Why Did Kodak Go Bankrupt? Thesis By Jan Hrnčiřík State University of New York Empire State College 2020 Reader: Tanweer Ali Statutory Declaration / Čestné prohlášení I, Jan Hrnčiřík, declare that the paper entitled: Why Did Kodak Company go bankrupt? was written by myself independently, using the sources and information listed in the list of references. I am aware that my work will be published in accordance with § 47b of Act No. 111/1998 Coll., On Higher Education Institutions, as amended, and in accordance with the valid publication guidelines for university graduate theses. Prohlašuji, že jsem tuto práci vypracoval/a samostatně s použitím uvedené literatury a zdrojů informací. Jsem vědom/a, že moje práce bude zveřejněna v souladu s § 47b zákona č. 111/1998 Sb., o vysokých školách ve znění pozdějších předpisů, a v souladu s platnou Směrnicí o zveřejňování vysokoškolských závěrečných prací. In Prague, 10.12.2020 Jan Hrnčiřík Acknowledgment I would like to express my gratitude to my primary supervisor, Tanweer Ali, who guided me throughout this project. I would also like to thank my girlfriend and my family who supported me and offered insights into the study. Table of Contents 1. Introduction ............................................................................................................. 6 2. Literature Review ................................................................................................... 7 2.1. Introduction ....................................................................................................... 7 2.2. Sources .............................................................................................................. 7 2.3. Conclusion ........................................................................................................ 9 3. Methodology .......................................................................................................... 10 3.1. Financial ratios ................................................................................................ 10 3.2. SWOT Analysis .............................................................................................. 11 3.3. Porter’s Five Forces ........................................................................................ 11 3.4. Product Life Cycle .......................................................................................... 12 4. Kodak’s Journey to the Top ................................................................................ 13 4.1. George Eastman-Journey to the Photographic World .................................... 13 4.2. Kodak Company Establishment...................................................................... 15 4.3. Kodak Brand Worldwide Rise – Beginning ................................................... 17 4.3.1. Kodak Marketing Strategies/ Advertising ...................................................... 18 4.4. Kodak Dominates the Market ......................................................................... 20 5. Industry & Company Analysis ............................................................................ 20 5.1. Kodak’s Financial Analysis ............................................................................ 20 5.2. SWOT Analysis .............................................................................................. 26 5.3. Porter’s Five Forces Analysis ......................................................................... 32 5.4. Life Cycle of Product ...................................................................................... 34 6. Falling from the Leading Position ....................................................................... 38 6.1. Competitors Analysis- The Rise of Fuji Film ................................................. 38 6.2. Digital Era ....................................................................................................... 40 7. Bankruptcy ............................................................................................................ 44 8. Kodak Company after Bankruptcy..................................................................... 44 9. Lessons Other Businesses Can Learn from Kodak’s Failure ........................... 45 10. Conclusion / Discussion .................................................................................... 45 11. Appendices ......................................................................................................... 46 12. References .......................................................................................................... 49 Abstract The research question of this thesis is “Why did Kodak go bankrupt?” Kodak filed for bankruptcy in 2012. The main goal of this thesis is to determine what mistakes and steps led to this failure. By highlighting the mistakes of a large company like Kodak, many other firms may learn valuable lessons from Kodak’s failure. In order to articulate the various reasons for Kodak’s bankruptcy, several different methods will be used, and the combined results will define the reason(s) for this failure. To obtain these necessary results, analysis such as Strengths, Weaknesses, Opportunities, and Threats (SWOT), Porter’s Five Forces, the Life Cycle of the Product, and the Calculations of Financial Ratios will be used. Each of these methods produced slightly different results, but, taken together, the consensus was that Kodak underestimated the industry transition from film to digital technology. This, together with other factors, like the decline of sales in roll film and the rise of strong competitors, caused the company to declare bankruptcy in 2012. 1. Introduction The research question of this thesis is “Why did Kodak go bankrupt?” In the process of developing the first draft of an outline for my senior project, I read many different case studies about Kodak that helped me understand the company’s decline in a logical, structured way. The thesis statement is an important, integral beginning point for every essay. It should demonstrate the main points or the essential core of the senior project. I have been developing this thesis statement based on the sources I have read so far from the available body of knowledge on this topic. The goal of this thesis is to analyze the rise and fall of the Eastman Kodak Company (hereafter referred to as Kodak) in 2012, in order to provide useful retrospective material for other companies to be able to learn from Kodak’s mistakes and be aware of better approaches and practices in terms of decision making going forward. The first part of this senior project will focus on Kodak’s rise to a position of prominence within the photo retail industry. To clearly and accurately introduce the reasons behind Kodak’s success, I will start from its primary sector, photography, where the history and the development of personal photography will be explained by providing the ideas of George Eastman who, in collaboration with another professional, developed and established the Eastman Kodak Company. The global rise of the Kodak brand, the development and success of roll film, the invention of the first personal cameras, and other important aspects of Kodak will be analyzed and explained. Kodak fell from a leading position in the market. All of the steps that led to this failure will be analyzed and discussed beginning with the business strategy Kodak had been following from its inception until the digitalization of the industry. For Kodak, the turning 6 point was the development of the first digital camera in the world and the subsequent refusal of company leadership to develop this type of camera for the commercial photography market. The reason for this is simple and can be found in the form of another corporation with a similar business model: Gillette. Gillette does not generate the majority of its profits from selling razors; most of the profits are from the sale of blades. This was the same case was for Kodak with the sale of cameras and rolls of film. Rolls of film represented the biggest revenue stream for the company. Therefore, investments were made in this sector because of demand from the market. The next important segment discussed in the outline will be the competitor’s analysis and the comparison of Kodak with other photography-based companies (particularly Fuji film) which are alive and well in today’s market. The beginning of Kodak’s decline as well as the steps taken by joint venture companies, the sale of patents, and other similarities will be explained as contributing factors to the bankruptcy itself. 2. Literature Review 2.1. Introduction The main goal of this Literature review is to collect and summarize already existing arguments and theories about the fall of the Eastman Kodak company in 2012 and supplement them with the additional knowledge obtained by using the several different methods and analyses previously described. The literature review should help orient the reader with regard to this topic and help them navigate different sources of information on this topic to compare different conclusions. 2.2. Sources The history of Kodak and about George Eastman will be drawn primarily from the original Kodak company page where goes into explicit detail and supports its statements by providing relevant pictures and articles from newspapers published during the 7 company’s timeline. Information provided on the Kodak page will be used as a primary source for the history of the company. However, it will not be relevant for further