While the days of bankruptcy may be over for the American technology giant Kodak, it seems a long time ago that they dominated various markets. The story of Kodak’s fall from grace has become the classic go-to case study to evidence the perils of not adjusting to technological advancements. Yet Kodak have managed to battle back since. In this article, we chart the rise, fall, and subsequent stability of Kodak.
Kodak was founded in 1888 by George Eastman and Henry A. Strong. The duo presided over a business that would initially conquer the rapidly-changing photography market. The first Kodak camera appeared in 1888, with several other devices being added in the following years. By 1895, a ‘Pocket Camera’ was created. Kodak would continue to innovate throughout the 1900s, launching several more products. Strong passed away in 1919, before Eastman took his own life in 1932, stating in his suicide note that his ‘work was done’. Both have been widely-praised in the contemporary age for their contributions to technology.
Kodak were able to move on however from the death of their founders. They used a classic business model in order to attain strong revenues. Like the famous razor and blade strategy, Kodak would sell cameras cheaply , only to then make money from strong margins on consumables such as film and paper. Kodak dominated the film and camera market for much of the 1900s.
Kodak faced their first real threat to their supremacy in the form of Japanese corporation Fujifilm. Fujifilm undercut Kodak in several areas upon entry to the American market, and secured significant publicity after being a major sponsor at the 1984 Olympics – which were held in USA. Fujifilm used their business model to gain a foothold in the market – in the process eating into Kodak’s market share. Fujifilm were also seen to be more responsive to changing technology, when compared to Kodak, with Fujifilm launching several products which utilised newer technology.
Kodak were very slow to respond. In a move which would lead to ridicule, Kodak complained to the World Trade Organization (WTO) regarding supposed ‘unfair practices’ employed by Fujifilm in the Japanese market, which Kodak stated was the cause of their struggles in Japan. The WTO rejected Kodak’s complaints, and by the end of 1997, Kodak’s revenues had dropped considerably, while net earnings plummeted from $1.29bn to $5million in just a year.
Around the turn of the millennium, digital photography captured the imagination of the worldwide public. Kodak were slow to respond to this exciting new market, despite the fact that they had ironically developed the world’s first digital camera in 1975. At the time, they didn’t pursue the product in the consumer market due to fears over its potential to derail Kodak’s photographic film arm. Kodak would rue this decision, as consumers moved towards digital photography.
It took until around 2004 for Kodak to finally secure a strong market share in digital photography. By then, another Japanese competitor had arisen – Sony. Sony were dominating the market. Yet Kodak made extensive use of customer research to try and find consumers’ issues with competitor’s cameras. Kodak then used this research to develop new products which circumvented problems such as computer and printer compatibility. Their digital camera sales surged as a result, and Kodak’s fortunes appeared to be changing.
But as is typical in the fast-moving technological world, Kodak’s success didn’t last long. With digital cameras becoming ubiquitous, a host of companies entered the market. Kodak started to lose market share once again, and Sony were able to recapture their position as the leading digital camera seller. Meanwhile, Kodak’s film business also struggled, and overall revenues dwindled. Canon, Nikon and Olympus were among the other firms to claw market share away from Kodak.
Cash reserves were used at an alarming rate throughout their struggles. Kodak turned to litigation as a way of generating revenue, with the business following up on potential patent infringements. One such infringement led to an $830million payout from LG. But this did little in the long-term to allay fears over Kodak’s long-term prospects. Shares fell 80% in 2011 alone. In early 2012, Kodak filed for Chapter 11 bankruptcy protection – it appeared they had simply been too late to innovate.
Yet Kodak were able to secure a loan to continue their operations, and thereafter attempted to turn their business around. Manufacturing was outsourced, and the firm entered the printing market as part of several strategy changes. Kodak initially enjoyed success in the printing market, despite deviating from Hewlett-Packard’s industry-leading business model of selling cheap printers and costly ink. Instead Kodak sold expensive printers and cheaper ink.
But despite the initial success, Kodak were unable to secure a profound market share in printing. Some areas of their printing business were eventually sold on, with other areas of the business also being sold. Kodak resorted to selling off highly-coveted patents as a way to raise crucial capital. Lucrative patents were sold to technology giants including Facebook, Google and Amazon.
The sales of patents raised almost $1bn, and, coupled with the process of spinning off some areas of the business, provided Kodak with the capital to emerge from bankruptcy – doing so in late 2013. Kodak have since been steadily gaining market share, with stability seemingly being achieved. Kodak still trade in a multitude of areas, including 3D printing and packaging, software and solutions, printing and ink, and their trusty consumer and film arm.
Kodak have undoubtedly had an interesting history. From domination to bankruptcy, they have rarely failed to attract interest. They are renowned for not moving with technological advancements. However, unlike many who perished, they had the nous to turn their fortunes around once again. While Kodak may not ever rule again, they are still in the game. The lasting lesson of Kodak is the importance of innovation, and how no business, regardless of size, can stand still in this era of rapid technological change.