EASTMAN KODAK CO.

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EASTMAN KODAK CO.
THEN AND NOW
Past Success Future Success?
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KODAK
FINANCIAL HIGHLIGHTS   Fiscal Year Fiscal Year E
nds31-Dec Most Recent Quarter (mrq)30-Jun-05
Profitability Profit Margin 0.75 Operating
Margin 5.82 Management Effectiveness Return
on Assets 3.41 Return on Equity -10.60 Inc
ome Statement Revenue 13.65B Revenue Per Shar
e 47.598 Qtrly Revenue Growth 6.40 Gross Prof
it 3.97 EBITDA 1.93B
Past Success Future Success?
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Recent News
Kodak Trims Film Operations in Rochester, West
Virginia and China Cuts 1,000 Jobs abcnews.com
August 25, 2005 Kodak Extends Lead Over Japane
se Rivals Canon and Sony in U.S. Digital-Camera
Market AP August 16, 2005 Kodak Expands Busin
ess Development Services at Print 05 quickprin
ting.com September 13, 2005 Kodak Awarded Seven
"Must See ems" at Print 05 Show
quickprinting.com September 13, 2005
Kodak Service Support Announces New Organizati
on Within Graphic Communications Group peguide
.com Kodak and Muller Martini Sign Reseller Agr
eement to Distribute New Hybrid Printing System
peguide.com


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Semester Timeline

• Student Coordinators Chris Brown and Gabby
  Rosenthal
  
• You are now Kodak executives
• Tonight/Very Near Future
• get together as a team - Social Activity
• read case then review and discuss it as a group
• understand basics of Kodak and the relevant
  industries
  
• begin to conduct research
• Moving Forward
• develop a plan - schedule a regular meeting time
• use orientation presentation as a guide
• Get to know the Management and Business Faculty -
  they want to contribute!
  
• use Library resources (Barbara Norelli)

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Semester Timeline

• Dry Runs November 8 10
• Minimal Preparation
• Strategic Concept
• Strategic Recommendation
• Basic Financials
• Basic PowerPoint
• What is involved
• presentation in front of student execs and
  faculty
  
• solid preparation will yield quality feedback
• use feedback to refine and enhance presentation
• Presentation Day - Friday, December 9, 2005
• assignment sheet outlines main tasks
• you must update the case to December 9, 2005

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Group Performance

• Accountability Each member must be aware of
  their responsibility to the team
  
• Communication Effective dialogue including
  criticism is a must
  
• Leadership Every teams needs leadership not
  just a leader
  
• Support Work together motivate each other
• Stages The team will have good bad days.
  Figure out your SWs.
  
• Flow Take Advantage of the Big MO Momentum
• Influences on Team Performance
• Scheduling Group Size
• Work Norms
• Task-Oriented Relationship-Oriented Cohesion
• COACHES WILL NOT DO THE WORK FOR YOU!

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Potential Failure of Groups

• Groupthink
• Escalation of Commitment
• Social Loafing

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Problem/Issue Identification and Resolution

Two Key Slides to include in your
presentation 1. What are our key challenges/
opportunities/issues? 2. Tell how your strat
egy addresses these.

Kodak makes the transition from selling analogue
photography products to serving demand for
digital photography.
The
Times (UK) August 26, 2005
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Situation Analysis Leads to Strategy

• External Analysis
• General/macro-environment
• Porters 5 forces
• Industry life cycle
• KSFs
• Value chain
• Competitor analysis
• Strategic group mapping
• Market segmentation
• Response profile

• Select Best
• Strategy
• 5 elements
• Arenas
• Vehicles
• Differentiators
• Staging
• Economic logic

Strategic Options

• Internal Analysis
• SWOT
• Core/distinctive competencies
• Internal value chain

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The Strategy Diamond

• Arenas
• Which product categories?
• Which market segments?
• Which geographic areas?
• Which core technologies?
• Which value chain emphasis?

How will we obtain our returns (make money)?
Where will we be active?

• Economic Logic
• Lowest costs via scale advantages?
• Lowest costs via scope and
• replication advantages?
• Premium prices due to
• unmatchable services?
• Premium prices due to proprietary
• product features?

• Vehicles
• Internal Development?
• Joint Ventures?
• Licensing/Franchising?
• Acquisitions?

• Staging
• Speed of expansion?
• Sequence of initiatives?

How will we get there?
What will be our speed and sequence of moves?

• Differentiators
• Image?
• Customization?
• Price?
• Styling?
• Product Reliability?

How will we win?
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Strategy Diamond --- Arenas
Where will we be active?

• What is our main product? Are there new products
  and/or market segments that are compatible with
  our current set?
  
• In which geographic markets do we operate and
  should we expand?
  
• In which market segments do we operate? Do gaps
  exist in our current market coverage?
  
• What elements of the value chain should we
  emphasize so that we maintain a competitive
  advantage?
  
• How can we utilize current technologies to
  improve operations and product mix?
  
• Are we sufficiently active in R D? or Do we
  need to employ different core technologies or
  processes in the development of new
  products/services?

Maturing Digital Camera Market Still Growing

This Week in Consumer
Electronics August 8, 2005
Kodak sets sights on mobiles.

Professional
Engineering July 27, 2005
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Strategy Diamond --- Vehicles

• How will we go to the next step?
• What are the cost/benefits of different vehicle
  options such as internal development?
  
• Are there attractive acquisition candidates?
• What are the benefits of reselling vs. licensing?
  Any criteria for partners?
  
• Are market trends or consumer preferences
  impacting our method of delivery and
  communications?
  
• Better to merge or form strategic alliances with
  other companies?
  
• Better to engage in backward or forward vertical
  integration?
  
• What are the traditional vehicles for expansion
  in Kodaks industry?

Kodak Enters MIS With EMS.
Graphic Arts Monthly August
2005
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Strategy Diamond ---- Differentiation

• How will we win in the marketplace?
• What factors have led to our success in the
  digital camera market? Can we transfer these
  factors to other product and service arenas?
  
• Are we the low cost player in terms of
  operations? If so, is this where we need to be?
  
• Are we unique relative to our competition? If
  so, how? and Is this a desired attribute?
  
• Do we know customer preferences? And do we react
  appropriately?
  
• How far do we go with customization?
• Are there any limitations on our ability to be
  innovative in the development of new product
  streams?
  
• Are there any benefits to segmenting the market
  based on gender? age? or any other demographic
  factors?

Kodak ads build up its digital image
USA Today
August 18, 2005

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Strategy Diamond --- Staging

• When will we implement change? Speed Sequence?
• What is our appropriate set of sequential action
  steps?
  
• What specific actions should be taken in Years
  1-3 versus 3-5 Years? (consider internal
  resources external threats)
  
• When will we be able to utilize or access
  specific resources that will facilitate our
  growth or change?
  
• If our resources become scarce, which market
  products and/or business categories demand
  continued attention?

Integration of KPG and Creo is going to plan.

Printing World July 28, 2005
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Strategy Diamond Trade-offs

• The Importance of Trade-offs
• Strategy is about planning decision-making with
  limited resources. That means making trade-offs.
  Choosing what NOT to do is equally important as
  choosing what to do.
• Potential Benefits of trade-offs
• consistent image and reputation
• helps to maintain a set clear priorities
• Cant be all things to all people find your
  niche!

Eastman Kodak Co. is closing its Sacramento
film-processing center as it speeds up the trans
ition to digital photography.

The
Sacramento Bee August 4, 2005

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Economic Logic

• Can we charge a premium price because we have
  distinctive competencies?
  
• If so, are these competencies sustainable?
• What factors influence the cost of our products?
  
  
• Are conditions surrounding these factors
  favorable or unfavorable?
  
• Whats the role of the macro environment in our
  cost structure and pricing policies?
  
• How can we respond appropriately to the current
  environment?
  
• Is maturity in the industry affecting our
  financial performance?
  
• Can we operate in the growth segments?

People are looking for improvements to prior
dissatisfactions.
Philip Scott of Kodak

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Basic Financial Estimates

• Cash Flow - What is your funding source?
• Operations
• Investment
• Financing
• Revenues
• Expenses
• Qualitative Explanations for Quantitative
  Analysis
  
• - Realism
• - A good story
• Offer a coherent explanation of your finances.

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The Big Day Financial Impact

• Financial Requirement
• 3 - 5 year Revenue, Cost, and Income Projections
• Generate a 10 increase in EBIT using 2004 as a
  base
  
• Dont be afraid to lose a little money in years
  one and two
  
• Use standard financial statements to communicate
  your
  
• revenue projections
• cost projections
• income/profit projections
• Project out 3 - 5 years

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Functional Policies

• How does your strategy and business actions fit
  into the overall vision of Kodaks management?
  
• What are your specific marketing and advertising
  plans? How much money will these plans require?
  
• What types of advertising are most appropriate
  given the nature of your strategic plan?
  
• How will your strategic recommendation impact
  Kodaks relationships with its suppliers and
  retailers?
  
• Do we need to consider manufacturing capacity?
• How are we going to manage, motivate, pay, and
  retain our employees?

.
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The Executive Viewpoint Litmus Test Issues

• Is your proposal strategic?
• Do your numbers add up, formatted appropriately?
• Do you look like young executives?
• Did you do the SWOT analysis?
• Are you a team?
• Do you have a basic understanding of financials?
  Are you able to explain your financials?
  
• Do you have a basic understanding of the
  appropriate
  
• marketplace? Are you able to describe the
  key characteristics of
  
• the marketplace?

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The MB107 Executive Viewpoint - Advice
Does your use of PowerPoint enhance what you are
saying or simply repeat it? Lead with analysis
, then explain why your idea fits the problem.
Have an answer for competitors responses anti
cipate these responses. Provide one overarching
strategic concept linking several sequential
action steps. Hand out detailed financials tha
t are legible, accurate and logical.
Identify the sources of the funds required to im
plement your idea and provide specifics about th
e cost. If you get asked a question that you si
mply dont have an answer for
1) stay in character 2) relate the issue to y
our presentation if possible and
3) identify the issue as something that the firm
should consider in the future.
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The Big Day - Strategic Plan Format

• Remember the two must include slides
• Diagnose major problems/opportunities - Do not
  address symptoms!
  
• Develop strategic recommendations - Specific
  courses of action that address problems and
  opportunities
  
• Justify your recommendations through analysis -
  Explain WHY you chose these courses of action
  
• Implement your ideas - Explain HOW you are going
  to make your plan become a reality
  
• Examine the risks of your strategy - What could
  go wrong?
  
• Outline possible contingency plans - If X
  happens, we will do Y.
  

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The Big Day - Reminders

• Make one unified presentation, not five separate
  ones!
  
• BE PREPARED!
• executive questions
• equipment failures
• disk failures
• travel arrangements
• RELAX, BE CREATIVE, and HAVE FUN