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Kodak At The Digital Crossroads

Executive Summary Report

Kodak at a Crossroads:
The Transition from Film Based to Digital Photography



March 26, 2007

The world we live in is evolving and advancing at a staggering pace, and in the digital technology/photography industry companies are finding that in order to survive intense competition they must abandon old business strategies that centered on traditional film processing and embrace strategies that focus on digital photography. For decades, Kodak thrived on a classic business model: sell lots of cameras at low prices in order to mark up profits on the inks, chemicals, and papers used for creating the prints. This strategy collapsed as the digital revolution and foreign competitors found a way to improve the technology at a cheaper price and at a much improved rate. As a result of these driving forces, Kodak no longer controls the photography business. That is the key issue that Kodak is facing. Is Kodak up for this challenge? Can Kodak successfully compete in the digital world?
Since January 2000, Kodak's revenues and net income have declined, its shares have dropped by 66 percent, and the company's S & P rating has dropped by 5 grades. Kodak has attempted to minimize its losses by reducing its workforce, cutting 7,300 employees in 2002. The company is struggling to survive, and although it invested over $4 billion in digital technologies since the nineties, is not gaining ground in the digital photography industry. On September 25, 2003, Kodak's CEO, Daniel Carp, proposed that the company invest more heavily into the digital market, and devote its resources to becoming a "digital-oriented growth company" in anticipation of becoming a $20 billion company by the year 2010. Are these realistic expectations, for a company whose foundation and history are based in the traditional film industry, and whose competitors are leading the way in an industry where innovation and differentiation are the keys to success?...