In my March 6 memo, I discussed the need for Kodak to revamp its core strategy and regain popularity. Eastman Kodak has been the leader of photography and printing products for nearly 130 years. Over the last few years Kodak has been in distress due to its poor fundamental shift into the digital age. Lack of strategic creativity led Kodak to misunderstand the industry in which it was operating. This lack of strategic creativity was costly for Kodak. This memo will explore the options I briefly discussed in the previous memo, in order to find a solution to this problem.
Each option will be assessed based on the same criteria. The options to consider are: * Hire a new CEO- new bolder leadership * Enter into a new aggressive market- ink cartridges * Partner with a new company to expand popularity- NFL In order to determine which option will be most suitable for company revamp, all options will be assessed on an equal scale. The following criteria will be used in this assessment: * Ease of Implementation * Cost of Implementation * Risk Ease of implementation directly refers to the level of difficulty faced when implementing an option.
This takes into consideration planning, time and the obstacles that will be faced for each option. Cost of implementation directly refers to any costs associated with an option. It will include costs such as infrastructure, logistics, operations, marketing and sales, and service. Risk directly refers to the level of danger affiliated in implementing each option. This criterion will be measured by the possible change in costs with each option. Option 1: Hire a new CEO A CEO with superior innovative and systematic performance is vital for Kodak in its current position.
A CEO’s main responsibilities include developing and implementing high-level strategies, making major corporate decisions, and managing the overall operations and resources of a company. The CEO will act as the main point of communication between the board of directors and the corporate operations. Enforcing positive growth and creating an effective rebound strategy have been ongoing problems for Kodak. Current CEO Antonio Perez has changed Kodak’s business strategy three times hoping to reinvent its core structure. He has been unsuccessful. The first steps for Kodak would be to fire Perez then hire a new CEO.
The new CEO when hired must follow these goals: * Align the Company’s cost structure with external economic realities * Fund core investments * Transform portions of its product portfolio * Drive positive cash flow before restructuring The CEO must ask the right questions in relationship to the market. By taking into consideration these goals, the new CEO will be able to develop successful alternatives for Kodak’s turnaround strategy. This option would be relatively complicated to implement. It will be complicated during initial process of finding a CEO with the background to follow these criteria effectively.
Even if the CEO is qualified and meets the criteria there is still a chance that his/her performance will prove dissatisfactory. This is a big risk for Kodak but could initiate the turnaround process. This option could also be costly for Kodak. The new CEO will have full capabilities to implement financial and nonfinancial changes throughout the value chain. The costs are based on adding or subtracting funds within the value chain. The value chain includes: The CEO must implement a cost effective strategy in the operations and logistics segment of Kodak’s value chain to minimize decline in sales.
From 2008 – 2009 Kodak’s percent of sales decreased $442 million. This decline was primarily due to volume declines within the following segments: * Digital Capture and Devices in the CDG segment * Prepress Solutions in the GCG segment * Traditional Photofinishing and Film Capture in the FPEG segment. This option could be very beneficial for Kodak. After the new CEO has taken position and evaluated the company, his/her decisions could generate large profits for Kodak. These profits can be achieved through tracking consumer needs and maintaining efficiency within the value chain.
The option can revamp its line of attack to surpass current expectations. Though this option has a high level of risk, if successful, would implement a drastic change to Kodak’s strategy and overall performance for the good of company leaders, employees, and stakeholders. The new CEO will be evaluated after one year by leaders, employees, and stakeholders. Option 2: Enter into a new aggressive market Kodak currently has no position within the ink market. The ink business is a $45 billion a year sector that could regenerate Kodak’s position in the printing sector.
The market for ink is dominated by HP, followed by Epson, Canon, and Lexmark. Entering a complete new market may be beneficial in its current position. According to Kodak, the greatest obstacle to printing at home is the cost of ink and supplies. Kodak can develop a cost efficient solution that will be more appealing to consumers. With the launch of this product, Kodak must focus on several sectors of business: marketing, pricing, distribution, and production. Onesource (2011). * Marketing- Kodak is the world’s foremost imaging innovator. Its reputation in the film printing business is dominant.
Introducing a new line of cost efficient printer ink will be effective and popular. Kodak’s target market will include anyone with a household printer. Kodak’s goal will focus on efficiency and uniqueness. Kodak could develop an environmentally friendly cartridge that can be safely disposed. Marketing for this product will include creative professionals to invent and convey the product with meaningful images and a focused strategy. * Pricing- Similar cartridges of black ink can sell as high as $25. Color ink sells as high as $25. Kodak could enter the market selling its ink at $9. 9 for black and $15 for color. Because Kodak has a reputation in the printing industry, this new pricing technique will quickly be recognized by consumers. Kodak will focus on variety and efficiency to implement lower pricing. * Distribution- Kodak could expand distribution centers. These centers could focus on countries like China where consumer demand is quickly growing. The Chinese buy printers from Lexmark and HP. Targeting new markets internationally could be beneficial for Kodak. * Production- Developing an environmentally friendly printer cartridge will stand out among its competitors.
Kodak should develop ink that is safe and nontoxic. Ink cartridges are a problem. Kodak will need to invest in research and development to create this product. This solution would not go unnoticed by consumers and could generate high profits. This option would be relatively easy to implement. Emerging into their already successful printing market, Kodak can introduce a new, efficient, and inexpensive ink cartridge. The costs involved with this option are fairly high. The bulk of the cost will come from marketing, research and development, and production.
Kodak’s aim is to be efficient within the value chain and follow consumer demand. For Hewlett-Packard printing and ink research alone is $1 billion a year. This heavy investment is why ink costs so much. It is important for Kodak to approach this new industry with caution. Logic and creativity could give it the upper hand in the development of this product. This product should be designed to be efficient and compatible with various printer models. In order for Kodak to claim leadership in the manufacturing industry, recycling and preserving the environment must be at the head of their operation.
Kodak’s new ink manufacturing centers will completely clean the empty cartridges to the original state, and fill the cartridges in a controlled environment, with ink and toners specially formulated for each printer. The cartridges should be tested during the remanufacturing process to ensure they are produced with the highest quality of workmanship. This expansion into a new market for Kodak could be risky but could also be beneficial in the long-run. Below, I have included a table to calculate the estimated costs of implementing this option over one year. Cost of Implementation and Profit
Sectors| R&D| Marketing| Production| Distribution| Pricing| Quantity| Profit| Ink CartridgeIn millions | $250| + $250| + $100| + $100| – $(9. 99)| *100| $300| Option 3: Partner with a new company Kodak recently became the official imaging provider for the PGA Tour. This partnership will expand Kodak’s popularity and help to reestablish its image as the world’s top imaging provider. Kodak needs to capture the attention of a broader customer target. A relationship also with the NFL could deliver leading-edge products and services to create strong connections with the diversity of fans.
The NFL can promote an easy point and shoot sport camera at games with quick print Easy Kiosks. These kiosks could be set up at concerts or any other large event. The kiosk will incorporate several options for easy to use cameras, printers, options for memory chips, electronic distributor. The customer will be able to keep what is bought from the kiosk. * Camera options- The kiosk will have a selection of three cameras. The first will be an easy point and shoot for personal photos with a purchase price of $5, not including memory.
The second camera will be a high resolution point and shoot for personal photos at $10, not including memory. The third camera will be a high resolution camera with zoom for action shots at $20, including memory. * Printers- The kiosk will have several quick printers. These printers will require the user to insert a memory chip that will automatically print high quality pictures. There will be no fee for prints. The customer will only be allowed one copy of each picture. The benefit will be no cost for high quality printing. The printer will develop a 4”x 6” picture with no other options. Memory chips- There will be three options for memory chips. One will be a 12 megabyte chip that holds 15 pictures at $9. The second will be 25 megabyte chip that holds 30 pictures at $15. The third will be a universal chip with a 50 mega byte capacity that holds 100 pictures at $35. By inserting the used memory chip into the kiosk, the customer’s pictures will be automatically printed. * Distributer- The kiosk will be 100% electronic with no employee on hand. It will distribute cameras and memory chips much like a vending machine. The printers will be encased in the kiosk with little slots to accept memory chips
The table below lists the prices and options the kiosk will provide: Easy Kiosk point and shoot camera options Camera| Memory chip| High resolution printer| Personal PhotosNo memory$ 5| 12 Mb15 pictures$ 9| FREE| High resolutionNo memory$ 10| 25 Mb30 pictures$ 15| FREE| Action shots12 Mb memory$ 20| 50 Mb100 pictures$ 35| FREE| This option will gradually boost popularity for Kodak. It will take several months to design and manufacture these kiosks and the products within the kiosk. The costs will be fairly high only in the development and distribution stages.
Research and development will be low because these products are available on the market. The Kiosk is an opportunity to bring the products to the customers with intent to use them at a cost efficient price. The NFL will take full responsibility for the kiosks and will be given a portion of the revenue generated from the kiosk. This option is intended for long-run credibility in the camera, printer, ink, and memory chip sectors of Kodak. By partnering with the NFL, Kodak will be able to market itself in such a way that interested consumers will be able to purchase, use, and develop the products in a convenient environment.
The Kodak kiosk will be a launching platform for new products. This option will prove beneficial for Kodak in the event of new product release. Consumers will be able to purchase and use the products as they are being introduced into the market. The kiosk will be a testing platform for the new products popularity and its capable features. This matrix indicates possibility of implementing each option: | Ease of Implementation| Cost of Implementation| Risk| Option 1: Hire a new CEO| X| XX| X| Option 2: Enter into new market| XX| X| XX| Option 3:Partner with NFL| XXX| XXX| XXX|
X’s indicate a higher rating option Recommendation Each option has its own set of advantages and disadvantages. I have carefully assessed each option based on the same criteria. My analysis has concluded that, Kodak should seek to implement option one “hire a new CEO”, to aid in developing a new turnaround strategy. This is the most important step in the revolution of Kodak, since they were unable to evolve into the digital age. The first option, “hire a new CEO,” has the advantage of a new bolder leadership but it does not guarantee that Kodak will rebound in its current position.
This option is inexpensive in the short-run (salary in millions) but cost more in the long-run, since the new CEO will be developing a new company structure, goals, and strategy. Eventually, the cost of this option will exceed the cost of revamping the inner workings of Kodak. This option is also flawed, since there is no way to estimate the time scale in which Kodak employees will accept the new CEO and his/her direction with the company. The second option, “enter into a new aggressive market,” could generate significant profits for Kodak.
The advantage of entering into a new market holds the potential for a new sector of income and a large return on investment. This option could be expensive in the short-run due to initial research and development phases, since Kodak has no current position within the ink industry. There is a high potential for popularity increase in the long-run with the development of a recyclable, environmentally friendly ink cartridge. In the long run, the cost of this option will exceed the cost of the initial investment.
The third option, “partner with a new company,” could generate a significant turnaround for Kodak. The advantage of developing a relationship with the NFL is substantial. With the introduction of the Easy Kiosk, consumers will be able purchase, use, and develop the products in a convenient environment. This option can be initiated with minimal cost but receive little revenue with kiosks but a large benefit in testing and distributing new products. Eventually, these kiosks will not only be at NFL games but lead to partnerships with the NBA, MLB, NHL, and any large venue.
This partnership base with a broad range of consumers could be a large step of Kodak in regaining consumer support and lead to higher profits. I will be developing the final proposal within the coming days. I will also have our marketing, research and development teams begin putting together a consumer profile for the ink cartridges and Easy Kiosk. Their research will include what types of marketing would be best received by particular demographics of the population and strategies to make Kodak a leader in the digital age. If you have any comments, questions, concerns or suggestions feel free to email me at [email protected] edu.