The problem in this case is Kodak's steadily eroding market share and shareholder value in the film rolls market. This is especially undesirable given the fact that the market has been growing at a tepid 2% annual rate and the steadily increasing threat from competition. Kodak needs to come up with a strategy for corrective action so as to arrest this decline, regain market share and increase share holder value. Kodak's strategy is to reposition itself by targeting a new segment of price sensitive customers and re-segmenting the super premium customers’ space by including a wider segment of special occasion customers. Supporting facts for the problem statement:
Kodak has overwhelming market domination, but its US market share has eroded from 76% to 70% in the last 5 years. Kodak’s market share increased at an average annual rate of 0.334% even when the market grew at an average of 2% (See Appendix A).
The stock price declined by 8% in one week in Jan 1994, on rumors of a price cut – displaying a decline in investor confidence about the company’s profitability.
Kodak is in direct competition with Fuji for global dominance in the world photographic market. A cause of concern for Kodak is that while Fuji has only 11% of the market share in the US, globally, it is 50% the size of Kodak. Also, Fuji & Polaroid are also growing in the US at 15% annually whereas Kodak only grew at 3%.
A 1991 survey in the “Discount Merchandiser” found that price sensitive consumers were increasing. Also, a large percentage of consumers tended to view film as a commodity, differentiating on price alone. Kodak’s research showed too that 10% of consumers bought solely on price. It also showed that 50% of the consumers (40% samplers, 10% shopping on price) did not just buy on brand loyalty alone.
Currently, Kodak doesn’t have any product in the economy brands segment.
Due to a 1921 consent decree, Kodak cannot expand in the private label market, forcing it to find a solution in the branded market. Problem Analysis & Recommendations
If we were responsible for solving the problem, we would go ahead with Kodak’s proposed strategy, with minor modifications, of introducing Funtime film rolls to target the price sensitive customer segment and replacing Ektar with Royal Gold, repositioning Kodak in the super premium segment to target a broader audience. Analysis of the Strategy
Funtime and Royal Gold are viable products targeting specific untapped market segments, with a good potential of achieving the stated objectives of increasing Kodak’s market share. Rationale behind agreeing with Funtime
Kodak currently does not have any product in the economy segment. Kodak’s research has shown that 10% of consumers shopped on price. Also, a 1991 survey claimed that US consumers tended to view film as a commodity. In 1993 Fuji’s increase in dollar sales of 15%, compared to Kodak’s 3%, was largely attributable to lower priced products. Kodak can therefore increase its market share significantly by introducing a lower priced product. Funtime will give Kodak a presence in the growing economy tier at a price 20% below Gold Plus. Rationale behind agreeing with Royal Gold
Ektar targeted a niche segment of professionals and advanced amateurs. By replacing Ektar with Royal Gold, Kodak plans to target a broader audience with a latent need for super premium brands. It wants to target the market of films for very special occasions that require better picture quality and enable enlargements. Consumers who buy Gold plus will probably buy Royal Gold for certain important occasions, encouraging movement up the value chain. Competitive Advantages of the New Strategy
Funtime: Within the economy space, Kodak has definite competitive advantage. Kodak can not only capitalize on its established brand name but also provide value with increased exposure latitude because of its new emulsion technology. With increased exposure latitude (film with...