Professor: Grace Zimmerman
Case: Eastman Kodak
Kodak as a brand had a Unit market share of 70% in a market of 670 million film rolls produced annually. I assume that Kodak Ektar accounted for 30% of the 70%, which equals to 21% of the whole market share, also equals to 140.7 million sales. The revenue can be calculated by multiplying this sales number by retail price, which is $600.79 million. Given the gross margin of 70%, the cost of each roll, $1.28, can be calculated.
Kodak Royal Gold, which was designed to replace Kodak Ektar, was priced at a 9% premium over Gold Plus to traders. The brand equity will have less value because of the decrease of the market value. Assuming the sales number unchanged, and the cost stays the same, the decreased price will generate only $535.24 million revenue. And gross margin will be decreased to 66%.
To keep the revenue, assuming the cost will not change, the roll sales should be increased to 157.9 million. Then the unit market share will be increased to 23.6% if the market size keeps the same as 670 million.
Kodak Funtime, which was planned to represent the Economy brand tier, was priced at 20% below Gold Plus. This strategy will further decrease the brand equity although the Funtime is only available with a limited quantity. By calculating in the same way of calculating Royal Gold, assuming the sales of Gold Plus will keep unchanged of total 328.3 million (49% of market share) but spitted into the Funtime sales and the non-funtime sales, the revenue will be $1031.19 million in total, comparing with the revenue before Funtime strategy of $1145.77 million. The gross margin will also be reduced to 63%.
To pursue the same revenue, assuming the cost will not change, the roll sales should be increased to 205.2 million. Then the unit market share will be increased to 55.1% totally for Gold Plus if the market size keeps the same as 670 million. But since Funtime will be only...