Managing Business in a Changing Environment: the Case of Kodak and Fujifilm

Success and failure of businesses is occasioned by managers’ embrace or ignorance of innovation. While some companies have used innovation to stay ahead of competition and provide value to customers, others have ignored it and suffered the consequences. Eastman Kodak is a multinational corporation involved in the production of equipment, systems and supplies in professional and consumer imaging. It was established in 1889 by George Eastman, a bank clerk in Rochester, New York, who started out by mass producing dry-plates for sale to photographers. The company soon became a model for photographic innovations by introducing a new machine that could process films without using a darkroom. They later introduced cheaper cameras which saw the company grow to command ninety percent of sales for cameras and film in the United States (Kodak, 2014). In the 1990s, sales started to crumble due to management rigidity and failure to adapt to change in the business environment; hence the company went bust and filed for bankruptcy in 2012.

Fujifilm Company was established in 1934 in Tokyo, Japan as primarily a film and processing company, when the Japanese government introduced a domestic film manufacturing industry. The company began by operating and producing photographic film, print paper and dry-plates. As business grew, the management decided to go international. The company diversified its operations, through mergers, acquisition and joint ventures, into graphic arts materials, micro-electrical, screen, packaging and ink-jet printing inks (Fujifilm, 2014). 

A company, in order to stay afloat ahead of competition needs to aggressively and innovatively introduce new products and services perpetually (Christensen, 2006).  Kodak employed mass production strategy and opened up more international distribution points; this lowered the unit cost of production that translated into cheaper products to their consumers. They also engaged in extensive research and development to improve product quality, while at the same time advertising extensively to create awareness on the quality of their products. Kodak and Fujifilm used both sustaining and disruptive innovation strategy to create new markets and leverage their innovations; they made easy to use cameras which were portable.

 Fujifilm used research and development to refine their technologies on products that would improve the quality of their customers’ lives. This was done by enhancing group synergies, and deepening the company fundamental technologies. Fujifilm started magnetic research and in 1963 produced videotape for television followed by the first floppy disk in 1977. Due to rising cost of silver for photographic imaging, Fujifilm decided to venture into electronic imaging technology and enlisted the help of the most qualified electronic engineers (Fujifilm, 2014).

While Eastman Kodak embraced convenience- based mass market, Fujifilm through good timing chose niche marketing by targeting professional and amateur photographers, while refining the quality of its products as its positioning strategy. This strategy saw Fujifilm beat Kodak with the introduction of faster film. It also improved on its manufacturing facilities, which began producing pre-sensitized materials, optical products and color processing chemicals for export resulting to reduction in overhead cost.

Christensen (2006) further states that, companies fail due to poor managerial planning and arrogance, bureaucracy and short term investment horizons. Over time, the product development of Eastman Kodak began to fail, Fujifilm then saw an opportunity to grow by producing faster and higher resolution films. It then became harder for Kodak to catch up with Fujifilm because Kodak adopted electronic technology later when Fujifilm had already embraced the value of electronic technology in imaging and processing. Another strategy that saw Fujifilm beat Kodak was corporate sponsorship, when it outbid Kodak to sponsor the 1984 Olympics event that was held in Los Angeles and subsequent soccer World Cup in 1982 even though Kodak used ambush marketing,  by sponsoring ABC television to air the games, at the expense of Fujifilm who was the main events sponsor. Fujifilm, in a bid to stay customer-oriented, started offering customer support and promotional discounts on purchases to customers, this increased sales by a greater margin.

Fujifilm decided to capture wholesale photofinishing market. It bought labs from Wal-Mart Stores and subsequently supplied the later with photofinishing services on all its stores. This move took business away from Kodak. The two companies used differentiation strategy to market their products through packaging. They used different colors for their products; Fujifilm used green with other bright colors, while Kodak preferred yellow. At that time, yellow was equated to gold, thus Kodak experienced unparalleled preference by consumers. 

Change of management structure has also impacted on the two companies’ success in that, Fujifilm changed into a holding company by creating Fujifilm Corporation. This changed the communication style in the organization; information started getting passed both up and down through management layers and horizontally amongst the departments forming the corporation. This also saw a change in influence from authority-based to expert-based, whereby managers began using their expertise and knowledge to influence and direct staff on their tasks. Fujifilm implemented full structural reforms, through imaging solution segment to preserve the company photography culture, laid new growth strategies by increasing research and development, capital and environmental investment. It also fostered consolidated management through consolidation of subsidiaries in manufacturing, sales, and logistics (Masatake, 1996).

Kodak took their products close to the customers through digital photography, but it was in printers that Kodak reaped from having market power and control over the customer. Kodak used a functional organizational structure by centering its operations on job functions. These job functions included; finance, sales and marketing, personnel, and research and development. Each manager had a special group of analysts reporting to them.

Kodak acquired Sterling Drug, a drug company, which the management thought would do well because drugs at the time had higher margins coupled with the fact that Kodak had been involved in making chemicals. The venture was a flop because they had no capacity to develop new, valuable, and patented drugs. Kodak was not able to come up with generic drugs at prices lower than those of their new competitors. The Eastman Drug Company was sold off at a loss after six years. Christensen, (2006) asserts that Kodak ventured into digital photography and as a result failed to take decisive measures to combat innovation challenges.

Companies should avoid complacency, which is arrogance because of gaining success in a field or business. Managers become satisfied with their accomplishments and so do not look for new emerging opportunities, but concentrate on the internal affairs of the organization. This proves detrimental to the organization and sooner competitors bust the company because managers have not initiated leadership in their companies. Company innovators should be listened to because if they leave the organization, business definitely goes down. Managers should give innovators the power to lead so as to uplift the culture of urgency and affect change.

Since a company is system that is open to the environment (Porter & Kramer, 2006), it should engage in corporate governance in socio-economic context. Corporate social responsibility allows companies to act as members of a community by engaging in community service, which in turn affirms profitability. Kodak, since its inception started out on giving back to the community and that cemented its position as a leader in welfare capitalism. The company embarked on an ambitious plan of social responsibility through its high wage and fringe benefit policies. Kodak is committed to environmental, safety and health for global sustainability (Kodak, 2014).  Fujifilm engages in social responsibility by responding to society’s demands of culture and technology and preservation of the environment. The company management also engages its stakeholders in dialogue to ascertain whether the social responsibilities are responding to their expectations. Fujifilm also discloses information to show accountability and enhance corporate transparency. Fujifilm, during the great east Japan earthquake, dispatched employees to involve in activities to support the victims in recovery (Fujifilm, 2014).

Changing market conditions made the two companies adapt in that, while Fujifilm business survived, Kodak went bust and filed for bankruptcy protection. This was occasioned by the companies’ reaction to competition and innovation. Kodak allowed complacency to take a toll on its business, innovators were never listened to, and the management wanted to follow the contemporary strategy of controlling the customer when new technology had made the strategy more difficult to use. Kochan, (1999) states that Kodak later found out the customers wanted more freedom of choice for products and services in the market. Fujifilm ventured in what its staff was good at and so made new customers by innovating products that suited the customer need. Fujifilm management found a new power in providing value to their customers. Fujifilm embarked on a price-cutting campaign which saw the company increase its market share in the United States, Kodak’s own country. 

Kodak had to downsize on its employees as a desperate measure to keep up with deteriorating profits. This action eroded the company’s lifetime security promise and the talent that had been hired was lost to competitors. The management also employed cost-benefit strategy to cut down on waste. The company employed a new chief executive officer, who chose to focus on the core film and imaging business to duplicate the kind of quality-focused manufacturing process he had orchestrated at his previous company, Motorola. Kodak had to go back to film manufacturing and decided to concentrate on that niche. They ventured into manufacture of LCD screens, and cosmetics (Kochan, 1999).

Companies should invest in decision making as a key leadership component to built flexibility. This provides for opportunity to change the course of action as the managers making strategic decisions get more information over time. Managers should define problem, Assess options and adjust approach. The process should start with defining the problem by gathering information to evaluate the possibility of solutions and estimate the outcome. Experienced managers make use of the available resources to collect data needed for knowledgeable decision. With data collected at hand, there is need to analyze the probable advantages and disadvantages of each option, change approach and step back to review the situation. Flexibility in decision making allows managers to learn from their mistakes and so strive for a successful outcome. Before managers can implement change, they should consider the organizational future objectives. The problem has to be analyzed in broad terms instead of step progression method. Managers need to apply critical thinking techniques in the decision making process. There is need to shift priorities to allow for change so as to take advantage of new opportunities as they arise.

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