CASE ANALYSIS

FUJI VS KODAK
PRESENTED BY
Adarsh Sheth
Purushottam Kalantry
IBS Mumbai (08-10)
 Introduction to the Case

 Kodak’s revenues were down from $15.97 bn in 1996 to
$14.36 bn in 1997 and net earnings fell from $1.29 bn
to just $5 mn


 More than 5 percent points decline in the US marketshare

(from 80.1% to 74.7%)

 Analysts felt that Kodak had underestimated its
competitors especially Fuji Photo Film

 Fuji entered the market in the mid- 1990s with 10%
marketshare and increased it to 17% in 1990s

 Aggressive marketing by Fuji brought down prices
significantly

 Contd…
 In the late 1990s, the rivalry between Kodak and Fuji
further intensified


 Analysts felt that Kodak should not take its home market
for granted as Fuji had become the world’s second
largest manufacturer of photographic film and paper
after Kodak


 Fuji was not just winning over cost-conscious consumers

but also steadily eroding Kodak’s lead in the
professional photography market
 Background


 George Eastman founded Eastman Kodak Company in

Waterville, New York


 Existing photography methods were cumbersome



 Photographic images were made on heavy, fragile glass

plates that had to be coated with a wet emulsion just
before picture was taken


 Pioneered and patented the dry plate process

 About FUJI


 Founded in 1934, with its headquarter at Tokyo, Japan



 Entered the US market in 1964 as a supplier of private

label films


 Focused on providing quality and innovative products at

cheap price


 Was the market leader in Japan, world’s second largest

market for photography products
 Reasons for Success
 Built a reputation for quality and innovative products


 Gained market share by offering products at prices lower

than that of Kodak’s


 Consumers viewed the company as Customer-oriented



 Regular introduction of new products, promotions and

slashing of prices


 Kodak’s defensive strategy vs. Fuji’s offensive strategy


 FUJI STRATEGY


 Fuji appears to price its product much higher in the

domestic market
 Gives Fuji cash flows
 Allows them to price low in the export market

 Fuji’s Strategy
 Established a Production plant in US
ü Cost Efficiency


 Reactive Follower


 Customer & Quality were the prime focus

üCLV & CRM


 Distribution Strategies


 Compatibility with Kodak Cameras & Films



 Aggressive Marketing

 FUJI’S PROS


Fuji’s chances for future growth-



 Fuji is attacking market leader by out innovating

Kodak in almost every sphere.
 Fuji looks to be more in line with customer needs
and have a great distributor network.
 The high spending on R&D has reaped results in the
past and might do the same in future.
 Digital technology seems to be the future of
photography. Fuji will do well to concentrate on
this.

 FUJI’S CONS


 Fuji has to overcome following disadvantages



 They have concentrated on long term strategy and

their profits are low as of now.
 Their market share might stagnate because of counter
offense by Kodak with much higher profits.
 Might result in low performance in the eyes of
stakeholders
 It is still not seen at par with Kodak in US market.


 KODAK


 1884- Roll of film



 1887- Manufacturing cameras and started operations in

London


 Mid 1890-Company owned distribution outlets



 1900-Entered Japan and set up its first distribution

outlet in 1905


 1924-Eastmen retired and became the Chairman of the Board

of Directors

 Decreased Brand Loyalty in the early 1970s. Growth rate
slowed by 2%-4% for Kodak


 1981-Sony Launched Mavica, a filmless electronic camera

which would display pictures on a TV screen


 Kodak reduced the price of its films



 In 1980s, Japanese players developed 35 mm autofocus

cameras. In response Kodak launched small disk cameras,
which used film disks instead of film rolls.
 Kodak in Japan


 Kodak entered Japan in 1905

 Never took market seriously


 1977
 Strengthened distribution and marketing system
 Joint venture (Kodak – Nagase)
 Created Subsidiary (Kodak – Japan)
 Increase employee from 12 to 4500


 Access to camera stores went up – 30k to 60k

 Kodak in Japan


 Large no of Fuji Exclusive stores



 Late 1970s
 Joint venture Bandai (Toy Mfg) – single use camera
 Setup own R&D and support center
 Kodak Symposium


 Improved Kodak image




 Kodak in Japan


 1980’s
 Concept of Minilabs
 Got advantage over Fuji
 Introduced “Panoramic Disposable Camera”
 Increase control on S & D system
 Bought Kusuda Business Machines

 Controlled 150 labs against 250 by Fuji

 Kodak in Japan


 Late 80’s
 Advertised heavily
 Introduced waterproof disposable camera
 Introduced Print film – Ektar


 In all company spent around $500 million



 Despite, Company failed to attract consumer


 Kodak in Japan


 1994
 Introduced single use Camera – Falcon
 Advertised this product unconventionally


 Became one of the best photographic product of the year

in Japan
 KODAK DIVERSIFICATION


 Kodak is more diversified than Fuji



 Revenue% and ROS per segments

 Revenue ROS
 87-89 90-92 87-90
90-92
 Imaging 40.0% 36.9% 16.9% 15.3%
 Information 23.5% 20.8% 1.9% -6.9%
 Chemicals 18.7% 19.2% 17.6% 14.5%
 Health 17.8% 24.5% 16.3% 1.5%


 Has Diversification been a good thing for

Kodak?
 DISTRIBUTION NETWORK
 JAPAN
 In 1977 KODAK tied up with the distributor Nagase & co
in Japan


 Increased its workforce from 12 to 4500



 Neglected the Japanese market earlier



 JV with Bandai a leading Japanese toy manufacturer - co

branding agreement





 Conducted annual Kodak symposiumpsin which the audience

included university professors & researchers,
customers & its partners


 This was done to project itself as a technology intensive

company


 In 1980 introduced the concept of “minilabs” at certain

retail outlets where the film can be processed much
faster than other labs





 Fuji products were sold through 216000 retail outlets



 15% of them gave 75% of the total sales.



 Fuji owned a controlling interest in 3 of the 5 major

wholesalers


 In response kodak bought Ksuda Business Machines a local

distrubutor there

DISTRIBUTION STRATEGY
 DIFFERENCE IN
DISTRIBUTION

 In US manufacturers sold directly to retailers &
photofinishers


 In Japan distributors acted as intermediaries



 Fuji had strong ties 4 main distributors Asanuma, Misuzu,

Kashimura and Ohmiya


 Whereas Kodak had only 1 distributor – Nagase



 Kodak claimed that the tie up of fuji with major

distributors prevented other brands entry


 Japanese government was supporting such monopolistic

distribution set up


 Fuji gave high commission to the distributors


FINANCIALS

SALES FELL 21 . 5 % IN 3 YEARS

ppliers to provide quality products at competitive p
 THE DISPUTE
ü
ü Higher market share of Fuji in US but lower market
share of Kodak in Japan


ü Kodak alleged Japanese government of favoring Fuji



ü Kodak filed a petition under Sec 301 referring to

unfair trade practices


ü Allegations were
 - Price fixing, bribing retailers and
wholesalers (Huge rebates), association with
photo labs.
 FUJI’S STAND


ü Kodak was unsuccessful majorly because of its

 - Poor marketing
 - Negligence
 - Bad management
 - Short term vision and priorities


ü It talked of not being involved in any kind of unfair

trade practices
 ROLE OF WORLD TRADE
ORGANISATION


ü
ü US favored Kodak in WTO
should be taken against
Kodak but it can crate
and the ultimate losers

by saying that punitive action
Japan and stated “ Its not just
problems for any foreign player
would be Japanese consumers”

ü In 1997 WTO ruled out all allegations by Kodak in absence

of substantial proof.
ü
ü Challenge faced by historical business model due to
transformational change in the technology, i.e. Theory
of Disruptive technology.


ü Kodak has experienced a nearly 80% decline in its

workforce, loss of market share, a tumbling stock price,
and significant internal turmoil as a result of its
failure to take advantage of this new technology.


ü Integration of market and nonmarket strategies in a

setting, involving market competition and international
trade policy where governments serve as bargaining
agents for firms.
ü
 CHANGING TRENDS
ü Changing customer
 - More accepting towards foreign brands
 - Found a bona fide competitor in fuji
 - Changing landscape for retail

ü The New Players
 - Especially Non Traditional competitor like Sony,
HP, Casio

ü Global Market share Battles
ü
ü US Market share Battles
ü
ü Price wars
 - Initiated by Fuji, but no after effects
from Kodak


ü Sponsorship Battles
 - Fuji, the Event Sponsor while Kodak, the
Broadcast Sponsor (80’s)


ü Court Battles
 - Had to go ahead because of weak Trade &
Investment Ombudsman (Japan)



 VARIOUS MODELS OR STEPS


ü Market Model incorporates structure of the market,

demand & supply


ü Enforcement of International Trade Agreement, i.e.

Sustainable Concessions


ü Preference based bargaining



ü Non Market Model e.g. Common Agency

 Kodak can anticipate market changes faster


 Steps Kodak can take to protect its strategic advantage

are -
 Full line strategy – Kodak should devote resources
for digital cameras and film processing.
 It is currently following counteroffensive defense.
It can try flank defense where it can use revenues
from high end products to attack low end products.
 Mobile defense – Kodak can look for new emerging
markets.
 Since photo processing forms the largest chunk of
revenues, Kodak might do well concentrating on
this segment besides high growth OTUCs.    

THANK YOU…!!