Kodak decided that traditional film and prints would continue to dominate through the 1980s and that photo finishers, film retailers, and, of course, Kodak itself could expect to continue to occupy their long-held positions until 1990. Kodak was right and wrong. The quality of digital cameras greatly improved. Prices plunged because the cameras generally followed Moore’s Law, the famous prediction by Intel co-founder Gordon Moore in the 1960s that the cost of a unit of computing power would fall by 50 percent every eighteen to twenty-four months. Cameras began to be equipped with what the industry called removable media -those little cards that hold the pictures – so pictures were easier to print or to move to other devices, such as computers. Printers improved. Their costs dropped, too. The Internet caught the popular imagination, and people began e-mailing each other pictures rather than print them. Kodak did little to ready itself for the onslaught of digital technology because it consistently tried to hold on to the profits from its old technology and underestimated the speed with which the new would take hold. Kodak decided it could use digital technology to enhance film, rather than replace it. Instead of preparing for the digital world, Kodak headed off in a direction that cost it dearly. In 1988, Kodak bought Sterling Drug for $5.1 billion. Kodak had decided it was really a chemicals business, not a photography company. So, Kodak reasoned, it should move into adjacent chemical markets, such as drugs. Well, chemically treated photo paper really isn’t that similar to hormonal agents and cardiovascular drugs. The customers are different. The delivery channels are different. Kodak lost its shirt. It sold Sterling in pieces in 1994 for about half the original purchase price. George M. C. Fisher was the new CEO of Kodak in 1993. Fisher’s solution was to hold on to the film business as long as possible, while adding a technological veneer to it. For instance, he introduced the Advantix Preview camera, a hybrid of digital and film technology. Users took pictures the way they always had, and the images were captured on film. Kodak spent more than $500 million developing Advantix, which flopped.
Fisher also tried to move Kodak’s traditional retail photo-processing systems into digital world and in this regard installed tens of thousands of image magic kiosks. These kiosks came just as numerous companies introduced inexpensive, high- quality photo printers that people could use at home, which, in fact, is where customers preferred to view their images and fiddle with them. Fisher also tried to insert Kodak as an intermediary in the process of sharing images electronically. He formed partnerships that let customers receive electronic versions of their photos by e-mail and gave them access to kiosks that let them manipulate and reproduce old photographs. You don’t need Kodak to upload photos to your computer and e-mail them. Fisher also formed a partnership with AOL called “You’ve Got Pictures.” Customers would have their film developed and posted online, where friends and family could view them. Customers would pay AOL $7 for this privilege, on top of the $9 paid for photo processing. However sites like, Snapfish were allowing pictures to be posted online free. Fisher promised early on, that Kodak’s digital-photography business would be profitable by 1997. It wasn’t. In 1997 Philippe Kahn lead the advent of cell phone camera. With the cell phone camera market growth Kodak didn’t just lose out on more prints. The whole industry lost out on sales of digital cameras, because they became just a feature that was given away free on cell phones. Soon cameras became a free feature on many personal computers, too. What had been so profitable for Kodak for so long-capturing images and displaying them-was going to become essentially free.
In 1999 Fisher resigned and Carp became the new CEO. In 2000, Carp’s first year as CEO, profit was about flat, at $1.41 billion. Carp, too, retired early, at age fifty-seven. Carp had pursued Fisher’s basic strategy of “enhancing” the film business to make it last as long as possible, while trying to figure out some way to get recurring revenue from the filmless, digital world. But the temporizing didn’t work any better for Carp than it had for Fisher. Kodak talked, for instance, about getting customers to digitize and upload to the Internet more of the 300 million rolls of film that Kodak processed annually, as of 2000. Instead, customers increasingly skipped the film part. In 2002, sales of digital cameras in the United States passed those of traditional cameras-even though Kodak in the mid- 1990s had projected that it would take twenty years for digital technology to eclipse film. The move to 100. Match the following digital in the 2000s happened so fast that, in 2004, Kodak introduced a film camera that won a “camera of the year” award, yet was discontinued by the time Kodak collected the award. Kodak staked out a position as one of the major sellers of digital cameras, but being “one of is a lot different from owning 70 percent to 80 percent of a market, as Kodak had with film, chemicals, and processing. In 2002 competition in the digital market was so intense that Kodak lost 75 percent of its stock market value over the past decade, falling to a level about half of what it was when the reporter suggested to Carp that he might sell the company. As of 2005, Kodak employed less than a third of the number who worked for it twenty years earlier. To see what might have been, look at Kodak’s principal competitors in the film and paper markets. Agfa temporized on digital technology, then sold its film and paper business to private-equity investors in 2004. The business went into bankruptcy proceedings the following year, but that wasn’t Agfa’s problem. It had cashed out at a halfway reasonable price.
1. As per the passage which of the following statement truly reflects the real theme of the passage?
(a) Moore’s law predicted that cost per unit of computing power would exhibit a standard deviation of 25% per annum.
(b) Popularity of removable media and internet lead to high demand for computers.
(c) Kodak managers were able to predict the flow of digital technology and their critical value drivers.
(d) Kodak did not have a vision to plough back the profits from old technology to research and development in new technology.
Ans: ()
2. Which of the following statements is not true
Kodak bought sterling drug as a strategic choice for a chemical business as it was already in the business of chemically treated photo paper
The chemical business was in sync with the existing business of Kodak running across the customer segment, delivery channels and the regulatory environment
III. Kodak committed a mistake by selling sterling in pieces at a loss of 50%.
Kodak’s diversification attempt with purchase of sterling to strengthen its core business and shift to digital world was a shift from its strategic focus.
(a) Only I & II
(b) Only II & III
(c) Only III & IV
(d) Only I, II, III
Ans: ()
3. Kodak lost a big piece of its market share to its competitors because of the following best explained reason.
When Carp became the CEO the digital Technology eclipsed film technology business and further Carp had been with the company for twenty nine years and had no background in technology.
Carp in 2004 introduced a film camera that won camera of the year award, yet it was discontinued by the time Kodak collected the awar(4)
III. Kodak moved from traditional retail photo processing systems into digital world installing several thousands of image magic kiosks that failed to deliver real benefits to the customers.
Phillipe Kahn led the advent of cell phone camera and Kodak lost out on the print business and ability to share images became a free feature with no additional charge.
(a) I & II
(b) II & III
(c) I & IV
(d) III & IV
Ans: ()
4. Match the following
Intel
Fisher
AOL
Agfa
(a) Preview cameras that helped users to immediately see the pictures taken
(b) Photo processing, developing and posting online photos
(c) Lead to insolvency of digital technology business
(d) Price of technology product reduces to half every year or two.
(a) 1-d,2-a,3-b,4-c
(b) 1-a,2-d,3-c,4-b
(c) 1-c,2-b,3-a,4-d
(d) 1-d, 2-c, 3-a, 4-b
Ans: ()
(Source: IIFT-2010)
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