Term Paper: Strategic Change: Kodak Many Companies Today

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Strategic Change: Kodak

Many companies today are facing the same challenges as Kodak. The digital era incorporates rapid technological and information changes that are very difficult to match in pace. Customer demands concomitantly change on a very regular and rapid basis, making companies either obsolete or absurdly successful nearly overnight. Kodak's history appears to suggest that the company's flair for innovation and its connection to customer demands is what made it successful since 1888. Perhaps Mr. Antonio Perez's confidence, both in himself and in his new capacity as chief executive of Kodak, is not as misplaced as some shareholders fear.

Various challenges face the Kodak company, the core of which lies in the rapidly changing demand in the world of imaging and film. Film is rapidly being replaced by digital technology as the preferred consumer imaging product. The problem is that film has been the core of Kodak's business since the company's inception. However, Mr. Perez has responded by creating a number of new products and services to mitigate this.

Two other challenging factors are related to digital technology itself. In the words of Mr. Perez himself, digital cameras themselves are not evolving fast enough to keep pace with evolving customer sophistication and demands. He calls them "dinosaurs" (Yee). The market is therefore extremely flexible and ever-changing, or "opaque," as Amy Yee states in the Financial Times of January 26, 2006. This makes it very difficult to project profitable products for the future. One thing that does appear certain is the fact that focusing on a single, stand-alone product such as digital cameras will certainly not satisfy future customer demands and certainly not result in profits.

Mr. Perez and his company have responded by attempting to meet the challenge with diversification. In creating its new business model for the digital age, therefore, Kodak is aiming at a diversity of user-friendly products connected with devices such as mobile phones and the Internet, on which users will be able to share and display their images. This is a sound strategy, as users have come to expect a diversity of digital products by means of which image sharing can be done. These devices have also become increasingly simple to use while concomitantly increasing in quality.

In response to such demand then, Mr. Perez has created a vision very similar to the one that focused Kodak's business when the company began: that Kodak should become synonymous once again with taking pictures. This vision has however widened to include a much greater variety of products and services. Specifically, Mr. Perez's projection for the future includes digital cameras, memory cards, easy-to-use but high quality printers, and in-store digital kiosks. These projections appear to correlate well with Kodak's drive to keep up with future projections for customer demands, needs and requirements.

Current developments seem to bode well for the above projection. The company has for example developed a new digital camera with two built-in lenses, which can accommodate both traditional and panoramic shots. Other elements of Kodak's survival strategy include strategic partnerships with companies such as Motorola and Skype. These partnerships enable Kodak to keep pace with imaging technologies other than cameras, such as mobile phones and the Internet. Through its partnership with Skype for example, the company has introduced a "digital storytelling" service, by which users can share online photos accompanied by live voice technology (Guerrera).

Further diversification strategies include Kodak's developments in health imaging and digital commercial printing. Perez emphasizes that his focus is on areas where he believes the company is likely to perform best. This is a sound strategy, as it focuses on future sustainability by meeting market demands with the company's best products.

Mr. Perez's strategy of evolving technology beyond what has so far been implemented also shows a sound basis of foresight. Health imaging is an example of this. Extending beyond the traditional X-ray film technology, Kodak's digital health imaging service appears to be in good form. This is one of the areas that Mr. Perez wishes to focus on for the future survival of his company. It appears to be a sustainable projection, as health companies are increasingly digitizing their imaging services.

In terms of the above, Mr. Perez appears to have made sound decisions for the future growth and sustainability of his company. Indeed, in the face of the challenge of the rapidly developing and opaque digital age, diversification appears to be the key to sustainability. Another apparently sound strategy that Kodak follows is relying on established, traditional product sales that still deliver considerable revenue. Celluloid used in movies, for example, is crucial to Kodak's short-term survival while the company strategizes for its future success.

Mr. Perez has also implemented human resource strategies to mitigate the losses suffered by the company. These include downsizing in terms of 27,000 out of the company's 64,000 employees. This strategy is focused on the fact that many of Kodak's products have become obsolete in the digital age, making certain sectors of work in the company obsolete also. Hence, to save on revenue, the employee base had to be considerably downsized.

In addition, overseas markets have been restructured in terms of the employee base in order to meet the needs and demands of those markets in a more focused way. One of Kodak's mistakes was for example overestimating the need for film instead of digital technology in emerging markets. This has been ascribed to the Western misunderstanding of the Asian paradigm. To mitigate this mistake, Asian executives are used to lead regional operations. This is a sound strategy in terms of globalization. Communication is a key element in ensuring that the needs of a particular market are understood. In any given country, natives best understand the needs and demands of the market, and hence it makes better sense to hire native executives than appoint American executives, whose understanding and communication paradigms do not fit as well into the particular target market (Guerrera).

To indicate its new paradigm as a digital company and supplier, Kodak has also changed its log. The red and yellow lettering remains, but the yellow square that could be associated with a box of film is removed. This is a good strategy, as it retains the familiarity of the company's brand, while also indicating that it is ready to evolve with the times.

In an assessment of Kodak's strategies and sustainability, one should recognize both the company's strengths and weaknesses, and how these are used in strategy formation. Historically, a great strength is Kodak's marketing prowess (Guerrera). Mr. Perez appears to be using this to its full potential in marketing new and projected products. His vision also correlates well with this paradigm, in that he is ambitious in terms of the future. Mr. Perez appears to make good use of the company's historical reputation to restore it for the future. A current strength implemented and used by Mr. Perez is focusing on the company's areas of best performance, while relying on current best performing products for the company's short-term revenue.

One of the company's weaknesses, on the other hand, is how digital products were initially implemented. Perez admits that, after implementing digital technology, Kodak did not do much to further develop, diversify or distinguish themselves in this market. Concomitant with this was the company's continued dependence upon film-based technology, while consumers demanded an increase in digital products. Mr. Perez has however accurately estimated the extent of this problem and appears to have created a sound basis for mitigating it by means of future developments.

This is an issue that should be kept in mind for the future of the company as well. Also, I believe that the lack of innovation and development in the digital field is what, as Guerrera indicates, led to the current need for a complete overhaul. To avoid this in the future, Mr. Perez should then keep in mind the need for continual market investigation. Keeping up with customer demands and market trends can then provide an early indication of market changes, and what should be done within the company to keep pace with these changes. Mr. Perez does appear to have set the pace as well as could be expected for the future of his company.

In an estimation of Kodak's sustainability, one should also address the risk factors involved. Perez has taken several risks in his overhaul of Kodak's business. The greatest risk factor indicated by both Guerrera and Yee is the amount of Kodak's debt, which amounts to $3.3 billion. This is however mitigated by the sale of the company's health imaging business. According to Guerrera, the debt amount is likely to be slashed by 2 billion from the revenue of this sale. The remaining debt is however still substantial.

Furthermore, Mr. Perez has created substantial risk by acquisitions. While Perez maintains that it was his only choice to maintain a sound footing in the imaging business, investors are concerned about the amount of debt, as well as the nature of digital products. A… [END OF PREVIEW]

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