Kodak and Fujifilm

I read and understand Strayer University’s Academic Integrity Policy listed in the Syllabus II of our classroom. In submitting this assignment, I assert that I acknowledged all sources, whether quoted or summarized, in APA citation style. I did not receive unauthorized assistance. I understand that violations of the Academic Integrity Policy will lead to disciplinary action against me, up to and including suspension or expulsion from the University. I understand that all students play a role in preserving the academic integrity of the University and have an obligation to report violations of the Academic Integrity Policy committed by other students.

Name: Abdulrahman Al-emadi Date: 1-31-2013

Introduction: History and Core Business

Eastman Kodak (Kodak) was the largest photographic filmmaker established in 1880 in the world and one of the representative firms which ranked 43th in the Fortune 500 in 1955. However, Kodak retreated to 327th in 2011 and filed protection for Chapter 11 bankruptcy on 19 January 2012. There are various comments on the Kodak’s business failure that Kodak was late to adapt to the wave of digitalization. But Kodak noticed the coming of the digital age in 1970s and invented a digital camera, the first in the world in 1975. Kodak aggressively entered into new business, and promoted M&A, but they could not make use of these strategies for the profit center. Introduce Kodak Professional Digital Camera System which enabled photojournalists to take electronic pictures with cameras equipped by Kodak with a 1.3 megapixel sensor. He also promoted the agreement with Sanofi, a leading French pharmaceutical company, which would result in a number of joint ventures between the companies. At the time of Whitmore’s chairmanship, Kodak continued primarily Imaging, Information, Chemical and Health Segments, though he denied Clay Chandler’s diversification policy. Fujifilm Co., Ltd., established, based on a government plan to establish a domestic photographic film manufacturing industry.

The new company inherited the split-off photographic film operations of Dainippon Celluloid Company Limited (Takeshi Yuzawa, 2012). Fujifilm could succeed in diversification and developing new technologies incubated in the company. Cosmetic is one of the fields found in the process of film production. Shigetaka Komori, CEO of Fujifilm, has spent around $9 billion on 40 companies since 2000, and slashed costs and jobs. In one 18-month stretch, he booked more than $3.3 billion in restructuring costs (Fujifilm Holdings Corporation, 2012). He was lucky because there were little shareholder pressure for short-term performance, which made it easier for Fujifilm to pursue Komori’s vision. American shareholders might not have been so patient. ‘Surprisingly, Kodak acted like a stereotypical change-resistant Japanese firm, while Fujifilm acted like a flexible American one.’ Fujifilm succeeded serves as a warning to American firms about the danger of trying to take the easy way out: competing through one’s marketing rather than taking the harder route of developing new products and new businesses (K.N.C., 2012).

Approach to Management

The managements of Fujifilm and Kodak has pursued the knew the digital age was surging towards us to embrace innovation Fujifilm Chief Executive Shigetaka Komori said in a recent interview. “The question was what to do about it. Fujifilm did was to look further than simply moving to digital photography from analog. Instead, the company tapped its chemical expertise for broader uses, such as drugs and liquid-crystal display panels. Fujifilm acted to survive the advance of digital photography by restructuring and venturing into new businesses. In 2005 and 2006, the company performed large cut in costs, mainly in its photographic-film business. His most decisive factor [for our success] was how drastically we were able to transform our businesses when digitalization occurred,” Mr. Komori said. What set Fujifilm apart from Kodak, he said, was the Japanese company’s effort to branch out by employing technologies that were originally, developed for photography. “Technologically, we already possessed diverse resources.

So we thought, ‘There must be ways to turn them into new businesses,’ “Mr. Komori said. Fujifilm could not have maintained revenue if it focused only on digital imaging (Jasper, 2012). Kodak’s Digital and Film Imaging Systems section produces digital and traditional film cameras for consumers, professional photographers, and the entertainment industry. This segment accounts for 69% of revenues earned by Kodak in 2003. The Commercial Imaging group produces aerial, industrial, graphic, and micrographic films, inkjet printers, scanners, and digital printing equipment to target commercial and industrial printing, banking, and insurance markets. Commercial Imaging accounts for 12% of revenues earned in 2003. Since the formation of Kodak, the company has remained the world’s leading film provider with virtually no competitors. That is until the arrival of Fuji Photo Film, which now surpasses Kodak in earnings per share and is viewed as the industries number two (4).

Success of Kodak and Fujifilm

Kodak and Fujifilm love in public. Like similar public displays of affection, they elicit a mixture of envy and doubt. Since October of 1989, when Kodak turned over the operation of five of its data centers to Fujifilm, representing percentage of its standards operations worldwide, Kodak and Fujifilm have had an outsourcing relationship that Kodak characterizes as not a long date but a nuptials. Both parties are boastful about how good their relations is and proud of how it has improved over time. Their friends say that they are outrageously happy. The combine own actions speak louder than words. Kodak has successively moved almost all of its remaining operations into Fujifilm data centers. Over the past five years, overseas Kodak operations, operations of domestic Kodak subsidiaries, and Kodak manufacturing process centers running midrange computers have been quietly outsourced to Fujifilm in eighteen additional agreements. Shareholder Value – Achieve financial benefits through staff level cuts and off balance sheet financing.

This goal was the locomotive that pulled the deals forward. Kodak moved 700 people to its partners, dropping over $35 million in salaries, and lowered its capital budget from $40 million to $5 million a year. They did not, for New York sales tax reasons, initially sell their equipment directly to their partners, only transferred the operations. Productivity – Aim for a for “quantum” level of improvement from partnering with a world-class technology company. This meant significant service level improvements coupled with service cost reductions. Pent and Hudson knew that at least two thirds of the gains would come just from the consolidation of data centers. Quality of Work life – Insure employees transferred to the outsourcing provider would keep salaries and benefits, and gain a broader career path. This was important to get employee cooperation and turned out to have a significant impact on vendor selection. Positioning for the Future – Allow internal to focus on high added value work and enable it to benefit from beta testing and increased upstream input of requirements to vendors. This goal has yet to be met (5).

Ethics and Adaptation to Changing Market Conditions

Customers are increasingly talking about sustainability. They want to know what we are doing to reduce the environmental impact of our products. They want to see innovations that make us better stewards of the world’s resources so that they, too, can become better stewards. We truly are in this together. Based on our past commitment to sustainability, we are well-positioned to talk with customers about our progress and about what we will do in the future. Kodak customers definitely see the value in addressing climate change for the good of their own businesses and their communities. They continually ask for our help in the form of more energy efficient products, as well as guidance and information to assist them in their efforts. This interest from our customers is one of many reasons why we have set a goal to qualify all eligible products in the ENERGY STAR program. Kodak continues to work collaboratively with customers to calculate our products’ contribution to our customers’ carbon footprint (Fujifilm Holding Corporation, 2008).

Fujifilm requires the ongoing creation of new businesses, medium-term management plan, which calls for the in-depth development and expansion of fundamental and core technologies. To this end, young, mid-level and expert researchers must act in concert to address the challenges of technological revolution by capitalizing on their respective strengths. Fully deploying existing systems, we will aggressively develop innovative technologies and products that lead to new ventures, while aiming to create new areas of focus and evoking within ourselves the passion to generate new ideas (Fujifilm Holding Corporation, 2011).

Conclusions
Kodak is criticized that it was late to take a response to the digital age owing to the conservative culture, ‘a complacent monopolist’ of the company. However, Kodak was very sensitive to the coming digitalization and devised the various innovations like the first digital camera in the world. At the time of Clay Chandler CEO, he promoted the diversification policy with the vertical organization, which was a popular idea for the advanced companies. However, following CEOs denied Chandler’s policy and divested many promising business in the future taking the policy of ‘selection and concentration of resources’. They shifted main business to digital cameras and printers with keeping film, which was categorized as an ‘image company’. Successive CEOs were trying to adopt new business model and they seemed to introduce to Kodak faithfully.Kodak’s main reason for its bankruptcy is that they concentrated their business on narrow fields, which prevented to develop new business at the time of IT.

From the ideas written in the annual report in 2012, we have to be pessimistic for their reconstruction. Fujifilm had a common in many aspects at the end of twentieth century as far as the company can enjoy the monopolistic situation as a film maker. But the drastic change to the digitalization endanger the business of Fujifilm, but the company could find new businesses, because it was organized vertically and they can incubate them. Fujifilm was lucky to consolidate Fuji Xerox from 2001, and it supports the financial position of Fujifilm Holding Company. Imaging Solutions sector, which is similar to Kodak’s main business, is in deficit, and digital cameras are not strong in the market. Information Solutions contains various businesses, and it is very difficult to appreciate their possibilities of success. It will be some time to know whether they will be major business or not, but as far as share market is concerned, investors are watching coolly Komori’s strategy (Takeshi Yuzawa, 2012).

References

1) Takeshi Yuzawa, 16th European Business History Association 2012 Kodak versus Fujifilm, ebha-bhsj-paris.sciencesconf.org, 2012, pdf. Retrieved 1 February 2013 from http://ebha-bhsj-paris.sciencesconf.org/4379/document

2) Fujifilm Holdings Corporation, History of the Fujifilm Group, fujifilmholdings.com, 2012, web. Retrieved 1 February 2013 from http://www.fujifilmholdings.com/en/about/history/index.html

3) K.N.C., Sharper focus, economist.com, 18 January 2012, web. Retrieved 1 February 2013 from http://www.economist.com/blogs/schumpeter/2012/01/how-fujifilm-survived

4) n.p., Kodak’s Successful Experience Outsourcing, joshuashapiro.com, n.d., pdf. Retrieved 1 February 2013 from http://www.joshuashapiro.com/Docs/Corporate%20IT%20Strategy.pdf

5) n.p., CHAPTER 15 STRATEGIC ELEMENTS OF COMPETITIVE ADVANTAGE, drillbitmarketing.com, n.d., pdf. Retrieved 1 February 2013 from http://drillbitmarketing.com/wp-content/uploads/2011/11/exam2_review.pdf 6) Fujifilm Holding Corporation, Sustainability Report, 2008, pdf. Retrieved 1 February 2013 from http://www.fujifilm.com/sustainability/report/pdf/index/ff_sr_2011_all.pdf

7) Fujifilm Holding Corporation, Sustainability Report, 2011, pdf. Retrieved 1 February 2013 from http://www.fujifilm.com/sustainability/report/pdf/index/ff_sr_2008_001.pdf