The Kodak - Fuji Rivalry

 
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Case Details:

Case Code : BSTR037
Case Length : 10 Pages
Period : 1998 - 2002
Organization : Eastman Kodak Company, Fuji Photo Film
Pub Date : 2002
Teaching Note : Available
Countries : USA
Industry : Photo films

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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"The fact that Fuji has made inroads in the US has surprised even Kodak, that is one reason why they are fighting back in every other market."

- Sugaya Aiko, analyst at Kleinwort Benson in Tokyo, Asia Week, July 1996.

"Fuji's greatest strength is that they always make sure that consumers are ready to buy their new products, and they actually get the products to the consumers."

- Toby Williams, an analyst at SBC Warburg in Tokyo, Fortune Magazine, May 1998.

"The momentum is all in Fuji's court. Fuji's gains in the US will push it past Kodak in worldwide marketshare."

- Alex Henderson, analyst at Prudential Securities, New York.

Introduction

In January 1998, the top management of the US-based Eastman Kodak Company (Kodak) in Rochester, New York, was extremely worried after reviewing the company's financial results for the year ending December 1997.

The company's revenues had come down from $15.97 billion in 1996 to $14.36 billion in 1997, a fall of more than 10%. Kodak's net earnings had taken a big hit falling from $1.29 billion to just $5 million for the same period (Refer Exhibit I). However, the most worrying factor for Kodak's management was the more than five percent points decline (from 80.1% to 74.7%) in its US marketshare. Kodak had been consistently losing its marketshare to its competitors since the early 1980s even when it enjoyed almost a monopoly status in the photographic film and paper industry in the US with more than 85% marketshare. However, the fall of 5-percentage points in just one year was alarming. Market observers wondered what had happened to Kodak, which had built a strong presence in the US markets and had established a household brand name synonymous for films.

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Some analysts felt that Kodak had underestimated its competitors especially Fuji Photo Film (Fuji). From being a lean player in the US during the initial years of its entry in the mid -1960s, Fuji went on to become a major competitor of Kodak in the photographic film market.

Though Fuji was able to build just 10% marketshare till the early 1990s, the increase in the marketshare was faster during 1993-1997 when Fuji's marketshare increased to 17%. Moreover, Fuji had intensified its efforts to gain share in the US, the largest market for photographic film and paper. The company established a production plant in the US, marketed aggressively and brought down prices significantly. In the late 1990s, the rivalry between Kodak and Fuji further intensified. Fuji had become the world's second largest manufacturer of photographic film and paper after Kodak. Analysts felt that for the first time in Kodak's century-long history had emerged a challenger who could dethrone Kodak in the US and hence Kodak should not take its home market for granted. According to Ray Pryor, Vice President, Gamma Labs, "Fuji is not just winning over cost conscious-consumers. Fuji is steadily eroding Kodak's lead in the professional photography market."

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