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Kodak's Transition to Digital Photography and the Driving Forces Behind It

Case Analysis: Eastman Kodak: Kodak’s Transition to Digital

In January 2012, famous and one of the oldest photography product company, Eastman Kodak filed for Chapter 11 protection in U.S. Bankruptcy Court for the Southern District of New York. According to Robert Burley, an associate professor at Toronto’s Ryerson University, although Kodak anticipated the inevitable rise of digital photography, its corporate culture was too rooted in the successes of the past (film-based photography) for it to make the clean break necessary to fully embrace the future.

Kodak was slow to respond to the changing marketing conditions and consumer preferences. Also, over the last several years, the rise of the smartphone further transformed the market, as consumers increasingly preferred to use feature-rich iPhones and Google Android devices over digital cameras.

The main issue behind this case is the problems faced by the Eastman Kodak Company in the process of changing to Digital technology in photo printing. Keeping the recent collapse of Kodak in mind, analyse the given case study and answer the given questions;

What were the driving forces behind Kodak’s decision to transition to digital photography? What were the major issues faced by Kodak in the transition process?

Now that you know what happened to the company, what went wrong at Kodak from the Change Management perspective?

What would have been potential barrier to change at Kodak?

What would you do if you were managing a change project at Kodak in a management role?

In addition to reading the case study, you will need to research the company and recent developments leading

Team Project: Develop and Present a Change Management Project Plan

Background:

The Wall Street Journal reported in 2009 that Blockbuster Video, whose shares were trading below $1, was seeking advice on how to file for bankruptcy. Blockbuster, at the time, countered that it was only trying to get help to restructure company’s debts. Finally on Sept 23, 2010, Blockbuster filed for bankruptcy.

In Australia, Paul Uniacke, who owns and operates the Franchise Entertainment Group, which includes the Blockbuster, Video Ezy and EzyDVD chains, said the Australian Blockbuster chain was separate from the US Company and said that there was no threat to the local business. While in the US, the Blockbuster group was taken over by Dish Network, taking the brand into home entertainment through its cable network, Blockbuster continues to operate in Australia as a traditional video rental store chain. Uniacke also said the Australian Blockbuster business remains better protected against online offerings, such as Quickflix, backed by entrepreneur Simon Backer, and BigPond DVD Rentals, saying the bricks-and-mortar stores offer better returns (Stafford, 2010: Smart Company).

As the market continues to evolve in many different directions with Google, Logitech, Intel and Sony entering the market with Google's open source Google TV software, Apple TV, and a gradually increasing uptake of Telstra’s T-Box and Foxtel’s Movies on Demand – not to mention the new entrant Red Room DVD that offers cheap DVD rentals through kiosks, the competitive environment for entertainment is becoming increasingly challenging for conventional video rental stores such as Blockbuster and Video Ezy in Australia.

In this assessment task, you and your tram will assume the role of a Change Management Project Team working at the headquarters of the Franchise Entertainment Group. After a month long deliberation, FEG’s.

board has decided to revamp the company and introduce two new services in a forward-looking strategy to tackle a growing threat of domestic competition;

Shopping centre Kiosks for DVD rentals

Downloadable movies through its website that expire after 48 hours

Your team has been given the responsibility to develop a Change Management plan that should include;

Identify and explain the need for change

Explain the likely impact of proposed changes on the company and its operations

Identify change requirements and develop specific and measurable objectives for the project

An analysis of trends in the external environment using an appropriate tool/technique (e.g. Consumer preferences, technology etc.)

Competitor analysis (at least two comparable competitors)

Specify major change requirements in company’s operations due to planned changes Cost-benefit analysis

Risk analysis and risk mitigation strategies

A communication or an education plan to promote the benefits of the change to the organisation Perceived barriers to change and strategies to overcome the barriers

Need for staff training and learning to implement the new initiative

Strategies for implementing or actioning the change at the company and its stores Resources required for implementation of the project (project resources).

Kodak's Transition to Digital Photography and the Driving Forces Behind It

The photography industry is significantly observed to inherit the digitalization in order increase the quality of the photographs. Several organizations in the mentioned industry are observed shift their focus from the traditional process of photography to the new process by incorporating the digital technology in their operation. The organizations that failed in managing the change are observed to get disconnected from the preferences of the customers. The paper is focused in elaborating one such case where the chosen organization is one of the market leader of the concerned industry named Eastman Kodak.

Eastman Kodak is one of the renowned name in the American Graphic Arts and imaging technology industry. The organization was established 130 years ago in the year 1888 by George Eastman and Henry A. Strong (Kodak.com 2018). The general products of the organization is photographic materials, equipment and services along with digital imaging. The organization is able to experience the excellent leadership of Jeffrey J. Clarke in the post of CEO and James V. Continenza as their chairman. Apart from this, the excellent work of their 6100 employees were significant in making the organization as one of the top two organizations in the concerned industry (Kodak.com 2018).

1.

The organization was one of the most important and successful company in the concerned industry. But the introduction of the Fuji photo film in the industry was the main reason behind the drop of the organization to the second position. The main reason behind the organization’s try to adapt the transition from the traditional form of photography to the new digital form is the follow up of the customers demand. The market at that time was significantly filled with the digital cameras and digital photography tools in accordance to the preferences of the customers. But being an organization that is largely focused in the traditional form of photography, Kodak was not able to participate in the market and that was significantly evident with the loss of the market share of the mentioned organization. Hence it lost its spot to the Fuji Photo Film, an organization that was significantly creating revolution in the photography industry with introduction of modern and updated digital cameras and digital photography tools. The shift in the market from the traditional photography to the modern digital method was pretty evident for the mentioned organization. Along with that the organization was able to observe significant scope in the production of the digital cameras for the consumers, professional photographers and entertainment industry. Along with that the change initiative inside the organization was significantly triggered by the scope of conducting profitable business with the health care imaging products like medical films, chemicals and processing equipment. The organization also had the chance to create commercial digital imaging products like graphic, micrographic, aerial and industrial films along with the inkjet printers, digital printing equipment and scanners for the commercial usage. These were the driving forces for the organization in the transition to the digital photography from the traditional mode of photography.  

The Major Issues Faced by Kodak in the Transition Process

2.

The main challenge that the organization faced in the transition was the difficulty in the adapting to the digital technology in printing. The organisation was one of the premier organization in the concerned industry. But their incapability of recognising the customer demand was the main reason behind their slip down to the second spot. As the sense of urgency in recognising and managing the change was absent from the part of the organization, it was utilised by the Fuji Photo Film in capturing the market share. Kodak was not able to create a market penetration with the digital products and significantly failed to establish market share. The organization was observed to be significantly threatened with the rapid diversification in the digital technology. Along with the organization was not able to evaluate the current strengths and capabilities of the organization that will be able to create it as “The Picture Company”. Apart from that the organization was not able to assess the seriousness weakness and the competitive deficiencies, the alignment of the organization’s resources with the market opportunities and the continuous ability of investing in the new technology. In addition to this, the organization was not able to decide regarding the appropriate strategies which will be instrumental in entering the digital camera business. It was unable to decide whether it should look for partners in developing the digital technology products or it should go alone and the organization also faced the need of suitable strategies in order to cope with the threats of the existing market competitors.

3.

The organization significantly failed to recognise the need of the customers. Along with that the change that the market was notably demanding, was ignored by the organization. Kodak was not able to assess the urgency of the change process and was observed to stick to the traditional method of photography which the customers were not liking. The organization was observed to follow the business model which were significantly invalid for the post-digital age which the organization was not seemed to recognising. By the time they recognised the need of the change, it was almost over for them. Hence the creation of the urgency in the change initiative was significantly missing from the part of the organization.

Apart from this, the organization was notably observed to ignore he preferences of the customers which is a significant risk for any organization. In the year 1984, the Fuji Photo Film was observed to introduce 400-speed colour film in a price that was 20 percent cheaper than that of the Kodak (Fujifilm Global, 2018). This was significant from the part of Fuji Photo Film in capturing the Kodak’s market share as considerable number of customers were observed switched from Kodak to Fuji. Hence it can be said that the organization was not able to follow the preferences of their customers which was a major drawback of change management perspectives of the mentioned organization.

What Went Wrong at Kodak from the Change Management Perspective?

4.

The major barriers to the change in the mentioned organization are primarily two reasons. The organization being a conventional business organization of the photography industry, was more interested in conducting business following the traditional model rather than acknowledging the need of change which was the transition to the digital technology. Apart from this, another major reason was that the organization’s core business which is the film business significantly stared to drop and other business areas of the organization was starting to be less profitable as well. Hence the organization was facing significant threat of competitors specifically from the Asian markets who were capable of producing the products in a significantly less price, the organization was not able to shift their focus from this major concern to the change needed to be executed.

5.

  The organization must have focused in the proper recognition of the customer preferences as that would have made their life easier in an intensely competitive business market. The focus was needed to be shifted largely towards the digital technology with continuous innovation and product development. The company needed to reduce the cycle time in the manufacturing with the frequent updates in the technology. As the technological advancement is a never ending process, the organization is in need to be aware of the existing scope of development. As mentioned earlier the organization was used to conduct business following the traditional photography model, hence the organization will face significant issue in adapting the transition to the digital technology in aspects like product development, skilled labours and many more. In this case the organization is advised to collaborate with other market leaders of the digital technology industry to lead the change in a better manner. Lastly the management must make sure that the organization be sensitive and open-minded to the change opportunities as it will ensure that the business operation of the organization is perfectly aligned with the requirements of the customers.

The market of the video rental industry was significantly developing with the entrance of the renowned organizations like Google, Sony, Intel and Logitech. Along with that the introduction of the Google’s open source Google TV software, Apple TV or the significantly growing market of the Telstra’s T-Box and Foxtel’s movies on demand was capturing the market in a notable manner. Apart from this, the organizations like Red Room DVD which conducts business by offering cheap DVD rentals through kiosks were making the market significantly competitive for the conventional video rental stores such as the Blockbuster or the Video Ezy in the Australian market. This is the reason why the Franchise Entertainment Group decided to introduce shopping centre kiosks for the DVD rentals and the facility of downloading the movies from the websites which will expire after 48 hours.

Potential Barriers to Change at Kodak

The likely impact of the proposed change will be the conversion of the organization as a more effective and compact player in the video rental industry. The organization will be able to cope up with the changing preferences of their customers which is evident with the introduction of the Telstra’s T-box, Apple TV or Google’s movie on demand. Apart from this the organization will be able to take part in the rapidly growing market of the cheap DVD rentals through the kiosks with the proposed change initiative.

The major change requirements for the organization will be to get the authorization in the shopping malls and crowded zones for the construction of their kiosks for the purpose of the DVD rentals. Apart from that the organization must make sure that they be able to build the necessary infrastructure along with the inclusion of the essential IT applications to provide the customers the chance to download the movies from their website which will expire after 48 hours.

The organization must form a tie up with the reputed shopping mall organizations regarding the usage of the infrastructure.

The organization must restructure their website in order to make it more user-friendly.

Measurable:

The measurable objective for the organization will be to reach 5% additional growth in the generated revenue at the end of the 6 months from the initiation of the project.

Pest analysis:

The Australian government is significantly concerned with the copyright infringement and they have established necessary rules and regulations in the form of anti-piracy law in order to stop any sort of unethical conduct from the part of the business organizations of the concerned industry (Australia.gov.au 2018). The government does not have any sort of specific rules regarding the construction of the kiosks as general rules of the shopping mall construction will be the concern for the organization in the case.

The organization will have significant opportunity to enter a market which generated 88 million US dollar in the second quarter of the financial year 2018 (Statista 2018). The market is believed to be expanding significantly as the CAGR report (2018-2022) claims that annual growth rate is expected to get increased to 2.4 % which will be resulting in a market volume of 97 million US dollar by the year 2022. Along with that the market statistics showed that the user penetration will increase from 7.0% of current year to 7.7% by the year 2022. Apart from that, the organization will be able to experience an average revenue of 50.68 US dollar per user (Statista 2018). The statistics are significant to prove the fact that the Australian people prefers the video downloading model in a notable manner. Hence the organization will be able to follow the customer preferences in a significant manner.

Managing a Change Project at Kodak

The organization will be liable to the concerned authorities regarding the production of the access to the teenagers to the adult age films and movies and the concerned rules and regulation of the child support agency of the Australian Human Services are ought to be maintained with perfection by the concerned organization (Humanservices.gov.au 2018).

The organization is able to use the technology governed kiosks for the video rentals and along with that the usage of the website for the downloading of the videos and the expiry of them after the 48 hours’ time span will incorporate significant presence of the technology and IT infrastructure.  

Netflix Australia is one of the major competitors for the organization in the industry with a rapid rise in their revenues in each of the financial years from 2014. In 2016, the organization was able to generate a revenue of 84.95 million US dollars which in the year 2017 got increased to 142.58 million US dollars (Statista 2018). The growth is assumed to be increasing only as the year 2018 is expected to generate a revenue of 205.13 million US dollars.

The other competitor for the organization will be the Telstra with the introduction of the Telstra T-box. The organization is able to generate a 26013 million US dollars as the revenue in the financial year 2017 along with that it also generated 28205 million US dollar as total income excluding the finance income in the financial year 2017 (Telstra.com.au 2018). The organization is able to generate 3874 million US dollar as profit for the concerned period (Telstra.com.au 2018). Hence these two organizations will be posing significant threat to Franchise Entertainment Group.

The organization being a conventional video rental agency, needs to invest significantly in collaborating with shopping mall organizations for the kiosks. Along with that the organization needs to incorporate specific rules and training activities to their employees who will be handling the websites for the purpose of the expiry of the movies.

Key Assumptions:

Public Sector Discount Rate 2011

8.00%

Appraisal period (years)

10

years

Summary of the Results of the Analysis:

Capital Costs

$0

Whole of Life Costs

$1,16,25,000

Present Value of Benefits

$17,43,330

Present Value of Costs

$10,52,177

Benefit Cost Ratio

1.66

Net Present Value

$6,91,153

0

1

2

3

4

5

6

7

8

9

Year

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Discount factor (mid-year)

0.96225

0.89097

0.82497

0.76387

0.70728

0.65489

0.60638

0.56146

0.51987

0.48136

Discount factor (start of year)

1

0.92593

0.85734

0.79383

0.73503

0.68058

0.63017

0.58349

0.54027

0.50025

Benefit 1 <description>

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

Benefit 2 <description>

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

Benefit 3 <description>

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

Benefit 4 <description>

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

Benefit 5 <description>

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

$50,000

Total Benefits (mid-year)

$2,50,000

                 

Present Value of Benefits (mid-yr)

$2,40,563

             

Present Value of Benefits

$17,43,330

Cost 1 <description>

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

Cost 2 <description>

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

Cost 3 <description>

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

Cost 4 <description>

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

Cost 5 <description>

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

($25,000)

Total Costs (mid-year)

($1,25,000)

                 

Capital Costs (at start of year)

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Total Costs

($1,25,000)

                 

Total Capital Costs

$0

Total Whole of Life Costs

($1,16,25,000)

Present Value of Costs (mid-year)

($1,20,281)

   

($95,483)

($88,410)

($81,861)

($75,798)

($70,183)

($64,984)

Present Value of Costs (start year)

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Present Value of Costs (by year)

($1,20,281)

   

($95,483)

($88,410)

($81,861)

($75,798)

($70,183)

($64,984)

Present Value of Costs

($10,52,177)

Net Cash Flows

$1,25,000

                 

Net Present Value (by year)

$1,20,281

   

$95,483

$88,410

$81,861

$75,798

$70,183

$64,984

 

Cumulative NPV

$1,20,281

                 

The organization needs to make sure that it does not get involved in any sort copyright infringement and along with that it must focus on the financial aspect of the organization. The strength of the competitors will be significantly high and in order to cope with that the organization must introduce notable discounts for their customers. In order to avoid the copyright infringement, the organization must make sure that they conduct the business according to the copyrights rules of the government and must obey the anti-piracy rules.

The organization must conduct a seminar in order to communicate the business plan and the strategy to the employees and the stakeholders of the organization in order to manage the change in a more effective manner. This will make sure that the employees be able to know their responsibility in the new plan and along with that stakeholders will also have an idea of the business conduction and possible sources of the revenues.

The resources for the implementation of the plan will be a user-friendly website, kiosks and the man power for handling the operation along with the banking transaction facilities.

The barriers in the implementation of the plan will be the infrastructural gap of the organization and along with that the incapability of the employees in handling the new business operations of the new model. In order to overcome these barriers, the organization is in need to make sure that they be able to invest in a sufficient manner in the creation of the appropriate infrastructure for the organization. Along with that the organization creates suitable training activities for their employees so that they be able to overcome their incapability in handling the new business operations.

The technology which will be applied to the kiosks for the video rental and in handling of the website for the purpose of payments and the video sharing along with the process of expiry will be new and in that case the employees of the organization will not be aware of that. Hence the organization must introduce appropriate training activities for the employees. The training activity must address the incapability or the queries of the employees in handling the operations.    

References:

Australia.gov.au. (2018). Copyright | australia.gov.au. [online] Available at: https://www.australia.gov.au/copyright

Fujifilm Global. (2018). Home. [online] Available at: https://www.fujifilm.com/

Humanservices.gov.au. (2018). Australian Government Department of Human Services. [online] Available at: https://www.humanservices.gov.au/

Kodak.com. (2018). Science, Art and Industry | Kodak. [online] Available at: https://www.kodak.com

Statista. (2018). Netflix: streaming revenues in Australia 2020 | Statistic. [online] Available at: https://www.statista.com/statistics/612277/netflix-streaming-revenues-australia/

Statista. (2018). Video Download (EST) - Australia | Statista Market Forecast. [online] Available at: https://www.statista.com/outlook/207/107/video-download--est-/australia

Telstra.com.au. (2018). [online] Available at: https://www.telstra.com.au/content/dam/tcom/about-us/investors/pdf%20F/2018-Annual-Report.pdf

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My Assignment Help. 'Analyzing Kodak's Transition To Digital Photography And Blockbuster Video's Bankruptcy In An Essay.' (My Assignment Help, 2020) <https://myassignmenthelp.com/free-samples/bsbinn601-lead-and-manage-organisational-change/eastman-kodak-and-blockbuster-video-case.html> accessed 21 July 2024.

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