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Eastman Kodak Company

Eastman Kodak Company

343 State Street
Rochester, New York 14650
U.S.A.
Telephone: (716) 724-4000
Fax: (716) 724-1089
Web site: http://www.kodak.com

Public Company
Incorporated:
1901
Employees: 80,650
Sales: $14.09 billion (1999)
Stock Exchanges: New York Pacific Boston Cincinnati Detroit Midwest Philadelphia
Ticker Symbol: EK
NAIC: 325992 Photographic Film, Paper, Plate, and Chemical Manufacturing; 333315 Photographic and Photocopying Equipment Manufacturing; 325411 Medicinal and Botanical Manufacturing; 325414 Biological Product (Except Diagnostic) Manufacturing; 334119 Other Computer Peripheral Equipment Manufacturing; 334510 Electromedical and Electrotherapeutic Apparatus Manufacturing; 511210 Software Publishers

A multinational corporation whose name and film products are familiar to photographers around the world, Eastman Kodak Company is a diversified manufacturer of equipment, supplies, and systems in consumer and professional imaging, including films, photographic papers, one-time-use and digital cameras, printers and scanners, photoprocessing services, photofinishing equipment, and photographic chemicals. The companys health imaging unit specializes in products and services for radiography, cardiology, dental, mammography, oncology, and ultra-sound imaging. Other Kodak products include motion picture films, audiovisual equipment, microfilm products, and optics and optical systems.

Late 19th-Century Origins: Photography for the Masses

The company bears the name of its founder, George Eastman, who became interested in photography during the late 1870s while planning a vacation from his job as a bank clerk in Rochester, New York. Taking a coworkers suggestion to make a photographic record of his intended trip to Santo Domingo, the 24-year-old Eastman soon found that the camera, film, and wet-plate-developing chemicals and equipment he had purchased were far too bulky. Instead of following through with his original vacation plans, Eastman spent the time studying how to make photography more convenient. He discovered a description of a dry-plate process that was being used by British photographers. He tried to replicate this process in his mothers kitchen at night after work.

After three years Eastman produced a dry glass plate with which he was satisfied. In 1880 he obtained a U.S. patent for the dry plate and for a machine for preparing many plates at one time, and he started manufacturing dry plates for sale to photographers. Henry A. Strong, a local businessman impressed by Eastmans work, joined him on January 1, 1881, to form the Eastman Dry Plate Company. Eastman left his position at the bank later that year to give his complete attention to the new company.

The new venture almost collapsed several times during its early years because the quality of the dry plates was inconsistent and Eastman insisted that the defective plates be replaced at no charge to the customer. Despite these setbacks, he was deter-mined to make the camera as convenient as the pencil.

As his business grew, Eastman experimented to find a lighter and more flexible substitute for the glass plate. In 1884 he introduced a new film system using gelatin-coated paper packed in a roll holder that could be used in almost every plate camera available at that time. Also that year, the company was reorganized as Eastman Dry Plate and Film Company. Strong was president and Eastman treasurer and general manager of the 14-shareholder corporation. The company also opened a sales office in London in 1885 to take advantage of the growing European photography market.

In 1888 Eastmans company introduced its first portable camera. Priced at $25, it included enough film for 100 pictures. After shooting the roll of film, the owner sent both the film and the camera to Rochester for processing. For $10, the company sent back the developed prints and the camera loaded with a new roll of film. This breakthrough is considered to be the birth of snapshot photography. It was also at this time that Eastman trademarked Kodak, which he invented by experimenting with words that began and ended with his favorite letter, K. The company advertised its new camera extensively using the slogan, You push the button, we do the rest.

The following year, the Eastman Photographic Materials Company was incorporated in the United Kingdom to distribute Kodak products outside the United States from its headquarters in London. The company built a manufacturing plant in 1891 outside London to accommodate the growing product demand overseas and set up additional distribution sites in France, Ger-many, and Italy by 1900. In 1889 the firms name was changed to Eastman Company and in 1892 to Eastman Kodak Company of New York.

Eastman was committed to bringing photography to the greatest number of people at the lowest possible price. As his company grew and production of both the camera and film increased, manufacturing costs decreased significantly. This allowed the firm to introduce a number of new cameras, including the Folding Pocket Kodak Camera, the precursor of all modern roll-film cameras, in 1898. It also brought out the first of a complete line of Brownie cameras, an easy-to-operate model that sold for $1 and used film that sold at 15 cents per roll, in 1900. The following year, the company was reorganized and incorporated in New Jersey as Eastman Kodak Company.

1900s Through 1960s: Continuing New Product Success

Over the next 20 years, the company continued to introduce photographic innovations. In 1902 Kodak brought to market a new developing machine that allowed film processing without benefit of a darkroom. The 1913 introduction of Eastman Portrait Film provided professional photographers with a sheet film alternative to glass plates.

In 1912 George Eastman hired Dr. C.E. Kenneth Mees, a British scientist, to head one of the first U.S. industrial research centers. Based in Rochester, New York, this lab was where various tools and manufacturing processes that provided the company with a continuing stream of new products in the 1920s were invented. These new productswhich included 16-millimeter Kodacolor motion picture film, the 16-millimeter Cine-Kodak motion picture camera, and the Kodascope projector (all of which debuted in 1923)were targeted at the mass market and priced appropriately.

Kodak developed other new products to support the countrys involvement in World War I. In 1917 the company developed aerial cameras and trained U.S. Signal Corps photographers in their use. It also supplied the U.S. Navy with cellulose acetate, a film product, for coating airplane wings, and produced the unbreakable lenses used on gas masks. Following the war, Eastman became president of the company upon Strongs death in 1919.

George Eastman had always been civic-minded; even as a struggling bank clerk he donated money to the Mechanics Institute of Rochester. As Kodak grew, his philanthropy extended to such institutions as the Massachusetts Institute of Technology, the Hampton and Tuskegee Institutes, and the University of Rochester. He was instrumental in starting numerous dental clinics around the world, and he enjoyed a reputation as a paternalistic employer because of his profit-sharing programs and insurance benefits for workers. In 1932 George Eastman committed suicide at the age of 77, leaving a note that read, To my friends. My work is done. Why wait? G.E.

That same year, the company introduced the first eight-millimeter motion picture system for the amateur photographer, consisting of film, cameras, and projectors. Three years later, it made available 16-millimeter Kodachrome film, the first amateur color film to gain commercial success. Similar film products for 35-millimeter slides and eight-millimeter home movies were introduced in 1936.

New photographic products continued to be introduced over the next decade, even as the company devoted a portion of its manufacturing capability to the production of equipment and film for the military during World War II. Following the war, Kodak focused its total attention once again on amateur photography with the introduction of a low-priced Brownie eight-millimeter movie camera in 1951 and the accompanying projector one year later.

In 1953 the company formed Eastman Chemical Products, Inc. to market alcohols, plastics, and fibers for industrial use. These substances were manufactured by Tennessee Eastman Company and Texas Eastman Company, two subsidiaries that had been formed in 1920 and 1952, respectively. The company had begun to manufacture these items because of its own use of chemicals in film manufacturing and processing.

Until this point, the company had always included the cost of film processing in the cost of film. A consent decree filed in 1954 forced Eastman Kodak to abandon this practice, but it also provided an opportunity for the company to serve a new market, independent photofinishers, with its film developing products. Kodak acquired several photofinishing laboratories, including Fox Photo and American Photographic Group, to form an independent joint venture known as Qualex with Colorcraft Corp., owned by Fuqua Industries.

By 1958 the company had made significant advances in 35-millimeter color slide technology and introduced the first completely automatic projector, called the Kodak Cavalcade. A line of Kodak Carousel projectors introduced three years later be-came highly successful.

Company Perspectives

On February 2, 2000, exactly 100 years from the day George Eastman introduced the Brownie camera, a group of Kodak researchers, inventors and business strategists met at the companys Rochester headquarters to speculate on what the next 100 years might bring to their industry. All agreed that the true power of imaging has barely been tappedand that the advances of this century will vindicate Eastmans dream of making communicating with pictures as easy as using a pencil.

In 1963, one year after astronaut John Glenn had used Kodak film to record his orbit of the earth, the company introduced the Instamatic camera. Using a film cartridge instead of film roll, the Instamatic revolutionized amateur photography and became a commercial success because it was easy to use. Two years later, Kodak brought out a similar cartridge system for super-eight format Instamatic movie cameras and projectors. In 1972 five different models of a pocket version of the Instamatic camera were launched and proved immediately popular. The following year, the company acquired Spin Physics, a San Diego, California-based producer of magnetic heads used in recording equipment.

1970s Through Early 1990s: Diversifying and Losing Ground Amid Increasing Competition

In the early 1970s, Eastman Kodak became the defendant in a series of antitrust suits filed by several smaller film, camera, and processing companies. These legal actions alleged that Kodak illegally monopolized the photographic market. The most widely publicized suit, filed by Berkey Photo, charged that Kodak had violated the Sherman Anti-Trust Act by conspiring with two other companies, Sylvania Companies, a subsidiary of GTE Products Corporation, and General Electric Company, to develop two photographic flash devices. Berkey requested that Eastman Kodak be divided into ten separate companies and asked for $300 million in damages. The case was settled in 1981 for $6.8 million.

In 1975 Kodak introduced the Ektaprint 100 Copier-Duplicator, putting itself into direct competition with two firmly entrenched rivals, Xerox Corporation and International Business Machines Corporation. Kodak considered this market to be a good fit with its existing microfilm business. In addition, the company had already established a foothold with a similar product, the Verifax machine, which had been introduced in 1953. This copier used a wet process like that used in photography, but it had become obsolete when Xerox introduced a technological advancement called xerography, which was less messy and produced better quality copies than previous systems. After careful research and planning, the Ektaprint copier was developed to serve businesses with large-scale duplicating needs. Not only could the Ektaprint produce numerous copies at high speed, but it could also collate them while duplicating, a unique feature at the time.

Key Dates

1880:
George Eastman begins manufacturing dry plates for sale to photographers.
1881:
Eastman and Henry A. Strong form partnership, Eastman Dry Plate Company.
1884:
Company is reorganized as a corporation under the name Eastman Dry Plate and Film Company.
1888:
Snapshot photography is born through the introduction of the Kodak portable camera.
1889:
Name changes to Eastman Company.
1892:
Name changes to Eastman Kodak Company of New York.
1898:
The Folding Pocket Kodak Camera is introduced.
1900:
The Brownie camera makes its debut.
1901:
Company is reorganized and incorporated in New Jersey as Eastman Kodak Company.
1912:
One of the first U.S. industrial research centers is set up in Rochester, New York.
1920:
Tennessee Eastman Company, forerunner of Eastman Chemical, is created.
1923:
Company introduces motion picture camera, film, and projector for the consumer market.
1932:
George Eastman commits suicide at the age of 77.
1935:
Kodachrome film, the first commercially successful color film for amateurs, debuts.
1951:
Low-priced Brownie eight-millimeter movie camera is introduced.
1953:
Eastman Chemical Products, Inc. is created as a new subsidiary.
1961:
Highly successful line of Kodak Carousel slide projectors is introduced.
1963:
The revolutionary Instamatic camera makes its debut.
1965:
Company introduces the super-eight format Instamatic movie camera.
1972:
The pocket Instamatic camera is launched.
1975:
Company enters the copier market with the debut of the Kodak Ektaprint 100 Copier-Duplicator.
1976:
Kodak enters the market for instant cameras; Polaroid files patent-infringement suit against Kodak.
1980:
Company expands its health imaging operations with the launch of the Ektachem 400 blood analyzer.
1982:
Company launches disc photography, an ultimately unsuccessful innovation.
1984:
Lines of videotapes and floppy discs are introduced.
1985:
Floppy disc maker Verbatim Corporation is acquired.
1986:
A federal appeals court orders Kodaks exit from the instant camera market; a line of alkaline batteries under the Supralife brand is launched; Eastman Pharmaceuticals Division is established.
1988:
Sterling Drug Inc., maker of prescription and OTC drugs, is acquired.
1990:
Verbatim is sold to Mitsubishi Kasei Corporation.
1991:
Polaroids suit against Kodak is settled, with the latter paying the former $925 million.
1992:
The Kodak Photo CD player hits the market.
1993:
George Fisher becomes the first outsider to head the company; Eastman Chemical is spun off to shareholders.
1994:
The companys pharmaceutical arm, Sterling Winthrop, its diagnostics products division, and several other nonimaging units are divested.
1997:
The WTO rules against Kodak in its dispute with Fuji Photo Film over access to the Japanese market; major restructuring is initiated.
1998:
Kodak Picture Maker debuts; company acquires the DryView laser imaging system from Imation.
1999:
The office imaging unit is sold.

In 1976 Kodak took on another well-established firm when it challenged Polaroid Corporations 30-year lock on instant photography with a new line of instant cameras and film that developed pictures outside the camera within a few minutes. Kodak had missed an opportunity to get in on the ground floor of this technology in the 1940s when it declined an offer to market an instant camera invented by Polaroid founder Edwin Land. The general feeling among Kodaks management at the time had been that Lands camera was a toy and the quality of its pictures not up to the companys accepted standards. Kodak had, however, also gained from Polaroids success. It had become the exclusive supplier of negatives for Polaroids instant, pull-apart color film in 1963. In 1969 Polaroid elected to take over this part of its film manufacturing itself. At the same time Polaroid cut prices drastically to bring its instant cameras more in line with the Kodak Instamatics. Kodak was convinced that Polaroids instant photography products posed a threat to the companys market leadership. But the companys methodical product-development process, which emphasized long-term product quality over quick market entry, as well as Polaroids ownership of hundreds of related patents, proved to be major obstacles to an immediate competitive response. When Kodak finally introduced its own instant camera four years after the decision was made to develop it, the company was plagued by production problems and a near-instant Polaroid lawsuit alleging patent infringement. Although the company captured about 25 percent of the U.S. instant camera market within its first year, reports of quality flaws with the cameras instant photographs and Polaroids response with another new instant camera stifled sales. Polaroid successfully exploited the business applications of instant photographyidentity cards, for exampleand retained its strong position in the market.

During this period, Kodaks president and CEO, Walter A. Fallon, and chairman, Gerald B. Zomow, oversaw product development. When Zomow retired in 1977, Fallon assumed the chairmanship and was succeeded as president by Colby H. Chandler. Employed with Kodak since 1941, Fallon had worked his way up from production to direct the U.S. and Canadian photographic division. He had been responsible for the launch of the pocket Instamatic camera line. Chandler had joined the company in 1951 and, as Fallons successor in the U.S. and Canadian photographic division, he was directly responsible for both the instant camera and the Ektaprint copier.

Upon becoming president, Chandler faced a challenge to Eastman Kodaks dominance in the photographic paper market from several Japanese competitors and U.S. suppliers, including Fuji Photo Film Co., Ltd. and 3M Company. These firms undercut Kodaks prices for a paper product of similar quality. Fuji also had the advantage of competing against a strong U.S. dollar, a factor that conversely reduced Kodaks profits significantly in foreign markets. The company responded with price reductions of its own, but suffered lower earnings and a decreasing level of investor confidence. Losing the title of official film of the 1984 Summer Olympics to Fuji added further insult to injury.

As the U.S. economy entered a recession in the late 1970s and sales growth in the companys consumer photographic products slowed, higher sales in other areas such as chemicals, business systems, and professional photofinishing pushed pro-fits upward once again. Several prior years of flat earnings across product areas were attributed in large part to a lack of strategic planning. At the end of 1978 company operations were reorganized to consolidate the U.S., Canadian, and international photographic areas into one division. The companys first director of corporate planning also was hired to speed the product development process and institute the controls needed to enable new products to become profitable more quickly.

The year 1980 marked the companys 100th anniversary. That year Kodak introduced the Ektachem 400 blood analyzer. This entry into the health sciences field represented a natural application of the companys film manufacturing technology and reinforced its already strong presence as a supplier of X-ray film to hospitals and other healthcare facilities.

During the 1980s the company faced intensifying Japanese competition in photography and a continuing decline in product demand. Rapid technological breakthroughs by other firms threatened to replace Kodaks core product line with more advanced equipment. The company instituted several measures to improve its performance. These included a stronger emphasis on nonphotographic products with high profit potential, a more aggressive approach to protecting its chemical imaging capabilities, a broader international marketing strategy, and a sharper focus on making acquisitions to bring the company up to speed technologically, particularly in electronics.

In 1981 the company purchased Atex, Inc., a major supplier of electronic text editing systems used by publishers. Formed as an entrepreneurial venture in 1972 and the leader in its field at the time of the acquisition, Atex later lost ground to fast-changing computer technology as Kodaks traditionally slow-moving product development process was unable to keep pace with the industry.

Despite its shift in priorities to other areas, Kodak continued to support its bread-and-butter line of photographic products. In 1982 it introduced a line of small cameras that used film discs instead of cartridges and was considered a replacement for the pocket Instamatic camera.

Since the companys founding, Kodak had maintained a policy of treating its employees fairly and with respect, earning the nickname of the Great Yellow Father. It was George Eastmans belief that an organizations prosperity was not necessarily due to its technological achievements, but more to its workers goodwill and loyalty. As a result, company benefits were well above average, morale had always remained high, and employees never felt the need to unionize. This protective culture came to an end in 1983, however, when the company was forced to reduce its workforce by five percent to cut costs. Competitive pressures from the Japanese and domestic and international economic problems had slowed product demand. Even the widely publicized disc camera failed to sustain its initial hot sales rate.

Upon Fallons retirement in 1983, Colby Chandler took over as chairman and, in an attempt to keep up with the pace of change, pointed Kodak toward the electronics and video areas in earnest. During the 1970s the company had brought out products that either lacked quality or important features, or arrived too late on the scene to capitalize on new opportunities. Of all the products introduced during Fallons tenure, only the Ektaprint copier was considered a success, although it gradually lost its marketing advantage to competitive offerings with greater speed and more features. Neither the instant nor the disc cameras had met original expectations. The companys X-ray film business also took a beating as hospital admissions dropped and attempts by medical institutions to control costs increased.

The companys new electronics division consisted of its Spin Physics subsidiary, a solid-state research laboratory, and another facility dedicated to the production of integrated circuits. Many of the products later introduced by the division, however, resulted from acquisitions or joint ventures with other companies. For example, in 1984 Kodak launched its first electronic product, a camcorder that combined an eight-millimeter video camera and recorder, in conjunction with Matsushita Electric Industrial Co., Ltd. of Japan. This represented a major departure for Kodak, which historically had been self-reliant in everything from manufacturing cardboard boxes to maintaining its own fire department.

Also in 1984 Kodak introduced complete lines of videotape cassettes for all video formats and floppy discs for use in personal computers. It bolstered the latter area in 1985 with the purchase of Verbatim Corporation, a floppy disc manufacturer. After five years of disappointing sales, Verbatim was sold to Mitsubishi Kasei Corporation of Japan.

Kodak underwent another major reorganization at the beginning of 1985 to capitalize more quickly on growth opportuni-ties. Seventeen business units and a new Life Sciences Group were formed, the latter division to be involved in developing biomedical technology. Each of the 17 operating units, which had previously existed as a centralized group under the photo-graphic division, were given more autonomy and flexibility to run their businesses as independent profit centers.

The company reentered the 35-millimeter camera market in 1985 with a product made by Chinon Industries of Japan. Fifteen years earlier, it had withdrawn from the market because of doubts about the 35-millimeter cameras mass appeal.

In 1986, ten years after Polaroid filed its patent-infringement suit over Kodaks instant camera, a federal appeals court upheld a lower court ruling and ordered Kodak to leave the instant camera business. Kodak voluntarily offered its customers trade-in options for their obsolete cameras but was forced to make a somewhat different offer as a result of a class-action lawsuit. The financial implications of this development and the continuing struggle to boost earnings led the company to institute another workforce reduction in 1986, this time by ten percent. Although the domestic picture was somewhat grim, the fact that nearly 40 percent of the companys sales came from overseas helped produce strong bottom-line gains over the previous year. A weakening U.S. dollar blunted the impact of foreign competition and allowed Kodak to reclaim lost ground in its core businesses while also entering new ones. An employees suggestion to apply the companys manufacturing capabilities to the production of lithium batteries resulted in the successful introduction of a complete line of alkaline battery products under the Supralife brand in 1986.

That same year, Kodak also formed the Eastman Pharmaceuticals Division to establish an even stronger presence in healthcare. Joint venture agreements and licensing arrangements with existing pharmaceutical companies initially occupied division managements attention. In 1988 Kodak acquired Sterling Drug Inc., a manufacturer of prescription drugs and such consumer products as Bayer aspirin and Lysol cleaner, to make the company more competitive in the pharmaceutical industry. The $5.1 billion acquisition, however, was viewed unfavorably by the companys shareholders, in part because Sterling had a second-rate reputation as a pharmaceutical manufacturer. One year later, this negative perception seemed correct. Intense competition had reduced the sales of Sterlings existing Pharmaceuticals while new products under development showed questionable effectiveness during testing.

In 1988 evidence came to light indicating that toxic chemicals from the companys Rochester plant had leaked into the areas groundwater, posing a possible health hazard to local residents. In April 1990 the company admitted that it had violated New Yorks environmental regulations and was fined $1 million. It also agreed to clean up the site of its Kodak Park manufacturing facility and reduce chemical emissions from the plant.

Under the direction of Mr. Kay Whitmore, who became chairman and CEO in 1990, profits of the goliath company grew steadily. The positive results that emerged from the companys restructuring of 1985, however, were eroded by the recession of the early 1990s. Coupled with the recession came the Persian Gulf War, which seriously dampened the tourist and travel industry and hurt sales of photographic equipment. The year 1991 also finally saw the culmination of the Polaroid suit against Kodak, with the latter agreeing to pay the former a settlement of $925 million.

Once again, Kodak embarked on a path of restructuring and cost cutting. As a cost-cutting incentive, management in 1990 devised an early retirement plan that would trim approximately 5,800 people from the workforce. One year later, however, the plan backfired somewhat when 6,600 decided to retire early. With a shortfall of employees, the company was forced to hire 1,600 new workers. Management also was trimmed. Only three managers were replaced out of the 12 who retired in 1991.

Of the four business segments that had been in place since the previous restructuringphotographic, information, health, and chemicalsmanagement merged photographic and information into a single group named Imaging. Three group presidents were appointed to head the three divisions. Downsizing, cost cutting, restructuring, and a suspicion of red tape, as one market analyst described it, injected new growth into Kodak and returned the company slowly to profitability.

The Imaging Division, the largest unit, focused on Kodaks core business of photography and photofinishing, as well as copying machines, computer printers, and software. As part of its exploration of various new technologies, including digital photography, the division in 1992 developed a camera able to store photographic shots on a compact disc that could be dis-played on a CD player. Such advances, including Kodaks introduction in the fall of 1992 of a writable compact disc publishing system (enabling the consumer to write, store, and retrieve information on a CD), enabled Kodak to retain its position as the world leader in electronic imaging. To maintain this lead, the company established a small Center for Creative Imaging in Camden, Maine, an artistic haven, to encourage imaging innovations in a creative atmosphere. Meantime, one piece of the former information business segment, Atex, was sold off in 1992 following the dwindling away of its market position because of its outmoded technology.

Kodaks Health Product Division also was restructured with the 1991 merger of two pharmaceutical companies into one entity, Sterling Winthrop, which manufactured both pharmaceuticals and nonpharmaceutical consumer products. Sterling Winthrop in turn formed a joint venture with the French firm Sanofi in 1991, enabling it to penetrate the European pharmaceutical market more easily than before. The joint venture placed Kodaks Health Division among the top 20 pharmaceutical concerns in the world. Included within Kodaks Health Division was the Clinical Products Division, which originated in 1980 when Kodak introduced its Ektachem blood analyzer. Other businesses within the health group included X-ray machines and electronic health imaging products.

The third division of Kodak, the Chemical Product Division, manufactured and marketed chemicals, fibers, and plastics. As of the early 1990s Eastman Chemical Company was the 15th largest chemical firm in the United States. The focus of the Chemical Division was on expansion and overseas sales. As a result, the Chemical Division became a global enterprise, with joint ventures in many foreign countries. In 1991 Eastman Chemical entered the propylene business with the purchase of propylene interests as well as the urethane polyols business of ARCO Chemical Company. In the early 1990s, the Tenite Plastics division of Eastman Chemical was the largest plastic bottle and container supplier in the world.

1993 into the 21st Century: Refocusing on Imaging, with an Emphasis on Digital

Despite the restructuring efforts, Kodak remained, according to Peter Nulty writing in Fortune magazine in early 1994, one of the most bureaucratic, wasteful, paternalistic, slow-moving, isolated, and beloved companies in America. The company continued to lose market share in its core film and photographic paper operations; not only was Kodak reluctant to fully embrace the digital future out of fear of undermining its chemical photography business, it also had been slow to recognize huge opportunities in that chemical core, such as the explosive growth of 35-millimeter film sales following the debut of point-and-shoot 35-millimeter cameras. The moves to diversify outside imaging, most notably the move into pharmaceuticals, proved ill-advised and saddled the company with more than $7 billion in debt. With earnings stagnating and no turnaround in sight, the board of directors, under pressure from outside investors, fired Whitmore in late 1993. Replacing him as chairman and CEO was George Fisher, who left the top spot at Motorola, Inc. to join Kodak, thereby becoming the first outsider to head the company.

Fisher almost immediately moved to refocus the company on its imaging core. Fisher and a newly installed top financial team went ahead with the spinoff to shareholders of Eastman Chemical at year-end 1993; this divestment had already been in the works under Whitmore. The following year, Kodak sold Sterling Winthrop to SmithKline Beecham plc for $4.6 billion, its diagnostics products division to Johnson & Johnson for $1 billion, and several other nonimaging units for about another $2.4 billion. These businesses had together accounted for $7.4 billion in revenues in 1993 but only $46 million in pretax profit. The asset sales reduced the debt load to a manageable $1.5 billion and returned the company to its roots.

Next, Fisher moved to transform Kodak into a digital company for the 21st century. Rather than viewing the digital future as a threat to the chemical photography past, Fisher saw digital photography as a great opportunity to revitalize Kodaks core, as he related to Forbes in early 1997: I think there was a fear of what digital was all about, whereas I was coming here because I believed digital imaging and the core photography business had a symbiotic relationship, which was, in fact, exciting. During 1994 Fisher created a new division called Digital and Applied Imaging, and hired Carl Gustin, a marketing executive who had previously worked at Digital Equipment Corporation and Apple Computer, Inc., as its head. Among the early developments of the new division was the 1995 relaunch of the Kodak Photo CD with a new design aimed at desktop personal computer users and the introduction that year of a full-featured digital camera priced at less than $1,000.

Back on the chemical photography front, Kodak under Fishers leadership took a more aggressive approach to trade disputes with its archrival Fuji Photo Film. In 1995 Kodak accused the Japanese government and Fuji of illegally restricting access to the Japanese market for film and photographic paper. The U.S. government took the case to the newly formed World Trade Organization (WTO) in 1996, with the European Union soon joining the Kodak side. Fuji contended that Kodaks policies in pricing and marketing its products in Japan were to blame for the companys low market share, and that Kodak faced an environment in Japan similar to what Fuji faced in the United States. In fact, both companies held about 70 percent of their respective home markets, while Kodak held about 12 percent of the Japanese market and Fuji still only ten percent of the U.S. market. In 1997 the WTO rejected Kodaks claims, ruling in Fujis favor.

Ironically in the midst of this legal battle, a Kodak-led consortium that included Fuji (as well as Canon Inc., Minolta Co., Ltd., and Nikon Corporation) developed the Advanced Photo System (APS), an effort to revitalize the stagnant still photography market. APS, which was a hybrid between conventional and digital photography technology, offered drop-in film loading and the ability to select from three photo sizes (four by six-inch, four by seven-inch, and a panoramic four by ten-inch) as photos were taken. In February 1996 Kodak unveiled the Advantix brand, which it used for its APS film, cameras, and related equipment and services. APS proved to be an instant success, and Kodak quickly captured 85 percent of the U.S. market for APS film.

In December 1996 Daniel A. Carp was named president and chief operating officer of Eastman Kodak. One month later Kodak completed the sale to Danka Business Systems PLC of its loss-making imaging services unit, which sold and serviced copiers and provided document management services. Later in 1997 Kodak acquired Wang Laboratories software business unit, which focused on imaging and work management soft-ware. The following year Kodak beefed up its health imaging division through the $530 million purchase of the bulk of Imation Corporations medical imaging business, including the Dry View laser imaging system. Divestments in 1998 included the Fox Photo, Inc. photofinishing chain, which was sold to Wolf Camera. Also in 1998 the company introduced the Kodak Picture Maker, a digital imaging kiosk through which consumers could manipulate, enlarge, and/or crop and then reprint an existing photograph.

Despite all of Fishers maneuvering, Kodak was still vulnerable. In the summer of 1997 the seeming turnaround turned sour when Fuji Photo initiated a brutal price war in the U.S. market at the same time that a strong U.S. dollar and the emerging Asian economic crisis wreaked additional havoc overseas. The na-scent digital division, for all its innovative new products, was on its way to losing $440 million for the year. In late 1997 Fisher announced a major restructuring, involving a workforce reduction of 20,000, a shakeup of top management, and a goal to cut more than $1 billion from annual costs. After having nearly all of its profits wiped out by a $1.46 billion restructuring charge in 1997, Kodak returned to post net income of $1.39 billion in both 1998 and 1999, on revenues of $13.41 billion and $14.09 billion, respectively.

During 1999 Kodak continued its drive to divest underper-forming units through the sale of its office imaging unitwhich included digital printers, copiers, and roller assembliesto Heidelberger Druckmaschinen AG of Germany. In January 2000 Fisher stepped down as CEO, remaining chairman until the end of that year; Carp was named his successor. Although Kodak had managed to make a profit of $20 million from its digital businesses in 1999, it was far from clear whether Kodak would be a major player in the digital world of the new millennium. For his part, Carp announced in mid-2000 that the company expected 45 percent of revenue to be generated from digital imaging in 2005, which would be a huge increase from the 17 percent of 1999. Eastman Kodaks progress toward this predicted level, or lack thereof, was likely to be highly indicative of the overall direction of the company in the early 21st century.

Principal Subsidiaries

Eastman Kodak International Sales Corporation (Barbados); Torrey Pines Realty Company, Inc.; Cinesite, Inc.; FPC Inc.; Qualex Inc.; Qualex Canada Photofinishing Inc.; Eastman Soft-ware Inc.; PictureVision Inc.; Eastman Gelatine Corporation; Eastman Canada Inc.; Kodak Canada Inc.; Kodak (Export Sales) Ltd. (Hong Kong); Kodak Argentina S.A.I.C.; Kodak Chilena S.A.F. (Chile); Kodak Caceo Ltd.; Kodak Panama, Ltd.; Kodak Americas, Ltd.; Kodak Venezuela, S.A.; Kodak (Near East), Inc.; Kodak (Singapore) Pte. Limited; Kodak Philippines, Ltd.; Kodak Limited (U.K.); Cinesite (Europe) Limited (U.K.); Kodak India Limited; Kodak International Finance Ltd. (U.K.); Kodak Polska Sp.zo.o (Poland); Kodak AO (Russia); Kodak (Ireland) Manufacturing Limited; Kodak Ireland Limited; Kodak-Pathe SA (France); Kodak A.G. (Germany); E.K. Holdings, B.V. (Netherlands); Kodak Brasileira C.I.L. (Brazil); Kodak Korea Limited; Kodak Far East Purchasing, Inc.; Kodak New Zealand Limited; Kodak (Australasia) Pty. Ltd. (Australia); Kodak (Kenya) Limited; Kodak (Egypt) S.A.E.; Kodak (Malaysia) S.B.; Kodak Taiwan Limited; Eastman Kodak International Capital Company, Inc.; Kodak de Mexico S.A. de C.V.; Kodak Export de Mexico, S. de R.L. de C.V.; Kodak Mexicana S.A. de C.V. (Mexico); N.V. Kodak S.A. (Belgium); Kodak a.s. (Denmark); Kodak Norge A/S (Norway); Kodak SA (Switzerland); Kodak (Far East) Limited (Hong Kong); Kodak (Thailand) Limited; Kodak G.m.b.H. (Austria); Kodak Kft. (Hungary); Kodak Oy (Finland); Kodak Nederland B.V. (Netherlands); Kodak S.p.A. (Italy); Kodak Portuguesa Limited; Kodak S.A. (Spain); Kodak AB (Sweden); Eastman Kodak (Japan) Ltd.; Kodak Japan Ltd.; Kodak Imagex K.K. (Japan); K.K. Kodak Information Systems (Japan); Kodak Japan Industries Ltd.; Kodak (China) Limited (Hong Kong); Kodak Electronic Products (Shanghai) Co., Ltd. (China); BASO Precision Optics, Ltd. (Taiwan); K.H. Optical Company Limited (Hong Kong); Kodak Photographic Equipment (Shanghai) Co., Ltd. (China); Kodak (China) Co. Ltd.; Kodak (WUXI) Co. Ltd. (China).

Principal Operating Units

Document Imaging; Eastman Software; Consumer Imaging; Commercial and Government Systems; Global Customer Service and Support; Digital and Applied Imaging; Health Imaging; Entertainment Imaging; KODAK Professional.

Principal Competitors

Agfa-Gevaert Group; Canon Inc.; Casio Computer Co., Ltd.; Fuji Photo Film Co., Ltd.; Hewlett-Packard Company; Leica Camera AG; Matsushita Electric Industrial Co., Ltd.; Minnesota Mining and Manufacturing Company; Minolta Co., Ltd.; Nikon Corporation; Olympus Optical Co., Ltd.; Koninklijke Philips Electronics N.V.; PhotoWorks, Inc.; Polaroid Corporation; Ricoh Company, Ltd.; Sharp Corporation; Sony Corporation; Xerox Corporation.

Further Reading

Astor, Will, Huge Pioneer-Kodak Project Marks Progress, Rochester Business Journal, September 25, 1992.

Bounds, Wendy, George Fisher Pushes Kodak into Digital Era, Wall Street Journal, June 9, 1995, p. B1.

Brayer, Elizabeth, George Eastman: A Biography, Baltimore: Johns Hopkins University Press, 1996.

Buell, Barbara, and Rebecca Aikman, Kodak Is Trying to Break Out of Its Shell, Business Week, June 10, 1985, pp. 92 +.

Burgess, John, Firms Plan Multimedia Consortium, Washington Post, October 1, 1992.

Chakravarty, Subrata N., How an Outsiders Vision Saved Kodak, Forbes, January 13, 1997, pp. 4547.

Chakravarty, Subrata N., and Ruth Simon, Has the World Passed Kodak By?, Forbes, November 5, 1984.

Collins, Douglas, The Story of Kodak, New York: Abrams, 1990.

Desmond, Edward W., Whats Ailing Kodak? Fuji, Fortune, October 27, 1997, pp. 185 +.

Deutsch, Claudia H., More Paths to Profits: Kodak Hopes Demand for Digital Images Will Sell Film, New York Times, December 2, 1996, p. D1.

Dvorak, John C, Razors with No Blades, Forbes, October 18, 1999, p. 168.

Grant, Linda, Can Fisher Focus Kodak?, Fortune, January 13, 1997, pp. 76 +.

______, A New Picture at Kodak, U.S. News and World Report, September 19, 1994, pp. 5860.

______, Why Kodak Still Isnt Fixed, Fortune, May 11, 1998, pp. 17981.

Hammonds, Keith H., Kodak May Wish It Never Went to the Drug-store, Business Week December 4, 1989, pp. 72 +.

Helm, Leslie, Has Kodak Set Itself Up for a Fall?, Business Week, February 22, 1988, pp. 134+.

______, Why Kodak Is Starting to Click Again, Business Week, February 23, 1987, pp. 134+.

Johnson, Greg, Kodak Device Places Images of Film on Disc, Los Angeles Times, July 31, 1992.

Journey into Imagination: The Kodak Story, Rochester, N.Y.: Eastman Kodak Company, 1988.

Klein, Alec, Kodak Expects Digital Imaging to Be 45% of Revenue by 2005, Wall Street Journal, June 15, 2000, p. B14.

______, Kodak Losing U.S. Market Share to Fuji, Wall Street Journal, May 28, 1999, p. A3.

______, Shutter Snaps on Fishers Leadership at Kodak, Wall Street Journal, June 10, 1999, p. B1.

Kodak Fights Back: Everybody Wants a Piece of Its Markets, Business Week, February 1, 1982, pp. 48 +.

Leib, Jeffrey, Kodak Colorado Peddles Injection-Molding Expertise, Denver Post, March 6, 1992.

Maremont, Mark, Kodaks New Focus: An Inside Look at George Fishers Strategy, Business Week, January 30, 1995, pp. 6268.

Maremont, Mark, and Elizabeth Lesly, Getting the Picture: Kodak Finally Heeds the Shareholders, Business Week, February 1,1993, pp. 2426.

______, The Revolution That Wasnt at Eastman Kodak, Business Week, May 10, 1993, pp. 2425.

Maremont, Mark, and Gary Me Williams, Kodak: Shoot the Works, Business Week, November 15, 1993, pp. 3032.

McGinn, Daniel, A Star Image Blurs, Newsweek, April 6, 1998, pp. 3638.

Moore, Thomas, and Lee Smith, Embattled Kodak Enters the Electronic Age, Fortune, August 22, 1983, pp. 120+.

Nulty, Peter, Digital Imaging Had Better Boom Before Kodak Film Busts, Fortune, May 1, 1995, pp. 8083.

______, Kodak Grabs for Growth Again, Fortune, May 16, 1994, pp. 7678.

Perdue, Wes, Eastman Kodak and BioScan Inc. Form Alliance, Business Wire, August 10, 1992.

Santoli, Michael, Kodaks New Colors, Barrons, August 24, 1998, pp. 2526, 2829.

Smith, Emily T., Picture This: Kodak Wants to Be a Biotech Giant, Too, Business Week, May 26, 1986, pp. 88 +.

Smith, Geoffrey, Film Vs. Digital: Can Kodak Build a Bridge?, Business Week, August 2, 1999, p. 66.

Smith, Geoffrey, et al., Can George Fisher Fix Kodak?, Business Week, October 20, 1997, pp. 11620, 124, 128.

Smith, Geoffrey, Brad Wolverton, and Ann Therese Palmer, A Dark Kodak Moment, Business Week, August 4, 1997, pp. 3031.

Swasy, Alecia, Changing Focus: Kodak and the Battle to Save a Great American Company, New York: Times Business, 1997.

Taylor, Alex, III, Kodak Scrambles to Refocus, Fortune, March 3, 1986, pp. 113 +.

Treece, James B., Barbara Buell, and Jane Sasseen, How Kodak Is Trying to Move Mount Fuji, Business Week, December 2, 1985, pp. 62 +.

Webb, Chanoine, The Picture Just Keeps Getting Darker at Kodak, Fortune, June 21, 1999, p. 206.

Weber, Jonathan, Top High-Tech Firms Team Up on Multimedia, Los Angeles Times, October 7, 1992.

Sandy Schusteff and Sina Dubovoj

updated by David E. Salamie

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Eastman Kodak Company

Eastman Kodak Company

343 State Street
Rochester, New York 14650
U.S.A.
(716) 724-4000
Fax: (716) 724-0663

Public Company
Incorporated: 1901
Employees: 132,600
Sales: $20.18 billion
Stock Exchange: New York
SICs: 3861 Photographic Equipment and Supplies; 5043 Photographic Equipment & Supplies; 2869 Industrial Organic Chemicals; 2899 Chemical Preparations; 2865 Cyclic Crudes & Intermediates; 3572 Computer Storage Devices; 3577 Computer Peripheral Equipment; 7372 Prepackaged Software; 7373 Computer Integrated Systems Design; 2796 Platemaking Services; 2833 Medicinals & Botanicals; 2821 Plastics Materials & Resins; 2823 Cellulosic Man-Made Fibers

A multinational corporation whose name and film products are familiar to photographers around the world, Eastman Kodak Company is a diversified manufacturer of photographic imaging equipment and supplies, chemicals, health-care products, and information systems. Kodak is recognized widely as a tightly managed company with superior international marketing.

The company bears the name of its founder, George Eastman, who became interested in photography during the late 1870s while planning a vacation from his job as a bank clerk in Rochester, New York. Taking a coworkers suggestion to make a photographic record of his intended trip to Santo Domingo, the 24-year-old Eastman soon discovered that the camera, film, and wet-plate-developing chemicals and equipment he had purchased were far too bulky. Instead of following through with his original vacation plans, Eastman spent the time studying how to make photography more convenient. He discovered a description of a dry-plate process that was being used by British photographers. He tried to replicate this process in his mothers kitchen at night after work.

After three years Eastman produced a dry glass plate with which he was satisfied. He obtained a U.S. patent for the dry plate and for a machine for preparing many plates at one time, and started manufacturing dry plates for sale to photographers. Henry A. Strong, a local businessman impressed by Eastmans work, joined him on January 1, 1881, to form the Eastman Dry Plate Company. Eastman left his position at the bank later that year to give his complete attention to the new company.

The new venture almost collapsed several times during its early years because the quality of the dry plates was inconsistent and Eastman insisted that the defective plates be replaced at no charge to the customer. Despite these setbacks, he was determined to make the camera as convenient as the pencil.

As his business grew, Eastman experimented to find a lighter and more flexible substitute for the glass plate. In 1884 he introduced a new film system using gelatin-coated paper packed in a roll holder that could be used in almost every plate camera available at that time. The company was recognized as Eastman Dry Plate and Film Company. Strong was president and Eastman treasurer and general manager of the 14-shareholder corporation. The company also opened a sales office in London in 1885 to take advantage of the growing European photography market.

In 1888 Eastmans company introduced its first portable camera. Priced at $25, it included enough film for 100 pictures. After shooting the roll of film, the owner sent both the film and the camera to Rochester for processing. For $10, the company sent back the developed prints and the camera loaded with a new roll of film. This breakthrough is considered to be the birth of snapshot photography. It was also at this time that Eastman trademarked Kodak, which he invented by experimenting with words that began and ended with his favorite letter, K. The company advertised its new camera extensively using the slogan, You push the button, we do the rest.

The following year, the Eastman Photographic Materials Company was incorporated in the United Kingdom to distribute Kodak products outside the United States from its headquarters in London. The company built a manufacturing plant in 1891 outside London to accommodate the growing product demand overseas, and set up additional distribution sites in France, Germany, and Italy by 1900.

In 1889 the firms name was changed to Eastman Company and in 1892 to Eastman Kodak Company. Eastman became president of the company upon Strongs death in 1919.

Eastman was committed to bringing photography to the greatest number of people at the lowest possible price. As his company grew and production of both the camera and film increased, manufacturing costs decreased significantly. This allowed the firm to introduce a number of new cameras, including the Folding Pocket Kodak Camera in 1898. It also brought out the first of a complete line of Brownie cameras, an easy-to-operate model that sold for $1 and used film that sold at 15 cents per roll, in 1900.

Over the next 20 years, the company continued to introduce photographic innovations. In 1902 Kodak brought to market a new developing machine that allowed film processing without benefit of a darkroom. The 1913 introduction of Eastman Portrait Film provided professional photographers with a sheet film alternative to glass plates.

In 1912 George Eastman hired Dr. C. E. Kenneth Mees, a British scientist, to head one of the first U.S. industrial research centers. Based in Rochester, this lab was where various tools and manufacturing processes that provided the company with a continuing stream of new products in the 1920s were invented. These new products, which included 16-millimeter Kodacolor motion picture film, the 16-millimeter Cine-Kodak motion picture camera, and the Kodascope projector, were targeted at the mass market and priced appropriately.

Kodak developed other new products to support the countrys involvement in World War I. In 1917 the company developed aerial cameras and trained U.S. Signal Corps photographers in their use. It also supplied the U.S. Navy with cellulose acetate, a film product, for coating airplane wings, and produced the unbreakable lenses used on gas masks.

George Eastman had always been civic-minded; even as a struggling bank clerk he donated money to the Mechanics Institute of Rochester. As Kodak grew, his philanthropy extended to such institutions as the Massachusetts Institute of Technology, the Hampton and Tuskegee institutes, and the University of Rochester. He was instrumental in starting numerous dental clinics around the world, and he enjoyed a reputation as a paternalistic employer because of his profit-sharing programs and insurance benefits for workers. In 1932 George Eastman committed suicide at the age of 77, leaving a note that read, To my friends. My work is done. Why wait? G.E.

That same year, the company introduced the first eight-millimeter motion picture system for the amateur photographer, consisting of film, cameras, and projectors. Three years later, it made available 16-millimeter Kodachrome film, the first amateur color film to gain commercial success. Similar film products for 35-millimeter slides and eight-millimeter home movies were introduced in 1936.

New photographic products continued to be introduced over the next decade, even as the company devoted a portion of its manufacturing capability to the production of equipment and film for the military during World War II. Following the war, Kodak focused its total attention once again on amateur photography with the introduction of a low-priced Brownie eight-millimeter movie camera in 1951 and the accompanying projector one year later.

In 1953 the company formed Eastman Chemical Products, Inc. to market alcohols, plastics, and fibers for industrial use. These substances were manufactured by Tennessee Eastman and Texas Eastman, two subsidiaries that had been formed in 1920 and 1952, respectively. The company had begun to manufacture these items because of its own use of chemicals in film manufacturing and processing.

Until this point, the company had always included the cost of film processing in the cost of film. A consent decree filed in 1954 forced Eastman Kodak to abandon this practice, but it also provided an opportunity for the company to serve a new market, independent photo finishers, with its film-developing products. Kodak acquired several photo finishing laboratories, including Fox Photo and American Photographic Group, to form an independent joint venture known as Qualex with Colorcraft Corp., owned by Fuqua Industries.

By 1958 the company had made significant advances in 35-millimeter color slide technology and introduced the first completely automatic projector, called the Kodak Calvalcade. A line of Kodak Carousel projectors introduced three years later became highly successful.

In 1963, one year after astronaut John Glenn had used Kodak film to record his orbit of the earth, the company introduced the Instamatic camera. Using a film cartridge instead of film roll, the Instamatic revolutionized amateur photography and became a commercial success because it was easy to use. Two years later, Kodak brought out a similar cartridge system for super-eight format Instamatic movie cameras and projectors. In 1972 five different models of a pocket version of the Instamatic camera were launched and proved immediately popular.

That same year, the company acquired Spin Physics, a San Diego, California-based producer of magnetic heads used in recording equipment. This purchase was completed in 1973.

In the early 1970s, Eastman Kodak became the defendant in a series of antitrust suits filed by several smaller film, camera, and processing companies. These legal actions alleged that Kodak illegally monopolized the photographic market. The most widely publicized suit, filed by Berkey Photo, charged that Kodak had violated the Sherman Antitrust Act by conspiring with two other companies, Sylvania Companiesa subsidiary of GTE Products Corporationand General Electric Company, to develop two photographic flash devices. Berkey requested that Eastman Kodak be divided into ten separate companies and asked for $300 million in damages. The case was settled in 1981 for $6.8 million.

In 1975 Kodak introduced the Ektaprint Copier-Duplicator, putting itself into direct competition with two firmly entrenched rivals, Xerox and IBM. Kodak considered this market to be a good fit with its existing microfilm business. In addition, the company had already established a foothold with a similar product, the Verifax machine, which had been introduced in 1953. This copier used a wet process like that used in photography, but it had become obsolete when Xerox introduced a technological advancement called xerography, which was less messy and produced better-quality copies than previous systems. After careful research and planning, the Ektaprint copier was developed to serve businesses with large-scale duplicating needs. Not only could the Ektaprint produce numerous copies at high speed, but it could also collate them while duplicating, a unique feature at the time.

In 1976 Kodak took on another well-established firm when it challenged Polaroid Corporations 30-year lock on instant photography with a new line of instant cameras and film that developed pictures outside the camera within a few minutes. Kodak had missed an opportunity to get in on the ground floor of this technology in the 1940s when it declined an offer to market an instant camera invented by Polaroid founder Edwin Land. The general feeling among Kodaks management at the time had been that Lands camera was a toy and the quality of its pictures not up to the companys accepted standards. Kodak had, however, also gained from Polaroids success. It had become the exclusive supplier of negatives for Polaroids instant, pull-apart color film in 1963. In 1969 Polaroid elected to take over this part of its film manufacturing itself. At the same time Polaroid cut prices drastically to bring its instant cameras more in line with the Kodak Instamatics. Kodak was convinced that Polaroids instant photography products posed a threat to the companys market leadership. However, the companys methodical product-development process, which emphasized long-term product quality over quick market entry, as well as Polaroids ownership of hundreds of related patents, proved to be major obstacles to an immediate competitive response. When Kodak finally introduced its own instant camera four years after the decision was made to develop it, the company was plagued by production problems and a Polaroid lawsuit alleging patent infringement. Although the company captured about 25 percent of the U.S. instant camera market within its first year, reports of quality flaws with the cameras instant photographs and Polaroids response with another new instant camera stifled sales. Polaroid successfully exploited the business applications of instant photographyidentity cards, for exampleand retained its strong position in the market.

During this period, Kodaks President and Chief Executive Officer Walter A. Fallon and Chairman Gerald B. Zornow oversaw product development. When Zornow retired in 1977, Fallón assumed the chairmanship and was succeeded as president by Colby H. Chandler. Employed with Kodak since 1941, Fallon had worked his way up from production to direct the U.S. and Canadian photographic division. He had been responsible for the launch of the pocket Instamatic camera line. Chandler had joined the company in 1951 and, as Fallens successor in the U.S. and Canadian photographic division, he was directly responsible for both the instant camera and the Ektaprint copier.

Upon becoming president, Chandler faced a challenge to Eastman Kodaks dominance in the photographic paper market by several Japanese competitors and U.S. suppliers, including Fuji Photo Film Company and 3M Company. These firms undercut Kodaks prices for a paper product of similar quality. Fuji also had the advantage of competing against a strong U.S. dollar, a factor that conversely reduced Kodaks profits significantly in foreign markets. The company responded with price reductions of its own, but suffered lower earnings and a decreasing level of investor confidence. Losing the title of official film of the 1984 Summer Olympics to Fuji added further insult to injury.

As the U.S. economy entered a recession in the late 1970s and sales growth in the companys consumer photographic products slowed, higher sales in other areas such as chemicals, business systems, and professional photo finishing pushed profits back on an upward trend. Several prior years of flat earnings across product areas were attributed largely to a lack of strategic planning. At the end of 1978 company operations were reorganized to consolidate the U.S., Canadian, and international photographic areas into one division. The companys first director of corporate planning was also hired to speed the product-development process and institute the controls needed to enable new products to become profitable more quickly.

The year 1980 marked the companys 100th anniversary. That year Kodak introduced the Ektachem 400 blood analyzer. This entry into the health sciences field represented a natural application of the companys film-manufacturing technology and reinforced its already strong presence as a supplier of x-ray film to hospitals and other health-care facilities.

During the 1980s the company faced intensifying Japanese competition in photography and a continuing decline in product demand. Rapid technological breakthroughs by other firms threatened to replace Kodaks core product line with more advanced equipment. The company instituted several measures to improve its performance. These included a stronger emphasis on nonphotographic products with high profit potential, a more aggressive approach to protecting its chemical imaging capabilities, a broader international marketing strategy, and a sharper focus on making acquisitions to bring the company up to speed technologically, particularly in electronics.

In 1981 the company purchased Atex, a major supplier of electronic text-editing systems used by publishers. Formed as an entrepreneurial venture in 1972 and the leader in its field at the time of the acquisition, Atex later lost ground to fast-changing computer technology as Kodaks traditionally slow-moving product development process was unable to keep pace with the industry.

Despite its shift in priorities to other areas, Kodak continued to support its bread-and-butter line of photographic products. In 1982 it introduced a line of small cameras that used film discs instead of cartridges and was considered a replacement for the pocket Instamatic camera.

Since the companys founding, Kodak had maintained a policy of treating its employees fairly and with respect, earning the nickname of the Great Yellow Father. It was George Eastmans belief that an organizations prosperity was not necessarily due to its technological achievements, but more to its workers goodwill and loyalty. As a result, company benefits were well above average, morale had always remained high, and employees never felt the need to unionize. This protective culture came to an end in 1983, however, when the company was forced to reduce its work force by 5 percent to cut costs. Competitive pressures from the Japanese and domestic and international economic problems had slowed product demand. Even the widely publicized disc camera failed to sustain its initial hot sales rate.

Upon Fallóns retirement in 1983, Colby Chandler took over as chairman and, in an attempt to keep up with the pace of change, pointed Kodak toward the electronics and video areas in earnest. During the 1970s the company had brought out products that either lacked quality or important features, or arrived too late on the scene to capitalize on new opportunities. Of all the products introduced during Fallóns tenure, only the Ektaprint copier was considered a success, although it gradually lost its marketing advantage to competitive offerings with greater speed and more features. Neither the instant nor the disc cameras had met original expectations. The companys x-ray film business also took a beating as hospital admissions dropped and attempts by medical institutions to control costs increased.

The companys new electronics division consisted of its Spin Physics subsidiary, a solid-state research laboratory, and another facility dedicated to the production of integrated circuits. Many of the products later introduced by the division, however, resulted from acquisitions or joint ventures with other companies. For example, in 1984 Kodak launched its first electronic product, a camcorder that combined an eight-millimeter video camera and recorder, in conjunction with Matsushita Electric Industrial Company of Japan. This represented a major departure for Kodak, which historically had been self-reliant in everything from manufacturing cardboard boxes to maintaining its own fire department.

Also in 1984 Kodak introduced complete lines of videotape cassettes for all video formats and floppy discs for use in personal computers. It bolstered the latter area in 1985 with the purchase of Verbatim Corporation, a floppy disc manufacturer. After five years of disappointing sales, Verbatim was sold to Mitsubishi Kasei Corporation of Japan.

Kodak underwent another major reorganization at the beginning of 1985 to capitalize more quickly on growth opportunities. Seventeen business units and a new Life Sciences Group were formed, the latter division to be involved in developing biomedical technology. Each of the 17 operating units, which had previously existed as a centralized group under the photographic division, were given more autonomy and flexibility to run their businesses as independent profit centers.

The company re-entered the 35-millimeter camera market in 1985 with a product made by Chinon Industries of Japan. Fifteen years earlier, it had withdrawn from the market because of doubts about the 35-millimeter cameras mass appeal.

In 1986, ten years after Polaroid filed its patent-infringement suit over Kodaks instant camera, a federal appeals court upheld a lower court ruling and ordered the company to leave the instant camera business. Kodak voluntarily offered its customers trade-in options for their obsolete cameras and was forced to make a somewhat different offer as a result of a class action lawsuit. The financial implications of this development and the continuing struggle to boost earnings led the company to institute another work force reduction in 1986, this time by 10 percent. Although the domestic picture was somewhat grim, the fact that nearly 40 percent of the companys sales came from overseas helped produce strong bottom-line gains over the previous year. A weakening U.S. dollar blunted the impact of foreign competition and allowed Kodak to reclaim lost ground in its core businesses while also entering new ones. An employees suggestion to apply the companys manufacturing capabilities to the production of lithium batteries resulted in the successful introduction of a complete line of alkaline battery products under the Supralife brand.

Kodak also formed the Eastman Pharmaceuticals Division to establish an even stronger presence in health care. Joint venture agreements and licensing arrangements with existing pharmaceutical companies initially occupied division managements attention. In 1988 Kodak acquired Sterling Drug Inc., a manufacturer of prescription drugs and such consumer products as Bayer aspirin and Lysol cleaners, to make the company more competitive in the pharmaceutical industry. The acquisition, however, was viewed unfavorably by the companys shareholders, in part because Sterling had a second-rate reputation as a pharmaceutical manufacturer. One year later, this negative perception seemed correct. Intense competition had reduced the sales of Sterlings existing pharmaceuticals while new products under development showed questionable effectiveness during testing.

In 1988 evidence came to light indicating that toxic chemicals from the companys Rochester plant had leaked into the areas groundwater, posing a possible health hazard to local residents. In April 1990 the company admitted that it had violated New Yorks environmental regulations and was fined $1 million. It also agreed to clean up the site of its Kodak Park manufacturing facility and reduce chemical emissions from the plant.

Under the direction of Mr. Kay Whitmore, who became chairman and CEO in 1990, profits of the goliath company grew steadily. However, the positive results that emerged from the companys restructuring of 1985 were eroded by the recession of the early 1990s. Coupled with the recession came the Persian Gulf War, which seriously dampened the tourist and travel industry and hurt sales of photographic equipment.

Once again, Kodak embarked on a path of restructuring and cost cutting. As a cost cutting incentive, management in 1990 devised an early retirement plan that would trim approximately 5,800 from the work force. One year later, however, the plan backfired somewhat when 6,600 decided to retire early. With a shortfall of employees, the company was forced to hire 1600 new workers. Management also was trimmed. Only three managers were replaced out of the 12 who retired in 1991.

Of the four business segments that had been in place since the previous restructuringphotographic, information, health, and chemicalsmanagement merged photographic and information into a single group named Imaging. Three group presidents were appointed to head the three divisions. Downsizing, cost cutting, restructuring, and a suspicion of red tape, as one market analyst described it, injected new growth into Kodak and returned the company slowly to profitability.

The largest business segment and the one generating the most sales (approximately 57 percent) is Imaging. This division includes Kodaks core business of photography and photo-finishing, as well as copying machines, computer printers, and software. The division is also exploring the various possibilities of new technologies, including digital photography. In 1992 the division developed a camera able to store photographic shots on a compact disc that can be displayed on a CD player. Such advances, including Kodaks introduction in the fall of 1992 of a writable compact disc publishing system (enabling the consumer to write, store, and retrieve information on a CD), have enabled Kodak to retain its position as the world leader in electronic imaging. To maintain this lead, the company established a small Center for Creative Imaging in Camden, Maine, an artistic haven, to encourage imaging innovations in a creative atmosphere.

Kodaks Health Product Division achieved record profits in 1991, accounting for approximately 24 percent of the companys sales. This testifies to the wisdom of broadening the companys scope beyond its traditional core business. Within this segment, restructuring has also taken place with the 1991 merger of two pharmaceutical companies into one entity, Sterling Winthrop, which manufactures not only pharmaceuticals but non-pharmaceutical consumer products. Sterling Winthrop in turn formed a joint venture with the French firm Sanofi in 1991, enabling it to penetrate the European pharmaceutical market more easily than before. The joint venture places Kodaks Health Division among the top twenty pharmaceutical concerns in the world. European customers will be serviced in turn by a new manufacturing plant in Strasbourg, France, that will also provide customer support.

Included within Kodaks Health Division is the Clinical Products Division, which originated in 1984 when Kodak introduced its Ektachem blood analyzer machine. Generating no sales when it first came out, by the early 1990s sales of the Clinical Products Division had topped a half billion dollars and were growing at a rate of 20 percent, twice the growth rate of Kodak overall. Other businesses within the Health group include x-ray machines and electronic imaging, sales of which contributed to making the Health Division Kodaks most promising and profitable in recession-plagued 1991.

The third division of Kodak, Chemical Product, generated approximately 18 percent of company sales in 1991. This group manufactures and markets chemicals, fibers, and plastics. In the 1990s Eastman Chemical Company has become the 15th largest chemical firm in the United States. The new focus of the Chemical Division has been on expansion and overseas sales. As a result, the Chemical Division has become a global enterprise, with joint ventures in many foreign countries. In 1991 Eastman Chemical entered the propylene business with the purchase of propylene interests as well as the urethane polyols business of ARCO Chemical Company. The Tenite Plastics division of Eastman Chemical is the largest plastic bottle and container supplier in the world.

Kodak has weathered many difficult economic times. In reasonable financial health at this time, the company is increasingly concerned with establishing an important presence in the global marketplace. Approximately 45 percent of the companys annual sales are generated overseas. Kodak was one of the first U.S. companies to take advantage of the fall of communism in Eastern Europe, setting up subsidiaries in Hungary and Poland and planning further penetration of that long deprived, but eager market. The company also has established a subsidiary in Turkey, numerous joint ventures with European firms, and a new headquarters in The Hague (Eastman Chemical).

Principal Subsidiaries

Eastman Kodak International Finance B.V. (Netherlands); Eastman Kodak International Sales Corporation (U.S. Virgin Islands); Eastman Technology, Inc.; Torrey Pines Realty Company, Inc.; Cyclotomics, Inc.; Datatape Incorporated; Electronic Pre-Press Systems, Inc.; Interactive Systems Corp.; Northfield Pharmaceuticals Limited; Ultra Technologies, Inc.; Eastman Chemical Products, Inc.; Holston Defense Corporation; Eastman Gelatine Corporation; Mustang Pipeline Company; Pinto Pipeline Company of Texas; Eastman Chemical International Ltd.; Eastman Chemical International, A.G. (Switzerland); Eastmanchem, Inc. (Canada); Eastman Canada, Inc.; Kodak Argentina, Ltd.; Kodak Brasileira C.I.L. (Brazil); Kodak Chilena S.A.F. (Chile); Kodak Colombiana, Ltd.; Kodak Mexicana, Ltd.; Kodak Panama, Ltd.; Kodak Export Limited; Laboratorios Kodak Limitada; Foto Interamericana de Peru, Ltd.; Kodak Caribbean, Limited; Kodak Uruguaya, Ltd. (Uruguay); Kodak Venezuela, S.A.; Kodak (Near East), Inc.; Kodak (Singapore) Pte. Limited; Kodak Philippines, Ltd.; Kodak Limited (U.K.); Kodak Ireland Limited (U.K.); Kodak Pathe (France); Kodak A.G. (Germany); Eastman Kodak International Capital Company, Inc.; Kodak Ges. m.b.h. (Austria); Kodak Oy (Finland); Kodak Nederland B.V. (Netherlands); Kodak S.p.A. (Italy); Kodak Portuguesa Limited; Kodak S.A. (Spain); Kodak AB (Sweden); Eastman Kodak (Japan) Ltd.; K.K. Kodak Information Systems (Japan); Kodak Japan Ltd.; Kodak Imagica K.K. (Japan); Kodak Far East Purchasing, Inc.; Kodak New Zealand Limited; Kodak (Australasia) Proprietary Limited; Kodak (Kenya) Limited; International Biotechnologies Inc.; Kodak (Egypt) S.A.; Komal S.B. (Malaysia); Kodak (Export Sales) Ltd. (Hong Kong); Kodak Taiwan Limited Inc.; Kodak Korea Ltd.; Sterling Drug Inc.

Further Reading

Chakravarty, Subrata N., and Ruth Simon, Has the World Passed Kodak By?, Forbes, November 5, 1984; Journey into Imagination: The Kodak Story, Rochester, New York, Eastman Kodak Company, 1988; Annual Report: Eastman Kodak Company, 1991; Leib, Jeffrey, Kodak Colorado Peddles Injection-Molding Expertise, Denver Post, March 6, 1992; Johnson, Greg, Kodak Device Places Images of Film on Disc, Los Angeles Times, July 31, 1992; Perdue, Wes, Eastman Kodak and BioScan Inc. Form Alliance, Business Wire, August 10, 1992; Astor, Will, Huge Pioneer-Kodak Project Marks Progress, Rochester Business Journal, September 25, 1992; Burgess, John, Firms Plan Multimedia Consortium, Washington Post, October 1, 1992; Weber, Jonathan, Top High-Tech Firms Team Up on Multimedia, Los Angeles Times, October 7, 1992.

Sandy Schusteff

updated by Sina Dubovoj

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Eastman Kodak Company

Eastman Kodak Company

343 State Street
Rochester, New York 14650
U.S.A.
(716) 724-4000
Fax: (716) 724-0663

Public Company
Incorporated: 1889 as Eastman Company
Employees: 137,750
Sales: $18.40 billion
Stock Exchange: New York

A multinational corporation whose name and film are familiar to photographers around the world, Eastman Kodak Company is a diversified manufacturer of photographic imaging equipment and supplies, chemicals, health-care products, and information systems. It is recognized widely as a tightly managed company with superior international marketing.

The company bears the name of its founder, George Eastman, who became interested in photography during the late 1870s while planning a vacation from his job as a bank clerk in Rochester, New York. Taking a co-workers suggestion to make a photographic record of his intended trip to Santo Domingo, the 24-year-old Eastman soon discovered that the camera, film, and wet-plate-developing chemicals and equipment he had purchased were far too bulky. Instead of following through with his original vacation plans, Eastman spent the time studying how to make photography more convenient. He discovered a description of a dry-plate process that was being used by British photographers. He tried to replicate this process in his mothers kitchen at night after work.

After three years Eastman produced a dry glass plate with which he was satisfied. He obtained a U.S. patent for the dry plate and for a machine for preparing many plates at one time, and started manufacturing dry plates for sale to photographers. Henry A. Strong, a local businessman impressed by Eastmans work, joined him on January 1, 1881, to form the Eastman Dry Plate Company. Eastman left his position at the bank later that year to give his complete attention to the new company.

The new venture almost collapsed several times during its early years because the quality of the dry plates was inconsistent and Eastman insisted that the defective plates be replaced at no charge to the customer. Despite these setbacks, he was determined to make the camera as convenient as the pencil.

As his business grew, Eastman experimented to find a lighter and more flexible substitute for the glass plate. In 1883 he introduced a new film system using gelatin-coated paper packed in a roll holder which could be used in almost every plate camera available at that time. The company was recognized the following year as Eastman Dry Plate and Film Company. Strong was president and Eastman treasurer and general manager of the 14-shareholder corporation. The company also opened a sales office in London in 1885 to take advantage of the growing European photography market.

In 1888 Eastmans company introduced its first portable camera. Priced at $5.00, it included enough film for 100 pictures. After shooting the roll of film, the owner sent both the film and the camera to Rochester for processing. For $10.00, the company sent back the developed prints and the camera loaded with a new roll of film. This breakthrough is considered to be the birth of snapshot photography. It was also at this time that Eastman trademarked Kodak, which he invented by experimenting with words that began and ended with his favorite letter, K. The company advertised its new camera extensively using the slogan, You push the button, we do the rest.

The following year, the Eastman Photographic Materials Company was incorporated in the United Kingdom, to distribute Kodak products outside the United States from its headquarters in London. The company built a manufacturing plant in 1891 outside London to accommodate the growing product demand overseas, and set up additional distribution sites in France, Germany, and Italy by 1900.

In 1889, the firms name was changed to Eastman Company and then again in 1892 to Eastman Kodak Company. Eastman became president of the company upon Strongs death in 1919.

Eastman was committed to bringing photography to the greatest number of people at the lowest possible price. As his company grew and production of both the camera and film increased, manufacturing costs decreased significantly and allowed the firm to introduce a number of new cameras, including the Folding Pocket Kodak Camera in 1897. It also brought out the first of a complete line of Brownie cameras, an easy-to-operate model that sold for $1.00 and used film that sold at 150 per roll, in 1900.

Over the next 20 years, the company continued to introduce photographic innovations. In 1902 Kodak brought to market a new developing machine that allowed film processing without a darkroom. The 1913 introduction of Eastman Portrait Film provided professional photographers with a sheet film alternative to glass plates.

In 1912 George Eastman hired Dr. C.E. Kenneth Mees, a British scientist, to head up one of the first U.S. industrial research centers. Based in Rochester, this lab was where various tools and manufacturing processes that provided the company with a continuing stream of new products in the 1920s were invented. These new products, including 16-millimeter Kodacolor motion picture film, the 16-millimeter Cine-Kodak motion picture camera, and the Koda-scope projector, were targeted at the mass market and priced appropriately.

Kodak developed other new products to support the countrys involvement in World War I. In 1917 the company developed aerial cameras and trained U.S. Signal Corps photographers in their use. It also supplied the U.S. Navy with cellulose acetate, a film product, for coating airplane wings, and produced the unbreakable lenses used on gas masks.

George Eastman had always been civic-minded; even as a struggling bank clerk he donated money to the Mechanics Institute of Rochester. As Eastman Kodak grew, his philanthropy extended to such institutions as the Massachusetts Institute of Technology, the Hampton and Tuskegee institutes, and the University of Rochester. He was instrumental in starting numerous dental clinics around the world, and he enjoyed a reputation as a paternalistic employer for his profit-sharing programs and insurance benefits for workers.

In 1932 George Eastman committed suicide at the age of 77, leaving a note that read, To my friends. My work is done. Why wait? G.E.

That same year, the company introduced the first eight-millimeter motion picture system for the amateur photographer, consisting of film, cameras, and projectors. Three years later, it made available 16-millimeter Kodachrome film, the first amateur color film to gain commercial success. Similar film products for 35-millimeter slides and 8-millimeter home movies were introduced in 1936.

New photographic products continued to be introduced over the next decade, even as the company devoted part of its manufacturing capability to the production of equipment and film for the military during World War II. Following the war, Kodak focused its total attention once again on amateur photography with the introduction of a low-priced Brownie 8-millimeter movie camera in 1951 and the accompanying projector one year later.

In 1953, the company formed Eastman Chemical Products to market alcohols, plastics, and fibers for industrial use. These substances were manufactured by Tennessee Eastman and Texas Eastman, two subsidiaries that had been formed in 1920 and 1952, respectively. The company had begun to manufacture these items because of its own use of chemicals in film manufacturing and processing.

Until this point, the company had always included the cost of film processing in the cost of film. A consent decree filed in 1954 forced Eastman Kodak to abandon this practice, but it also provided an opportunity for the company to serve a new market, independent photofinishers, with its film-developing products. Beginning in 1986 Kodak acquired several photofinishing laboratories, including Fox Photo and American Photographic Group, to further solidify its relationships with photographic consumers and professionals.

By 1958 the company had made significant advances in 35-millimeter color slide technology and introduced the first completely automatic projector called the Kodak Calvalcade. A line of Kodak Carousel projectors introduced three years later became highly successful.

In 1963, one year after astronaut John Glenn had used Kodak film to record his orbit of the earth, the company introduced the Instamatic camera. Using a film cartridge instead of film roll, the Instamatic revolutionized amateur photography and became a commercial success because it was easy to use. Two years later, Kodak brought out a similar cartridge system for super-8 format Instamatic movie cameras and projectors. In 1972 five different models of a pocket version of the Instamatic camera were launched and became immediately popular.

That same year, the company formed Eastman Technology to develop new produces in areas unrelated to its traditional businesses. Its first acquisition was Spin Physics, a San Diego, California-based producer of magnetic heads used in recording equipment. This purchase was completed in 1973.

In the early 1970s, Eastman Kodak became the defendant in a series of antitrust suits filed by several smaller film, camera, and processing companies. These legal actions alleged that Kodak illegally monopolized the photographic market. The most widely publicized suit, filed by Berkey Photo, charged that Kodak had violated the Sherman Antitrust Act by conspiring with two other companies, Sylvania Companiesa subsidiary of GTE Products Corporation and General Electric Company, to develop two photographic flash devices. Berkey requested that Eastman Kodak be divided into ten separate companies and asked for $300 million in damages. The case was settled in 1981 for $6.8 million.

In 1975, Kodak introduced the Ektaprint Copier-Duplicator, putting itself into direct competition with two firmly entrenched rivals, Xerox and IBM. Kodak considered this market to be a good fit with its existing microfilm business and already had established a foothold with a similar product, the Verifax machine, which had been introduced in 1953. This copier used a wet process like that used in photography, but it had become obsolete when Xerox introduced a technological advancement called xerography, which was less messy and produced better-quality copies than previous systems. After careful research and planning, the Ektaprint copier was developed to serve businesses with large-scale duplicating needs. Not only could the Ektaprint produce numerous copies at high speed, but it could also collate them while duplicating, a unique feature at the time. Despite its innovative attributes and high-quality image production, however, Ektaprint lost about $150 million over its first five years, due primarily to the companys slow entry into the market.

In 1976 Eastman Kodak took on another well-established firm when it challenged Polaroid Corporations 30-year lock on instant photography with a new line of instant cameras and film that developed pictures outside the camera within a few minutes. The company had missed an opportunity to get in on the ground floor of this technology in the 1940s when it declined an offer to market an instant camera invented by Polaroid founder Edwin Land. The general feeling among Kodaks management had been that Lands camera was a toy and the quality of its pictures was not up to the companys accepted standards. Eastman Kodak had also gained from Polaroids success. It had become the exclusive supplier of negatives for Polaroids instant, pull-apart color film in 1963. In 1969, however, Polaroid elected to take over this part of its film manufacturing itself. At the same time Polaroid cut prices drastically to bring its instant cameras more in line with the Kodak Instamatics. Kodak was convinced that Polaroids instant photography products posed a threat to the companys market leadership. However, the companys methodical product-development process, which emphasized long-term product quality over quick market entry, as well as Polaroids ownership of hundreds of related patents, proved to be major obstacles to an immediate competitive response. When Kodak finally introduced its own instant camera four years after the decision was made to develop it, the company was plagued by production problems and a Polaroid lawsuit alleging patent infringement. Although the company captured about 25% of the U.S. instant camera market within its first year, reports of quality flaws with the cameras instant photographs and Polaroids response with another new instant camera stifled sales. Polaroid successfully exploited the business applications of instant photographyfor identity cards, for exampleand retained its strong position in the market.

During this period, Eastman Kodaks President and Chief Executive Officer Walter A. Fallón and Chairman Gerald B. Zornow oversaw product development. When Zornow retired in 1977, Fallón assumed the chairmanship and was succeeded as president by Colby H. Chandler. With Eastman Kodak since 1941, Fallón had worked his way up from production to direct the U.S. and Canadian photographic division. He had been responsible for the launch of the pocket Instamatic camera line. Chandler had joined the company in 1951, and as Fallóns successor in the U.S. and Canadian photographic division he was directly responsible for both the instant camera and the Ektaprint copier.

Upon becoming president, Chandler faced a challenge to Eastman Kodaks dominance in the photographic paper market by several Japanese competitors and U.S. suppliers, including Fuji Photo Film Company and 3M Company. These firms undercut Kodaks prices for a paper product of similar quality. Fuji also had the advantage of competing against a strong U.S. dollar, which reduced Eastman Kodaks profits significantly in foreign markets. The company responded with price reductions of its own but suffered lower earnings and a decreasing level of investor confidence. Losing the title of official film of the 1984 Summer Olympics to Fuji added further insult to injury.

As the U.S. economy entered a recession in the late 1970s and sales of the companys consumer photographic products declined, higher sales in other areas, such as chemicals, business systems, and professional photofinishing, set profits back on an upward trend. Several prior years of flat earnings across product areas were attributed largely to a lack of strategic planning. At the end of 1978 company operations were reorganized to consolidate the U.S., Canadian, and international photographic areas into one division. The companys first director of corporate planning was also hired to speed the product-development process and institute the controls needed for new products to become profitable more quickly.

The year 1980 marked the companys 100th anniversary. That year Kodak introduced the Ektachem 400 blood analyzer. This entry into the health sciences field represented a natural application of the companys film-manufacturing technology and reinforced its already strong presence as a supplier of x-ray film to hospitals and other health-care facilities.

During the 1980s the company faced intensifying Japanese competition in photography and a continuing decline in product demand. Rapid technological breakthroughs by other firms threatened to replace Eastman Kodaks core product line with more advanced equipment. The company instituted several measures to improve its performance. These included a stronger emphasis on nonphotographic products with high profit potential, a more aggressive approach to protecting its chemical imaging capabilities, a broader international marketing strategy, and a sharper focus on making acquisitions to bring the company up to speed technologically, particularly in electronics.

In 1982 the company purchased Atex, a major supplier of electronic text-editing systems used by publishers. Formed as an entrepreneurial venture in 1972 and leading its field at the time of the acquisition, Atex later lost ground to fast-changing computer technology as Kodaks traditionally slow-moving product-development process was unable to keep pace with the industry.

Despite its shift in priorities to other areas, Eastman Kodak continued to support its bread-and-butter line of photographic products. In 1982 it introduced a line of small cameras that used film discs instead of cartridges and was considered a replacement for the pocket Instamatic camera.

Since the companys founding, Kodak had maintained a policy of treating its employees fairly and with respect, earning the nickname of the Great Yellow Father. It was George Eastmans belief that an organizations prosperity was not necessarily due to its technological achievements, but more to its workers goodwill and loyalty. As a result, company benefits were well above average, morale had always remained high, and employees never felt the need to unionize. This protective culture came to an end in 1983, however, when the company was forced to reduce its workforce by 5% in order to cut costs. Competitive pressures from the Japanese and both domestic and international economic problems had slowed product demand. Even the widely publicized disc camera failed to sustain its initial, hot sales rate.

Upon Fallens retirement in 1983, Colby Chandler took over as chairman and, in an attempt to keep up with the pace of change, pointed Eastman Kodak toward the electronics and video areas in earnest. During the 1970s, the company had brought out products that either lacked quality or important features, or arrived too late on the scene to capitalize on new opportunities. Of all the products introduced during Fallons tenure, only the Ektaprint copier was considered a success, although it gradually lost its marketing advantage to competitive offerings with greater speed and more features. Neither the instant nor the disc cameras had met original expectations and the Ektachem 400 blood analyzer was unable to match the number of tests performed or the reliability of competing products. Two improved versions of the blood analyzer were subsequently introduced in 1984. The companys x-ray film business also took a beating as hospital admissions dropped and attempts by medical institutions to control costs increased.

The companys new electronics division consisted of its Spin Physics subsidiary, a solid-state research laboratory, and another facility dedicated to the production of integrated circuits. Many of the products later introduced by the division, however, resulted from acquisitions or joint ventures with other companies. For example, in 1984 Kodak launched its first electronic product, a camcorder combining an eight-millimeter video camera and recorder, which was developed jointly with Matsushita Electric Industrial Company of Japan. This represented a major departure for Kodak, which historically had been self-reliant in everything from manufacturing cardboard boxes to maintaining its own fire department. It was not the first time that Eastman Kodak had considered marketing a video product. In the mid-1970s the company had elected not to market a videocassette recorder it had developed internally because it would have been priced much higher than its cameras; Kodak believed that consumers would be resistant to the cost.

Also in 1984 Kodak introduced complete lines of videotape cassettes for all video formats and floppy discs for use in personal computers. It bolstered the latter area in 1985 with the purchase of Verbatim Corporation, a floppy disc manufacturer. After five years of disappointing sales, Verbatim was sold to Mitsubishi Kasei Corporation of Japan.

Kodak underwent another major reorganization at the beginning of 1985 in order to capitalize more quickly on growth opportunities. Seventeen business units and a new Life Sciences Group were formed, the latter division to be involved in developing biomedical technology. Each of the 17 operating units, which had previously existed as a centralized group under the photographic division, were given more autonomy and flexibility to run their businesses as independent profit centers.

The company re-entered the 35-millimeter camera market in 1985 with a product made by Chinon Industries of Japan. Fifteen years earlier, it had withdrawn from the market because it was not convinced of the 35-millimeter cameras mass appeal.

In 1986, ten years after Polaroid filed its patent-infringement suit over Eastman Kodaks instant camera, a federal appeals court upheld a lower court ruling and ordered the company to leave the instant camera business. Eastman Kodak was forced to offer its customers trade-in options for their obsolete cameras. The financial implications of this development and the continuing struggle to boost earnings led the company to institute another work force reduction in 1986, this time by 10%. Although the domestic picture was somewhat grim, the fact that nearly 40% of the companys sales came from overseas helped produce strong bottom-line gains over the previous year. A weakening U.S. dollar blunted the impact of foreign competition and allowed Eastman Kodak to reclaim lost ground in its core businesses while also entering new ones. An employees suggestion to apply the companys manufacturing capabilities to the production of lithium batteries resulted in the successful introduction of a complete line of alkaline battery products under the Supralife brand.

Kodak also formed the Eastman Pharmaceuticals Division to establish an even stronger presence in health care. Joint-venture agreements and licensing arrangements with existing pharmaceutical companies initially occupied division managements attention. In 1988 Eastman Kodak acquired Sterling Drug, a manufacturer of prescription drugs and such consumer products as Bayer aspirin and Lysol cleaners, to make the company more competitive in the pharmaceutical industry. The acquisition, however, was viewed unfavorably by the companys shareholders because Sterling had a second-rate reputation as a pharmaceutical manufacturer and had no blockbuster drugs in its product line. One year later, this negative perception seemed correct. Intense competition had reduced the sales of Sterlings existing pharmaceuticals while new products under development showed questionable effectiveness during testing.

In 1988 evidence came to light indicating that toxic chemicals from the companys Rochester plant had leached into the areas groundwater, posing a possible health hazard to local residents. In April 1990, the company admitted that it had violated New Yorks environmental law and was fined $2 million. It also agreed to clean up the site of its Kodak Park manufacturing facility and reduce chemical emissions from the plant by 1992.

Eastman Kodak continues its founders legacy of providing customers with quality products and services. Chaired by Kay R. Whitmore, who served as president under Colby Chandler until Chandlers retirement in 1990, Eastman Kodak is exploring various ways to integrate electronics with its conventional silver halide imaging technology.

Vulnerable to economic peaks and valleys and fluctuating currency exchange rates, the companys global initiatives will require a stronger presence in European and Asian markets as trade relations between East and West grow closer. Eastman Kodak possesses a solid foundation of innovation, technology, and material science upon which to build.

Principal Subsidiaries

Eastman Kodak Credit Corporation; Eastman Kodak International Finance B.V. (Netherlands); Eastman Kodak International Sales Corporation (U.S. Virgin Islands); Eastman Technology, Inc.; Torrey Pines Realty Company, Inc.; Cyclotomics, Inc.; Datatape Incorporated; Electronic Pre-Press Systems, Inc.; Interactive Systems Corp.; Northfield Pharmaceuticals Limited; Ultra Technologies, Inc.; Verbatim Corporation; Eastman Chemical Products, Inc.; Holston Defense Corporation; Eastman Gelatine Corporation; Mustang Pipeline Company; Pinto Pipeline Company of Texas; Eastman Chemical International Ltd.; Eastman Chemical International, A.G. (Switzerland); East-manchem, Inc. (Canada); Eastman Canada, Inc.; Kodak Argentina, Ltd.; Kodak Brasileira C.I.L. (Brazil); Kodak Chilena S.A.F. (Chile); Kodak Colombiana, Ltd.; Kodak Mexicana, Ltd.; Kodak Panama, Ltd.; Kodak Export Limited; Laboratorios Kodak Limitada; Foto Interamericana de Peru, Ltd.; Kodak Caribbean, Limited; Kodak Uruguaya, Ltd. (Uruguay); Kodak Venezuela, S.A.; Kodak (Near East), Inc.; Kodak (Singapore) Pte. Limited; Kodak Phillippines, Ltd.; Kodak Limited (U.K.); Kodak Ireland Limited (U.K.); Kodak Pathe (France); Kodak A.G. (Germany); Eastman Kodak International Capital Company, Inc.; Kodak Ges. m.b.h. (Austria); Kodak Oy (Finland); Kodak Nederland B.V. (Netherlands); Kodak S.p.A. (Italy); Kodak Portuguesa Limited; Kodak S.A. (Spain); Kodak AB (Sweden); Eastman Kodak (Japan) Ltd.; K.K. Kodak Information Systems (Japan); Kodak Japan Ltd.; Kodak Imagica K.K. (Japan); Kodak Far East Purchasing, Inc.; Kodak New Zealand Limited; Kodak (Australasia) Proprietary Limited; Kodak (Kenya) Limited; International Biotechnologies Inc.; Kodak (Egypt) S.A.; Komal S.B. (Malaysia); Kodak (Export Sales) Ltd. (Hong Kong); Kodak Taiwan Limited Inc.; Kodak Korea Ltd.; Sterling Drug Inc.

Further Reading

Chakravarty, Subrata N., and Ruth Simon, Has the world passed Kodak by?, Forbes, November 5, 1984; Journey Into Imagination: The Kodak Story, Rochester, New York, Eastman Kodak Company, 1988.

Sandy Schusteff

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Eastman Kodak Company

Eastman Kodak
Company

343 State Street
Rochester, NY 14650
(716) 724-4000
www.kodak.com

For more than 120 years, Eastman Kodak has helped people around the world capture their most memorable occasions on film. The company began in the late 1800s, when Kodak founder George Eastman almost single-handedly took photography from a science practiced by a few professionals and dedicated amateurs to a hobby anyone could enjoy. Kodak sold easy-to-use cameras and film, then developed its customers' pictures.

Photography, however, would not be Eastman Kodak's only business. It provided film and equipment to Hollywood moviemakers and hospitals. Eventually, however, the company's products touched on anything that could record an imagefrom copying machines to videotape. Now, in the twenty-first century, Kodak plays a major role in digital imaging, using the power of computers to capture, store, and display pictures and other information.

From Dry Plates to Roll Film

When George Eastman of Rochester, New York, bought his first camera in 1877, taking and developing a picture was time-consuming, awkward, and messy. Photographers used a "wet-plate" process featuring heavy glass plates covered with a mixture of silver and other chemicals. After a picture was taken, it took an entire day for it to develop. This method was gradually replaced by a system that used a glass plate treated first with gelatin. The "dry-plate" process, first developed in Great Britain, required fewer chemicals to produce a picture.

Eastman perfected his own dry-plate method, including a machine that put the chemicals on the plates. He received a patent on the process in April 1880 and set up a small factorya one-room operation above a Rochester music store. Before the end of the year, he had a local investor, Henry Strong, interested in his business. On January 1, 1881, Eastman and Strong became partners in the Eastman Dry Plate Company.

Film was soon added to the company's product line, as Eastman perfected a way of putting the gelatin-and-chemical mixture on rolls of paper. The paper rolls reduced the weight of cameras and the time it took to take pictures. Eastman also designed a special roll-holder so the film could be used in existing plate cameras. Eastman won international praise for the new system, and he set up a London branch of the company to handle worldwide sales. Eastman also began making cameras. The company's first camera was created in 1887, but only a few were made. The next camera, however, changed photography forever.

Eastman Kodak at a Glance

  • Employees: 78,400
  • CEO: Daniel A. Carp
  • Subsidiaries: BASO Precision Optics, Ltd.; Cinesite, Inc.; E. K. Holdings B.V.; PictureVision, Inc.; Qualex, Inc.,
  • Major Competitors: Canon U.S.A., Inc.; Fuji Photo Film Company; Nikon Inc.; Polaroid Corporation; Panavision, Inc.; CPI Corporation
  • Notable Products: Digital Science digital cameras; EasyShare digital cameras; Advantix cameras; Max one-time use cameras; Elite film; Gold film; Kodachrome film; Ektachrome film; Photo CD; ImageSource copier

Kodak Does the Rest

Built in a small wooden box, the new Eastman camera cost $25. It contained the patented Eastman roll-holder and was sold with a roll of film that took one hundred pictures. After finishing the roll, the photographer sent the entire camera back to Eastman. The company developed the negatives and returned the camera with a fresh roll of film. Eastman called his new camera the Kodak.

The Kodak camera was an instant success. For the first time, anyone could easily take their own pictures. Eastman sold five thousand Kodaks in just six months and began developing new models. A smart businessman as well as an inventor, Eastman immediately put money into promoting his new product. Eastman wrote what became one of the first great advertising slogans: "You push the button, we do the rest."

Timeline

1881:
George Eastman and partner Henry Strong form the Eastman Dry Plate Company.
1888:
The first successful Kodak camera appears on the market.
1892:
Eastman renames his business the Eastman Kodak Company.
1900:
The Brownie camera, priced at $1, makes photography affordable.
1912:
Eastman Kodak opens its research laboratory.
1923:
Kodak introduces home movie-making equipment.
1950:
An improved film for motion pictures earns Eastman Kodak an Academy Award.
1962:
The Instamatic, Kodak's most popular camera ever, appears in stores.
1984:
Kodak begins selling videotape and computer floppy discs.
2002:
Company creates Appairent Technologies to focus on digital technology.

In 1889, a Kodak chemist created a new roll of film made out of celluloid, the first plastic. The new film was transparent and flexible. Sales of the new film took off; all along, Eastman knew that making film and developing would be his true moneymaker. People loved the idea of taking their own pictures, especially on vacations and at family gatherings. The Kodak name was soon known around the world, and it was featured in songs and books. Eastman eventually changed the name of his business to the Eastman Kodak Company.

Controlling the Market

Almost from the beginning, Eastman wanted to dominate the new market he created. He bought photographic patents held by others and introduced innovative new products. Kodak sold a pocket camera in 1895 and the inexpensive Brownie camera appeared five years later. Eastman Kodak opened its first overseas plant in London in 1891, and by 1900 it had distribution sites in other European countries. Going into the twentieth century, Kodak controlled about 90 percent of the photography market.

The Eastman Kodak empire went beyond snapshots and simple cameras. Eastman provided cameras and film to the new motion picture industry, first located in the East and then transplanted to California. Kodak also provided film for X-ray machines, which first appeared in 1896. The company's other innovations included a machine that did not require a dark room to develop negatives, "safety film," which was less flammable than the original celluloid film, and a new film for professional photographers.

By 1907, Kodak had more than five thousand employees worldwide, and in 1912, the company opened its own research-and-development (R&D) lab, making it one of the first companies in the world with this kind of facility. One of its greatest developments was Kodachrome, Kodak's name for color film, which was used for the first time during the 1930s.

George Eastman gave several explanations about the origins of the name "Kodak." According to Eastman biographer Elizabeth Brayer, the inventor liked the letter K because it was "strong and incisive firm and unyielding." It was also the first letter of his mother's maiden name. Eastman thought Kodak was easy to say and easy to rememberimportant qualities for a new product.

Success, however, brought legal problems. A New Jersey minister, Hannibal Goodwin, had filed a patent for celluloid roll film just before Eastman did. A long legal battle over who had claim to the patent ended in 1914, when Kodak paid a $5 million settlement. The next year, a federal judge ruled that Eastman Kodak was an illegal monopoly, which means it controlled too much of the photography industry. The company challenged the decision, but in 1921, Kodak agreed to sell several plants that produced paper and dry-plate technologynot its most important products. Eastman Kodak continued to be the major power in the photography industry, expanding into the new field of home movies and constantly upgrading its film.

Kodak after Eastman

In 1932, George Eastman tragically committed suicide, leaving behind a legacy that would endure for generations. His company expanded to become Rochester's major industry; the complex known as Kodak Park eventually covered several thousand acres; and Eastman had become a leader known for treating his workers fairly. He offered a form of profit-sharing as early as 1899, and added other benefits over the years. In profit-sharing, each worker is given a bonus based on how well the company's sales are going. Eastman's style continued under his successors.

After providing film and cameras to the U.S. government during World War II (1939-45), Kodak returned to amateur and professional photography and filmmaking. New products included a cheaper home-movie camera, improved motion picture film, and better equipment for developing film. In 1953, Kodak formed Eastman Chemical Products to market industrial materials, including plastics and fibers.

By 1962, Kodak's annual sales in the United States alone were $1 billion. The company had just introduced the Carousel, a popular automatic slide projector, and in 1962 it began selling the Instamatic camera. Its film came in a small cartridge that was easy to handle. The Instamatic introduced a new age of simple amateur photography, just as the first Kodak had seventy-five years before. By 1970, the company sold fifty million Instamatics. During that decade, Eastman Kodak also entered into the copier business with its Ektaprint machine. The copier, however, did not gain much ground in the market, facing tough competition from industry leaders Xerox and IBM.

A Cloudier Picture

The Ektaprint experience reflected a growing problem within Kodak. As new technologies emerged, the company was often slow to adapt them, or to take risks with new products it developed. Kodak built a video recorder and camera system before such equipment was common, but it feared customers would not accept the high cost. In 1984, Forbes quoted an unnamed industry analyst looking back at that time: "They were so used to selling $20 cameras, they couldn't believe there was a mass market for $500 machines." In the late 1970s, when VCRs became popular, Kodak did not have a product to sell.

Kodak repeated its copier experience with instant cameras. It waited until 1976 to compete with Polaroid, the pioneer of instant photography. The Kodak camera did not sell well, and the company was sued for violating some of Polaroid's patents. Kodak lost its court battle in 1986, stopped selling instant cameras, and paid Polaroid almost $1 billion in damages.

The Polaroid settlement was part of a string of setbacks during the 1970s and 1980s. In the film market, Kodak lost ground to Fuji, a Japanese company. In cameras, cheaper 35 millimeter cameras competed against Kodak products. And when the company finally entered the video recorder business, it backed a format that was not compatible with the popular VHS system. Although sales were strongtopping $10 billion in 1983profits went down.

During this period, Kodak introduced its Disc camera, which took pictures on a small disc instead of a roll of film. Despite heavy advertising, the camera flopped. The company also entered new businesses, buying Atex, a computer publishing venture; Verbatim, a company that made floppy discs for computers; and Sterling, a drug manufacturer. Most of these new businesses were not successful, but the Atex and Verbatim deals showed that Kodak was preparing to expand even more into electronics and computers.

Entering the Digital Age

One of Kodak's first digital imaging products was the Photo CD. Released in 1991, the CD stored hundreds of photos taken on roll film. The company later introduced new digital cameras, but it faced tough competition from such Japanese companies as Sony and Canon. Through the 1990s, Kodak saw sales fall from $20 billion in 1992 to under $14 billion in 2000. During this time, the company went through several changes at the top. In 1993, George M. C. Fisher replaced Kay Whitmore as chief executive officer (CEO). At the beginning of 2000, Fisher was replaced by Daniel Carp. In a company statement issued when he took over, Carp said, "The picture business today is on the verge of the greatest breakthroughs since George Eastman put photography in the hands of consumers. We are changing the ways our customers and consumers can bring new uses and meaning to picturesno matter what the technology.

Fighting Pollution

From its founding, Eastman Kodak has been a chemical company, since photography depends on special light-sensitive chemicals to produce pictures. By the 1980s, Kodak Park in Rochester, New York, included about two hundred manufacturing buildings, many of which produced chemical waste. In 1988, New York officials learned that some chemicals had entered groundwater near Kodak Park, posing a possible health hazard to local residents. In 1990, Kodak admitted it had violated state environmental laws and paid $2 million in fines.

Kodak's environmental problems, however, were not over. Although the company pledged to cut its chemical emissions, it remained New York's largest polluter through most of the 1990s. Housing values fell because of the pollution, and Kodak offered to help pay relocation costs for people who wanted to move. In October 1994, Kodak was fined $5 million by the U.S. government for breaking federal pollution laws. That fine was reduced from $8 million, because Kodak promised to fix environmental problems. By 2000, Kodak reported it had reduced emissions at Kodak Park by almost 80 percent from 1987 levels.

The changing lineup of Kodak executives faced similar issues: keeping profits up in a traditional business while moving farther into digital imaging. In 2001, Marty Coyne, head of Kodak's commercial business group, told Ziff Davis reporter Michael Ryan, "It's going to cost money to get the digital pieces in place. We have to invest in our future." By then, Kodak had several successful digital products on the market, including the best-selling digital camera and a device that takes digital pictures and plays music recorded in the MP3 format. In 2002, the company created a new firm, Appairent Technologies, out of its R & D lab. Appairent focuses on the wireless transmission of digital information.

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Eastman Kodak

EASTMAN KODAK


Headquartered in Rochester, New York, the Eastman Kodak Company was one of the leading image photography businesses in the United States. The company had eight major divisions: Consumer Imaging; Kodak Professional, Digital and Applied Imaging; Entertainment Imaging; Health Imaging; Commercial and Governmental Systems; Business Imaging Systems; Office Imaging; and Global Customer Service and Support. Kodak was the top U.S. manufacturer of 35-millimeter (mm) film, capturing close to 75 percent of the market at the end of 1998 and 70 percent at the beginning of 1999. But Kodak shared the lead with Fuji Photo in worldwide film sales. Kodak also manufactured cameras, information systems (including writable CDs and software), and medical imaging technology.

The Eastman Kodak Company traces its origins to 1881 when George Eastman (18541932) founded the Eastman Dry Plate Company. A bank clerk from Rochester, New York, Eastman had spent three years developing the dry-plate photography process, which was a vast improvement over the sloppy and awkward wet-plate process in use at the time. Determined to develop a camera that was as easy to work as a pencil, Eastman next produced a film consisting of gelatin coated paper packed in a roll that could be used in any dry-plate camera. In 1884 the company changed its name to Eastman Dry Plate and Film Company.

In 1888 the company introduced the first readily portable camera. Selling for $25, the camera held enough rolled film for 100 photographs. Customers developed the film by sending it back to Rochester, where the company printed the photographs and refilled the camera with a new roll. The product was advertised with the slogan, "You push the button, we do the rest." The small sized, easy to use camera revolutionized photography by opening it up as a hobby to thousands of people.

In 1892 Eastman renamed his business again, calling it the Eastman Kodak Company. Eastman chose the name "Kodak" after experimenting with combinations of letters starting and ending with the letter "k," which the founder thought was a "strong, incisive sort of letter." In addition, to register his cameras for trademark protection in Britain, Eastman needed to use a word that did not already exist in the English language. By 1897 Eastman Kodak had manufactured 100,000 cameras, but Eastman wanted to make photography more convenient and less expensive. In 1900 he did so, introducing the first Brownie Camera. It sold for $1 and used a 15-cent roll of film.

During the next two decades Eastman Kodak continued introducing new products and technologies. In 1902 it offered a machine that developed film without a dark room. During World War I (19141918) Eastman Kodak developed products to help U.S. troops fighting in Europe, including aerial cameras and an unbreakable lens for gas masks. In the 1920s Eastman Kodak rolled out 16-mm motion picture film, a 16-mm motion picture camera, and the Kodascope projector. Despite George Eastman's death by suicide in 1932, Kodak continued to thrive. In 1935 the company introduced Kodachrome film, the first commercially successful amateur color film.

Kodak's success, however, was not without some mistakes in judgment. During the 1940s the company rejected Edwin Land's offer to have Kodak market the instant camera he had invented. Land later went on to found a firm that competed with Kodak, the Polaroid Corporation. Bouncing back in the 1950s, Kodak brought out the inexpensive Brownie hand-held movie camera and the Brownie projector. In 1953 Kodak formed the Eastman Chemical Products Company to produce chemicals, plastics, and fibers used in film production, poising itself to serve the burgeoning new market of photofinishing. Five years later Kodak unveiled the first fully automated slide projector.

In 1963 Kodak again revolutionized amateur photography with its introduction of the Instamatic camera that used a film cartridge instead of a roll, eliminating the need to load film in the dark. Within ten years Kodak had launched five different, immediately successful pocket models of the Instamatic. By 1976 the company had sold about 60 million such cameras, 50 million more than the nearest competitor.

Kodak's commercial success was tempered by its legal setbacks. In the early 1970s several smaller companies filed a series of antitrust lawsuits, alleging that Kodak had illegally monopolized the photography industry. The most famous of these cases involved Berky Photo, which accused Kodak of conspiring with Sylvania Companies and the General Electric Company in developing two photographic flash products. The case was settled for $6.8 million in 1981. Kodak also lost a patent infringement suit instituted by Polaroid during the 1980s. As a result, Kodak was forced to pay $925 million in damages, cease production of instant cameras, and recall all instant cameras that had been sold to customers. In 1997 the World Trade Organization (WTO) denied Kodak's claim that it had been refused fair access to Japanese markets.

As its market share began dwindling in the 1990s, Kodak took several actions to reverse its fortunes. The company first began selling its peripheral businesses in chemicals, pharmaceuticals, and household products. Kodak then refocused its energies on its core imaging business, investing heavily in digital photography. In 1992 Kodak introduced the Photo CD system, allowing photofinishers to record 35-mm images on compact discs, and enabling customers to view the images on their televisions and personal computers.

Kodak also formed a strategic research alliance with some of its competitors, including Fuji Photo, Canon, Inc., Nikkon Corporation, and Minolta, Co., Ltd. This endeavor resulted in the 1996 release of the Kodak's Advanced Photo System (APS), featuring a drop-in film cassette, a choice of print formats, and improved picture quality. But sales continued to decline, and in 1997 Kodak announced a restructuring program whereby it would reduce the company's workforce by 20 percent before the end of the century. By 1999 Kodak could boast that it manufactured a line of digital cameras among the best in the world. But the cost of such cameras, between $700 and $1000, was too high for most consumers.

See also: George Eastman


FURTHER READING

"Pretty Picture." Discount Merchandiser, February 1, 1999.

Dickinson, Mike. "RPD's focus on combating crime turning digital." Rochester Business Journal, November 6, 1998.

Garfinkle, Simson L. "Not Exactly Picture Perfect, Kodak Digital Cameras Among Best Around But Very Expensive." The Boston Globe, April 8, 1999.

"Eastman Kodak Company," [cited April 10, 1999] available from the World Wide Web @ http://www.hoovers.com/.

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Eastman Kodak Company

Eastman Kodak Company

founded: eastman kodak company was founded in 1884 as the eastman dry plate and film company.



Contact Information:

headquarters: 343 state st. rochester, ny 14650 phone: (716)724-4000 fax: (716)724-1089 url: http://www.kodak.com

OVERVIEW

Eastman Kodak is one of the leading image photography businesses in the United States. The company is constituted by eight major divisions: Consumer Imaging; Kodak Professional, Digital and Applied Imaging; Entertainment Imaging; Health Imaging; Commercial and Government Systems; Business Imaging Systems; Office Imaging; and Global Customer Service and Support. In 1997, Eastman Kodak was the top U.S. manufacturer of 35 millimeter (mm) film, capturing 65 percent of the U.S. market. Worldwide, Kodak shares the lead in film sales with Fuji Photo. Kodak also manufactures cameras, information systems (including writable CDs and software), and X-ray and medical imaging technology.

Like many giants in American industry in the 1990s, including Chrysler, Texaco, and IBM, Kodak found itself weighed down by an outdated business model and in need of extensive renovations to compete in the changing business world. For years, Kodak relied heavily on the hefty—70 percent—profit margins available in the consumer film business. Due in part to pressure from consistent underpricing by competitor Fuji Photo, these profit margins have been rapidly dwindling. With the likelihood that the future for the photographic industry will be digital, Kodak is under extreme pressure to produce digital imaging technology and products. To retain its eminent position in the world of photographic equipment and supplies, Kodak hired maverick George Fisher, former CEO of Motorola, as Chairman and CEO in 1993 and began plans to streamline its business concerns, update its products to keep pace with new technologies, and attempt to penetrate and secure new foreign markets.

COMPANY FINANCES

In 1997, Eastman Kodak had worldwide sales in excess of $14.5 billion, a decrease of 9 percent from the year before. (In 1996, Kodak's sales reached almost $16 billion.) Over half of Kodak's 1997 sales came from Consumer Imaging, the company's largest business unit, which provides film and other photographic products to consumers. Over half of Consumer Imaging's sales, about $4.2 billion, came from outside the United States; about $3.5 billion of the unit's sales came from inside the United States. Kodak's Commercial Imaging sales reached $6.8 billion in 1997, a decline of 17 percent from the previous year. After deducting costs for restructuring and asset impairments, Kodak's total earnings from operations for 1997 totaled just $130 million dollars, down 93 percent from 1996. Because Kodak failed to meet earnings targets and stock slumped dramatically in the second half of 1997, falling from $80 in mid-June to $58 in mid-December, the company cut CEO George Fisher's bonus.

From April 1995 to April 1998, Eastman Kodak stock fluctuated from a low of about $55 to a high of almost $95. From April 1997 to April 1998, the stock ranged from $54 to a high of $84. By May of 1998, the stock had reached about $73.50—up 10 points from January. In 1997 Kodak's earnings per share was about $3.52. Jonathan Rosenzweig of Salomon Smith Barney says the brokerage firm expects Kodak's price-earnings (P/E) ratio at December 1998 to be 17.7. On April 15, 1998, due to greater than expected savings associated with Kodak's restructuring, decreasing losses in the digital area, positive growth in Kodak's Advanced Photo System products, and evidence that Kodak's prices are moderating in certain consumer and commercial areas, Salomon Smith Barney upgraded its rating of Eastman Kodak stock to 1M ("Buy, Medium Risk"), up from a 3M rating ("Neutral, Medium Risk").




ANALYSTS' OPINIONS

Surviving in the photographic industry into the twenty-first century will likely require Kodak to shift toward newer technologies, like digital imaging technologies. In this arena, however, Kodak faces fierce competition from U.S. and Japanese companies like Sony and Canon who are accustomed to the quick pace of change in digital technology. With regard to digital camera manufacturing, many hold that Kodak's chances of making a profit are slim. Aside from the Instamatic, Kodak has little past success with conventional cameras, and profit margins on new digital devices are marginal. Some suggest that trying to grow in both the analog and digital photography worlds at once may be Kodak's greatest current challenge. As head of the consumer group at Hewlett-Packard, Antonio M. Perez asks, "Can Kodak balance the needs of their revenue- and profit-generating film business with their new investments in digital technology?" Some, like industry reporter Ilan Greenberg, suggest that, "The company will ultimately fail to reinvent itself . . . it will never make it into the ranks of America's leading digital corporations." Robert I. Krinsky, principal at IdeaScope, a Cambridge, Massachusetts consulting firm, says that "[t]o win at this game will require speed and flexibility—and that's not what I think of when I think of Kodak."

HISTORY

In the late 1870s, when 24-year-old George Eastman, a bank clerk in Rochester, New York, told a coworker he was planning a vacation to Santo Domingo, the co-worker suggested Eastman make a photographic record of his trip. Interested in the idea, Eastman purchased the necessary photographic equipment—a camera, film, and wet-plate developing equipment and supplies—only to find they were much too bulky for travel. Rather than leaving the equipment behind, Eastman cancelled his vacation and turned his attention to investigating how to make photographic equipment more convenient. For several years, Eastman experimented with a dry-plate developing process he'd read was being used by British photographers. After just three years, Eastman obtained a U.S. patent for a product he was satisfied with and began making dry plates to sell to photographers. On January 1, 1881, local businessman Henry A. Strong joined Eastman to form the Eastman Dry Plate Company.

At first, the quality of the dry plates the company produced was uneven and, because Eastman insisted the company replace defective plates free of charge, Eastman Dry Plate nearly collapsed. But continued research resulted in better product and the company grew. Determined to develop a camera that would be "as convenient as the pencil," Eastman experimented to try to find a light, flexible replacement for the glass plate. In 1883, Eastman produced a film system consisting of a gelatin-coated paper packed in a roll holder that could be used in almost any dry-plate camera. The following year, the company became known as Eastman Dry Plate and Film Company, and Henry Strong served as its president while George Eastman was treasurer. In 1888, the company introduced its first camera, which came loaded with enough film for 100 photographs. Customers sent the entire camera filled with the exposed film back to the company for processing. For $10, the company developed the film, printed the photographs, and refilled the camera with a new roll of film.

In 1889, Eastman changed the company's name to Eastman Company. Apparently still not satisfied with the name, Eastman experimented with many combinations of letters starting and ending with "k," which he thought was a "strong, incisive sort of letter." Finally, Eastman came up with the name "Kodak" and, in 1892, he renamed the company Eastman Kodak Company. When Henry Strong died in 1919, George Eastman became president of Eastman Kodak. Committed to making photography convenient and inexpensive, Eastman launched the Folding Pocket Kodak Camera in 1897 and, in 1900, introduced the first Brownie camera, an easy-to-operate, inexpensive model that sold for $1.00 and used film that cost $.15 a roll. For the next two decades, Kodak continued introducing new products and technologies: in 1902, it offered a machine that developed film without a darkroom; in 1913, the company introduced sheet film for use for professional photographers; and in the 1920s, in its newly developed research center (one of the first industrial research centers in the United States) Kodak developed 16 mm motion picture film, a 16 mm Cine-Kodak motion picture camera, and the Kodascope projector. Kodak also developed products specifically to support the United States' involvement in World War I, like aerial cameras and unbreakable lenses for gas masks.

In 1932, ailing and claiming in a note that he believed his work was done, George Eastman committed suicide. Despite this tragedy, Kodak continued to thrive. The year Eastman died, the company introduced the first 8 mm motion picture system for amateur photographers. Within three years, the company introduced 16 mm Kodachrome film, the first commercially successful amateur color film. In the 1940s, Edwin Land (who would go on to found Polaroid Corporation) offered Kodak the opportunity to market the instant camera he had invented, but Kodak declined. After expending energy and resources producing equipment and film for the United States military during World War II, Kodak brought out an inexpensive Brownie hand-held movie camera in 1951; the following year, the company offered the Brownie's projector. In 1953, Kodak formed the Eastman Chemical Products Company to produce chemicals, plastics, and fibers used in film production. Kodak had always incorporated the price of film processing in the cost of its film, but in 1954, it was forced to give up this practice. With its Chemical Products Company, however, Kodak was now positioned to serve a new market, the burgeoning photofinishing market, by supplying it with chemicals and equipment for film developing and processing. Having made important progress in color slide technology, Kodak introduced the first fully automatic slide projector, the Kodak Calvalcade, in 1958; three years later, the company introduced the Carousel line of projectors that became extremely successful.

In 1963, Kodak would revolutionize amateur photography with its introduction of the easy-to-use Instamatic camera that used a film cartridge instead of a roll, eliminating the need to load film in the dark. In 1965, the company introduced a cartridge system for its super-8 Instamatic movie camera and projector. By 1972, Kodak had launched five different, immediately successful pocket models of the Instamatic camera; by 1976, Kodak had sold about 60 million Instamatic cameras—about 50 million more cameras than all its competitors combined. In 1972, Kodak formed a subsidiary it called Eastman Technology to develop new products in areas unrelated to photography. The following year, Eastman Technology purchased Spin Physics, a San Diego-based manufacturer of magnetic heads used in recording equipment.

In the early 1970s, Kodak became the defendant in antitrust lawsuits filed by several smaller companies, alleging that Kodak had illegally monopolized the photographic industry. The most famous of these cases involved Berky Photo, who charged Kodak with conspiring with Sylvania Companies and General Electric Company in developing two photographic flash products. The case was eventually settled out of court in 1981 for $6.8 million. In the mid-1970s, after meticulous research and planning, Kodak introduced its Ektaprint Copier-Duplicator thereby directly challenging Xerox and IBM, two firmly entrenched competitors. Not only did the Ektaprint produce numerous copies at high speed, but it also collated them, a unique feature at the time. Although initially considered a success, and surely one of Kodak's most successful products of that decade, the Ektaprint lost about $150 million over its first five years due to its late market entry. In 1976 Kodak challenged Polaroid Corporation's hold on the instant photography market by introducing its own line of instant cameras that developed film into photographs outside of the camera within minutes of taking the pictures. Although Kodak secured 25 percent of the instant camera market in the United States in its first year, quality problems and Polaroid's introduction of another new instant camera squelched sales.

In the late 1970s, several Japanese competitors and U.S. suppliers, including Fuji Photo and 3M Company, challenged Kodak's dominance in the photographic paper market. The Japanese had the additional advantage of competing against a strong U.S. dollar, which was substantially reducing Kodak's profits in foreign markets. Through the 1980s and 1990s, Fuji Photo began capturing a substantial share of the U.S. photographic film market by offering a similar quality product at a much lower price.




STRATEGY

For years, Eastman Kodak preferred its products' long-term quality over quick market entry. The company's cautious product-development process cost it dearly on several occasions. For example, in 1975, after years of development, Kodak finally introduced the Ektaprint copier to serve businesses with large-scale copying needs. The copier did its job well, but largely due to its slow entry into the market, the Ektaprint lost an estimated $150 million in its first five years. Another product that stalled then failed in this way was Kodak's instant camera, introduced in 1976, about four years after Kodak decided to develop it. Unfortunately, by the time of the product's launch, the company was riddled with production problems and faced a lawsuit filed by Polaroid claiming patent infringement.

Early on, Kodak branched out into related non-photographic concerns. In 1920, the company founded Tennessee Eastman to produce chemicals for Kodak's film manufacturing and processing. In 1953, Kodak merged its Tennessee Eastman with its Texas Eastman chemical business to form Eastman Chemical Products, which would sell alcohol, plastics, and fibers for industrial purposes. Later, in 1972, Kodak formed a subsidiary it called Eastman Technology to develop new products in areas unrelated to photography. The following year, Eastman Technology purchased Spin Physics, a small company that manufactured magnetic heads for use in recording equipment. In 1980, Kodak entered the health sciences field with its Ektachem 400 blood analyzer, supplementing its then current position as supplier of X-ray film to hospitals and medical facilities. Unfortunately, the Ektachem proved unable to match competitors in terms of reliability and speed. In 1984, Kodak introduced two improved versions of the blood analyzer. In 1988, when drug stocks were at their peak, Kodak purchased Bayer aspirin manufacturer Sterling Drug for $5.1 billion. It later sold the company in 1994.

FAST FACTS: About Eastman Kodak Company


Ownership: Eastman Kodak Co. is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: EK

Officers: George M. C. Fisher, Chmn. & CEO, 56, 1997 pay $3,725,000; Daniel A. Carp, Pres., COO, & Director, 48, 1997 pay $1,167,309; Harry L. Kavetas, CFO, Exec. VP & Director, 59, 1997 pay $1,047,692; Carl F. Kohrt, Exec. VP & Asst. COO, 53, 1997 pay $886,538

Employees: 97,500

Principal Subsidiary Companies: Eastman Kodak Company has operations worldwide and manufacturing plants in Australia, Brazil, Canada, France, Germany, Ireland, Mexico, the United Kingdom, the United States, and elsewhere. The company is parent to Eastman Software, Inc.; Fox Photo, Inc.; and an equal co-owner with Sun Chemical Corporation of Kodak Polychrome Graphics, a global graphic arts supply company with operations in more than 40 countries.

Chief Competitors: Eastman Kodak's competitors include: Fuji Photo Film Co., Ltd.; Hewlett-Packard; Nikon Corporation; and Minnesota Mining and Manufacturing Co.




By the early 1980s, it had become clear to Kodak that it needed to enter the electronics industry, which was defining the future for image and print. In an effort to do so, in 1982, Kodak purchased Atex, a supplier of electronic word-processing systems for newspaper publishers. The following year, Kodak formed its electronics division. Two years later, Kodak moved further into electronics with its purchase of Verbatim, maker of floppy disks and other electronic storage systems. But Kodak was unable to keep pace with the quickly changing computer industry, and soon its Atex word processing systems were outdated. After five years of lackluster sales, Kodak sold Verbatim in 1990. Although Kodak had paid more than $80 million for Atex in 1982, a decade later, it sold the company for a mere $5 million.

With increasing pressure from its competitor Fuji Photo, which throughout the 1990s undercut Kodak's prices and eroded its market share, Kodak was forced to further streamline its operations, selling off its Eastman Chemical division in late 1993 and its Sterling Drug business in 1994. Another part of its response to Fuji was to form strategic alliances with other companies. In 1991, Kodak joined with Canon Inc., Fuji Photo, Minolta Co., Ltd., and Nikon Corporation in a research and development project to investigate technologies for a new photo system. As a result of this endeavor, in 1996, Kodak launched its Advanced Photo System (APS), "user friendly" photo system and its Advantix line of cameras and film.

In 1993, George Fisher came to Kodak as chairman and CEO from Motorola Inc., in which he had turned an ailing electronics company into a telecommunications powerhouse. As CEO of Motorola, Fisher had developed a tremendously successful two-pronged strategy, which he believed he could apply immediately to Kodak. First, he would produce high-tech products; in this case, digital photographic equipment producing images that could be stored on disk. And second, he would use diplomacy to win in the global arena. As CEO at Motorola, Fisher had successfully lobbied Washington to help open Japan's market for Motorola; now, Fisher hoped to convince the U.S. government and the World Trade Organization to open the Japanese film market to U.S. film competitors like Kodak. By late 1997, it appeared that neither approach was working. Kodak's digital offerings, like its Photo CD, hadn't caught on with the majority of consumers. By November, Kodak's 1997 loss on the Photo CD reached $400 million. And, according to Prudential Securities, from November 1996 to November 1997, Fuji's share of the U.S. photo film market rose from 14.0 to 19.4 percent, while Kodak's share slipped from 71.4 to 65.0 percent. Moreover, Fuji further increased its distribution in the United States by taking over photo finishing laboratories for Wal-Mart and by spending more than a billion dollars from the mid- to late 1990s to start up six factories in South Carolina.

CHRONOLOGY: Key Dates for Eastman Kodak Company


1884:

Founded as the Eastman Dry Plate and Film Company

1888:

Eastman introduces its first camera

1889:

Changes name to Eastman Company

1892:

Company is renamed Eastman Kodak Company

1897:

Introduces the Folding Pocket Kodak Camera

1900:

Introduces the Brownie Camera

1913:

Introduced sheet film for professional photographers

1919:

Henry Strong dies; George Eastman becomes president

1932:

George Eastman commits suicide; Kodak introduces 8mm motion picture system

1951:

Introduces hand-held movie camera

1952:

Offers the Brownie projector

1953:

Forms Eastman Chemical Products Company

1958:

Introduces the Kodak Calvacade slide projector

1963:

Introduces the Instamatic camera

1972:

Introduces five models of the Instamatic camera; forms Eastman Technology

1975:

Introduces the Ektaprint copier

1981:

Berkey Photo lawsuit is settled

1982:

Purchases Atex

1984:

Purchases Verbatim

1988:

Purchases Sterling Drug

1990:

Sells Verbatim

1992:

Sells Atex; launches Photo CD

1993:

George Fisher is hired as chairman and CEO

1994:

Sells Sterling Drug

1996:

Launches Advanced Photo System (APS)

1997:

Loses claim with the World Trade Organization that Japan was denying fair access to its market

1998:

Enters joint venture with Kodak Polychrome Graphics; holds Imaging Expo at the Olympic Games in Nagano, Japan

In response to Kodak's dismal performance and the company's lack of success with the World Trade Organization, which in the fall of 1997 rejected Kodak's claim that Japan had denied the company fair access to its film market, Kodak president and COO Daniel Carp announced in November 1997 that Kodak would be changing its business model. Carp claimed that Kodak would become much more competitive and capable of achieving profitable growth by spending $100 to $150 million less on research and development in 1998; by changing its approach to equipment manufacturing, possibly by employing outsourcing; by entering into joint ventures like Kodak Poly-chrome Graphics, the global graphics art supply company Kodak co-owns with Sun Chemical Corporation; and by laying off 10,000 employees worldwide and reducing Kodak's costs by $1 billion by the end of 1999. (The company planned to cut almost 20,000 workers from its payroll by the year 2000.) Carp added that instead of reducing prices, Kodak would come back from its share loss by increasing spending on advertising, by working with retailers to strengthen Kodak's retail presence, and by continuing to support Kodak's relaunch of its Advantix line of photo products. Some have been skeptical about how these moves could help Kodak to recapture sales against Fuji given Fuji's consistently lower prices. (In the summer of 1997, Fuji's products often cost as much as 30 percent less than Kodak's in the United States.)



INFLUENCES

Some of the most profound influences on Eastman Kodak came in the last quarter of the twentieth century. The late 1970s economic recession in the United States caused Kodak's consumer photographic equipment and film sales to plummet. In response, Kodak shifted its focus and emphasized sales in other areas, such as chemicals, business systems, and professional photo finishing services. Probably the single biggest influence on Kodak began in the late 1970s when Japanese competitors like Fuji Photo and U.S. suppliers such as 3M Company were starting to offer products, in this case paper products, of nearly the same quality as Kodak's for much less. As the dollar grew stronger, Kodak's profits suffered in foreign markets and Japanese underpricing finally began to erode Kodak's share of the U.S. market as well.

Under this increasing competitive pressure, Kodak cut its workforce by 5 percent in 1983. The following year, Kodak lost the title of "official film of the 1984 Summer Olympics" to Fuji, further evidence of its declining status. In 1986, a federal appeals court ordered Kodak to leave the instant camera business and Kodak was forced to offer its customers a trade-in option for the cameras that it had been producing for a decade. To offset this financial burden and to try to boost earnings, Kodak reduced its work force by another 10 percent. Since his arrival from Motorola in 1993, George Fisher has had a tremendous influence on the company, cutting funding for research and development and reducing the work force by another 10,000 positions. Finally, perhaps one of the most profound current influences on Kodak, and on the photographic industry as a whole, has been the Internet and the trend toward digital imaging.

CURRENT TRENDS

The extraordinary, continuing growth of the Internet has produced tremendous interest in digital photography, photography creating images that can be put on disk. Many see digital imaging as the future for today's photography businesses, which could derive their future revenues from digital cameras, Internet-based photo services, software for image enhancement, and digital peripherals for home and office. In an effort to produce the digital imaging technology that could be necessary to its future, Kodak made some striking moves: in the summer of 1997, for example, the company appointed Willy C. Shih, former Silicon Graphics vice president of marketing, as president of Kodak's Digital and Applied Imaging business. Also in 1997, Kodak bought Wang Laboratories' document management software operations for $260 million thereby creating a new subsidiary it called Eastman Software.

Kodak made another move toward the digital arena when it entered into a joint venture with Sun Chemical Corporation, the world's largest manufacturer of printing ink and organic pigments and a large part of the Japanese company Dainippon Ink & Chemicals, Inc. The joint venture combines Kodak's Graphics Systems Markets business, part of its Professional Division, with Sun Chemical Corporation's Polychrome Division to form Kodak Polychrome Graphics, a worldwide supplier of graphics arts products and services. This partnership was well positioned to supply over $1 billion in goods to the market and to provide a transitional route to existing and future digital solutions. In March of 1998, Eastman Software, Inc. announced its launch of a line of collaborative work management products for Microsoft Exchange, the leading business messaging platform. To further solidify its entrance into the world of digital photography, Kodak held a "trade show" for the public it called its "Imaging Expo" at the Winter Olympic Games in Nagano, Japan, in 1998. There, Kodak displayed products and services, offered live interactive exhibits, and introduced its Picture Network, an Internet-based picture-sharing service.




PRODUCTS

From the start, George Eastman's goal was to produce convenient, easy-to-use, inexpensive photographic equipment so that virtually anyone in the United States who wanted to own a camera could. Eastman introduced his first commercial camera in 1888: it was small, inexpensive, and easy to use. From then on, the company produced a long line of inexpensive photographic equipment. In 1982, Kodak introduced a line of small cameras that it considered a modern replacement for the Instamatic, a wildly successful camera that dominated the market in the 1960s and 1970s. These new cameras, called disc cameras, used film discs instead of cartridges, but they were not successful. In 1984, Kodak teamed up with Matsushita Electric Industrial Company of Japan to produce its first electronic product, an 8 mm camcorder.

In 1992 Kodak launched its Photo CD, a writable compact disk with the ability to store photographs. The product failed with general consumers but achieved some success with small businesses and desktop publishers. Kodak relaunched the Photo CD in 1995, this time directly to the desktop publishing market. In October of that year, at the Photo and Imaging Expo in London, Kodak introduced the Advanced Photo System (APS), which resulted from its 1991 joint research and development project with four other major photographic companies: Canon, Fuji Photo, Minolta, and Nikon. Cameras in the Advanced Photo System use film that permits "magnetic information exchange"—that is, the film is coated with a special magnetic layer that allows cameras and other writing devices to add information (about the scene photographed, for example) to the film. APS cameras also permit three format choices for photos and allow the changing of a roll of film midway through shooting and the reloading of a partially used roll. Kodak named its line of APS cameras and film "Advantix" and originally launched the line in February 1996. But poor product availability and an advertising campaign that never told consumers why they should purchase the Advantix made for an unsuccessful launch. In 1997 the company relaunched the product.

COSMIC CAMERAS

When you think Kodak, you probably think of a little yellow Instamatic, four-inch color prints, and "Kodak moments." But Kodak is also associated with more otherworldly ventures—when NASA has had a need for quality, high-tech space imaging, remote sensing, and optical systems, it has turned to Kodak.

Kodak's space heritage dates back to the mid-1960s, when NASA sent the five Lunar Orbiters to the moon in order to map its surface in preparation for the first lunar landing. Each orbiter had a Kodak-built photographic system and processing laboratory that photographed the lunar surface, processed and scanned the film, and sent a video signal back to Earth. By the end of the mission, over 1,600 pictures were taken and 99 percent of the moon's surface was photographed. But most importantly, the pictures helped NASA identify the Sea of Tranquility as the landing site for the Apollo 11 mission in 1969.

To record that historic mission, the Apollo astronauts took 33 rolls of Kodak film, plus a special stereoscopic color camera used to take extreme close-ups of the moon's surface. Today, thanks in great part to Kodak, we have a better understanding of the geology of the moon.

And Kodak "cameras" have also helped us learn more about the geology of the red planet. In July 1997, the Pathfinder lander descended upon the Martian surface and released the Sojourner surface rover. Kodak developed the imaging sensors that functioned as the rover's "eyes," helping Sojourner successfully maneuver the rocky Martian terrain. Kodak also developed the sensors set to be used in the orbiter and lander for the December 1998 Martian mission. These sensors, though, will provide 2.5 times better resolution then the ones used in Sojourner.

Kodak has also played a large role in aiding the development of the biggest and best telescopes. The camera company produced the backup mirror for the Hubble Space Telescope. The mirror weighs 1,700 pounds and, as Kodak is quick to point out, does not contain the "spherical aberration" found in the original. Kodak also developed the world's largest segmented mirror. In 1997 this mirror was place in the Hobby-Eberly Telescope at the McDonald Observatory in Texas. It captures the light from objects that are 100 million times fainter then what the unaided human eye can see. And in the fall of 1998, the space shuttle was scheduled to take up the Kodak-built Advanced X-ray Astrophysics Facility (AXAF). This telescope system will focus X-rays with a resolving power that is equivalent to eyesight that can read a newspaper from half a mile away—"Superman eyesight", as Kodak boasts. With AXAF, scientists will be able to better study the fantastic phenomena in the backwaters of the cosmos.

Kodak has been instrumental in humanity's quest to discover the wonders beyond our little blue globe, and it will continue to help us peer into the farthest reaches of our universe as we continue the quest to unravel the mysteries of its beginnings.




Along with launching several digital cameras in 1997, Kodak also entered into partnerships with computer-industry companies like Picture Works Technology to try to revitalize its networked PC applications. In March of 1998, by way of Eastman Software, Inc., Kodak launched a line of collaborative work management products for Microsoft Exchange, the leading business messaging platform.

Michael D. McCreary, director of operations of Eastman Kodak's Microelectronics Technology division, claimed in 1998 that the division was making the highest-resolution color image sensors available on the market. Like regular computer chips, the image sensors process information but the information is received in the form of light instead of electrical signals.These image sensors can be used in cutting edge products such as digital cameras.

In early 1998 Kodak announced that it was launching seven new Advantix APS products: two color films, a 400-speed black and white film, a zoom camera, two personal film scanners, and a single-use camera that allows customers to choose between two of Kodak's APS formats. At the winter Olympics in Nagano, Japan, Kodak introduced its Picture Network, an Internet-based picture-sharing service that allows consumers to share picture with other Web users by posting them on the Internet.

Kodak Business Imaging Systems introduced a high-performance scanner in March of 1998 at the CeBIT information technology conference in Hanover, Germany. The Kodak Digital Science Scanner 3500 is a mid-volume scanner intended to bring simple, high-performance scanning to the general office for traditional scanning as well as Internet-based applications. In April 1998, Kodak Poly-chrome Graphics, Kodak's joint venture with Sun Chemical, announced its Digital Science DCP 9500 desktop color proofer, a digital continuous-tone proofing system that can create professionally accurate color proofs from a host computer in about five minutes. Available worldwide in June 1998, the DCP 500 was to be marketed largely to pre-press customers like trade shops, advertising agencies, and commercial printers.



GLOBAL PRESENCE

As the company's first venture outside of the United States, Kodak opened its Eastman Photographic Materials Company in London in 1889. In 1891, Kodak constructed a manufacturing plant outside London to accommodate increasing European product demand. By 1900, Kodak established distribution points in Italy, France, and Germany. Throughout the century, as the European and world markets grew, so did Kodak's presence in them.

In 1995, Kodak opened a distribution center in Moscow, Kodak AO, which received Kodak products from plants in the United Kingdom, France, and Germany. From 1996 to 1997, Kodak's 35 mm roll volume grew 61 percent in Russia. In the early 1990s, Kodak established two facilities in China to manufacture 35 mm cameras, electronic components, and photo processing equipment. Within several years, Kodak founded a software development center in Shanghai. In March of 1998, Kodak announced plans to invest more than $1 billion over several years to expand its presence in China, increasing its manufacturing and marketing capabilities there by acquiring several ailing Chinese film manufacturers, building a new plant, and overhauling its existing facilities. Kodak thus became the first foreign company to work with the Chinese government and China's current state-owned businesses to build a large, world-class industry. China is now Kodak's third-largest color film and paper market.

Nonetheless, Kodak has only secured 10 percent of the Japanese market, which is the second-largest photographic film and paper market in the world. Fuji has a 70 percent share of that market. Moreover, while Fuji's share of the U.S. photo film market has been increasing to nearly 20 percent, Kodak's share has fallen to 65 percent.



SOURCES OF INFORMATION

Bibliography

"as kodak advantix system gains momentum, kodak unveils plans to drive future growth with seven new products." business wire, 20 january 1998.

"carp says changes to create far more competitive kodak." business wire, 10 november 1997.

cary, peter. "loser layoffs: kodak offers an object lesson in the perils of downsizing." u.s. news & world report, 25 november 1996.

"eastman kodak company." hoover's online, 10 april 1998. available at http://www.hoovers.com.

"eastman kodak: collaborative work management solutions for ms exchange from eastman software." m2 presswire, 18 march 1998.

ebersole, phil. "kodak keeps edge with color image sensors." gannett news service, 25 march 1998.

gillis, chris. "kodak's experience in russia." american shipper, october 1995.

greenberg, ilan. "the bleak picture." the red herring online, january 1998.

holstein, william j. "imperfect picture: kodak's continuing woes." us news & world report, 14 november 1997.

"imaging expo creates kodak moments for olympic fans in nagano." business wire, 27 january 1998.

"kodak and polychrome joint venture will create new global organization to serve graphics arts market." business wire, 14 october 1997.

"kodak expands investments to manufacture film and paper in china." business wire, 23 march 1998.

"kodak polychrome graphics announces new desktop color proofing solution." business wire, 5 april 1998.

laver, ross. "an image problem." mclean's, 5 february 1996.

mirabile, lisa, ed. international directory of company histories, detroit: st. james press, 1990.

"new kodak document scanner emphasizes ease of use, signals company's aggressive move into mid-volume market." business wire, 13 march 1998.

nulty, peter. "corporate performance: kodak grabs for growth again." fortune, 16 may 1994.

reingold, jennifer, richard a. melcher, and gary mcwilliams. "executive pay." business week, 20 april 1998.

roberts, dexter, joyce barnathan, and robert j. dow. "now, it's reform or bust in beijing." business week, 6 april 1998.

smith, geoffrey, william c. symmonds, peter burrows, ellen neuborne, and paul c. judge. "can george fisher fix kodak?" business week, 20 october 1997.

standard & poor's register of corporations, directors and executives. new york: the mcgraw-hill companies, inc., 1997.

For an annual report:

on the internet at: http://www.kodak.comor write: literature & marketing support, eastman kodak company, 343 state st., rochester, ny 14650-0532


For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. eastman kodak's primary sics are:

2843 surface active agents

2865 cyclic crudes & intermediates

3081 unsupported plastics film & sheet

3861 photographic equipment & supplies

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Eastman Kodak Company

Eastman Kodak Company

ADVANTIX CAMPAIGN
THE BEST PART OF PHOTOGRAPHY IS THE PRINTS CAMPAIGN
TAKE PICTURES. FURTHER. CAMPAIGN
TALL TALES CAMPAIGN

343 State Street
Rochester, New York 14650-0002
USA
Telephone: (800) 698-3324
Telephone:(585) 724-4000
Fax: (585) 724-4000
Web site: www.kodak.com

ADVANTIX CAMPAIGN

OVERVIEW

Eastman Kodak Company ran one of the largest advertising campaigns in its history to publicize the Advanced Photo System (APS), a new type of camera, film, and related products developed jointly by Kodak and a number of competitors. Kodak's APS cameras were designed primarily to make photography easier for the snap-shooter, the consumer who took pictures to remember birthdays and other such occasions.

Because the public was still confused about APS after an initial marketing campaign in 1996, the company hired ad agency Ogilvy & Mather of New York to design new advertising for 1997 to explain the advantages of APS products. These commercials ran until they were replaced by the next phase of APS promotions, which began in the summer of 1998. Kodak spent far more than its competitors to promote APS, which helped consumers equate APS with Advantix, the Kodak brand of APS products.

The 1997 "Advantix" television campaign ran in two stages. The first was a spot that asked, "Can your camera do this?" and then explained three of an Advantix camera's innovative features; drop-in film loading, choice of three picture sizes, and an index print. The second stage consisted of three humorous scenarios, one for each special feature of the Advantix system, which showed photographers experiencing problems they could have avoided if they had used APS. One spot, for example, showed an elderly woman who had fulfilled her lifelong dream of having her picture taken in front of the Eiffel Tower. When she had the pictures developed, she was horrified to see that the photographer had cropped off most of her head so that the tower would fit into the picture. The ad concluded, "She should've had a Kodak Advantix camera with three picture sizes for better pictures."

The campaign also included print advertisements that illustrated the three distinctive features of APS products. Each ad displayed color photographs against a Kodak yellow background and was accompanied by a brief explanation of one of the features and of Kodak's general corporate signature, "Take Pictures. Further."

HISTORICAL CONTEXT

In helping to develop the Advanced Photo System to make photography easier for the average consumer, Kodak was staying true to its roots. The company had been founded in 1888 on the slogan "You push the button, we do the rest." Kodak had a history of introducing new products, including photographic equipment and supplies, projectors, and copiers. In 1997 Kodak was a multinational corporation with nearly 100,000 employees, one of the 25 largest companies in the United States.

The "Tall Tales" commercials ran in the same year as the first ads to promote the new Advantix camera. The initial campaign, launched in February 1996, was designed by J. Walter Thompson, which had been Kodak's primary ad agency for more than 60 years. The commercials opened with the customary Kodak moment, as when a bearded hippie admired a spectacular mountain vista and commented, "Some people see mountains. I see personalities." After the point had been made that every photographer captured pictures from a unique point of view, the voice-over said, "Now Kodak introduces a new technology that will let you take those pictures further than you've ever imagined." The commercial concluded by summarizing the three innovative features of APS cameras and film.

In 1997, when J. Walter Thompson was replaced by Ogilvy & Mather, the "Advantix" campaign began. Kodak had invested a great deal of money in researching and developing APS, and it allocated $100 million to promote Advantix products worldwide.

TARGET MARKET

Kodak believed that its core customers would take more pictures of a broader range of subjects if they were provided with cameras, film, and other merchandise that would make photography easier. The company wanted to attract new customers but was primarily interested in appealing to those who were already familiar with its products. A large percentage of Kodak's customers were mothers who took pictures during birthday parties, holiday celebrations, vacations, and other family occasions. Kodak's previous advertising had focused on this type of situation, but as its customers became more adept at photography, the company's commercials featured a wider variety of possibilities.

Although many customers had learned how to use the more complex 35-mm equipment that had been their best option before the advent of the Advanced Photo System, they were not particularly interested in creating professional-looking photographs. Instead, they wanted convenient equipment that was easy to use and would produce pictures of good quality. It was thought that they would appreciate the compact size of the Advantix cameras, the "foolproof" drop-in loading that would help them avoid frustrating mechanical problems, and the choice of three picture sizes for each shot. In addition, they would welcome the index print, which, like a proof sheet, showed miniature replicas of each shot on the roll of film. The index print would allow users to see what they were getting when they ordered reprints without having to deal with negatives. The marketing campaign pointed out each of these advantages in a simple way that could be grasped by watching a 30-second television commercial or by reading a few sentences in a print ad.

COMPETITION

Each of the five companies—Kodak, Canon U.S.A., Minolta, Nikon, and Fuji Photo Film U.S.A.—that cooperated in developing the Advanced Photo System had its own brand of APS products, and they were designed to meet the needs of somewhat different target markets. In general, all provided the three basic APS features, and Fuji also introduced a line of APS film. Kodak's Advantix camera tended to be slightly less expensive than some of the other APS brands and was generally easier for snapshooters to use. Consumers did not have the option of changing lenses with the Advantix camera, but it did have a built-in zoom lens.

SPILLOVER EFFECTS

Although the "Advantix" campaign focused on just one of Kodak's products, it helped increase overall sales. One reason for the company's success was its family orientation and reputation for trustworthiness. Its advertising traditionally revolved around the "Kodak moment," an emotional portrait of a consumer capturing a heartwarming experience on film. This had helped Kodak cultivate a wholesome image, but research showed that the company was not particularly appealing to younger consumers. In 1996 Ogilvy & Mather tried a new angle with its humorous "Tall Tales" commercials that portrayed unconventional uses for various Kodak products. For instance, one ad featured a consumer using Kodak's Image Magic digital enhancement station to disguise the dents in a Gremlin automobile. The campaign was well received, particularly among young adults.

In contrast, one of Canon's four APS cameras, the EOS IX, was designed to accept more than 50 lenses and hundreds of accessories. The company also introduced the credit card-size ELPH, the world's smallest shutter camera with a 2x zoom lens. The ELPH had several sophisticated features, including an active autofocusing mode that used an infrared emitter and sensor and a passive mode that could discern variations in contrast. Another model, the Canon ELPH 490Z, featured a 4x zoom lens. In television commercials a woman with an elfin air about her inquired, "Have you seen the ELPH?" as a series of ultracompact cameras floated past. The ads ended with the tag line "It's so advanced … it's simple." Another Canon slogan said, "ELPH: the big name in the Advanced Photo System."

During 1997 Fuji offered rebates of up to $15 to develop and print a roll of its Fujicolor SmartFilm when customers purchased certain Fujifilm Endeavor APS cameras. To publicize the rebates, the company ran a full-page ad in USA Today and other ads in 15 key markets. The campaign was launched in September 1997 to coincide with holidays such as Thanksgiving and Christmas. In addition to promotional efforts for its APS films, Fuji expanded its network of photographic laboratories in Europe and the United States and offered digital imaging services. Fuji's net sales increased 12 percent in 1997.

Minolta and Nikon also advertised their cameras and accessories, but Kodak spent far more to publicize APS than did all the other companies combined. In addition to its "Advantix" campaigns, Kodak participated in co-op ads with the other companies to educate the public about APS.

Kodak's $100 million budget to advertise Advantix products amounted to about 85 percent of the total all five companies spent to publicize APS products in 1997. Fuji initially allocated about $13 million, twice its previous ad budget, to promote its SmartFilm brand. Minolta allocated $10 million, about 150 percent of its previous ad budget, to promote its Vectis brand of APS products. Kodak's total spending on advertising in 1994, just before APS was introduced, was $65.4 million. In 1997 the company budgeted about $60 million for advertising Advantix in the United States alone.

MARKETING STRATEGY

At the end of the 1996 campaign introducing the Advanced Photo System equipment and film, consumers still seem confused. As a result, Ogilvy & Mather introduced the "Can Your Camera Do This?" spot. The 1997 round of ads was intended primarily to promote the Advantix brand and only secondarily APS. The challenge was to communicate the basics of a new, complex technology in print ads and television commercials.

In April 1997 Kodak began airing television ads that asked, "Can your camera do this?" They stressed the three features of Advantix cameras—drop-in film loading, the choice of three picture sizes, and an index print. This first phase of the campaign was designed to explain the functional benefits of APS.

The next series of television ads were humorous, depicting common problems that photographers could eliminate by using Advantix products. The print ads gave more details. For example, one television spot showed a couple who were having a reprint made so that they could enter the photo in a cute-baby contest but who chose the wrong negative and inadvertently submitted a picture of a chubby grown-up. The commercial ended with the line "They should've had the Kodak Advantix system with an index print so you can see what you're ordering." The corresponding print ad showed an example of an index print and included explanatory text: "Choosing your favorite smile is a lot easier when you can actually see the smile. When Kodak Advantix film is processed, your pictures come back with the negatives in their original film cassette and with an index print that gives you a miniature version of every shot. Ordering reprints is easy, and you can get them in any of the three sizes. So no more squinting at negatives, trying to tell a grimace from a grin."

The broadcast ads were aired on network, cable, and syndicated television programs, particularly during the Academy Awards and the coverage of the Winter Olympics in Nagano, Japan. In addition to the United States, they ran in the United Kingdom and in other countries. In non-U.S. markets the "Can your camera do this?" spots were shown more often than the humorous ads. The print ads ran primarily in consumer magazines in the United States. Some appeared in publications that focused on new parents and travel so as to reach readers who were likely to be taking more than the average number of photographs. The ads also appeared in general-interest magazines and in various other publications.

The ads highlighting the three features of the Advantix camera ran into the summer of 1998, when the next stage of the promotion began. Kodak's promotion of Advantix products and APS had been designed to encompass several years, allowing the company to expand gradually on the basic message.

OUTCOME

Kodak and Ogilvy & Mather analyzed the public's reaction to the campaign and found that it scored high on every positive indicator. When asked to tell what they recalled about the advertisements, people were able to repeat the words almost exactly. One of the spots was included on Adweek's list of the best ads of 1997. During 1997 Kodak saw strong growth for its other merchandise as well, in part because of the promotion of such products as Max film and Goldfilm.

FURTHER READING

Cardona, Mercedes M. "Kodak Media-Buying Biz Follows Creative to O&M." Advertising Age, June 23, 1997.

Enrico, Dottie. "Kodak Campaign Clicks, Develops Tech-Savvy Image." USA Today, September 16, 1996.

Garfield, Bob. "Kodak's Split Image Lights Up Advantix." Advertising Age, February 1, 1996.

"Kodak Ends an Era, Calls It Quits with JWT." Advertising Age, June 17, 1997.

Wilke, Michael. "Kodak, JWT Snap Closer with Advantix Push." Advertising Age, February 5, 1996.

――――――. "Kodak Tries Humorous Tack in $60 Mil Advantix Effort: Ads Strive to Create Human Attachment to New Tech." Advertising Age, June 9, 1997.

                                        Susan Risland

THE BEST PART OF PHOTOGRAPHY IS THE PRINTS CAMPAIGN

OVERVIEW

One of the most successful brands in the history of the United States, Eastman Kodak Company, whose founder had invented popular photography in the 1880s, was slipping as it entered the twenty-first century. Although it was a pioneer in the development of digital photography, Kodak had continued to focus on its highly profitable film products, conceding much of the digital-photography market to a host of competitors. Realizing it was falling behind, the company in 2003 decided to concentrate on its digital lines. To promote Kodak's easy-to-use printing systems—which were available through either self-service kiosks or camera docks that connected to a personal computer—Kodak and its advertising agency, Ogilvy & Mather Worldwide, launched a campaign in 2004 titled "The Best Part of Photography Is the Prints."

The campaign's print and television advertisements played off the question "Where are my pictures?"—touching upon the frustrations many digital-camera users encountered when trying to get hard copies of the photos they had taken. The commercials targeted women, who, according to market research, took the vast majority of family pictures and maintained the family photo albums.

The "Best Part of Photography Is the Prints" campaign won a 2005 EFFIE award and helped Kodak to increase the sales of its digital lines. But as the sale of traditional film products eroded further, the company continued to struggle financially. In the hopes of reestablishing its prominent position in the shifting photography marketplace, the company in 2005 replaced the campaign with a new marketing effort promoting Kodak's cutting-edge digital cameras.

HISTORICAL CONTEXT

Kodak had essentially invented the amateur photography industry in the 1880s, when bank clerk George Eastman founded the Eastman Dry Plate and Film Company and introduced the first Kodak brand camera. From the start the company proved to be a savvy marketer, as evidenced by its initial slogan, "You press the button—we do the rest." While Kodak made money from the sale of cameras and especially from its film, over the decades the company wisely associated itself with the picture-taking process and lifestyle rather than with the merchandise—which included many innovative items, such as the $1 Brownie camera in 1900 (with film costing 15 cents a roll), the world's first true color negative film in 1942, and the Instamatic camera in 1963. Kodak embraced television advertising early on, establishing fruitful relationships with television stars such as Ozzie and Harriet Nelson, variety show host Ed Sullivan, and sitcom actor Dick Van Dyke. The company later employed campaigns urging consumers to put "open me first" cards on Christmas presents containing Kodak cameras so that pictures could be taken when the rest of the presents were opened. Kodak's marketing triumphs peaked in the early 1990s, when it tapped into the vernacular phrase "Kodak moment" to promote its cameras and film. But with the rise of digital photography people began to seriously question whether Kodak's moment had come and gone.

Ironically, although Kodak was a pioneer in digital camera technology, garnering a number of key patents, the general public was mostly unaware of these accomplishments. The company, failing to anticipate how quickly digital technology would surpass traditional cameras and film, allowed a number of companies, some with no association with cameras at all, to stake significant claims in the growing new market.

In the mid-1990s Kodak dropped its longtime advertising agency, J. Walter Thompson Company, in favor of Ogilvy & Mather and attempted a corporate makeover to appeal to younger consumers. But Kodak still gave short shrift to digital photography by continuing to emphasize traditional photography and film, especially in China and in developing countries in Eastern Europe. Revenues began to erode, declining four years in a row by 2003, and the price of Kodak stock followed suit. The company found itself at a crossroads: it could either remain in the high-profit-margin film business or fully commit to digital technology, where margins were lower and, like those of all high-tech electronics, dropping. To complicate matters, Kodak lacked the reputation in digital it had enjoyed for so many years in traditional photography.

In September 2003 the company announced it was casting its lot with digital technology. Money that had gone to promoting the film business in developed markets would instead be directed toward selling such technologies as ink-jet printers and high-end digital printing. A large number of digital-camera users were not making prints of their photographs, but Kodak believed that eventually they would see the value of having hard copies. Sensing an opportunity, the company decided to emphasize its kiosk printers and home-printing camera docks, which became the focal point of the campaign, titled "The Best Part of Photography Is the Prints." In a larger sense, however, Kodak wanted to position itself as a player in the entire digital process, from capturing the image to outputting it.

TARGET MARKET

While in general Kodak's "Best Part of Photography Is the Prints" campaign was aimed at all digital-camera users, the company had a more specific target in mind: wives and mothers. Kodak research had revealed that 70 to 80 percent of family pictures were taken by women. Moreover women were generally the keepers of family memories and maintained the photo albums. It was with women in mind that the company had earlier introduced its EasyShare system, which included a camera, software, and an easy-to-use dock for transferring pictures to a computer. Later it offered an EasyShare printer dock, which allowed photos to be printed straight from a camera, without using a computer. The company said that women generally placed the printer dock in the kitchen and often took it with them as a party printer. But as Carl E. Gustin, Jr., Kodak's chief marketing officer, explained to Claudia H. Deutsch of the New York Times, the company also realized that the target customer would want a printing option that did not involve owning a home ink-jet printer. He stated, "So if digital photography and printing is going to be a truly mass phenomenon, then self-service retail has to be a big part of it." Thus promoting Kodak's kiosks at retail stores was also a priority for the company and the new marketing campaign.

According to Beth Snyder Bulik, writing for Advertising Age, the target audience was "women, ranging from teens to grandmothers." Because consumers in the younger demographic tended to E-mail pictures to one another and to view Kodak as a stodgy brand, the company had decided not to pursue this group aggressively. Nevertheless Kodak also hoped to begin connecting with young people by promoting its cutting-edge technology. For example, Kodak possessed high-definition OLED (organic light-emitting diode) display technology, which allowed for thinner cameras and mobile phones with picture-taking capabilities. The company was optimistic that when tech-savvy members of the younger generation began to realize the implications of this and other Kodak innovations, they would begin to change their view of the brand.

DON'T MESS WITH THE CLOTHES

The founder of the Eastman Kodak Company, George Eastman, was a frugal bank bookkeeper whose only extravagance was photographic equipment, which at the time included heavy glass plates and chemicals. According to lore, during a vacation he made the mistake of packing the chemicals along with his clothes, which were ruined by a leak. Disgruntled by the wet-plate process that had cost him part of his wardrobe, he examined the new dry-plate process—which had emerged only a few years earlier—and soon perfected a longer-lasting version. Eastman next eliminated the glass altogether, coating paper with gelatin and photographic emulsion and rolling it on a spool. He then invented a simple camera to use the film. He called it the Kodak, a word without meaning but one that quickly became associated with popular photography.

COMPETITION

Kodak faced competition in the digital arena on a number of fronts. Its digital cameras competed against established camera companies, such as Canon, Fuji, Minolta, and Olympus, but also against newcomers, such as Hewlett-Packard, LG Electronics, Nokia, Samsung, and Sony. All of the latter group had arrived in the photography market via their successes in digital technology and had the deep pockets to support aggressive marketing campaigns. On the home-printing front Kodak's main competitor was market leader Hewlett-Packard (although Kodak led in the sale of the ink-jet paper on which digital photos were printed).

Digital pictures that were saved on memory cards and CDs could also be dropped off like film rolls at a local photo shop or drugstore counter for processing, but increasingly consumers were turning to do-it-yourself digital-photo kiosks where pictures could be selected, edited, and printed on the spot. It was in this category that Kodak was able to leverage its brand to establish itself as a major player in the digital-photography industry. It forged alliances with drugstore chains, such as CVS in the United States and Boots in the United Kingdom, and with superstores, such as Wal-Mart and Target. Nevertheless kiosks remained a competitive sector, the direct competition coming from the likes of Polaroid, Olympus, PMI/KIS, IBM, Mitsubishi, Sony, and a host of smaller companies.

MARKETING STRATEGY

Kodak continued to follow its century-long strategy of playing up the lifestyle of taking pictures rather than the cameras or film themselves. The difference was that digital products were made the priority, and Kodak allocated the necessary resources to promote them. According to TNS Media Intelligence, out of the $109 million Kodak spent in 2004 on measured media (that is, TV, radio, and print), $71 million was devoted to digital cameras, home-printing solutions, and self-service kiosks. The thrust of the "Best Part of Photography Is the Prints" campaign, composed of both television and print elements, was on ease of use, in particular in printing digital photos. This was a market, unlike digital cameras, where Kodak could truly use the strength of its brand to its advantage. In a three-month companion campaign developed by HSR Business to Business, Cincinnati, the Kodak Professional unit promoted its line of digital-photo printers through print ads aimed at professional photographers.

Nicola Bell, worldwide executive group director at Ogilvy & Mather, told Claudia H. Deutsch of the New York Times, "Our research shows that even people who love their digital cameras are still frustrated about how to get prints." The strategy of the new television spots was relatively straightforward. "We have to position the kiosks as friendly little machines that guarantee good, long-lived pictures," Bell explained.

Writing for Advertising Age, Beth Snyder Bulik maintained that the strategy of the new campaign could be encapsulated in the question asked in each ad: "Where are my pictures?" She interviewed Pierre Schaeffer, Kodak's vice president and director of business strategy and marketing services, who said that many people could relate to the catchphrase, adding, "There has been a brainwashing in digital cameras that suggests you need to be a computer expert. We try to break that image …' You press a button, we do the rest. We're the experts in photography, you don't have to be.'"

The "Best Part of Photography Is the Prints" campaign broke in late May 2004. In the new TV spots Kodak customers talked about how they loved digital photography but lamented the fact that they never actually got their photos printed. One commercial featured the EasyShare digital camera and printer dock. Another promoted the picture maker kiosk. In the International Herald Tribune, Deutsch described the commercials as featuring "a panoply of people—young and old, male and female, black and white and Asian—professing love for their digital cameras. Then it pans to one young man crying plaintively, 'Where are my pictures?' The answer, of course, is readily at hand—if he would only go to his local self-service kiosk and make them." Other TV spots focused on consumers using the EasyShare printer dock at home.

The campaign's print ads also divided their focus between the self-service kiosks and the easy-to-use home printer dock. Other aspects of the campaign included monthly educational E-mail newsletters, a holiday mailing, and booths at NASCAR races.

OUTCOME

Kodak's Schaeffer told Advertising Age that the different elements of the company's "Best Part of Photography Is the Prints" campaign "all paid off big-time." Kodak gained U.S. market share on Sony, improving from 15.3 to 18.3 percent in the first half of 2004. On the kiosk side of the business, Kodak was enjoying tremendous growth, due in large measure to advertising and to the distribution of Kodak kiosks throughout the marketplace. Not to be discounted, however, was the quality of the product, which ranked at or near the top of the three different categories defined by the Digital Imaging Marketing Association: stand-alone units, kiosks linked to remote printing equipment, and combination kiosks that could either print locally or send files to a remote digital-photo minilab for development. Also of great importance was that an increasing number of people were turning to kiosks for their prints. According to market research about 39 percent of digital-camera users tried kiosks in 2004 compared with 28 percent in 2003. The campaign also garnered recognition for Ogilvy & Mather, which won a bronze in the Consumer Electronics category at the 2005 EFFIE Awards, given out annually by the New York American Marketing Association in recognition of the year's most effective advertising campaigns.

Kodak made strides in positioning itself in the digital marketplace in 2004, and its digital sales were growing at a strong clip, but the traditional film business was slipping even faster than expected, putting additional pressure on Kodak's marketers to promote the digital lines to make up for shrinking film sales. In the first quarter of 2005 Kodak generated sales of $2.83 billion, down from the $2.92 billion it had reported for the same period a year earlier. In the second quarter the company suffered a net loss of $143 million. Ogilvy & Mather's next major market effort, launched in 2005, pursued the theme "Keep it forever. Keep it Kodak," another attempt to retain Kodak's connection to the past while portraying the company as an innovator. In addition Kodak was undergoing a large makeover that ranged from revamping product design and styling to updating operating systems.

FURTHER READING

Bulik, Beth Snyder. "Kodak EasyShare." Advertising Age, November 2004, p. S2.

――――――. "Kodak Scores with Digital Cameras but Film-Biz Losses Cloud Big Pictures." Advertising Age, April 25, 2005, p. 4.

――――――. "Sony, Kodak Lead U.S. Battle for Share in Digital Cameras." Advertising Age, May 31, 2004, p. 12.

Denn, Rebekah. "Digital Photo Kiosks Are Dandy, but Not All Are Created Equal." Seattle Post-Intelligence, November 30, 2004.

Deutsch, Claudia H. "Get the Pictures?" International Herald Tribune, July 21, 2004, p. 16.

――――――. "The Post-film Photo Industry Promotes Kiosks for Turning Digital Images into Print." New York Times, July 20, 2004, p. C9.

Howard, Theresa. "Kodak Ads Build Up Its Digital Image." USA Today, August 18, 2005.

Jardine, Alexandra. "Is This a Kodak Moment?" Marketing, October 13, 2004, p. 28.

Wasserman, Todd. "Kodak Focuses on Processing." Brandweek, May 24, 2004, p. 15.

                                        Ed Dinger

TAKE PICTURES. FURTHER. CAMPAIGN

OVERVIEW

In the mid-1990s the Eastman Kodak Company was not just the leading manufacturer of photographic film, paper, and chemicals; it was listed as one of the top companies in America. In both 1996 and 1997 the stock-market researcher EquiTrend selected Kodak as the number one brand for quality in the United States. At that time digital photography had not yet reached critical mass, and Kodak wanted to promote its new Kodak Advantix Photo System. Advantix was pitched as an "error-free, drop-in film" that allowed consumers to download film images onto a computer. At the same time camera makers such as Canon Inc. and Sony Corporation were developing digital cameras. Hoping to brand Kodak for a younger market and promote Advantix, Kodak released its "Take Pictures. Further" campaign.

The television, radio, outdoor, and print campaign was funded by Kodak's $100 million marketing budget and debuted in April 1996. Created by the ad agency Ogilvy & Mather of New York, the campaign was separated into different executions. "Anthem" consisted of five 60- and 30-second spots with the actor Luke Perry repeatedly answering the question "What can a picture be?" The second execution, titled "Tall Tales," featured two 60-second commercials that each told a story through images. Campaign spots that were not connected to "Anthem" or "Tall Tales" aired later. The headline in an advertisement in People magazine asked, "Isn't it time you had a new box to keep your pictures in?" A second magazine ad featured a photograph of workers mining vivid yellow sulfur on a steaming volcano. The text explained that Kodak Ektachrome Elite II amateur slide film could capture vibrant, pure colors under varying light conditions. The campaign officially ended in March 2001.

"Take Pictures. Further" began just as digital photography was entering the mainstream culture. Advantix was not as popular as Kodak had expected. From 1999 to 2001 the company's sales dropped from $14.1 billion to $13.2 billion. Because the campaign branded Kodak with film technologies instead of emerging digital technologies, the advertising community blamed it for outdating the Kodak brand while digital photography blossomed.

HISTORICAL CONTEXT

Kodak traced its roots to Eastman Dry Plate Company, founded in 1880 by George Eastman and Henry Strong. Dry plates represented a significant improvement over the chemically treated wet plates of glass that photographers had previously used to expose one picture at a time in their cameras, a procedure that required considerable expertise. In 1884 the company patented the first roll film, a long strip of paper coated with emulsion that was sensitive to light. In 1888 Eastman began marketing the Kodak, a portable box camera that cost $25 and was loaded with enough film for 100 pictures. The invention of this type of camera and film was important in the growth of the motion-picture industry, and it opened the field of photography to amateurs.

Emphasizing that its new cameras were simple enough for the average consumer to use, Eastman Company advertised with the slogan "You push the button, we do the rest." At the turn of the century the firm increased its mass-market appeal by introducing a small Kodak camera called the Brownie at the inexpensive price of $1. By that time the enterprise was known as Eastman Kodak Company. Among its many noteworthy innovations were the introduction of color film in 1935 and the launch of the Kodak Instamatic camera in 1963. Ease of use remained a primary theme in the company's marketing efforts. "Kodak Instamatic Cameras load instantly! Automatically shoot and take sharp, clear pictures time after time!" said an advertisement in Good Housekeeping. "No threading. No fumbling. No rewinding."

With a market share that averaged 60 to 70 percent, Kodak led the industry for decades. By 1997 it was one of the 25 largest companies in the United States. Its products included photography equipment and supplies, film, projectors, and copiers. Units such as Sterling Drug had been acquired over the years but were divested in the early 1990s as part of a general overhaul that focused the company on imaging products. During the late 1990s the firm kept up with changing technology by rapidly expanding and improving its digital equipment and services. These innovations allowed consumers to store their photographs on compact or floppy disks, view them and alter them on computer screens, and transmit them over the Internet. Kodak offered numerous state-of-the-art products and services, and it formed marketing alliances with companies such as America Online and Intel Corporation to encourage customers to use their photographs in new ways.

Over the years Kodak had cultivated a family-oriented image with advertising that revolved around the "Kodak moment," a portrait of a consumer capturing a heartwarming experience on film. Many people were not aware, however, that Kodak offered more than film and cameras. In addition, research showed that consumers thought the company was old-fashioned. In 1996 Kodak released the "Take Pictures. Further" campaign to change its image and to publicize its many products along with the possibilities they offered to consumers.

TARGET MARKET

Kodak had cultivated a loyal following among consumers at least 35 years old, but it was not particularly appealing to most younger people. The new corporate-image campaign was intended to retain Kodak's traditional customers while reaching teenagers and young adults, with a particular emphasis on consumers who were interested in mastering the most recent technologies. The first advertisements to use the "Take Pictures. Further" theme were aimed at the parents (ages 25 to 55) of school-age children, at young adults who used computers and had a college education (ages 18 to 34), and at business managers and department heads (ages 35 to 64). These ads promoted products such as Image Magic service, which allowed consumers to crop and enlarge their photographs using Advantix, and the Fun Saver, a camera designed to be used only one time. Later advertisements also showcased innovative products. "Introducing the easiest way to get your pictures into your PC. The new Kodak Advantix film drive," said a magazine ad that ran in 1998.

Some advertisements targeted the company's core clientele of snap shooters 25 to 54 years old, primarily women, who took pictures to remember events such as birthday parties and family vacations. Kodak had become the industry leader by making it easy for people to take good photographs, and as the company introduced digital cameras and other innovations, its advertising assured consumers that photography would still be easy and more fun than ever. One advertisement in Travel & Leisure promoted Kodak Max film with the headline "I don't care about f-stops. I don't care about shutter speeds. I just want to take a picture." The ad showed three badly exposed photographs labeled "Before Kodak Max" and three correctly exposed photographs labeled "After Kodak Max."

KODAK.COM

Kodak's home page on the Internet (http://www.kodak.com) was redesigned in 1998 with easier navigation and expanded content. It included a new section called "Further," which targeted consumers who were adept at using the latest technology. It was one of the few marketing efforts by Kodak in 1998 that connected Kodak's brand to digital photography. The website section explained how consumers could use digital photography, animation, and other innovations. Kodak.com also contained articles for general audiences. The site had been launched in 1995, received more than 66 million page views in 1997, and consisted of more than 25,000 pages by 1998.

By showing new ways for people to enjoy their photographs, Kodak encouraged its customers to do more with their pictures than toss them in a drawer or file them away in a photo album. Of the 70 to 80 billion photographs that Americans snapped each year, only 2 percent were reprinted or enlarged. The "Take Pictures. Further" campaign urged consumers to use new technology such as E-mail to share photographs with their families and friends, to incorporate more photographs into documents created on their computers, and to improve photographs by altering their appearance. In addition to promoting Kodak's digital products and services, the campaign was intended to revive interest in traditional film and cameras by explaining the many ways that average people could work with visual images.

COMPETITION

One of Kodak's primary rivals was a company with headquarters in Japan, Fuji Photo Film U.S.A. Both Kodak and Fuji made film and photographic papers for professionals and amateurs, both firms had acquired large film processing companies nationwide to increase their share of the photo-finishing market, and both had begun manufacturing products such as digital cameras to compete in the emerging field of digital technology. Fuji had earned a reputation for low prices and high quality. In the spring of 1997 it suddenly slashed the price of its film, saying that one of its largest distributors had switched to Kodak and left Fuji with 2.5 million rolls of excess film to sell. During that summer Kodak's film sometimes cost as much as 30 percent more than Fuji's. According to Brandweek, Kodak's share of the $3 billion U.S. film market slipped from 85 percent in 1988 to about 70 percent by the summer of 1997 and 65 percent by June 1998. Fuji had about 15 percent of the film market in 1998, up from 10 percent in 1996, and it also controlled about 15 percent of the photo-finishing market. Lacking the brand loyalty that Kodak had cultivated over the years, Fuji attempted to strengthen its corporate brand image in 1998 with an advertising campaign that used bright colors, surreal scenes, and the slogan "You can see the future from here."

Kodak also competed with companies that made cameras and related products. In 1998 Canon U.S.A. promoted its Advanced Photo System camera, the ELPH, with the tagline "So advanced … it's simple." The company's "Wildlife as Canon Sees It" series of magazine ads featured large, beautiful photographs of wildlife above text that characterized each animal and mentioned Canon's efforts to protect endangered species. Each ad included a small photograph and description of a Canon product. Another camera maker, Pentax Corporation, asked, "Aren't your pictures worth a Pentax?" The campaign showed customers explaining that they had been able to take spectacular photographs thanks to certain features on their Pentax cameras. Minolta Corporation continued its "Only from the Mind of Minolta" campaign, while Olympus America Inc. used the slogan "Focus on Life."

MARKETING STRATEGY

Kodak had been using 200 advertising agencies worldwide but reduced that number to 4 during a general restructuring of its marketing program in 1994 and 1995. The company then increased its advertising expenditures for film, cameras, and its first image campaign. Kodak's U.S. advertising budget was $65.4 million in 1994, $82 million in 1995, and about $100 million from 1996 through 1998. Each of the four agencies (Ogilvy & Mather, J. Walter Thompson, Uniworld, and Saatchi & Saatchi) promoted a specific group of products, with the separate advertising campaigns all using the new slogan "Take Pictures. Further." Ogilvy & Mather was responsible for the overall corporate-image effort. Kodak's trademark yellow served as the dominant color in the advertisements, helping to unify the brand message. In print ads the tagline was positioned beside or below the red and yellow Kodak logo, often near the address of the company's home page on the Internet, which was also designed around the "Take Pictures. Further" theme.

The tagline first appeared in advertisements designed by J. Walter Thompson to publicize Kodak's new Advantix camera and accessories, which were launched in April 1996. Ogilvy & Mather handled the Advantix campaign in 1997 and 1998, still using the "Take Pictures. Further" slogan. Ads for Advantix products explained that the camera could take pictures in three sizes, that it featured drop-in film loading, and that the consumer received an index print when the film was developed. In 1997 Kodak spent about $60 million to advertise the Advantix brand in the United States. Ogilvy & Mather also created the "Tall Tales" execution, which had a budget of $20 to $40 million and ran during 1996 and 1997. These humorous scenarios, which aired on television and at movie theaters, showed people using products and services such as Kodak Gold and Max films and Kodak premium processing. One spot showed a young man accidentally photographing a flying saucer, then being pursued by government agents and rescued by space aliens. In another spot a consumer used Kodak's Image Magic digital enhancement station to hide the dents in a photograph of a Gremlin automobile.

OUTDOOR ADVERTISING

The "Take Pictures. Further" theme was used in the Kodak Image Expo at the 1996 Olympic Games and on kiosks and signs at Turner Field, the ballpark of the Atlanta Braves professional baseball team.

Many executions in the "Take Pictures. Further" campaign emphasized Kodak's digital products. A two-page ad in Reader's Digest in 1998 featured a photograph of three boys playing soccer. The headline read, "Your son was a blur as he raced down the field. But every detail will be crystal clear when you print out your pictures." The opposite page showed a digital camera with text explaining that the product allowed consumers to preview pictures, delete whatever they disliked, store the digital images on a picture card, use a computer to E-mail them to family and friends, and print them on high-quality paper. An ad in People magazine in 1998 also showed boys playing soccer next to the headline "This kick went clear across the country." A coupon was included, inviting consumers to try Kodak PhotoNet (an online service for E-mailing photographs, ordering reprints, and purchasing gifts via the Internet) or Kodak Picture disk (a floppy disk that allowed consumers to view photographs on their computer monitors and incorporate pictures into documents).

Kodak continued to use the slogan in new advertising campaigns during the late 1990s to promote three digital-imaging products that allowed amateurs to enlarge or crop their photographs, remove the red that flash photography sometimes caused in a subject's eyes, add messages to the image, and place decorative borders around their pictures. Noting an increase in the number of teenage consumers, Kodak began slanting more of its U.S. advertising toward teenage girls. One spot, titled "Tattoo," featured a girl who wanted a tattoo. Adhering to her mother's advice to "shoot your friends' tattoos, and we'll look at the options," she used an Advantix camera to photograph four different tattoos she liked. After having a nightmare in which the phrase "Viva Macarena" was tattooed across her forehead, the teen decided against getting a tattoo.

Unifying its global advertisements, the company launched its first worldwide image campaign in 1999. The effort built on the earlier campaign's "Tall Tales" commercials and featured more fantastic stories told through photographs taken with Kodak products.

OUTCOME

During the six-year span of "Take Pictures. Further," Kodak's uncontested dominance over the photography industry began to wane. The enterprise lost business not to other film companies but to the skyrocketing popularity of digital photography. According to Kodak executives and advertising analysts, the problem with "Take Pictures. Further" was that it failed to promote Kodak's own advancements in digital technology. In 1996 Kodak was one of the first companies to introduce a range of pocket-size digital cameras. Instead of marketing the digital cameras, however, Kodak promoted Advantix, which did not offer as many features as digital photography and cost more for consumers to develop. Belinda Parmar, an Ogilvy & Mather representative who worked on the campaign, told Marketing that Kodak's greatest problem was that "[i]t may have promising digital technology, but it has failed to communicate this effectively and convince consumers that Kodak is a digital brand."

Sales for Kodak steadily declined during the campaign's final three years. Kodak released several digital cameras throughout this period, but technology critics believed that digital Kodak cameras lacked the functionality and form of cameras made by Sony and Canon. In 2001 Kodak also made a late entry into online photo development with its launch of www.Ofoto.com, a web-site onto which consumers could upload their digital images and later receive the printed images in the mail. Kodak was offering digital products, but its campaign pushed the more expensive and less popular film products. "Kodak is well placed to become a success in home printing, particularly as the sector moves from high-end to mass market," Parmar continued in Marketing. "But first," she said, "it must focus its marketing communication on why, rather than how, people print out digital."

FURTHER READING

Crain, Rance. "Capturing the Kodak Moment Fast Becoming a Sad Memory." Advertising Age, November 24, 1997, p. 25.

Desmond, Edward W. "What's Ailing Kodak?." Fortune, October 27, 1997, p. 185.

Freeman, Laurie. "Shooting for Share." Supermarket Business, February 1999, p. 47.

Gelsi, Steve. "Putting the Big Picture Back in Focus: Kodak, Revamping Staff and Budget, Takes an Edgy Tack to Get Back on the Growth Track." Brandweek, November 25, 1996, p. 18.

Jardine, Alexandra. "Kodak: Is This a Kodak Moment?" Marketing, October 13, 2004, p. 28.

Kim, Hank. "Ogilvy Helming Global Kodak Effort." Adweek (eastern ed.), November 23, 1998, p. 5.

"Momentous Shifts." Brandweek, June 1, 1998, p. 26.

Panczyk, Tania D. "HSR Set to Push Kodak to Pros." Adweek, November 25, 2002.

Street, Rita. "Making Pretty Pictures Hip." Shoot, October 18, 1996, p. 25.

                                        Susan Risland

                                         Kevin Teague

TALL TALES CAMPAIGN

OVERVIEW

In the early 1990s Kodak, the venerable photo products company, found itself in increasing difficulties. Despite a long history of pioneering products and dominating the market, the company was up against strong competition, and it also faced rapidly changing new technology. In trying to keep up, Kodak had ventured unsuccessfully outside its core market of imaging, which for Kodak included photography, digital imaging, color management systems, and image and document storage systems. In this digital age most consumers were unaware that Kodak had digital products; rather, Kodak was seen as the "yellow box" company. By 1993 Kodak posted a $1.5 million loss. The company still dominated in film sales, but it was perceived as old-fashioned and out of touch with younger consumers.

The company took several steps to revitalize its image. It created the tag line "Take Pictures. Further" for all of its advertising in order to show consumers the many possibilities available to them in taking and developing their photos. Kodak also turned to the New York advertising agency Ogilvy & Mather to create the "Tall Tales" corporate brand campaign for television, the first such effort for Kodak. The campaign had a twofold objective: to establish the Kodak brand as one offering a multitude of possibilities for pictures and to make the company more relevant to potential new customers in the generation X age group.

"Tall Tales" was made up of two series of spots, each minimovies of 60 seconds, which ran during 1996 and 1997 on television and at movie theaters. The 1996 series was highly successful, winning a Gold Effie and a number of other awards. In 1997 Kodak followed with a second set of "Tall Tales."

HISTORICAL CONTEXT

Kodak was founded in 1881 by George Eastman and became a household name and market leader with the introduction of the Brownie camera in 1900, color film in 1935 and, above all, the Kodak Instamatic camera in 1963. Eastman believed in reaching ordinary people, and his mission was to make photography, then a cumbersome procedure, something anybody could do and enjoy. "You push the button, we do the rest" was the Kodak slogan, and it was a tremendous success. It made Kodak far and away the market leader for a century, maintaining a 60-70 percent market share.

When CEO George Fisher took over the reins at Kodak at the end of 1993, his goal was to refocus Kodak on what it does best. He was in a sense returning to the vision of George Eastman but placing his efforts firmly in the context of digital technology—meaning the use of computers and other digital media to create, manipulate, send, and store images. Fisher began selling off the new ventures that had led the company off its path—which had included Sterling Drug, L&F Products (makers of Lysol and related products), and the Clinical Diagnostics division—and refocused the company on imaging.

Kodak's marketing dilemma was that it had failed to position itself as a digital imaging innovator. Surveys showed that few consumers were even aware that Kodak had digital products. Indeed, as the magazine Sales and Marketing Management reported in early 1997, only very technology-savvy consumers were aware of the range of possibilities for enhancing photographs. During the 1990s, of the 60 million photos that were taken annually around the world, fewer than 2 percent were enlarged, manipulated, hung for display, or used commercially. Most went into a photo album or shoe box.

To resolve this dilemma Fisher created the new position of Chief Marketing Officer and in 1995 appointed Carl Gustin to fill it. Gustin left a position with the computer giant Apple to join Kodak and had also worked for a number of prestigious marketing agencies. Thus, he embodied exactly the talents Fisher sought to position Kodak for the digital age. The marketing department led by Gustin sat atop the business units and created centralized corporate branding and strategic planning. The new system was a dramatic change for Kodak. Whereas formerly each business division had carried out single-product advertising, Kodak changed to system advertising, which was planned through the corporate marketing division.

"Our goal is to go beyond 'You push the button' and take customers toward a future where they 'Take pictures. Further'," Fisher told Sales and Marketing Management. "But we'll do this in a way that makes it just as easy to take pictures further as it was to push the button. We want our imaging technology to be easy to use. Consumers want more and better pictures, not technology for its own sake."

TARGET MARKET

The "Tall Tales" campaign was directed at three separate and distinct groups. It focused first on parents of school-age children. More specifically, this group, generally 25 to 55 years old, was college-educated, used a PC at home, often subscribed to an on-line service, and took pictures. The group was also thought to influence the technology decisions of mainstream Kodak consumers who were less comfortable with technology.

A second major focus group was the "wired generation," adults 18 to 34 years old who were college-educated and PC and Internet users. It was thought that this group influenced other young consumers, as well as technology providers. Finally, the campaign focused on business managers and department heads, aged 35 to 64, who might have been part of the decision-making process for technology purchases in medium and large businesses. This group was likely to influence the technology considerations of fellow business executives, managers, and employees. All three groups were considered influential in the "Information Age."

COMPETITION

For much of its history Kodak had been without serious competition. However, the company met with new threats to its market position, during the 1970s and 1980s. Companies like Fuji and Konica successfully entered the film business and companies like Microsoft, Apple, Sony, and Hewlett Packard became leaders in the arena of new technologies. Because Kodak initially failed to position itself as a player in the digital age, it posed little threat to key digital competitors. Few consumers saw Kodak as a forward-thinking and innovative company; many did not even know of Kodak's digital products and services. But Kodak retained strong brand recognition. In 1996, for example, branding expert Interbrand Schechter Inc. called it the world's fourth strongest brand, surpassed only by McDonald's, Coca-Cola, and Disney.

Kodak saw Fuji as a particularly strong competitor in the film business. The two companies engaged in a protracted dispute over Kodak's share in the Japanese film market during the 1990s, with Kodak asserting that it had been denied a fair chance to reach out to Japanese consumers. Although Kodak lost the battle legally, it had the backing of the U.S. government and was able to wring some concessions from the Japanese government.

MARKETING STRATEGY

Prior to the "Tall Tales" campaign, Kodak had used single-product advertising, parceling out its $300 million advertising budget among some 200 agencies worldwide. By 1996 Gustin had consolidated these 200 agencies to four: Ogilvy & Mather, J. Walter Thompson, Uniworld, and Saatchi & Saatchi, assigning each to focus on specific products worldwide. In a further consolidation, Ogilvy & Mather became the sole agency for the "Tall Tales" executions, which combined product and image advertising in Kodak's first-ever corporate brand campaign.

The campaign had very specific goals. It sought to position Kodak as a digital technology innovator among those most influential in the Information Age; to develop Kodak brand awareness among the young wired generation, a good number of whom did not own cameras; and to increase awareness that Kodak had digital imaging products for both home and business uses.

The point of the campaign, which cost between $20 million and $40 million, was to convince the target groups that Kodak could best help them unleash the power of pictures. Kodak's products were perceived by consumers as being both reliable and of high quality, and evoked images of family values. On the other hand, consumers also saw Kodak as an old-fashioned and stodgy company that mostly made little yellow boxes of film to capture "Kodak moments." The campaign sought to draw on the long-held positive values to reposition Kodak as an innovative company more focused on the future than on treasured moments of the past. At the same time, Kodak was concerned that it not alienate its core group of older consumers. In other words, the campaign needed to promise the digital future without abandoning a long and worthy heritage.

KODAK OUT OF THE PICTURE IN JAPAN

In 1995 Kodak filed a petition with the United States government (under section 301 of the Trade Act of 1974) asking the government to investigate and remedy what it saw as anti-competitive trade practices in the Japanese market for consumer photographic film and paper. Japan was the second-largest market for consumer photographic products in the world, but Kodak's share of the film market there was less than 10 percent. The company had a much higher market share in other industrialized nations, including other Asian countries. The company said that its market research had shown that Japanese consumers were aware of the Kodak brand but cited "lack of availability" as their primary reason for not trying Kodak products.

Kodak's position in the conflict was strengthened in mid-1996, when an investigation by the U.S. trade representative confirmed the existence of trade barriers to imports of photographic film and paper in Japan. In February 1997 the U.S. government filed suit against Japan with the World Trade Organization (WTO) in Geneva, charging the government of Japan with preventing foreign importers from gaining a meaningful share of the Japanese market for consumer photographic products. The WTO ruled against Kodak later that year, but in early 1998 the U.S. government announced that it would hold the government of Japan to market access commitments it had made during the course of the dispute.

During the first phase of the "Tall Tales" campaign, buses at the 1996 Olympic Games in Atlanta carried Kodak advertising, and a CD-ROM containing video clips and company materials was distributed to selected members of the press. The campaign included Internet marketing as well. The Kodak website was redesigned around the "Take Pictures. Further" theme for both 1996 and 1997.

The 1997 series consisted of three "60-second movies" that linked life events with Kodak products. Among the products and services the campaign showcased were the Funsaver single-use camera, Kodak premium processing, Kodak Gold film with color sharp technology, Gold Max film, and Image Magic cropping and enlarging features.

In the first television spot, "Tattoo," a teenager desires a tattoo. Rather than prohibiting it outright, her mother proposes a compromise: she can photograph her friends' tattoos, and they will study the results together. The girl uses a Kodak camera to take snapshots of her friends' tattoos: Mickey's bulldog, Rachel's rose, Daphne's lizard, and Uncle Leo's faded and indecipherable "something." That night she awakens screaming from a nightmare in which "Viva Macarena" is tattooed onto her forehead. To her mother's visible relief, she announces the next day that she has decided to forego the entire project. In another spot, called "Saturday," a bouncy teenager takes pictures of scenes from an ordinary suburban day. Her bright and colorful pictures of feet, socks, a dog, and a bowl of cereal are fun and offbeat, and unexpectedly a museum curator offers the young photographer $100,000 to exhibit them. She accepts eagerly and basks in the spotlight of instant fame. Finally, in "Stacy" a young man sweeps his girlfriend off her feet with a digitally enhanced Kodak photo, paving the way for the couple's dreams of marriage and a long life together.

Specific network, cable, and syndicated programs made up the television media plan. The airings were planned to reach viewers of lighter television shows and those with an interest in technology and innovation. "Tattoo" had its prime-time debut on the Drew Carey Show on March 12, 1997; "Saturday" made its first appearance also on March 12 on the Fox Network; and "Stacy" premiered on The Simpsons on March 9. "Saturday" was also shown during the Academy Awards on March 24. The broadcast schedule ran May through July 1996 and during March 1997.

OUTCOME

Kodak executives viewed the "Tall Tales" campaign of 1996 and 1997 a success, declaring that the campaign had effectively redefined Kodak as a serious player in the Information Age. A 16-country tracking study showed a 3 percent gain in brand equity (or confidence in the brand), which the company attributed to "re-energizing, rather than abandoning a focus on memories," as CEO Fisher expressed it in a letter to the magazine Advertising Age. The campaign's commercials of 1996, which won a Gold Effie, registered an "enjoyability" score higher than 97 percent of all spots ever tested by Millward Brown International (MBI). In the category "uniqueness," "Tall Tales" received the best MBI score ever. Post campaign ad surveys by MBI Ad Trackers found that target consumers had changed their brand perceptions and that Kodak was seen as a more forward-thinking technological innovator after the campaign.

The wired generation also found more relevance in the Kodak brand. MBI found that the perception of the Kodak brand as "contemporary," "cool," and, above all, relevant rose by 25 percent in this group. Looking at the target audience as a whole, MBI found increased awareness that Kodak offered a variety of products for home and business users and that Kodak was more than just the "yellow box" company.

The campaign also had an immediate short-term effect on film sales for the second quarter of 1997. Still, despite the positive outlook, many financial experts felt it was too soon to judge the success of the "Tall Tales" campaign and questioned whether customers had truly accepted the company as a digital leader. "Kodak is in the midst of a long-term transition," Tom Graves of Standard & Poors told Sales & Marketing Management. "But if Kodak offers innovative, affordable products, it can be accepted as a leader in digital technologies."

FURTHER READING

Conlon, Ginger. "Getting into Focus: Carl Gustin is Leading Kodak's Effort to Reinvent Itself for the Future." Sales & Marketing Management January 1, 1997.

Gelsi, Steve. "Kodak Eyes Edgier Ads via Creative Consortium." Brandweek October 28, 1996.

Nelson, Emily, and Sally Goll Beatty. "Eastman Kodak Takes Thompson out of Picture, Focuses on Ogilvy." The Wall Street Journal June 17, 1997.

Wilke, Michael. "Kodak Studies 'Low' Interest by Kids: Working toward Global Ad Effort, Using Saatchi's Kid Connection." Advertising Age, April 14, 1997.

                                        Susan M. Steiner

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