Kodak and Polaroid are both extremely different firms. Polaroid has only one specialization and that is the instant photo market. Kodak on the other hand has reaches in all photo related industries. Kodak had high fixed costs due to their in-house production while Polaroid opted to be flexible and loose by subcontracting most of its production facilities. Therefore, Kodak had to reach a certain level of market volume in order to break even and become profitable. Polaroid, on the other hand, had huge R&D cost that was an impediment to break-even point. This difference in strategy was an incentive that gave Kodak its reasoning for aggressive maneuvers in the market to weed out Polaroid. It wanted its economies of scale to be created easily so that its operations were profitable. With Polaroid, like a thorn in the side, this was a difficult and cumbersome task.
The duel that ensued between Kodak and Polaroid involved various complex strategic tools such as pricing, marketing, to distribution tactics. The costs entailed were enormous for both sides. Failures as well as success were mixed in blood and tears on both sides.
Both parties counteracted each the other’s move, which resulted in strategic game shifts. The market they created was a hyper-intensified situation where both firms would create quick competitive advantages and then abandon them immediately as the other party was catching on. In such an environment, the constant introduction of product development, the rapid renewals of pricing and marketing strategies were key enablers in gaining the leading position.
In the end Kodak lost a lawsuit that was filed by Polaroid in 1976 about technology infringement. Perhaps coupled with doubts that Kodak had about the market and its future, or whether the market did not suit Kodak’s expertise, we do not know, but Kodak left the instant photo market in 1985 when it lost that lawsuit.
In hindsight, so much was lost in a vain attempt by Kodak at an ill-perceived market. Polaroid got hurt in the process as well. The only party to win was the consumers since they got low prices, excessive promotions, and new products extremely fast.
Bout by Bout
Bout 1: Enter the Dragon (Kodak enters the market): Kodak entered the market aggressively by signaling their success in Canada market. This was the trigger of ‘Grim’ theory among the two companies. Kodak’s prior success in the Canadian market provides them with a flow of demand in the US. Due to production constraints, however, Kodak was unable to meet that demand, thus reducing their credibility. However, at the end of the bout Kodak had made its mark to stay in the business.
In response to Kodak’s entrance, Polaroid launched 2 products as a counter-signal. Though Kodak understood the signal clearly, they questioned the power and might of Polaroid’s signal so they decided to penetrate the lower-end market only as a ‘testing-the-waters’ strategy to see how Polaroid would further respond.
Bout 2: Polaroid: Polarizing the Threat: As unwelcome as Kodak’s entrance into the market was, Polaroid further signaled Kodak to not enter their territory. This was done by introducing a new range of products with hopes that it would intimidate Kodak from pushing any further.
Bout 3: The Battle of the Prices: Kodak, with its stronger cash and company portfolio, first started a price war against Polaroid, through the launch of the Handle along with new promotional programs, to signal their commitment to compete in the instant photo market. Although the promotional tool was intended to signal price competition which Kodak hoped would successfully deliver its message this time about, the program was exercised for only a short period of time. Therefore, Polaroid might not have taken this action as seriously as Kodak intended.
Bout 4: Confusion?: By announcing both the good and bad news, Kodak misled Polaroid to interpret its softening strategies and...