Master free essay sample

Executive Summary The purpose of this report was to analyze the problems faced with the company called Kodak Eastman. Methods of analysis include SWOT, PESTLE and Porter’s Five Forces, which are frequently used to analyze the organization and the external environment. All details of these methods used in this case can be found in the appendices. In particular, there may be three factors mainly contribute to the fall of Kodak: new entry and existing competitors, carelessness of new technology and inconsistency in leadership. Recommendation discussed include: pay attention on quality of product, maintain the stability of leadership, introduce new powerful product and provide lower-cost consumable. 1.0 Introduction This report provides an analysis problems faced with the corporation whose name and product are familiar to the fans of photography, Eastman Kodak. Kodak was founded by George Eastman in 1888 and played a dominant role in photographic film market such as digital printing enterprise and Graphics, entertainment commercial films. Kodak was founded by George Eastman in 1888 and played a dominant role in photographic film market such as digital printing enterprise and Graphics, entertainment commercial films. However, Kodak has emerged from bankruptcy which means the old company will end up and a new Kodak will set up after the Chapter 11 restructuring ( IBS Center for Management Research 2012; Hedeen 2013). This report will give a brief introduction of Kodak Eastman firstly, and then analyze their current situation by using SWOT, PESTLE and Porter’s Five Forces. At last, some recommendations will be given on the aspects of how to deal with how to deal with the new and existing competitors, rapid development of technology and maintain the stability of leadership.2. 0 Analysis 2.1. Kodak Eastman: A Brief Introduction The company was founded by George Eastman and Henry Alvah Strong under the name Eastman Dry Plate Company in 1881, and renamed as Eastman Kodak Company in 1892. In the late 19th century, Kodak aimed at provide customers an operate simply camera with a lower price. For instance, although the pocket Kodak camera only cost US$5, Eastman still working hard to invent a low-cost cardboard box camera called ‘Brownie camera’, which sold for US$1 and used film sold at 15 cents per roll.The company continued to develop new technology product over the next 20 years and had been making a sharp rise in sales. However, Kodak started to losing ground within increasing competition from some other companies such as Fuji, Nikon Corporation, Canon Inc. and so on even Kodak continued developing new products. From 1993, Kodak refocus on its core business by spinning off its chemical company which had been running successfully (IBS Center for Management Research 2012). However, the company’s net income and market share still went down due to intense competition. At last, in the 21st century, Kodak began to struggle financially and announced emergence from bankruptcy in January 2012. (Hedeen 2013)2.2 Analysis of internal strengths and weaknesses by SWOT analysis Chermack (2007) assert that SWOT analysis can help companies to analyze internal as well as external environment and make appropriate decisions. Moreover, Chermack point out that the SWOT analysis model consist of six steps (as in figure 1) Figure 1. General model of SWOT analysis (Chermack 2007)Strength: To start with, the most obvious strength of Kodak is the strong brand image (MarketLine 2013). Kodak is one of the oldest and most famous brands around the world, since it was established for almost 125 years. Moreover, the study (IBS Center for Management Research 2012) show that it used to play a dominant role in market share till 1999 (from 79.2% in 1997 to 70.5% in 1999). The brand awareness will help them to capture leading position even in the competitive digital age. Weakness:However, according to IBS Center for Management Research (2012), one of the weaknesses of Kodak is inconsistency in leadership strategy. Kodak had been 13 president or CEO between 1884 and 2003, which means there had been many changes in policy in the company’s history. Furthermore, the leaders may cannot develop appropriate strategy in a short time. Besides, such changes may make the in-house leadership unhappy, which may negatively influence the brand image of the company.Additionally, MarketLine(2013) pointed out that lack of product diversification is another weakness of Kodak. For instance, in 1993, Kodak closed its chemical company which had been successfully to focus only on its core imaging business. Moreover, it sold some other businesses to ensure product concentration (IBS Center for Management Research 2012). It was indeed increased income of the company, but such discontinued operations may make aggressive impact to company in future, since the competitors like Cannon and Fuji offer more a wide variety of products and services. The opportunity and threat are also significant for analyzing the situation of Kodak. The opportunity include invented the first digital camera, strategic alliance. On the other hand, tough competitive environment, rapid development of technology may threaten the company’s result of operation and decision making (MarketLine 2013). The two-by-two matrix of SWOT analysis can be seen as Appendix I. 2.3 Analysis of external environment by using PESTLE methodMullins (2010) asserts that the management of opportunities, challenges and risks caused by the changing external environment is essential for organizational performance. PESTLE analysis is a popular method for analyzing the external environment. The letters of PESTLE stand for Political, Economic, Social, Technological, Legal and Environment. This section will focus on discussing economic and technological elements in relation to Kodak. Economic element:In considering the economic factor, the impact of Global Financial Crisis (GFC) cannot be ignored. The household incomes were lower in 2009 than they were in 2008 not only in low-income countries but also in middle-income countries (Foxley 2009; International Monetary Fund 2009). People became cautious in spending in such an economic environment. In spite of this, the price of Kodak’s price is still high, but its competitors such as Fuji, Canon cut down the price to attract more customers.Additionally, the row cost of films such as silver rose, as a result, Kodak had to increase the prices for its consumer and movie films (The USATODAY 2006). The increased cost of materials may affect Kodak’s earning. On the other hand, such problem will not affect the competitors since they are more focus on the digital market. Technological element:In the technological area, Kodak invented the first digital camera in 1975 and continued to develop new high-tech product such as OLED material and hold the dominant position on the film market and camera sales (IBS Center for Management Research 2012). Nevertheless, the competitors such as Sony introduced some filmless technology products which can record image on floppy disks. This make the growth of Kodak’s income decelerate. Despite Kodak introduced some new products to response, the products were unsuccessful. Even Kodak invented the world first digital camera, they did not catch the potential of digital product. On the other hand, Kodak’s competitors recognized that and started to focus on digital market. According to IBS Center for Management Research (2012 p13), ‘the fall of Kodak was a classic example which should serve to warn other companies that innovation alone was not enough.’ Insufficiency in speed of change and adoption of new technology is a significant reason for Kodak’s losing their market share to its competitors.Other elements: The other elements such as Political, Social, Environmental and Legal factors are also important to analyzing the Kodak’s case, which can be seen as Appendix II.2.4 Analysis of Competitive environment by using Porter’s five forces Porter (2008) points out that there are five forces that shape industry competition: threat of new entrants, threat of substitute products or service, bargaining power of suppliers, bargaining power of buyers and rivalry among existing competitors.In the 1950s, Japanese manufacturers s uch as Fuji, Olympus, Nikon entered the camera market as the new entrants and make a significant threat to the traditional power, Kodak. From then on, Fuji became the most powerful competitor since it provided substitute product such as photographic films and digital cameras of Kodak. Move to 1990s, such rival brands offered higher quality at a lower price product than Kodak. Therefore, buyers got the power to choose products in a lower price, which lead to the decline of Kodak’s market share (IBS Center for Management Research 2012). 3.0 Conclusions3.1 Kodak Eastman obtain a well know strong brand image which means it can rise up through making appropriate decisions by a stable leadership team. 3. 2 Study shows that Kodak Eastman lacks diversification in its products and services, whereas its competitors have a more diversified portfolio. This may causes it lose market share again in the future. 3.3 The Global Financial Crisis and the rise cost of raw material caused a economic problem to Kodak Eastman, which means it should rose up the price of its products at a same quality. Therefore, the buyers from low-income and middle-income countries would be cautious to buy such products. 3.4 The Kodak management underestimated the change of digital technology while the competitors recognized the potential of digital camera. Experts assert that this caused by alone innovation of Kodak Eastman. 3.5 Although faced keen competition from other companies such as Fuji, Nikon, Canon and so on. Kodak Eastman underrated such crisis. This resulted in Kodak fall in the creative digital age and came out of bankruptcy in 2013. 4.0 RecommendationsAccording to the analysis above of Kodak Eastman, the following recommendations are made: ? Since the strong brand image Kodak Eastman have obtained, it should pay more attention on improving quality of product and providing better after-sale service instead of advertisement. ?Maintain a stable leadership team which should include people from different areas to ensure that the diversification of its products. ? Be more focus on the digital market to decrease the cost of raw material of films such silver in the first five years of new Kodak company established. ?Allocate money in researching and developing new technology and introduce a new powerful, innovative product at the beginning of 2014. ?Provide low-cost and consumable product such as inkjet cartridges and camera batteries cheaper than the competitors.