The Japanese photo major, Fuji Photo Film (Fuji) first entered the US market in 1964 as a supplier of private label film and established its first subsidiary in 1965. Since the beginning, Fuji focused on providing quality and innovative products to its US consumers. Fuji felt that it made more strategic sense to follow the New York based, Eastman Kodak Company’s (Kodak) lead, avoid attracting Kodak’s attention, and not take any steps that would provoke Kodak’s retaliation. The company focused on building its marketshare in the US by adopting strategies to get the share of weaker US competitors rather than that of Kodak. Slowly but steadily, Fuji entered the professional market and also made efforts to build its credibility in the larger amateur market. In 1970, Fuji introduced a faster film with brighter colors, which was what professional and serious amateur photographers were looking for. In 1972, Fuji began to market its film under its own brand name in several camera stores. In an attempt to gain more market recognition, Fuji provided buyers of Japanese cameras with free film rolls. In 1976, Fuji introduced the 400-speed color film that was faster than any of the films made by Kodak during that time. In the following year Fuji reduced the prices of its print paper. In 1978, Fuji expanded its distribution to drugstores, supermarkets and discount chains. In 1983, Fuji brought out a new high-resolution film in two speeds. Kodak responded by introducing a similar film and offering it in four speeds. By now, Fuji realized that it would be unable to outsmart Kodak. However, the company believed that by building its reputation for quality products and offering products at prices lower than that of Kodak, it could gain significant marketshare in the long run. The important element of Fuji’s strategy was to ensure that its products were 100% compatible with Kodak cameras and Kodak film, thereby allowing price-conscious consumers to substitute Fuji film for Kodak. The Japanese threat began to mount when Fuji became the official film for the 1984 Summer Olympics in Los Angeles, California. This sponsorship agreement helped Fuji gain international recognition. After it lost the sponsorship agreement, Kodak realized that Fuji could be a potential threat to it. Accepting Fuji’s challenge, Kodak also engaged itself in constant price wars with Fuji to gain valuable marketshare in the US. Kodak took the challenge a step further by strengthening its presence in Japan, the world’s second largest market for photographic products after the US. Fuji took considerable interest in pursuing research and development to introduce new technology that would enable it to produce innovative products to drive sales further. The company spent 7% of its revenues on R&D annually. This helped Fuji to maintain its competitive advantage as it was able to introduce new products that customers needed. In 1986, Fuji became the first company to introduce one-time-use cameras. Kodak did not offer a similar product thus giving Fuji the image of a company that introduced more consumer-oriented and innovative products. In the early 1990s, Fuji steadily gained marketshare as more consumers preferred to use Fuji’s film, as the color was brighter and the processing speed was faster. In 1997, Fuji reduced prices by 50% on its multiple roll film packs and even sold four rolls of film for just $4.99. Fuji’s prices were three times lower than those of Kodak for the same product. This reduction in prices resulted in drop of Kodak’s marketshare in the US from 80.1% in 1996 to 74.7% in 1997. In response to this move, Kodak also slashed its prices. However, the company once again could not cut its prices steeply as this reduced its profit margins from its most profitable business of films. During the late 1990s, Kodak’s top management was in great dilemma whether to reduce prices significantly to match Fuji’s levels and thus risk the profitability of its most lucrative films business or to keep quite and see its marketshare continue to erode. However in 1988, Kodak grabbed the opportunity to sponsor the Olympics resulting in the sponsorship battles and marketing rivalry between Fuji and Kodak. Though Kodak entered the Japanese market in 1905, the company never took the Japanese market seriously. In the early 1980s, Japan emerged as the second largest market in photographic products. Due to the rising competition from Fuji in the US, Kodak decided to strengthen its competitive position in Japan. In 1977, Kodak strengthened its control over the distribution and marketing efforts of its Japanese arm Nagase & Co. In the following year, the company formed a joint venture company named Kodak-Nagase. Later, Kodak converted the import division of Nagase into its own subsidiary and was renamed as Kodak-Japan. Tying up with the Japanese partner helped Kodak to have access to 60,000 camera stores up from the initial 30,000 stores in Japan. It gave Kodak access to more shelf space to display its products. However, Kodak could not get into the stores, which marketed Fuji products exclusively. In the late 1970s, Kodak formed several joint ventures and strategic alliances with many Japanese partners. One such company was Bandai, a leading Japanese toy manufacturer, with which Kodak established a co-branding arrangement to sell single-use cameras. Kodak set up its own R&D center and opened a technical assistance center to help customers. The company conducted an annual Kodak Symposium in which the audience included university professors and researchers and the major customers and companies with which Kodak had strategic alliances in Japan. In 1980, Kodak came out with the concept of “minilabs” at certain retail outlets in Japan. Kodak entered into an agreement with the world’s leading manufacturer of minilabs equipment, Noritsu Koki. In the early 1980s, Kodak introduced many new products in the Japanese market and also reduced the prices of some of its products as a challenge to Fuji’s leadership. Kodak introduced the “panoramic disposable camera,” which was not present in Fuji’s product range. Kodak aggressively marketed the panoramic camera, as the Japanese were fond of taking pictures in large groups. A group photograph outdoors was not possible with the help of conventional cameras in those days. In the mid-1980s, Kodak increased efforts to gain greater control over the distribution of its own products. Fuji’s products were sold through 216,000 retail outlets. Approximately, 15% (33,000) retail outlets accounted for 75% of Fuji’s sales. By 1985, Kodak controlled around 150 labs for photographic paper in Japan whereas Fuji controlled 250 labs. In 1986, Kodak advertised heavily in the media to increase its popularity. The company constructed a huge yellow sign symbolizing Kodak’s name, which took many years to complete and put it in downtown Tokyo. In August 1986, Kodak leased the only available blimp in Japan and decorated it with bright yellow color with its trademark and name. It was placed in front of the Fuji headquarters in Tokyo. In the late 1980s, Kodak introduced waterproof disposable cameras. Initially, the consumers complained about certain shortcomings in its design. Kodak employed a team of engineers, finance and marketing people to rectify the problems. In 1994, Kodak came out with a new product, a single-use camera, called Falcon. The product was so named because Kodak’s development team wanted it to resemble a bird of prey attacking rival products. Kodak advertised this product rather unconventionally in the Japanese market. In 1999, Kodak and Fuji had the same marketshare of 70% in their respective home countries and had an almost equal marketshare in the rest of the world (each had 1/3 of the world marketshare). In 1999, Fuji had 18.8% marketshare in the US while Kodak’s share in Japan was hovering around 7%. It remains to be seen how well Kodak and Fuji would be able to sustain their respective marketshares in the future.

1. Examine the strategies adopted by Fuji to enter and build its presence in the US market. Analyze the reasons for Fuji’s success in the US. 2. Examine the strategies adopted by Kodak to counter Fuji in Japan. What were the reasons for Kodak’s poor performance in Japan?