Kodak in China


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Case Details:

Case Code : BSTR146
Case Length : 14 Pages
Period : 1984-2004
Organization : Kodak
Pub Date : 2005
Teaching Note : Available
Countries : China
Industry : Imaging

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"If only half the people there (China) shot a single 36-exposure roll of film a year -- a fraction of usage rates in other countries -- that would swell the number of worldwide 'clicks' by 25%. Each second, 500 more photos will be taken. That is the equivalent of adding another U.S. or Japan to the world photographic market." 1

- George Fisher, Chairman and CEO, Eastman Kodak, in 1998.

Kodak Clicks in China

In 2003, Eastman Kodak's (Kodak) China operations recorded sales of over US $1 billion, a 12% growth over that of the previous year. This was in contrast to its global sales growth of only three percent during the same period. Earlier, in 1997, Kodak estimated that the Chinese market for film and related products would grow at a rate of 15-30% per year.

In the late 1990s, there was a saturation of demand for Kodak products in the US and European markets, which saw stiff competition in the sales of traditional film. During Q4 1998, sales fell by 13 percent as compared to Q4 1997 and there was a loss of $744 million in Q4 1998 as compared to the profits of $164 million in Q4 1997. With declining sales in the developed markets, Kodak began to look to emerging markets like China and India for growth opportunities. To be the leader in the Chinese market, there was a need for Kodak to keep the price of its products at the minimum and also ensure that its products were available to consumers in both the rural and urban markets.

Till 1998, Kodak products were being imported to the mainland through Hong Kong. The company realized that to gain economies of scale, it had to start its manufacturing operations in China itself.

In 1998, Kodak took over three ailing Chinese companies to form Kodak (China) Company Limited (Kodak China) and Kodak (Wuxi) Company Limited (Kodak Wuxi). Manufacturing in China, coupled with local tie-ups and marketing moves like increasing the number of retail outlets, ensured that Kodak's business improved in China.

The Far Eastern Economic Review in 2001 reported Kodak's photo sales in 2001 to be around $500 million, 10 % of its total non-US sales.2 In 2002, China became Kodak's largest market after the US. By 2003-04, Kodak had a market share of almost 50% in the Chinese film market.

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1] Cesar Bacani, Kodak's China Moment, "The U.S. giant may set a business precedent," Asiaweek, May 1, 1998.

2] Bruce Gilley, "Overexposed," Far Eastern Economic Review, June 28, 2001.

 

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