Questions at the bottom

Chapter 6

Case AssignmentWhat Would You Do?

EASTMAN KODAK COMPANY

Rochester, NY. Most companies can only dream of having their trade name become synonymous with their product. Known as a generic trademark, this phenomenon typically occurs only once the product has gained substantial market share and, more importantly, mind sharethe epitome of market success for many consumer products.

Founded in 1888, for most of the 20th century, Kodak held, by far, the dominant market share for photographic film. In 1976, Kodak supplied 90 percent of film sold in the United States, and 85 percent of cameras sold. For more than a century, Kodaks trademark was easily one of the worlds most recognizable brands. At the height of its success, Kodak was worth an estimated $20 billion, and employed almost 145,000 people. Kodak film was so popular and universal that Kodaks advertising slogan a Kodak moment became a common expression used to describe an event that was so important or memorable that it should be committed to film. By early 2012, however, the Eastman Kodak Company had filed for bankruptcy protection. Share prices had steadily dropped from a high of $45 to $0.40, and the company employed fewer than 15,000 people.

Many believe that Kodak was simply put out of business by the invention and immediate popularity of digital photography, but few realize that Kodak was a pioneer in the development of digital photography, and, in fact, invented the first digital camera in 1975. The camera was specifically and intentionally ignored by Kodak management, however, because Kodak feared cannibalizing its extremely profitable film business. When Sony released the first digital camera in 1981, Kodak recognized that change was coming, but still sought to protect the film division through aggressive marketing and promotion strategies of its iconic photographic film.

Over the next decade, Kodak invested approximately $5 billionor 45 percent of its R&D budgetin digital imaging. When digital cameras gained mass appeal in the late 1990s, Kodak was at the forefront of the new technology, and its digital products were top sellers. In 2005, Kodak was ranked No. 1 in the United States. in digital camera sales with sales of $5.7 billion. The company also had untold intellectual property in digital imaging with thousands of patents worth billions of dollars. But digital cameras are a commodity, with low profit margins, unlike photography film, and Kodak was quickly overtaken by competitors who could offer digital cameras with similar features at lower prices. In 2007, Kodak was the 4th most popular camera company in the United States, but by 2010 it had fallen to 7th place, and Kodak was losing money on each camera sold.

When Kodak came out of bankruptcy protection in mid-2013, it sold many of its digital imaging patents for approximately $525,000,000 to several indirect competitor companies including Apple, Google, Facebook, Amazon, Microsoft, Samsung, Adobe Systems, and HTC. These companies are doing what Kodak has been unable to do: capitalizing on photographys digital age. How could a company that started out so well, with untold resources and brand reputation, fail to translate its success in film to the digital imaging industry?

Questions

Short Answer

1. At what stage on the S-curve is digital photography?

2. Kodak had a promising entry into the field of digital photography, first by inventing the digital camera and then by being first in sales in 2005. How could the company have failed to capitalize on innovations that it created?

3. Suppose that in 1975, you were an upper-level manager at Kodak, and you recognized the potential in digital cameras, but your peers did not. What could you do to help implement this change?