Foundations of Global Business: Kodak - Case Study Example

Foundations of Global Business Individual Assignment Spring Contents Executive summary 3 Introduction 4 Findings 4 PEST analysis, its purpose and the business benefit 4 PEST analysis for Kodak 5 Economic 5 SWOT analysis: its purpose and business benefit 9 SWOT analysis for Fujifilm: recommendations 9 Conclusion 11 References 12 Executive summary This paper deals with the comparative positions of Kodak, the US based multinational and Fuji Film, the Japanese company as a result of the changes in the market due to the introduction of digital technologies and the smart phones. The extent of rigidness of Kodak and the flexible strategic approach of Fuji Film have been analyzed in this paper to explain the relative positions of the two companies in the industry. The PEST analysis framework has been used in order to explain the declining performance of Kodak over the years and the reason of being on the edge of extinction from the industry. The success behind its rival, Fuji Film’s business has explained with the evaluation of the strategic efforts of the company through the help of Ansoff Matrix. The recommendations have been provided that would help Fuji Film to expand and secure the progress of their performance in the industry. Introduction The existence of Kodak has been threatened due to its own initiative of developing a digital camera for the first time. The digital initiative was taken forward by the competitors and the electronic companies like Samsung, Apple, Sony, etc who developed technological superior digital cameras. Kodak, the US multinational company which was once counted as one of the five best companies in the world reached a stage where it is on the verge of elimination from the industry die top its inability to cope up with the market changes. The company which once held the monopoly business in selling films and cameras was complacent in responding to the changes in the lifestyle and demands of the market. The acceptance of the digital camera and the subsequent implementation of smart-phones made the Kodak products obsolete in the market. It rival, Fuji Film on the other hand was strategic in undergoing the transition of market demands due to which the company is in a relatively much better position in the context of survival and sustainability of the business. Findings PEST analysis, its purpose and the business benefit The PEST analysis is a review of the external environment of the business that provides the business detailed insights on the effects of political, economic, social and technological changes in the market. The purpose of PEST analysis is to enable the business to undertake strategic policies in order to respond to the external environment of the business. Due to the effectiveness of the developed strategies, the opportunities in the market could be tapped and the challenges posed by the external business environment could be addressed. PEST analysis for Kodak The PEST analysis for Kodak reveals the political, economic, social and technological factors that influence the business of Kodak. Considering the fact that the US multinational company is operating for about 132 in the industry of imaging and printing, the company is exposed to the threat of digital technology and printing activities that have captured the market shares across the world. Political The policy makers in US have introduced the US copyrights Act in printing and imaging which demands that the photographs taken by professionals in this industry could not be printed by the imaging companies without release of the above of the mentioned copyright. Kodak has embarked in filing law suits against such entities that have breached the Copyrights Act in the rapidly growing digital imaging industry. Even the amateur photographers who resort to digital printing of the photographs for better imaging have affected the sales and revenue earnings of Kodak. Economic The increasing use of the digital cameras and images since 2000 reflects the increased acceptance of the digital printing and imaging products in the world markets. The old film and camera business in which Kodak had monopoly till the 1990s faced the crisis situation as they failed to undergo smooth transition with the changes in the industry. This resulted in declining economic position of the company with the fall of shares prices by 90% as shown below. Social The changes in the social lifestyle in the world wide markets resembles that the males and the females customers have started to use digital camera and devices in order to attain efficiency in the areas of time management. The old films and camera manufactured by Kodak started to become obsolete with increasing rejection by the customers. Technology The industry of films and imaging in which Kodak operates has undergone rapid technological changes. Although the first digital camera was manufactured by Kodak, the momentum has been taken forward by the technology and software companies like Apple, Samsungs, Sony, etc. with the manufacture of smart-phones and use of smart chips for electronic transfer of digital images. The position of Kodak has been threatened due to its complacency to cope up with the technological changes in the market (Reuvid, 2012, p.82). Strategies of Fuji Film with reference to Ansoff Referring to Ansoff Matrix, the strategies adopted by Fuji Film to expand and survive over a period of time have been explained as follows. The Ansoff matrix relates the strategies of Fuji Film in relation to four aspects of the Ansoff matrix which are market penetration, market development, product development and business diversification. Fuji Film sensed that old film and the camera markets which are being dominated by their rival company, Kodak are undergoing changes due to the advent of the digital technology and the digital printing devices launched in the markets by the competitors. The company which sold cheaper films and camera in the Japanese markets adopted the policy of tapping the new market segments of US which have been showing increasing trend of switching to digital camera products. A strategic measure for new market development by Fuji Film was the acquiring of sponsorship rights in the Los Angeles Olympic. Due to the sponsorship in the international event, the digital version of the Fuji Film products was able to position themselves in the new markets of US and other parts of the world (Fitzroy and Herbert, 2007, p.46). In terms of market penetration in the existing markets, Fuji Film in the late 1980s and 190s started to pull out funds from their existing business of cameras and films and invested those funds in the new lines of the business. Thus the company made it clear that they were not interested in penetrating the existing markets any more as the products are going to be outdated in future due to the transition of customer behaviour towards digital products. Fuji Film started to concentrate on the areas of product development in a strategic manner that was deemed to be fit as per the changing trends of the industry and transition of the customer behaviour in purchasing more digital cameras and digital printing devices. The company started to develop digital camera and imaging devices in order to meet the demands of the market. The company invested 4 billion dollars in the business for the purpose of product development. The optical films manufactured for use in the LCD flat screens were also initiatives of the company for product development. Fuji Film also adopted the strategy of diversifying the business of films and camera due to the anticipation of the upcoming changes due to the digital trend in the industry. The chemicals use in the manufacturing of films by the company could be used as anti-oxidants. These anti-oxidants used for preservation were invested in the cosmetic product business for preservation of skin. Thus the business was diversified in order to reduce the risk of its existing business in films and camera products (Coade, 1997, p.51). SWOT analysis: its purpose and business benefit The SWOT analysis could be explained as the analysis of strength, weakness, opportunities and threats to a business operating in any industry. The strength and weakness of the company are areas of evaluation which are internal to the company and the opportunities and threats are external factors of consideration to the business. The business could benefit from the SWOT Analysis by identifying its own strengths and weakness and undertaking strategies to tap the opportunities and mitigate the areas of threats. SWOT analysis for Fujifilm: recommendations Strengths The strengths of Fuji Film include the quality of its management and the effective decisions taken by the management in meeting the changing demands of the market. The company has a strong goodwill in the market due to its brand name and conduct of the business of film and cameras for a long period of time. The company also has a strong technology base which has enable them to meet the transition rate of the industry towards digital camera and imaging products. The company has a unique price mechanism in place by which it fixes cheaper prices to acquire substantial market shares. Weakness The premier business of Fuji Films has been in the manufacturing, distribution and selling of films and cameras which produced printed photographs and images. However, with the advent of digital technologies and the increasing use of digital cameras, electronic chips for transferring digital images, the print technology for the old films and camera manufactured and sold by Fuji Film became outdated. The company also has weakness in the distribution of the films and camera devices due to the weakness in supply chain in the form of relationship management with the suppliers, wholesalers, etc. Opportunities The opportunities available to Fuji Film are in the form of the new technological developments that led to the rising demand for digital cameras launched in the market. The developing economies as well as the developed economies witnessed rise in the income level of the middle class of customers. The company had the opportunity to expand its business in the new emerging markets of the world and sell increasing number of cameras and imaging products to the markets. This is likely to result in the improvement of the generation of revenues of the company which would lead to higher profitability of the company (Abrams and Abrams, 2003, p.28). Threats The threats to the business of Fuji Film have occurred due to the saturation of the markets where customers have manufactured the old films and camera devices over the years. The introduction of digital cameras has been accepted increasingly by the customers due to the changes in the lifestyle and habits of the society with more emphasis on time management and increased economic activities. These market developments have threatened the position of the company in terms of business sustainability which has been addressed efficiently by the organizational strategies. Recommendations In order to ensure expansion and survival in the industry, the following strategies could be recommended to Fuji Film. Looking at the increasing use of smart-phones by the customers in the market, Fuji Film should look to develop smart films for use in the smart-phone screens. This would lead to generation of huge revenues from the smart-phone segment. This measure would lead to expansion of the business and enable the business to survive on the face of threats due to digital cameras. The company could also look to expand by setting up business in the field of image transferring and posting through the social networking sites. These strategies would help in the diversification of business of the company that mitigates the risk of business expansion. This would help the business to attain sustainability in the long run. Conclusion The above analysis revealed that Kodak has filed lawsuits due to the violation of US Copyrights Act of allowing professional photographers to print digital version of photographs captured by them. The changing lifestyles of the society have led to the increasing acceptance of the digital cameras. Kodak has been slow to respond to the market changes for which the demand of the products declined and the slowdown in the financial performance was reflected in the rapid decline of the share prices. Fuji Film, its closest competitor has responded to the market changes by pulling out funds from their old film and camera segment and investing the funds for development of the new digital cameras. The company also developed optical films for LCD flat screens in order to acquire new market segments. The company undertook opportunities in the emerging markets for expansion of the business. The diversification strategy was also adopted by Fuji Film by investing into cosmetic products for skin care in order to ensure survival of the business in the long run. References Abrams, R. and Abrams, R. M. 2003. The Successful Business Plan: Secrets & Strategies. Toronto: The Planning Shop. Coade, N. 1997. Managing International Business. Stamford: Cengage Learning. Fitzroy, P. and Herbert, J. M. 2007. Strategic Management: Creating Value in a Turbulent World. NJ: John Wiley & Sons. Reuvid, J. 2012. Managing Business Risk: A Practical Guide to Protecting Your Business. 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