Eastman Kodak Case

1857 Words Sep 11th, 2010 8 Pages
Eastman Kodak – Case Analysis
The problem in this case is concerned with Eastman Kodak losing its market share in film products to lower-priced economy brands. Over the last five years, in addition to being brand-aware, customers have also become price-conscious. This has resulted in the fast paced growth of lower priced segments in which Kodak has no presence.
Kodak plans to address this issue by introducing a new brand, “Funtime” in the economy brand segment. Kodak also proposes to replace their Superpremium brand by launching “Royal Gold” which would target a broader audience.
If I were responsible for solving the problem, in addition to Kodak’s repositioning strategy, I would do the following: * While the
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Increasing dealer margins to 25% is not a possibility in the case of Kodak Gold Plus since this would lead to a yearly loss of $77 million considering Kodak Gold plus unit volume in 1993.

Advertising Support
As Kodak is introducing Funtime to target the fast-growing Economy brands market and since it will be available only in off-seasons and in limited quantity, it should be supported by advertising. Kodak Gold Plus being the flagship brand will receive 60% of the dollar advertisement support. As Royal Gold has a larger profit margin ($0.96 per unit), it will receive 30% of the dollar advertisement support. The remaining (10%) of the dollar advertisement will be used for supporting Funtime. The distribution of the marketing budget can be justified from the break–even analysis given in next section.

Break Even Analysis
Advertising Budget for Funtime: $5 million
Break-Even volume =Advertising budgetUnit Contribution =$ 5 million$0.44 =11.36 million units
Cannibalization (only during off-season)
Assuming that Kodak Gold Plus sells about 20% of its yearly sales during off-seasons, the resulting cannibalisation will amount to:
454 million units x 0.2 x 0.84 x 0.05 = $3.8 million
Hence, Break-Even volume =$3.8 million$0.44 = 8.6 million units
Based on Exhibit 5, we will be able to realise break even sales within a year.
Royal Gold:

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