Eastman Kodak Company Case Study

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Eastman Kodak Company: Funtime Film

1. Diagnose the reasons for Kodak’s market share loss and make your assessment of the likely development of the market if Kodak maintained the status quo.

Kodak has been losing market share for the past five years to the point it has gone from 76% to 70%. The underlying causes that have generated such losses and have ultimately led consumers to favor competing brands with larger growth are:

I. Consumers are tending to view film as a commodity, often buying on price alone. Half of the picture takers claim they know little or nothing about photography. II. Quality differences among films are unclear. Superpremium, Premium, Economy and Price brands showed no real quality difference
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However, Kodak will position itself with a new and unknown brand, without leveraging on the Kodak credentials and in the upper Economy price range, therefore still not targeting the bulk of competing value brands.

Marketing Plan: We consider a mistake for Funtime not to leverage on the Kodak name, wasting an opportunity to gain inmediate consumer awareness and brand recognition. Furthermore, Funtime will not benefit from any advertising support and will not even be available throughout the year, as it will be launched twice a year in off-peak film use times. On the other hand, there will be no attempt to correct trade margins with Funtime, making it even harder for retailers to promote it. With no prior history as a brand, no advertising resources to build brand equity, scarce supply and therefore availability, and trade disincentives to sell the product, we believe Funtime has little probability to succeed.

Contribution Margin: Funtime will be launched at 20% below Gold Plus. As you can see from the table below, respecting Kodak’s 20% Trade Margin policy, Funtime will contribute with $1.4 per roll making it a profitable line extension.

The following table shows the contribution margin of the main products of Kodak, including Funtime, | Royal Gold | Gold Plus | Funtime | Retail Price | 4.19 | 3.49 | 2.79 | Dealer's Margin (20%) | 0.84 | 0.7 | 0.56 | Wholesaler's Price | 3.04 | 2.79 | 2.23 | Cost (30%) | 1.26 |

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