SITUATION ANALYSIS
In 2015, Kodak posted 1,798 million and $54 million in revenues and operating income, respectively, representing a gross profit margin of 21.2% and a net income margin of 3.0%. In spite of the acceptably high revenues, the company recorded a net loss of $80 million. Kodak’s 2015 financial performance was the worst since 2005, when the company had gross revenues of $14,268 million. The 2015, performance also marks a continuing and steady decline in Kodak’s revenues and profitability (Morningstar, 2016; Eastman Kodak Company, 2016).
Figure 1: Kodak's financial performance is steadily declining
Currently, the company that is primarily focused on providing solutions for the graphic communications and goods packaging markets, as well as commercializing products for functional printing markets. Kodak’s services and products for motion pictures and commercial films as well as ink for its existing printing consumer base (Eastman Kodak Company, 2016; MarketLine, 2016).
Kodak’s strategic strengths lie in its focus on technological innovation leadership, which has yielded a strong portfolio of proprietary technologies in its various product segments. The company also has a well-established global research and manufacturing facilities, including manufacturing facilities in the US (Rochester, Dayton, and Weatherford), China, Germany, Canada, the UK, and Japan. Kodak has also diversified its revenue base by running operations across the world, even though it remains overly reliant on the US and Europe. Its strong brand recognition remains its most important asset. However, Kodak’s products are undiversified, compared to competitors such as Sony, Canon, and Xerox. This renders it vulnerable to technological risks.
Growth opportunities for the company lie in the robustly growing functional printing market (3-D printing, with screen printing technology dominating the production of radio frequency identification antennas. According to MarketLine (2016), the funaional printing market is expected to grow by a CAGR of 22.1% in 2013-2020, to reach $13.8 billion a year. Ith the lauch of products such as SP360, Kodak is equally well-positioned to capitalize on the action camera market, estimated to grow by a CAGR of 23.0% in 2014-2020. The action cameras could well offset the decline in the demand for digital cameras (Eastman Kodak Company, 2016; MarketLine, 2016).
Target Audience Analysis
Since its founding in 1889, the Kodak brand has survived rapid technological changes and still managed to hold itself as a cutting edge innovator, but the company was forced to change its focus away from photography in the face of stringent competition to focus more on corporate markets. Kodak offers the technology, intellectual property and products that businesses in multiple industries require to develop their products and services. Effectively, Kodak has moved from a developer, manufacturer, and distributor of photographical products to the mass market, to the development of technologies and support services for corporate corporations such as movie studios and electronics manufacturers (Eastman Kodak Company, 2016; Hitt, Ireland, & Hoskisson, 2014). Even with the change in focus, the Kodak brand remains one of the most valuable in the world, both because of the groundbreaking innovations such as the production of first roll film and digital camera, but most importantly because of its drive for innovation. For instance, MarketLine (2016) argues that Kodak is set to regain its leadership position with its prosper inkjet technology, thousands of patents, and functional packaging product portfolio.
Its operations are segmented into two. The company’s graphics, entertainment and commercial films segment contributed more than 68.2% of the revenues. This division encompasses motion picture film business for advertising and entertainment industries, include industrial films (mostly used by the electronics industries to produce printed circuit boards) and related component businesses e.g. specialty chemicals, solvent recovery, inks, and polyester film (Eastman Kodak Company, 2016; MarketLine, 2016). The brand and intellectual property licensing market includes licensing of patent-related activities, brand, and proprietary technology (including batteries, recording media, cameras, and camera accessories. On the other hand, the digital printing and enterprise segment provides hardware, media, and software products to commercial packaging, digital service bureau, printing services, consumer printing market, in-plant, and newspaper markets. This market is further divided into four sub-segments: functional printing and packaging, consumer inkjet systems, digital printing, and enterprise solutions and services. Effectively, the mainstay of Kodak’s current customers are mainly corporations/businesses as against individual consumers, even though some of its products such as batteries and cameras are sold directly to the final consumers, either directly or through licensed third parties.
The market is geographically segmented as well. Kodak’s largest geographical markets are the US and Europe, which accounted for 35.1% and 34.6% of the revenues in 2015. The Asia Pacific region and Canada/Latin America accounted for 21.5% and 8.9% of the revenues, respectively. Functional printing customers mainly use the products/technology to produce sensors and RFID antennas using inks and substrates. On the other hand, action cameras are used mostly in professional film/movie industry. Further, the global packaging industry is expected to hit $60 billion in 2010, particularly due to the rapidly growing urbanization, growth in retail chains, growth in construction/housing markets, as well as the expansion in the cosmetics and healthcare industries. With the rapid expansions in the packaging industries in India, Russia, Brazil, China and other emerging economies, Kodak’s is in an excellent position to take advantage of these opportunities.
References
Eastman Kodak Company. (2016, May 3). About Kodak. Retrieved from http://www.kodak.com/ek/US/en/corp/default.htm
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2014). Strategic Management: Concepts: Competitiveness and Globalization. New York: South-Western College Pub.
MarketLine. (2016). Eastman Kodak Company: Company Profile. New York: MarketLine.
Morningstar. (2016, June 3). Eastman Kodak Company. Retrieved from http://financials.morningstar.com/ratios/r.html?t=KODK
Pisano, G. P. (2015). A Normative Theory of Dynamic Capabilities: Connecting Strategy, Know-How, and Competition. Harvard Business School Working Paper 16-036.
Yahoo Finance. (2016, May 17). Eastman Kodak Co. :KODK-US: Earnings Analysis: Q1, 2016 By the Numbers : May 23, 2016. Retrieved from Yahoo Finance: http://www.capitalcube.com/blog/index.php/eastman-kodak-co-kodk-us-earnings-analysis-q1-2016-by-the-numbers-may-23-2016/?yptr=yahoo
