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Kodak's Marketing Strategies Help

Essay by   •  February 4, 2011  •  Research Paper  •  2,208 Words (9 Pages)  •  1,812 Views

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Kodak's Marketing Strategies Help

Company Effectively Compete in Digital Age

Founded in 1881 by George Eastman, Kodak turned point-and-shoot photography into an overnight obsession when, in 1900, it introduced its $1 Brownie camera. The Eastman Kodak Company became a symbol of American ingenuity and one of the most recognizable brand names during the 20th century. By 1927, it virtually held a monopoly of the U.S. photographic industry, and in the 1980s, Kodak still had nearly two-thirds of color-film sales worldwide (Dobbin, 2004). However, during the 1990s, it became complacent and slow to take advantage of technology and new markets, such as that of the point-and-shoot 35 mm camera. This complacency and slow action enabled Fuji, the Tokyo-based film and camera company, to jump from anonymity about 25 years ago to challenge Kodak for the number one spot.

Kodak's film business wan for more than a decade and its decline continued to accelerate in the 21st century. It was losing to the new film-less digital camera, which recorded pictures on a computer chip. Other camera companies were already producing and promoting this new technology. Just as it was slow to grasp the point-and-shoot 35 mm camera technology, Kodak was slow to enter into the digital camera business. Its complacency, lack of action in scanning its competitive environment for new products, and unwillingness to embrace new technology seemed to be Kodak's modus operandi. Lack of action caused it to lose market shares in the photography industry. In 2003, Kodak's fourth quarter profit was $19 million, or 7 cents a share, down sharply from $113 million, or 39 cents in 2002 (Dobbin, 2004). Kodak had to cut its workforce worldwide from 136,500 in 1983 to about 35,000 in 2003. Laying off of workforce and loss of profits are consequences of a company not scanning its competitive environment and not keeping up with changing times.

Kodak was struggling to recover from the decline in its film business. If it wanted to survive and not fade into history, it had to develop a competitive strategy to overcome its dilemma. That strategy had to include manufacturing and marketing products using digital technology. Because it was slow to move into digital photography, Kodak saw its competitors gain great momentum and success in marketing digital photography technology. It needed to find ways to effectively convert to digital photography and compete in the digital age. In 2003, the company did admit that it was struggling with the rapid conversion to digital photography when it announced a big drop in profits and cutbacks of its workforce (Dabkowski, 2003).

Even though it does not have the monopoly it had in the 20th century, Kodak is now holding its own in the digital technology business and turning things around. Although the company's overall profit did decrease in the fourth quarter of 2003, its consumer digital camera sales leaped 87 percent, and revenue from its online photo-sharing service surged 55 percent (Dobbin, 2004). Kodak has taken action to effectively compete in the digital age by implementing strategies that have helped it to become the multi-industry, digital imaging leader it has become today. This paper will discuss some of those actions, in particular, Kodak's products, sales promotions, pricing, and distribution strategies.

Strategies

Products

In 1991, Kodak finally produced its first digital camera, the Kodak Professional Digital Camera, which was a high-end camera allowing photojournalists to take electronic pictures (Lehmkuhl, et al., n.d.). Kodak is now betting its future on new-wave photography, digital printing, and health imaging, which are fast-growing but highly competitive markets. Kodak has invested billions of dollars in digital camera and imaging technology, and is trying to set itself as a center for people to get their digital photos processed. Kodak is no longer a film company, rather it is becoming an imaging company. Until now it has been at the front end, helping to capture the image; however, from now on it wants to be at the output end. Kodak has poured more than $4 billion into digital research in the past decade, securing hundreds of patents and developing a vast array of products and services. Some are innovative, competitively priced, and proving popular with consumers, such as its Picture CD software, online photo-sharing service and digital cameras.

Kodak seems to have well positioned itself in the business of selling digital cameras. Its easy-to-use line of Easyshare V-Series digital cameras is most popular. As a strategy, Kodak is also manufacturing and selling Kodak photo printers for use in printing pictures from its digital cameras. Even though Kodak finally has a good position in digital cameras, it felt that the only way to make money is with its printing equipment which can be used with its digital products. Kodak, therefore, entered into the highly competitive inkjet printer and cartridge market (Bulik, 2007). Until now, Kodak printers have been sold at a loss. Profits were made up by the later sales of high-margin ink cartridges. The purpose of Kodak's strategy here is to sell premium priced printers with no discounts, and then offer its much cheaper ink cartridges for a profit. Of course, the profit will be at a slimmer margin. The cheaper inkjet cartridge strategy has never been done before in the inkjet printer industry. This is a smart move on Kodak's part. Ink cartridges are very expensive, and for a consumer to be able to purchase them at a third of what Kodak's competitors charge would be beneficial to the consumer. Furthermore, it is a great competitive advantage for Kodak.

Promotion

Kodak has implemented many sales promotions to get consumers to purchase its products. Currently, it is promoting a trade-in and trade-up program. In this program, the consumer buys any Kodak Easyshare digital camera at the Kodak Store and trades in his or her old digital camera regardless of brand for a cash rebate. The program also offers a trade-up to a new Kodak Easyshare digital camera that has newer and updated features and technology. This strategy is aimed at keeping customer loyalty. If the consumer can trade up, at a discount, to a better product, then the likelihood of that consumer buying more Kodak products will increase. This is a good strategy. Furthermore, to make the trade-in and trade-up program easy for consumers, Kodak has created a trade-in center customer service message form where the customer can complete the form online to easily receive immediate support. Also, there is an 800 support number for the customer to call. Kodak

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