Management in Kodak and Fujifilm
Companies face tough management decisions in the wake of the digital era. The digital age adversely affects the film and camera industry, with companies like Kodak facing billion of dollars in losses in 2007. On the other hand, companies like Fujifilm are reaping the benefits of venturing into the digital technology. The goal of this paper is to identify and describe those management, business, and marketing strategies that have led to the fall of Kodak and the rise of Fujifilm. This is in terms of a comparison and contrast of the management approaches taken by Fujifilm and Kodak in relation to innovation and the eventual consequences.
Eastman Kodak Co. was originally established in 1880 by George Eastman and created dry plate photographs. In addition, the company created “silver halide paper-based photographic roll film” in 1884, which was added to the first portable camera in 1888 (Hill & Jones, 2008). In the company’s early decades of development, Eastman led Kodak to create breakthroughs in the development of photography. The company also led the world to the mass acceptance of photography as a leisure activity increasing the popularity of recorded images (Hill & Jones, 2008). At this time, the company went through an inventions revolutionary age under the management of Eastman, becoming the world leader in photographic technology. The core business for Kodak was film and camera production. This grew as the company produced the first filmless photography in 1990s, the CCD in 1960s, and the first imaging prototypes in the mid 1970s (Hill & Jones, 2008).
The differences between Kodak and Fujifilm are evident in the different management approaches to business. Fujifilm unlike Kodak began as a subsidiary to Dainippon Celluloid, a chemical company in 1934. At the time, Fujifilm was the second largest film producer to Sakura, currently Konica film in the Japanese market. Fujifilm surpassed Konica in the 1970s, following its venture into the European and American markets in the 1960s. It was in the late 1970s that the competition between Kodak and Fujifilm began, as both companies competed for the American and Japanese markets (Sarvas, 2011). From the beginning, Fujifilm appeared to surpass Kodak as it gained popularity in America, though Kodak held a 70% market share. Mean while, Kodak’s attempt at venturing into the Japanese market was hampered by Fujifilm’s strong market share, as it only gained 7-10% market share (Sarvas, 2011). This stiff competition between the companies and eventual loss by Kodak are in association to the different management and business approaches.
From its inception, Kodak founded its core business on four main objectives to guide strategies and growth in business. First, the company focused on mass production to reduce the costs of production. Secondly, it aimed at maintaining the leading position in technological developments. Thirdly, its marketing strategy was on extensive and aggressive product advertising (Hill & Jones, 2008). Fourthly, Kodak focused on creation and growth of multinational business exploits in the global market. A review of literature finds that these goals were revolutionary at the time, and assisted in driving Kodak as the world leader in photography production. However, Kodak’s recent massive losses and file for bankruptcy is due to the management decisions and poor transition from film to digital realm.
In the 1980s and 1990s, Kodak was facing problems arising from missteps and miscalculations by management into the venture of instant photography (Sarvas, 2011). The management continued with the four objectives directing its core business, rather than investing in research and development of future photography. The failures in the 1980s and 1990s led management to restructure the organization and lay off employees. This is because Kodak’s management was conservative and stagnated in the innovative strategies used in the pre-war decades (Sarvas, 2011). Therefore, the arrival of the digital age found Kodak in a poor financial and organizational position to adopt o react to innovation. Therefore, Kodak did not increase its product line nor did it venture into innovation to increase its business and market share (Sarvas, 2011). This factor is associated with Kodak’s lack of preparation for the digital age and eventual losses in 2007.
As Kodak battled with management and organizational problems, Fujifilm was advancing into the digital era with ease. This is because Fujifilm’s management was forward thinking as it focused on research and development of future photography. This is evident in its joint venture with Rank Xerox in 1962 to create Fuji Xerox that increased Fujifilm’s product line and market share through innovation (Sarvas, 2011). Products associated with the digital era that increase Fujifilm’s position in the market are imaging solutions like color films, color reversal films, photofinishing equipment, inkjet-system dry minilabs, and electronic imaging. The electronic imaging innovations created with the new venture is FinePix digital cameras and accessories to digital cameras (Sarvas, 2011). The second class of product line is the information solutions involving digital x-ray imaging, digital endoscopes, data cartridges, and camera-phone lens units among others. Fujifilm further created a class of document solution products like color office printers, computer printing systems, and on-demand publishing systems among others. Therefore, though Kodak was successful in photography and film production, Fujifilm surpassed Kodak through its aggressive innovative strategy. Though many companies like Sony and Samsung have created digital cameras, Fujifilm remains successful in the digital era especially due to the document solutions products. Fujifilm is more successful than Kodak since its managers invested in business ventures that embraced innovation leading to an overlap in its core business field in imaging solutions.
Reviewing the management strategies and decisions reveals that Kodak did operate in research, manufacturing, and distribution innovative networks across the globe. These networks created and produced advanced color film and superior chemical and plastics necessary for film production. The company also created the first digital camera, and the first instant photography. However, its failure is the result of the management’s complacency, as it became the most profitable American corporation for many years. The management invested heavily in the research and development of the silver halide photography making the product the main business for many years (Hill & Jones, 2008). The managers used the resources of the company to expand sales of the silver halide photography making the product unmatched globally. The success of its products and the company’s supremacy in the market made the management complacency and slow in introducing quality and productivity improvements (Hill & Jones, 2008). This was different from Fujifilm that expanded and produced different products in photography, imaging, and electronics. In addition, Kodak produced its films in different nations of the world rather than using a single country for production creating a cost disadvantage (Hill & Jones, 2008).
On the other hand, Fujifilm invested heavily in low-cost, huge manufacturing plants with the latest technology to produce film in mass and large volumes (Hill & Jones, 2008). Fujifilm opted for low production costs and competitive, aggressive price cutting to compete and reduce Kodak’s profit margin. Since Fujifilm produce films with the same level of quality and vividness of color as Kodak’s film, consumers turned to the Japanese products reducing Kodak’s market share (Hill & Jones, 2008). Therefore, Fujifilm successfully combined cost advantage, efficient production, and innovation in its management style to become a cost leader in film and photography production.
Another area of management concern is ethics and corporate social responsibility. For Fujifilm, issues of corporate social responsibility (CSR) is from the perspective of the stakeholders and the corporation, as managers promote CSR activities through prioritizing areas and taking up concrete measures. The company uses its CSR to support achievement and meet management target, rebuild corporate structure, and growth strategies. Fujifilm also uses CSR activities to hold the company structure (CSR Activity Report, 2012). This CSR approach has led Fujifilm to meet its economic and legal responsibilities, meet society’s demands for development of culture and technology. By requiring that all stakeholders, employees, investors, customers, business partners and local communities participate in CSR, Fujifilm has increased its market share (CSR Activity Report, 2012). This has seen the company gain a solid profitable market of approximately $ 12.6 billion as compared to Kodak’s $ 220 million. This is also possible by Fujifilm’s ethics principle that drives its compliance strategy. Fujifilm’s ethics make employees aware for the need for raising compliance through training and applying corruption prevention rules (CSR Activity Report, 2012). Employees are made aware of compliance and corruption avoidance rules through information sessions held each year since 2003. These seminars have improved the company’s quality, production, and image with the market.
Ethics and CSR has also proven useful in sustaining Kodak during the recession and the struggle with the digital age. Kodak is driven by a CSR and ethics system that includes safety, health, and environmental performance. Kodak in the last five years has tried to align its business model and product portfolio with its CSR to have a social, economic, and environmental responsible team (Eastman Kodak Company, 2009). Ethics and CSR has been incorporated in Kodak’s governance structure providing a framework to control the effect of products, activities, and services on the community. This framework also assists governance to manage key activities and demonstrate commitment to programs and policies (Eastman Kodak Company, 2009). This has assisted the company to maintain a position in the market despite its failure to adopt digital technology on time. This research finds Kodak’s ethics and CSR has sustained it through its turbulent times, and led it to survive the problems until its bankruptcy file in 2012, unlike companies like Polaroid that collapsed in 2001 following the digital age.
A company wishing to build in flexibility for its decision-making process to adapt to changing market conditions should do the following. First, the company and its management approaches must be oriented to their markets, with the aim of understanding these markets to create sustained organizational orientation. Secondly, a company should create capabilities approach to its strategic management and couple it with total quality management, to offer a rich set of programs to enhance its market orientation. Thirdly, the company should be market-driven as it masters its market and senses consumer needs. Therefore, the company should have a program aimed at enhancing capabilities that will lead to diagnosis of its capabilities and anticipate future market needs. This also leads to the creative use of innovation, information technology, and continuous progress to meet market changes and demands.
References
CSR Activity Report (2012). Fujifilm Holdings Corporation Sustainability Report, 2012.
Eastman Kodak Company (2009). Global Sustainability: Eastman Kodak Company 2009 Annual Report. Eastman Kodak Company.
Frohlich, D.M. & Sarvas, R. (2011). From Snapshots to Social Media- The Changing Picture of Domestic Photography. Computer Supported Cooperative Work, Springer.
Hill, C.W.L., & Jones, G.R. (2008). Strategic Management: An Integrated Approach. 8th edition, South-Western College Publication.
