Kodak Case Study

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PESTLE ANALYSIS

Political Factors

Laws and governmental regulations have an impact on the way Kodak operates and manufactures its products. Kodak riding the wave of globalization expanded into many different countries. By doing this, Kodak became obliged to adapt to different legislations. The problem with this is that not only are the politics of each country possibly incompatible with the politics of other countries which jeopardizes Kodak’s entire value chain and creates problems at all levels of the supply chain, but there are in fact some countries, now considered isolated, that have norms and rules that put Kodak’s business identity into question, making the company have to completely alter the structure of its operations.

Economic Factors

Kodak has been significantly impacted by the changing externalities in the economy. These are a result of globalization opening the way to new markets and bringing more (and more sizable) competition to the company. Another socio-economic factor lies with the influence of changing demographics in terms of costumer IT services. Increased wealth and income coupled with increased access to new technological developments for a larger amount of people have radically altered certain parts of Kodak’s market forcing it to adapt to new changes. We can also mention that the decline in prices has made it more affordable for consumers to buy digital cameras. However, the economic crisis guarantees that the growth of buying power isn’t so accentuated, holding one of the 5 forces of Porter in check in favor of the company, but hurting it on the revenue side.

Sociological Factors

Social changes have also significantly impacted Kodak in relation to changing demographics in the costumers it targets. As such, costumer´s changes in needs and preferences for high-tech imaging products and changing life styles have increased the pace of organizational changes of Kodak in terms of meeting those needs. Increased globalization has led to costumers demanding faster responses to their needs creating much more competitive business fields. Costumers have also become more service sensitive as well as technique and quality oriented as a result of higher educational levels and income levels. Current trends show that consumers take and share photos on mobile phones daily which led to digital cameras being integrated in them and Kodak even creating its own brand of phones.

Technological Factors

The rate of technological development in the imaging industry has been and is even more rapid and has forced both start ups and established companies to respond and adapt quickly in the face of radical and architectural innovation. In fact, it was this factor, above all, that led, according to some theories, to the downfall of Kodak for not being able to instantly transform its business into the digital business, instead preferring a gradual transformation to milk the cash flow out of its old business. We can also include the fact that the digital revolution stopped Kodak’s plan of continuing to sell printed images on its tracks.

Environmental factors

Kodak´s products are hard to dispose of and are unfriendly to the environment (for example the chemicals used in the manufacturing process) and so the company has to be aware of a lot of green issues. However, Kodak has been emphasizing change in the creation of technology, processes and products that are less hazardous and that create fewer environmental externalities.

Legal Factors

Kodak operates in several countries and in order to adapt and deal better with the legal environment of each on Kodak created partnerships and joint ventures in order to minimize exposure and being able to enter in certain markets.

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SWOT ANALYSIS

Strengths (resources and capabilities)

Kodak has several strengths that allow it to distinguish itself from rivals. Kodak has definitely a superior brand recognition when compared to rival brands, mainly on its main market the United States, based on US consumer reports. Another strength is the massive worldwide distribution presence through retail photography stores, film processors and professional photographers which provided Kodak with competitive advantage in the past. Kodak also leads in the higher- end photo quality camera segment where it launched its major innovations in imaging. It also has several resources such as paper, ink and chemical technology. This, in turn, is derived from another strength, its 11000 patents derived from significant investment made during the 20th century. We can also mention its tremendous depth of understanding of recording and processing images. Central to Kodak´s imaging capability is its color management capability. In the digitalizing color and transferring digital images to paper, Kodak possesses a powerful set of complementary technologies in sensing, color management and thermal printing.

Weaknesses

Kodak also has several weaknesses namely the fact that they avoided taking risks, they were not innovative enough and relied on existing procedures and policies to maintain standards during the rise of the digital age. They were slow to bring new products to the markets. The retail network of stores is a depreciating asset due to the ever increasing use of home computers, email and print technologies. We can also say that focuses too heavily on the extremely competitive entry-level market and fails to develop innovative products fast enough. Its product development and sales departments are also fragmented and scattered over many divisions. Kodak´s middle managers are also resistant to change and do not understand the digital world. They ignore analysis work based on info gained from Kodak´s eroding market share. We can also say that they lack vision and strategy.

Opportunities

A few opportunities exist for Kodak. Kodak could try to attract the consumer trust it already has in film to the digital segment. Kodak could use its huge resources and capabilities to also focus on its core business and development of new technologies and new products to adapt it to the new digital era. Creation of alliances with other companies that would be eager to work with an industrial giant full of expertise would also be a good solution.