Eastman Kodak – Case Analysis Problem The problem in this case is concerned with Eastman Kodak losing its market share in film products to lower-priced economy brands. Over the last five years, in addition to being brand-aware, customers have also become price-conscious. This has resulted in the fast paced growth of lower priced segments in which Kodak has no presence. Kodak plans to address this issue by introducing a new brand, “Funtime” in the economy brand segment. Kodak also proposes to replace their Superpremium brand by launching “Royal Gold” which would target a broader audience. Solution If I were responsible for solving the problem, in addition to Kodak’s repositioning strategy, I would do the following: * While the strategy to enter the ‘Economy Brand’ segment is strong, I would set the price of Funtime at $2. 91 * Match the dealer margins given by other suppliers for the new product Funtime * Allocate $5 million of advertising support to support Funtime As an alternate strategy, we could also offer Funtime on a year-round basis. However this approach has some drawbacks which make it less attractive than our primary strategy. Segmentation Analysis Target Market: The US photo film market is 670 million rolls units and divided into four segments. As shown in Exhibit 1, the Superpremium segment with an average retail price of $4. 35 accounts for roughly 5% of the market. The Premium brand segment has an average retail price of $3. 49 and accounts for a 67. 67% market share. The fast growing Economy brand segment occupies about 13. 34% of the market with an average retail price of $2. 91. Finally the Price Brands segment occupies 14% of the market with an average price of $2. 0. Internal Analysis: Kodak’s flagship product, Gold Plus, enjoys approximately 66% of the market share with revenues of $2. 79 per unit. The total profit from Gold Plus without advertising expenses amounts to $371. 4 million. Kodak has no major competitors in this segment and continues to lead with its existing brand image. Kodak’s Superpremium product Ektar has per unit revenue of $3. 42 resulting in total profits of about $30. 7 million. As shown in Exhibit 2, Kodak’s net income comes to about $356 million. Focus Segments: From the above analysis we can conclude that Kodak has a stronghold on the Premium Brands segment with Gold Plus. However, Kodak is non-existent in the Economy Brands segment. The Economy Brands segment is currently growing at around three times the market growth rate and Kodak’s competitors are gaining market share through this segment. In a market that is becoming more price sensitive, Kodak’s attempts to gain market share through Ektar have not yielded results. Hence Kodak’s main focus segments should first be Economy Brands and then Superpremium Brands. Hence this reaffirms Kodak’s strategy of launching Funtime and Royal Gold in the Economy and Superpremium brand segments respectively. Pricing & Dealer Margins As Funtime is a new entrant in the economy segment, we can use the going-rate pricing method and match the price of this product with that of the segment leader.
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