Pre-seen exam information
Semester 2 2012
Global Strategy and Leadership
© CPA Australia Ltd 2012
Case Scenario 1
Kodak case facts
Eastman Kodak Company (Kodak) was founded in the late 19th century by amateur photographer George Eastman in Rochester, New York. With the slogan ‘you press the button, we do the rest,’ Kodak gave consumers the first simple camera in 1888, making a cumbersome and complicated process easy to use and readily accessible. A major multinational organisation, Kodak was listed on the New York Stock Exchange and became a powerhouse in the photography industry. The company led the way as an innovator, launching a large range of new products and processes to make photography simpler, more useful and more enjoyable.
With the rapid growth of digital photography, competition against its product and being slow to embrace the move to digital technology Kodak has fallen on hard times. In January 2012, Kodak and its US subsidiaries filed voluntary petitions for Chapter 11 business reorganisation1 in the US Bankruptcy Court for the Southern District of New York. A company spokesperson said the aim of the business reorganisation was to enable Kodak to bolster liquidity, sell off nonstrategic intellectual property, and enable the company to focus on the most valuable business lines. The process will allow Kodak to continue normal business operations while it attempts to emerge a profitable and sustainable enterprise2.
Kodak: Snapshot of an innovative icon slow to move with the times In filing for bankruptcy protection, Kodak executives say they are seeking to follow the path of US corporations that have reinvented themselves after a court-supervised reorganisation, like United Airlines and Chrysler. Antonio Perez, the company’s oft-criticised chief executive who has been trying to turn the company around since 2005, said the bankruptcy was a step ‘in the transformation in order to build the strong possible foundation for the Kodak of the future’. ‘What everyone should expect from Kodak is business as usual’, he said in a video message.
For critics, business as usual is exactly the problem with Kodak. They questioned how Kodak would emerge from bankruptcy as a viable company since it has not yet proved its turnaround strategy, focusing on consumer and commercial printers, can turn a profit. ‘My sense is they have played every card they can dig out of the deck’, said Jay Lawrence Westbrook, a business law professor at the University of Texas. He predicted that Kodak would liquidate most of its assets, with some parts remaining as viable companies, perhaps even called Kodak. But he added, ‘I would be surprised if they reorganised and look anything like the Kodak that went in’. Shannon Cross, an analyst who has had a sell rating on Kodak since 2001, said the problem for Kodak was that its core business had not been making money and the company had been living off licensing fees for intellectual property. ‘To me it’s not clear that the pieces that will be left at the end make sense as a stand-alone company’, she said. ‘It’s sad that it happened. It’s not a surprise, the way it’s been managed’.
A US Chapter 11 proceeding is a legal mechanism that allows an organisation otherwise considered potentially bankrupt to focus on the preservation and reorganisation of ongoing operating companies.
The introductory two paragraphs are adapted from the Kodak Company website accessed 26 April 2012 via .
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Global Strategy and Leadership—Pre-seen exam information
The predecessor to Kodak, Eastman Dry Plate Co, was formed as a partnership in 1881 by George Eastman, and it became one of America’s blue-chip giants, a company whose name was synonymous with taking pictures and its ubiquitous yellow film box. But the company was slow to respond to competition in the film business from Fujifilm of Japan, which undercut Kodak’s prices. And...