CASE 2 External Environment Analysis

CASE 2 External Environment Analysis

The Kodak brand has always ranked among the top in the world by name recognition and quality. Eastman Kodak has built its brand loyalty since 1888 when George Eastman produced the first camera that simplified the complex process of photography and made it available to everyone. Since then, Kodak has pioneered many new products to numerous markets for a multitude of reasons: pleasure, business, medical, scientific, and entertainment. In the early years of 2000, Kodak was faced with a huge challenge as their main driver of revenue, camera film and processing was losing popularity. Technology was driving the trend to go digital and Kodak's film business was clearly in jeopardy. Kodak shifted their main focus to digital and over the last six years has become a leader in the market today. In 2001, Kodak introduced the Easy Share System which consisted of a digital camera and docking station. The same year, Kodak acquired Ofoto, the leading online photography service.

As disruptive digital technologies have hollowed out Kodak's core film business, the company's stock price has dropped more than 60 percent since peaking 10 years ago. Kodak has laid off thousands of workers as part of a desperate attempt to re-invent itself over that decade. Kodak has appropriately tried to diversify beyond film, creating a portfolio of simple-to-use digital cameras, printers that plug directly into cameras, and a photo sharing Web site through its purchase of Ofoto in 2001. Unfortunately, Kodak's sagging stock price shows that these new businesses have not gotten big enough, fast enough to offset the decline of its old business. Disruption, which caused the decline in Kodak's film business, is also at the very heart of their strategy entering into the printer market. According to CEO Antonio Perez, “We're very proud that we're coming to market 20 years late. We think it will give us an opportunity to disrupt the industry's business model and address consumers' key dissatisfaction: the high cost of ink.” (Hamm 2007) "Consumers aren't printing as much as they could, because home printing is so expensive, and the quality isn't as good as the lab," says Kodak marketing director Bob Ohlweiler. "We have the technology to solve these issues." Ohlweiler says Kodak will profit handily on its ink sales, even if the margins are lower than competitors'. He also says that Kodak will include more ink in its cartridges than its competitors do. (Graham 2007)By industry estimates, only a fraction of all digital images we take end up on paper. For the most part they're stored, viewed and exchanged electronically, or just discarded. (Baker 2007) Most of us are content to view them on our computers, and an increasing percentage of those that are printed are done using photo labs, not our own printers. Why? Many of us cringe at the high cost of home printing. Ink cartridges typically cost $60 to $90 each time they need replacing, and we know the profit margins are ...