- Pages: 8
- Word count: 1803
- Category: Kodak
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The current business environment is characterized by a considerable level of competitive rivalry and it is no different in the photography industry. In order to build and maintain a competitive advantage in this industry companies have to maintain the continuous improvement process. This is where the operations at Eastman Kodak went wrong. The photography industry had been revolutionized by technological sophistication. However Eastman Kodak did not keep pace with change and therefore demand declined for its products. The problem that the company has been facing is that it is still primarily reliant on the traditional film business. However the industry has been transformed by the digital revolution in which Eastman Kodak did not participate. This is the challenge that Perez faces as the new CEO at Eastman Kodak. From the business initiatives that he has been undertaking, it is clear that company will be in a position to get back on track in terms of profitability. This is because all of the business initiatives so far have been focused on digitally transforming the company.
According to Porter’s five forces analysis, Antonio Perez will have a tough job in his hands because of the high level of competitive rivalry existing in the industry. It is true that the threat of new entrants is minimal. However there are high threats of substitute products and competitive rivalry. Eastman Kodak’s main rival is Hewlett Packard and Hewlett Packard has been investing heavily in its printing business in order to develop new standards (cited in Windstrom, 2007). It is not possible for Eastman Kodak to invest to the same extent in developing its business. Therefore the company has to follow the cost minimization strategy. According to Michael Porter’s framework for strategy formulation, a business organization has three strategies at its disposal in order to build and maintain a competitive advantage. These are differentiation, cost minimization and focus. Under the leadership of Antonio Perez, Eastman Kodak has been following a combination of the strategies of differentiation and cost minimization. This will likely build a favorable position for the company.
In terms of an analysis of the macro environment, it is clear that technological factors are the most important considerations to be taken into account. The current business environment is being transformed by technological advancements and it is a critical success factor for Eastman Kodak to diversify its products and services in order to tap into the technological revolution (cited in Symonds, 2006). The technological revolution has tripled business productivity. With greater research and development, prices in the technological sector are also coming down. As a result it is becoming a cost-effective strategy to invest in the process of automation. This presents a great business opportunity. However under previous leaderships, Eastman Kodak had not undertaken strategies in order to tap into this opportunity. With Antonio Perez as the CEO, it is becoming clear that the company will steer a very different course from the one that was pursued previously. The mistake that had been made previously was that the management had not foreseen the different direction in which market developments were taking place. They were out of touch with the macro environment.
Eastman Kodak is likely to succeed under the new strategic framework. This framework is being spearheaded by Perez himself whose previous work experience was in the printing business at HP for 25 years (cited in Symonds & Burrows, 2005). Therefore Perez can draw from a vast pool of experience to make the printer business at Eastman Kodak successful as well. Since becoming the CEO at Eastman Kodak, Perez had launched a new program code-named Goya to make a big entrance into the consumer inkjet print business. In this respect the company has formed strategic alliances with other companies which have already been operating in this industry for some time. For example, the company formed a partnership with chip-design specialist SigmaTellInc (cited in Hamm, 2007). This allows the company to go to the market quickly with its new product. This is going to be a crucial consideration for the company as Eastman Kodak is competing directly with the industry giant HP. As a result, company strategies are focusing on quickening the process of new product development.
The strategy of quick response is a vital one for Eastman Kodak because as mentioned before the company is directly competing with Hewlett Packard which has been investing substantially in research and development in order to build and maintain a competitive advantage. In this respect the management at Eastman Kodak should implement the strategy of benchmarking in order to build up its own competitive advantage. The company cannot implement the process of internal benchmarking because the entire business model has to change in order to accommodate the digital revolution (cited in Fred, 2006). Therefore it has to conduct external benchmarking. In this respect, the management should consider the strategy of exchanging visits at HP plants in order to conduct the process of external benchmarking. The problem with conducting external benchmarking is that most of the practices cannot be made transferable between companies because of the differences in organizational cultures. Each company has a unique organizational culture and therefore the same practice cannot be executable.
Given the current reliance on the traditional film business, Eastman Kodak needs a fundamental change in its organizational culture. Employees are the most important assets in an organization and therefore when it comes to managing change, the management should give employee involvement the top priority. According to research findings, most change management projects fail because of employee resistance. This is likely to be the problem at Eastman Kodak because of the fundamental restructuring that the new CEO is currently undertaking. Unless employees are comfortable working in the new framework, the process of change will not be successful. In this respect, the top management has to be in constant communications with the employees in order to address the issues of employee morale (cited in Hill & Charles, 2007). The process of training and development is also a critical success factor in terms of enabling employees to make the connection between their work and the strategic focus of the company.
The problem with conducting formal training and development programs is that the outcome is hard to quantify. As a result it becomes difficult for the management to justify the expenditures that must be made in order to finance formal training and development programs. An additional problem is that the content of these training and development programs cannot anticipate all the issues that are likely to arise in the actual business environment. Therefore the learning process may not be effective. In this respect, the management at Eastman Kodak should consider the possibility of implementing the learning contract. The learning contract is a document that represents an agreement between an employee and his manager to pursue certain learning outcomes. The advantage of implementing the learning outcome is that the learning process is completely individualized. The premise is built upon the learning styles inventory developed by David Kolb (cited in Dess, 2007). According to this framework, each individual has his own style of learning and this process has to be conducted accordingly in order to maximize the effectiveness.
As mentioned before the organizational culture at Eastman Kodak is changing fundamentally in order to facilitate entry into the digital revolution. Therefore this is an issue of business process reengineering that the company has to deal with at the moment. In this respect, the management must ensure that the strategic alignment process is maintained. This alignment process takes place between four areas: IT strategy, business strategy, organizational issues and information systems issues (cited in Hitt, 2007). IT strategy is the process of selecting the best hardware platform and software solutions. Business strategy is the process of justifying the expenditures that must be made in order to finance IT strategy. Organizational issues refer the current skills sets of the employees. The organizational issues are attended to in order to ensure that the employees have the necessary skills with which to operate the new system. Information systems issues refer to the knowledge management system that facilitates the process of informal learning.
The organizational structure at Eastman Kodak is undergoing fundamental change in order to facilitate access to the digital revolution. This change must be managed under the framework of the strategic alignment process as described earlier. This will ensure that regardless of the degree of change that is initiated in order to maintain the company’s competitive advantage, alignment with the strategic focus is maintained. This is a critical consideration for the company because it is competing directly with Hewlett Packard. Therefore, the management has to ensure that it is targeting the right market segment. Eastman Kodak lacks the resources that Hewlett Packard has access to. Therefore Eastman Kodak’s spending has to be carefully aimed at the target market in order to ensure that its products and services maintain high awareness.
The company must continue to focus on the two strategies of differentiation and cost minimization in order to build and maintain a competitive advantage in the market. In this respect, the opportunity for the company is to minimize the cost of manufacturing digital equipment. Implementation of this strategy will be facilitated with forming strategic alliances with different technology partners. The threat for the company is that it will be competing directly with Hewlett Packard which has a much bigger resource base. However, under the leadership of Antonio Perez, the company’s business strategy is undergoing fundamental change in terms of diverting resources to digital photography. In this respect, the company is likely to be successful given the fundamental restructuring which will enable the company to conduct the process of new product development quickly.
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