"Success is never a destination - it is a journey" (Satenig St. Marie) and there is a company that understands that journey. Kodak has been around for many years providing families around the world with innovative and high quality products. Many homes worldwide recognize and associate film with the Kodak name. "The company ranks as a premier multinational corporation, with a brand recognized in virtually every country around the world" (Kodak History). However, the changes in technology create a dilemma for Kodak. The company's considerations for digital imaging will change its long history with 35mm film production. Will the shift from 35mm to digital imaging affect Kodak's successful journey? To find an answer to this question, we must analyze Kodak from an economic perspective. An economic perspective views many different factors and determines whether it is in Kodak's best interest to pursue digital imaging, will give enough evidence to support a rational decision. The era of digital photography is well under way. After surpassing sales of film cameras in 2003, the demand for digital devices in the US and other developed markets continues to swell. According to market research firm IDC, during the first nine months of 2004, "U.S. shipments of digital still cameras grew by close to 50%, vs. the same period in 2003. Conversely, we think U.S. shipments of traditional film cameras declined at a double-digit rate in 2004, and we expect a similar drop in 2005" (Stice). With the technology currently available, digital photography holds several major advantages over traditional film photography. The benefits can be categorized by cost, time, and versatility (Bhatia). Kodak wisely restructured its manufacturing to remain a strong competitor in the industry's market demand for traditional 35mm film. Film cameras are slowly declining in existing markets. Kodak takes full advantage of the situation by shifting its core focus to the increasingly demanded digital imaging technologies. But since emerging markets continue their demand for traditional products, an efficient number of production factors are still available in China and India, where Kodak will continue service and support products for existing markets. Their strategy is to fill the profit gap left from traditional product sales losses with sales gains from the new digital products plus gain top market share. In 2004, Kodak Operating Systems (KOS), charged with Kodak's Manufacturing and Logistics, began making manufacturing plans to restructure decisions as they realized the opportunity costs of having un- or under-used factors of production at PPC1 (See Fig. 1). Some facilities, machines, and labor were not being used, while other factors were not be utilized for their multiple duty potential. Pt. A1 represents this underutilization. Kodak's goal uses the least amount of factors of production to achieve the greatest amount of product in order to see economies of scale. Using less resources and smaller facilities means the PPC curve shifted inward (PPC2), therefore KOS had to determine the best combination of traditional and digital products they could most efficiently manufacture along their production possibilities curve. Point DP1 represents an ideal situation for Kodak: multiple resources focused on the core digital technologies with only a minimal but efficient amount of resources to fill the traditional products demand. This presented the added burden of predicting the future of the traditional product demand declines in order to remove fixed costs before volumes fell. KOS' success rewarded the company with reduced production costs of traditional products that allowed for extra cash flow and freed up assets to utilize for the restructuring project. Although the initial cost of digital imaging equipment is comparable to or only slightly higher than professional 35-mm film photography equipment, the cost savings prove significant over...
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