forces Analysis
To better understand what is exactly pressuring Kodak’s business, Michael Porter’s Five Forces analysis has been chosen. The impact of the different forces on the company is presented as follows:
I. Rivalry among competitors
- Numerous competitors active in all segments of the imaging industry (rolled films, traditional photography, digital photography, traditional printing, and digital printing).
- Faster than expected consumer adoption of the new technology attracting new entrants.
- Decrease in sales for traditional products forcing incumbents to quickly release new digital solutions.
- Switching costs inexistent for consumers
II. Threat of substitutes
- The fast advent of digital technologies led to rapid switching and this new substitute is proving problematic to handle for Kodak.
- Modern cell phones are now boasting high definition photography capabilities up to 16 megapixels (anselmobiasse.com)reducing the attractiveness of existing cameras.
- High commoditization: digital image capturing devices are found in laptops, tablets, cell phones, televisions and cameras. This solution is hard to differentiate and thus consumers’ choices are driven by price.
- Free, cloud-based solutions (picasa, photobucket, flickr, etc…) offered in the management of pictures undermine the attractiveness of branded, paid solutions offered by major players.
III. Threat of new entrants
- High entry barriers due to development costs, distribution costs and R&D expenditure make this industry difficult to enter.
- Kodak’s aggressive expansion in emerging markets like China (ceibs.edu)9 make it difficult for newcomers to establish a credible presence.
IV. Bargaining power of suppliers
- Cameras providers can develop their own manufacturing processes or turn to the numerous parts manufacturers without any prospect of economic retaliation.
- Primary materials like silver used in the manufacture of rolled film are becoming more expensive as demand has grown tremendously. Thus suppliers have the upper hand and can more easily choose who they sell to.
V. Bargaining power of buyers
• - Wholesalers and individual dealers have a wide range of choices at their disposal to favor one brand over another depending on the business terms and profit margins offered.
• - Individual buyers don’t have much leverage at their level but the trend could somewhat change given the tremendous importance and credibility of word of mouth through social medias. This might influence other potential buyers and thus has to be taken in consideration as well.
The different forces at play here make for a very competitive industry, characterized by slim profits margins and low profitability in the digital segment of the business.
In the case of Kodak, this is mitigated by the fact that their traditionally profitable business is growing rapidly in emerging markets where the demand for rolled films and traditional photofinishing solutions is still high.

SWOT ANALYSIS
The analysis below puts the finger on what Kodak is all about: a company that carries its former glory like a burden, unable to free itself from the shackles of Eastman’s legacy.
I. Strengths
• - Century-long experience in the traditional photography business
• - Household brand name
• - Highly valuable brand equity
• - International presence
• - Strong distribution channels
• - Huge financial resources
II. Weaknesses
• - Lack of long term commitment to its SBU’s
• - Core rigidities ingrained in the company
• - Company culture hindering strategic changes
• - Inability to translate innovation into marketable products
• - Lack of digital culture and expertise
• - Inability to integrate acquisitions
III. Opportunities
• - High growth in digital imaging demand (products and services)
• - Emerging markets are ripe for Kodak’s existing product portfolio
IV. Threats
• - Industry saturating with new entrants and incumbents
• - Shrinking profit margins in the digital SBU’s
• - Consumers’ progressive abandon of analog photographic solutions
• - More experienced competition in the digital field
Challenges are numerous for Kodak and it is currently not in an ideal position to overcome them.In the next segment we’ll see how Kodak could take a completely different path to success in differentiating itself and in leveraging its current competences to enter new markets.
Stubbornness allied with condescension produced a deleterious corporate climate...
FUTURE STRATEGIC DIRECTION
Divestment
Following the findings highlighted in the study above, one of the possibilities – as drastic as it might sound – would be to turn the company around by progressively exiting the silver-halide consumer business. Although this might seem like something unconceivable for Kodak’s management, it could well be a blessing in disguise for the firm.
Over the last century the company has amassed considerable capital equipment, specialized human resources, technical processes and competences. Theses assets are depreciating as fast as consumers are adopting digital technologies.
Taking that matter of fact into account, wouldn’t it be clairvoyant from the managing team to strategically divest those assets and sell them off unit by unit to companies in emerging countries?
It has been said and demonstrated that Kodak is profitable in China, notably due to the fact that this particular market has become much more affluent over the past twenty years and the huge potential customer base that couldn’t afford cameras, rolled films and printing paper is now ripe for Kodak’s offerings.
Instead of evaluating a strategy from a resource-based perspective where the company milks its distribution channels and kiosks, Kodak’s management could view it from a market-based perspective: it is self-evident that in the long term the consumer analog photography business is facing extinction and this business is no longer attractive in mature markets, so Kodak has to make choices.
Selling off its traditional imaging business would alleviate Kodak’s heavy operating costs, and getting rid of the dogs in its portfolio would relieve them and provide much needed resources to concentrate on their digital businesses.
This process could take years to complete but would yield benefits for Kodak immediately. Before the company’s assets become unsellable and the exit costs too high, Kodak would be well advised to reconsider their strategy in this regard. After numerous unsuccessful acquisitions and botched joint ventures, it is clear that the company has trouble integrating its acquisitions in its different SBU’s and has even more trouble working with others.
This stems from the fact that Kodak used to do everything internally and had been leading the way for too long without any credible threat crossing its path. This led to an insular company culture and business operations where Kodak would keep churning out the same kind of products while knowing that a disruptive technology was already undermining their efforts.
Stubbornness allied with condescension produced a deleterious corporate climate where innovation is hindered, old ways are favored over new methods and executive management is unable to foster change among the company.