Eastman Kodak Case

1857 Words Sep 11th, 2010 8 Pages
Eastman Kodak – Case Analysis
Problem
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.
Solution
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
Funtime:
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:
Profit

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