Eastman Kodak Company is a famous manufacturer of films, plates, cameras and other various goods used in photographic industry. The company has already been operating on the world market for more than a century. However, it has not always been successful, and years of prosperity were always superseded by the years of decline. Facing stiff competition, the company very often experienced the decline in sales volumes and profits. Current situation of Kodak Company is not an exception. Four years ago, in April 2002, the Chief Executive Officer of Eastman Kodak, Daniel Carp announced that the company was experiencing the decrease in earnings and sales. However, Daniel Carp did not name any of his faults that could cause the decline in profits but referred the current situation to the situation in the 1980s when Colby Chandler performed the functions of company’s CEO. Daniel Carp regrets that Chandler did not direct the monetary investment to the correct course, and preferred to conduct the program of diversification by investing the company’s money into healthcare and chemical project, rather than investing it into the research and development of digital technologies. Being organized by George Eastman as early as in 1901 Eastman Kodak Company was a successor of Eastman Dry Plate Company (1880). It became a world leader in the field of photography because it introduced the first portable camera in 1888. During the second half of the 20th century, the company faced keen competition from the side of Fuji Photo Film Co, which was able to offer consumers the film with the same quality as Kodak’s film but at lower prices. While the company was experiencing the period of decline, it was Colby Chandler who became a CEO of Eastman Kodak Company. He adopted his strategies, the analysis of conducted below.
Conduct a stakeholders analysis for Kodak.
In order to conduct stakeholders analysis, it is necessary to identify individuals, groups of individuals or organizations that are influenced by the activity of a company. Usually, stakeholders include not only shareholders but also advertisement agencies, suppliers, distributing corporations and other participants in the process of manufacturing and distributing the goods. Thus, it consists of all parties that are affected by or can affect the operations of the company. When Colby Chandler was a CEO of Eastman Kodak, he made sure acquisitions, which widened the number of Kodak’s stakeholders. When Kodak Company purchased sterling Drug, the latter adopted a very different strategy in comparison with the past.
To cell 35-mm automatic cameras at lower prices, Kodak purchased a minority stake and joined Japanese joint venture Chinon. Then Kodak just sold the cameras under its brand. Indeed, Kodak used to buy cheap Japanese products, which it later used for the manufacturing of its goods. However, shareholders probably were the most dependent on Kodak, especially when the company experienced a decline in the profits, which was causing the reduction of share costs.
Stakeholders’ most significant interest is profit and prospects for future, meaning that company might or might not grow in the future. Usually, stakeholders try to secure themselves, signing certain contracts protecting them from dramatic losses.
What organizational structures did Kodak adopt over the years? Explain.
The organizational structure of Eastman Kodak wasn’t always the same. At first, the company’s corporate structure was corporation operating only inside the USA, representing a functional structure of the company. However, very soon the company grew, and its products became popular not just in the USA but also worldwide. In 1985 the CEO of Kodak Colby Chandler started reorganizing the company with the help of “entrepreneurial” approach. By 1989 Chandler restructured the company by dividing Kodak into four operating groups: the Imaging Group, the Information Systems Group, the Health Group, and the Chemicals group. The first operating group included the original business of Kodak: picture and video products, photo finishing, electronics and other consumer products. The Information System Group aimed at gaining a share of the market by extending its economic activity in computer systems, telecommunications, measuring equipment and peripherals. The Health group was busy with the development of not only film for x-rays, but also with the development of bioproducts, nutritional supplements, and other biomedical compounds. The latter of the Kodak’s operating groups besides supplying the raw materials for the manufacturing of photographic products manufactured PET bottles, printing inks, performance plastics, and animal nutrition supplements.
However, these changes were not the only ones that Chandler implemented while being CEO. He did the further reconstruction of Kodak’s imaging group into 17 units, which were operating separately. Every unit was considered to be independent; however, they all had a common goal to improve quality of the goods and to remove difficulties while transporting resources and technology among operating groups. By implementing these changes, Chandler promoted innovation, and shifted the company to a new level of management, shifting a firm to the multidivisional structure. George Fisher, the next CEO of Kodak eliminated the activity of two operating groups organized by Chandler (the Health Group and the Chemicals Group), and decentralized the process of decision making by reorganization of “Kodak’s product groups into fourteen autonomous business units based on serving the needs of distinct groups of customers”, forming a new market’s structure . However, in 2001 the new CEO of Kodak Daniel Carp implemented another important reorganization of Kodak. Due to this reorganization, Kodak moved “from a structure based on customer groups to one based on strategic product lines” . This reorganization is very similar to the one conducted by Chandler.
Describe Kodak’s organizational culture and how it impacted Kodak’s competitive advantage.
As it has been mentioned above Kodak Company was the first one to develop a portable camera and silver halide paper; that is why the company was never very much worried about the outside competition because it was a world leader. This very much predetermined Kodak’s organizational culture, which was based on “traditional, conservative values rather than entrepreneurial values.” Kodak was always considered to be a conservative company due to the decision-making process being centralized at the top of it. However, the research, development, and marketing of products operated separately, which caused the lack of communication and slowed down the process of making new product decisions. For many years Kodak neglected marketing research, and all decisions were made with the domination of scientists and engineers, who spent much time on developing and testing of new products, rather than studying if customers will be satisfied with them. Thus, Kodak’s organizational culture negatively impacted its competitive advantage. Because of its conservative corporate culture Kodak didn’t conduct marketing researches and gave the competitors an opportunity to invent new products, such as xerography, instant cameras, and digital cameras. Of course, competitors didn’t miss the chance and overtook Kodak in several areas, which are very close to photography.
What business-level and corporate-level strategies did Kodak adopt to regain its competitive advantage?
To regain Kodak’s competitive advantage, Colby Chandler conducted the policy of cost-cutting by reducing the workforce. “Kodak’s policy of lifetime employment was swept out the door when declining profitability led to a large employee layoff” . Chandler cut employment by 10 percent in 1985, and budgetary expenditures by 5 percent. Then Chandler reorganized the imaging group into separate units. By doing this, he was hoping to improve the quality of goods, and eliminate “problems in the transfer of resources and technology among operating groups.” The main goal of reconstruction was to increase integration within the company, to promote innovation and of course gain profits. Also, Kodak reorganized the common facilities it possessed by “closing duplicate manufacturing facilities and centralizing production and marketing operations, and it also brought sonic foreign manufacturing home.” Thus, Kodak gained profits and was able to obtain a more competitive advantage.
Did the corporate-level strategy create value for its shareholders? Did it create any problems? Explain.
At the beginning of Kodak’s business activity, it was one of the most profitable corporations in America. At that time Kodak’s return on the shareholder’s equity was about eighteen percent for a rather extended period. However, Kodak’s value for its shareholders changed when the company implemented a new corporate-level strategy. Facing keen competition on the world market, the company leaders decided to conduct the policy of diversification into new businesses to increase the profitability.
This plan aimed at widening the market share of Kodak using manufacturing of new products, which were not very close to the photography. Thus the company made sure acquisitions and involved in the production of medicine and chemicals. For a while this strategy worked, however, very soon Kodak again faced competition from the side of more experienced companies operating in this field of industry. The company ran into debts, and shareholders lost a part of the money invested. To overcome the problems George Fisher divested Sterling Drugs to pay off the debts. He also considered the Chemicals Group to be unsuitable for his “digital strategy.” For this reason “he spun the group off and gave each Kodak shareholder a share in the new company, Eastman Chemicals, whose stock price soon increased rapidly.” So, this new strategy created value for Kodak’s shareholders, by avoiding high costs, increasing quality and implement product differentiation.
Describe the control mechanisms Kodak pursued in implementing its business- and corporate-level strategies.
Eastman Kodak used to be a centralized and very conservative company. Thus, it is possible to say, that all decision–making process was controlled by its CEO and top managers. However, while implementing Kodak’s innovative strategy the company was divided at first into four major operating groups, and the Imaging Group was later divided into small units. Though the company became decentralized, it became easier to gain control of the process of production, because each unit was headed by a manager, fulfilling the instructions of CEO and other top managers. Later George Fisher reorganized the company, but it was still divided into small business units, which “had not decentralized control to business unit leaders, and Fisher and his top management team were still overseeing all important strategic decisions. “Thus while Fisher had brought Kodak’s focus back to its core photography business, he had not put in place the infrastructure that would allow its managers to achieve its new digital mission.” .
How was Chandler’s reorganization of Kodak’s structure consistent with its corporate-level strategy?
It is necessary to emphasize that the principal goal of Kodak for all times was to become and stay a leader in the photographic industry. Thus its primary strategy was to implement new technologies and innovations to receive massive profits and be able to compete on the world market. However, when Colby Chandler became a CEO he, from our point of view, altered a little bit the strategy of the company. Of course, he wanted to gain as many profits as possible, but he didn’t pay enough attention to the development of the new technologies in the photographic industry. That’s why the company had to face severe competition from the side of Fuji, which was able to sell its products at lower prices. Because of Kodak’s reorganization in 1980s Kodak lost the opportunity to be a leader in the field of digital technologies, because much of the money and effort was directed to the Health and Chemicals Group, which in reality had little in common with the photography, and the strategy of the company.
By reorganizing a company, its CEO wanted to reduce the costs and create a more competitive environment for the business. The process of decentralization aimed at the quicker integration of new acquisitions and provided some freedom of acquired companies, where managers could perform all decision making process without contacting higher officials.
Having spoken about Eastman Kodak, its strategy, organizational structure, culture and significant problems, it is necessary to conclude. Keen competition is still the dominant concern of Kodak, whose customers realize that the products of Kodak are similar to those produced by its competitors at lower prices. Nowadays, Kodak competes with such companies as Hewlett Packard, Canon, and Fuji on the market of digital technologies. It placed a lot of photo-finishing laboratories in supermarkets all over the USA, on which it is very much dependent. Though, a company experiences significant problems, “it still pays shareholders one of the top ten dividends of all companies,” and we will see how it will do in future.
Gareth R. Jones. “You Push the Button. We Do the Rest”: from Silver Halide to Infoimaging at Eastman Kodak. Texas A&M University.
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