Kodak’s primary downside was not foreseeing and adapting to market modifications of worth and competition. Kodak had dominated the picture film market for most of the 1900s till competitors like Fuji began taking market share from Kodak in 1984. Kodak ignored the model new threats till the late 1990s, relying on their market dominance. Problem Analysis Kodak supplied three product traces to target numerous market segments as part of their Funtime technique to regain market share. Prior to this strategy, Kodak provided only two product lines, Ektar, their superpremium line, and Royal Gold, their premium line.
They deliberate to introduce Funtime movie, an economy brand movie, which focused the value delicate consumer. The target market is the typical film person who has little or no education about movie, buys strictly on worth, and is not influenced by advertising — the 50% of consumers that weren’t brand loyal (40% have been film “samplers”; 10% purchased on price). Gold Plus is the premium brand film and is developed to target average shoppers who’re already Kodak-loyal or in search of high quality photographs over worth.
The superpremium movie, Royal Gold’s goal market is professionals, critical amateurs and common shoppers who pay the premium for skilled grade pictures for “very special” occasions. (See Appendix A) In the 1990’s Kodak’s primary opponents were Fuji of Japan, Agfa of Germany, 3M, Konica of Japan, and Polaroid as a late competitor. Kodak has many ways to distinguish themselves from all of these competitors. As a longtime photography and movie brand, Kodak has dominated 70% of the market share within the U.
S. ; the place lots of their competitors are new to the market.
Kodak has not offered a personal or financial system movie line like many other rivals have. In the superpremium tier Fujicolor Reala was concentrating on superior amateurs and professionals only while Kodak focused a more broad segment with their competing Royal Gold line. In the Economy model tier, Funtime was launched as an economic system model competing with Fujicolor Super G, Konica Super SR, and ScotchColor. Funtime was the one movie in this model tier to be offered solely at off-peak film use instances and solely packaged in worth packs. Kodak dominated the film market all through the 1900’s.
They by no means obtained any main competition until Fuji started to attack their market share in the 1980s, after they have been introduced as the official movie sponsors of the 1984 Summer Olympics in Los Angeles, Kodak three California. Kodak believed their dominance and buyer loyalty would proceed to hold them as new competitors entered the market and as film costs have been starting to fall. They underestimated their competitors and did not react soon enough. It seemed as if Kodak believed that individuals wouldn’t purchase another film apart from Kodak. By the late Nineteen Eighties the film market started to see many rivals and Kodak’s market share began to fall.
While nonetheless the dominant competitor, their market share fell from 76% in 1989 to 70% in 1994, and equally the typical value of film started to fall. While Kodak’s movie rolls were within the neighborhood of $3. 50 to $6 per roll, competitors started releasing movie under personal manufacturers beginning at $2. 19. Shortly after the economic system movie market began to type, Consumer Reports launched a excessive quality check of the top 6 films in the market. While Kodak positioned themselves because the superior quality film, Consumer Reports reported that, “We found most movies to be no better or worse than their opponents of the same velocity.
and will yield prints of comparable quality. Kodak’s normal, Gold Plus, even ranked under Fuji’s financial system film. With movie market evolving, Discount Merchandiser launched a survey in 1991 stating that “more than 50% of the picture takers within the US claim to know nothing or little about pictures, and as a outcomes they have a tendency to view film as a commodity, usually buying on worth alone. ” This led Kodak to a major repositioning of its film product line, introducing Funtime movie, an economic movie line, something Kodak would have by no means beforehand considered.
Kodak was determined to recuperate a variety of the market share they had just lately misplaced and implemented a new strategy to help recapture a few of their market share. They launched the Funtime Strategy. In this technique, Kodak would offer 3 lines of movie (superpremium, premium and economy). The economy line was new for Kodak since they specialised in high-end photography that was parallel with their top quality model image. Funtime was to be provided at 20% less than Gold Plus (their premium brand) and supplied in restricted portions solely twice a 12 months at off-peak movie use times, 4 months out of the 12 months.
Funtime was solely sold in “valuepacks” of two or four rolls of the 2 hottest speeds, ISO one hundred and 200. The major inconsistency with implementing this new strategy was the dearth of promoting spent by Kodak; they offered no support and a lack of dedication to Funtime. Kodak was too involved with sustaining its high profit margins that they were not keen to cannibalize their very own market share before the competition did. Kodak four Whereas their focus was to regain some market share with their new Funtime line, they replaced their superpremium line with Royal Gold, broadening their “professional” target market.
They emphasized that Royal Gold could presumably be for “very special” events not just professional images. Kodak spent 40% of its whole film-advertising finances on this line and the opposite 60% on its Gold Plus. The Funtime strategy was a last probability effort to regain market share and compete with private label manufacturers. It seemed that the economic system line was launched too late to recuperate the shares that were lost. By solely offering it twice a yr Kodak appeared as if they were not absolutely committed to this line. The lack of advertising despatched a deceitful message.
It appeared as if they have been hiding the line as to not take away from their other “quality” strains. They wanted to keep their prime quality image whereas competing within the low end of the market as well. This technique does not solve their downside of competing with their rivals. The case did not point out any new ways in which Kodak tried to distinguish themselves from their competitors or clarify to their customers why they thought they have been superior to them. Kodak supplied three main lines of film but didn’t educate the client on the difference between the strains.
They stated their superpremium, premium and economy lines however did not take time to coach the consumers of the difference between the three strains and the way they differentiated from their competition. Since Consumer Reports launched a examine showing that the majority film rolls in that time carried out similarly and printed pictures of comparable quality. Kodak did not take time to inform apart themselves from this new competition but merely relied on their trusted model name they had built in the years prior. Before differentiating themselves from their competitors they should have reacted instantly to new competition quite than ignore it.
Because Kodak was late to react, Fuji was capable of simply differentiate themselves from Kodak. Kodak should have seen Fuji’s sponsoring of the LA Summer Olympics as a menace. They should have immediately started discussion strategies on repositioning themselves to avoid the competition absorbing their market. Kodak was not ready for the market changes that got here. The week of January 25, 1994, Kodak’s inventory misplaced 8% in worth. Kodak was used to the big profit margins on movie and could not rationalize cannibalizing their own earnings by reducing prices due to their inflexible management earlier than the entire business lowered prices.
The reality was that the movie business was slowly declining, individuals viewed photography as a commodity and they have been just on the cusp of Kodak 5 the digital era. Kodak was reluctant to return to phrases with this new actuality. Their competitors capitalized in the marketplace modifications and private film corporations started offering lower price film of comparable quality. Kodak did not look far sufficient into the future of the market and had been slow to react to competition which is why they failed to stay forward of their competitors and minimize any losses.
Alternative Solutions
Due to Kodak’s misplaced market share, lowered inventory prices, and declining revenue margins, it was evident that the company was headed in a downward spiral. Surviving within the industry, because of film being a commodity product, was not easy, and the company was in dire have to revive its personal worth. To clear up its major problem, not foreseeing and adapting to market adjustments, we suggest five various options:
- delve into wholesale market share,
- better educate customers regarding the products’ benefits and values,
- spend extra time on analysis and improvement,
- halting production of the Funtime product, and
- both educating prospects concerning the products’ advantages and values, and spending more time on research and improvement.
Alternative Solution 1
Kodak might promote its movie in worth packs at wholesale stores, such as Costco or Sam’s Club, to be able to regain the market share within the trade. In doing so, this would be an efficient way for Kodak to tap into market share that had not yet been touched. Film, at this point, had not been sold in bigger wholesale packs, and was being bought primarily in smaller groupings, at common retail services.
Because of the recent upward trend with consumers shopping for in bulk, wholesale retailers have been gaining extra loyal clients on a daily basis. By selling inside most of these shops, companies had been extra likely to succeed because this was a retail niche that was evolving, and would give specific manufacturers and products more consumer recognition. Kodak may have taken advantage of the robust market and loyal customers that a wholesale retail firm already has. By partnering with Costco, for example, Kodak might turn into its unique film companion.
With this sort of partnership, Kodak might have the flexibility to capitalize on the exclusivity of Costco’s movie gross sales. Also, seeing in latest years that Costco has turn into a very common place for shoppers to have their rolls of film developed, and frequently sells movie rolls in worth packs, it seems to be a one-stop-shop for households who are continuously on-the-go. If Kodak 6 Kodak had been to partner efficiently with retailers like this, the company would be capable of acquire further market share and gross sales, as a outcome of folks would enhance their recognition of this explicit brand, and will turn into the go-to brand for most.
Wholesale retailers, like Costco, are extraordinarily popular and well-trusted. By associating its picture with these companies, Kodak would have a aggressive benefit over others within the trade, and could possibly be associated with Costco’s constructive identification, thus giving itself a positively-positioned image relative to its opponents. The biggest drawback in implementing this solution, however, could be in securing a mutually-beneficial partnership with a wholesale retailer.
Most wholesalers would not essentially be prone to decide to an unique partnership to at least one particular brand (in this case, Kodak), just because they limit their very own product availability, and therefore cut into their own gross sales. Retailers, like Costco and Sam’s Club, concentrate on having all kinds of products from which customers may choose. If wholesalers have been to commit solely to Kodak, per se, then they could lose out on potential sales from shoppers who want the competing film product. There is not essentially an inherent profit for wholesalers with exclusivity.
Alternative Solution 2
Apart from selling within wholesale retail locations, one other method to regain lost market share is to higher educate consumers relating to camera film. Film had become a commodity product to most shoppers, and there was little customer loyalty to any specific digital camera movie model. Differentiation between the companies’ own merchandise, in addition to the competitors’ merchandise, is an important facet of any business. However, it appears that evidently Kodak lacked a differentiation technique and had not communicated to customers how its merchandise had been positioned positively, relative to those of its rivals.
Consumers knew “little or nothing about images,” in accordance with the 1991 survey in Discount Merchandiser. Its lack of instructional promoting left clients at midnight, so far as the difference between merchandise available. Because many uneducated prospects merely buy primarily based off of worth alone, Kodak needs to tell clients why they want to pay the premium worth, and what benefits come together with paying that premium. No different film firms were educating customers about worth and benefits, so Kodak had a chance to capitalize on the lack of knowledge thereof.
Kodak 7 would become familiar with their film needs, and the film’s benefits. Simultaneously, they’d also acquaint consumers with the value of their product, when in comparability with others. As a outcome, Kodak would create more model loyalty. Moreover, in the case study, we are informed that Kodak offered three forms of movies: Gold Plus, Royal Gold, and Funtime. To the average consumer, Gold Plus and Royal Gold are far too similar in name, and provides off the impression that they’re of the same high quality. Customers were becoming confused because of the similarity between these two names.
By educating the shoppers about its merchandise, consumers would start to understand the worth of Kodak’s movie relative to opponents, and the inherent variations between its products. However, if this answer were implemented, the probability of making a large influence on its own market share would be minimal if implemented by itself. By itself, it would not help restore Kodak’s decline in gross sales, inventory prices, and market share (because of its inability to adapt to market trends). Let aside, this would not address the problem of having been unadaptive, at its core. Educating consumers would probably only work finest when paired with another different resolution.
Alternative Solution 3
It was ten years earlier than Kodak responded to the Fuji’s sponsorship of the Olympic Games. Clearly, Kodak ought to have had a fast response to this risk. Due to their lack of capitalization and overconfident mindset, Kodak misplaced a vast quantity of their market. Kodak should have acknowledged that expertise would advance sooner rather than later. Instead of solely specializing in repositioning their film, they should have additionally tried to advance the know-how of their cameras.
The key to a profitable enterprise is focusing on the present product, while spending time on researching and growing the lengthy run product. Kodak executives should have asked themselves, “What can we do to get forward in the market? ” Seeing that the main drawback with Kodak was its inability to anticipate and adapt to future market developments and developments, it should spend extra time, efforts, and money on proper product growth. This late response resulted in a fast lack of market share. Had Kodak responded to this with extra immediacy, its market share wouldn’t have dropped so significantly.
To stop market loss in the future, Kodak ought to make investments extra money and time on correctly creating “cash cow” products. Prior to the development of Funtime, the products Kodak 8 within Kodak’s camera movie portfolio have been thought of money cows. Due to adverse market rumors, the company supposed on creating another money cow, as to maintain its market share. However, had the corporate spent more time on researching the digital camera film industry, it might have noticed that developing one other cash cow product was not intelligent.
Market analysis is extremely necessary in understanding what subsequent steps an organization ought to take, and tips on how to create a strategic marketing strategy. Rather than Kodak’s executives asking themselves “What can we do to maintain our market share? ” they should have requested themselves “What can we do to get ahead in the market? ” Kodak’s strategy was to boost its current products as stars, and develop a new product (Funtime) as a cash cow. Accordingly, the star products (Gold Plus and Royal Gold) could be funded and, ultimately, additional promoted.
In asking the wrong questions, Kodak forged its personal demise: Funtime became a query mark product, liquidating revenues made by the prevailing cash cows. By spending extra time on analyzing present developments and advancing technologies, Kodak may develop merchandise that would help it recover misplaced market share and turn into a dominating drive throughout the industry. The biggest disadvantage in implementing this, nonetheless, could be the risk of product failure. Kodak’s executives would want to make knowledgeable choices relating to whether or not such developmental dangers are worth product failure.
Alternative Solution 4
As mentioned in the case examine, Funtime film would be offered “only twice a yr at offpeak movie use times”. Kodak confused its clients regarding the value of its product. In the eyes of the shoppers, offering a special product solely at certain instances of the year, with a lower price, introduced down the worth associated with Kodak movie. The case mentions that Kodak’s “stock had lost 8% in worth on rumors of a value minimize on film”. If rumors of a value reduce introduced down its stock prices, then adding a decrease high quality product, like Funtime, would additionally deliver down company stock costs.
In analyzing Kodak’s merchandise with a BCG Matrix (see Appendix B), Funtime could be considered as a query mark, whereas every of its other products have been money cows. The market share for decrease high quality movie was not rising and didn’t generate a lot money. Often occasions, dog merchandise must be divested. Kodak should have rapidly determined whether the Funtime Film Kodak 9 would develop right into a money cow or canine. Because Kodak was solely selling this product during the off seasons, Funtime could never turn into a money cow.
While creating Funtime would have been an excellent answer given regular circumstances, growing a model new decrease quality product amidst adverse market rumors was a dangerous transfer. Other firms, similar to Fuji and Polaroid, had canine merchandise, and were preventing to turn out to be cash cow merchandise. To retain the market share it already has, and for the explanation that Funtime product is already developed, although, Kodak ought to section out its production. This would flip the product into a dog, and over time, could be absolutely liquidated. Some foreseeable cons with this resolution could be the prices incurred from holding inventory and phasing out a product.
This would further reduce into firm revenues, making it harder to return from a decline in stock value.
Alternative Solution 5
We consider that a mix of Alternative Solutions 2 and 3 would be an efficient resolution for Kodak. Education will explain the products’ values and benefits, while simultaneously maintaining its distinctive brand image. By educating clients and anticipating future market trends, not only is Kodak capable of retain its loyal customers, but positively place themselves in the minds of non-Kodak-loyal film consumers, as well.
This, nevertheless, solely speaks to part of its primary problem. Accordingly, this education must be aided by correct market analysis, so that Kodak is in a position to foresee market developments, and is ready to react accordingly. The company must focus equally on each the present and the long run. By utilizing this two-pronged method, between education and proper R&D, the company is in a position to educate shoppers inside the market for movie, and additionally, decide the way to stay ahead of the competition. Proposed Solution In direct reference to Kodak’s primary problem (not foreseeing and adapting to market changes), we extremely recommend that Kodak choose Alternative Solution 5: spend more time educating prospects and speaking the value of Kodak’s merchandise, in addition to investing extra efforts in correct product development, aided by effective market analysis. By educating clients, Kodak is able to each lock-in the loyalty of present clients, maintain its competitive benefit, and find extra methods to draw more new customers. Moreover, investing its time Kodak 10 and cash on proper product growth and evaluation will allow Kodak to grow within the creating market.
As a end result, Kodak would be able to develop a star product, whereas maintaining several cash cows. Implementation Product In regards to the product life cycle, Kodak’s present product Gold Plus, exists in the maturity stage and their main objective at this level is to defend and regain market share. To do that, Kodak must redevelop an existing line that may enchantment to a broader audience of photographers. We are going to introduce Royal Gold to exchange the current film, Ektar, in the high-end phase.
At the same time we’re going to suggest to maintain our premium product, Gold Plus, the place it’s presently at in the middle segment and over the course of a 12 months, as we wish to part it into the low-end of the middle phase, and make the value competitive with economy manufacturers. This is partly as a outcome of most customers don’t buy as much from the middle section. Therefore, we need to enter a more profitable market phase. By phasing Gold Plus into the lower end, we can compete in both the high and low-end market.
However, we can’t go about this by merely dropping the worth of Gold Plus instantly. Mainly because doing so, within the eye on the customer, will cause confusion and probably scale back brand fairness. Instead, we will drop costs a couple of times a month over the course of a year. This way, both products shall be positioned better, in that we’ll be competitive in each areas. Royal Gold shall be focused to a broader buyer base. It might be targeted to professionals and critical amateurs, as nicely as any photographer looking for movie for “special” events, as referenced in the case research.
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Royal Gold will produce a sharper picture and overall a greater high quality photo, thus attracting customers preferring to have options in what they do with their photographs. Those wishing to doubtlessly enlarge the photograph will have a completed product that’s so crisp they’ll have the peace of thoughts in figuring out it won’t jeopardize the integrity of the picture. Royal Gold will be obtainable for purchase in quite so much of types. In order for Kodak to be profitable with this new product it’ll must be bought in particular person packages, as well as packs of three and/or six so as to give prospects a spread in selection.
Kodak eleven Place Royal Gold and Gold Plus shall be sold in places where other Kodak products are at present being sold. There are a quantity of stores that carry Kodak merchandise so buying the brand new line is not going to be tough or exhausting to seek out. The distribution might be allotted in quantities that can maximize profitability and shall be attractive to clients who are selective in where they buy movie. Our primary distribution for Royal Gold and Gold Plus shall be to discount and department shops, about 34%; the eased decline in pricing will not be as noticeable in such a store.
Next shall be to drug shops who typically don’t offer as many reductions except a customer is a part of their rewards program, about 25% shall be distributed to such. Camera shops will get about 15% of the distribution, as this will entice the shopper base that Gold Plus targets, these photographers looking for a extra professional picture. It is within the privately owned shops that single rolls of movie might be bought extra frequently. The other 26% might be allocated to supermarkets and wholesale golf equipment. We predict income will be maximized tremendously coming from these institutions, especially in gross sales of the three/six worth packs.
It could be wise of Kodak to track the earnings the place the movie is distributed throughout the first few months after repricing Gold Plus, gauge consumer demand and produce and distribute enough movie in order to satisfy the market. Price While making an attempt to implement an economy brand, Kodak failed when releasing Funtime movie. The shopper was not educated in the differentiation between the superpremium Royal Gold, premium Gold Plus, and economic system Funtime. Although the market was trying to find a product from Kodak that would be introduced within the economy brand, Funtime was unsuccessful.
By taking Funtime off the cabinets, the economic system portion of the Kodak market is unavailable. Gold Plus is Kodak’s present lowest model of movie, however still provides greater quality over competing financial system manufacturers. Due to the phases within the product life cycle, Gold Plus’ worth will naturally decrease. Gold Plus has already skilled its peak instances of gross sales in the course of the introduction and progress levels. Now that Gold Plus has been on the market for some time, it’s now within the maturity stage of its life cycle, as sales have begun to stabilize. In order for a product to still succeed in the Kodak 12 maturity stage, the product should stand out among competitors. Implementing a gradual value decrease will slowly lower Gold Plus into the economy stage tier with out including an entire new Kodak line. Eventually, a 15% worth reduce would give Gold Plus a value of $2. ninety six, $. 05 greater than the Fujicolor Super G and Konice Super SR economy brands. Still permitting Kodak to have a distinguished model image over competitors within the economic system model, this is in a position to place Gold Plus as a premium model competing with competitors of the financial system level. Sending coupons to prospects is one other method to help Kodak achieve again market share within the lowering market.
Coupons create model recognition and make clients really feel like they, personally, are receiving an excellent deal. Because perception is reality, it’s important for Kodak to position its model as a product of excessive value. Instead of drastically slashing prices, Kodak’s gradual value lower, along with coupons, will help achieve back the market. Making coupons available to customers helps Kodak maintain their worth. On the other hand, Royal Gold is still in the growth stage because of the substitute of Kodak’s previous superpremium movie, Ektar.
When Kodak implements Royal Gold into the market, changing Ektar, Royal Gold’s worth is 20% decrease than the previously current Ektar, at $4. 19. In the superpremium market, Fujicolor Reala is selling at $4. 69, a $. 42 enhance over Kodak Ektar. By progressively lowering the price of Royal Gold, additional time, it’s going to eventually take the place of Gold Plus’ previous position. In 1993, the premium model, Gold Plus offered at $3. forty nine, competing on the identical worth as Agfacolor XRG. “Gold Plus price was commonplace of the industry”. Gold Plus not has the power of setting the price because of the lack of market share and position in the product life cycle.
Instead of permitting Gold Plus to fully diminish from the market, diffusing it into the economic system tier will still give Gold Plus a competitive edge. Promotion In order to regain market share, it is important for Kodak to advertise the advantages of Royal Gold and Gold Plus film. A easy picture can show quality of film; alongside educating through commercials, Kodak will ensure the buyer is conscious of precisely what to look for in movie. Mailing out coupons is another great form of advertising. Promotion will help Kodak educate, along with create model recognition. In turn, customers will purchase Kodak movie and keep away from post-purchase dissonance.
By launching an advertising marketing campaign and Kodak 13 emphasizing the long-term high quality of Kodak, in addition to educating the shopper on distinctions between each product, consumers shall be interested in the movie best suited to their wants. Kodak can gain a larger market share by informing the shopper what they’re gaining from purchasing Kodak film before even getting into the shop. This marketing campaign, accomplished by way of commercials, emphasizes the advantages of purchasing for each Kodak product. As Royal Gold is new to the market, extra advertising must be focused to teach consumers about the product.
Devote 60% of the advertising finances to Royal Gold and 40% to Gold Plus, permitting Royal Gold more sources to takeoff as a model new product. Pinpointing the concept the typical picture taker can take a picture like an expert, without being targeted to professionals. A industrial representing Royal Gold in addition to Gold Plus is critical to indicate the perk of every product. The innovation of Royal Gold coming from Ektar, which was originally focused to professionals, provides confusion to the typical photographer, assuming the consumer must be a professional to buy the product.
By making it clear to the market that Royal Gold is focused to the patron wishing to capture the “special moments”, the common client might be extra drawn to the product. Gold Plus commercial will focus on the value of everyday quality movie. Whenever you take an image, Gold Plus is there for you, at all times dependable in any state of affairs. In a Kodak commercial, Royal Gold is the movie used to seize the special first moments of a baby being born. Gold Plus is the reliable film for irresistible instances thereafter when the child is consistently photographed.
As a result of customers being uneducated within the film market, the overall hesitation of purchasing film will come from being unaware of the benefits each film offers. Educating shoppers, selling advantages of Kodak and displaying the attributes important in the Gold Plus in addition to the Royal Gold movie will lead customers to the right product. With the right promotional strategy, the schooling shall be suited to the target market, resulting in a glad client.
