Hidden Reasons for Kodak's Digital Revolution

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Kodak and the Digital Revolution: Case Analysis
Since the early 1880’s, Kodak had proven themselves to be great innovators and had worked on building their brand on a domestic and international front. They invested heavily in marketing to establish their image and realized early on that their profits would come from consumables rather than hardware. They sold their equipment at low prices in order to fuel their highly profitable film sales. This use of a razor-blade strategy, coupled with strong relationships with retailers positioned Kodak as an industry leader. Additionally, their heavy investment in R&D allowed Kodak to grow organically, proving fruitful with the advent of color film. Thus, Kodak’s expertise in color film differentiated them from competitors in the marketplace, creating a competitive advantage. “Their photo-finishing process became an industry standard.”1 Competitors faced high barriers to enter the market due to Kodak’s strong brand image, customer’s reluctance to bear switching costs, and the reproductive ease for the photo shop when printing. Kodak’s success in the photo printing business was illustrated by increasing sales from $1 billion to $10 billion between 1962 and 1981. The major structural differences between traditional photography and digital imaging include the order of the imaging chain and the roles of the steps in the imaging chain. First, the order of the imaging chain has changed. Traditional imaging puts printing before storage, whereas; digital imaging allows the user to store all images prior to printing or sharing. The role of the image capture step in the imaging chain has also changed from traditional film and video cameras to include digital cameras. The function of the roll of film from traditional imaging was replaced by digitization. The storage step in the imaging chain was changed from traditional photo albums to digital storage on hard discs, floppy discs, and CDs. The traditional step of printing was...
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