Eastman Kodak Company: Funtime Film

1. Diagnose the reasons for Kodak’s market share loss and make your assessment of the likely development of the market if Kodak maintained the status quo.

Kodak has been losing market share for the past five years to the point it has gone from 76% to 70%. The underlying causes that have generated such losses and have ultimately led consumers to favor competing brands with larger growth are:

I. Consumers are tending to view film as a commodity, often buying on price alone. Half of the picture takers claim they know little or nothing about photography. II. Quality differences among films are unclear. Superpremium, Premium, Economy and Price brands showed no real quality difference
In order to assess Price cuts in our flagship Gold Plus brand we need to understand what our change in contribution would be for the different price cuts, what would or sales volume had to be in order to maintain a 70% market share

As you see below, e have constructed scenarios for 5% price cuts up to a 20% price cut, leveling Gold Plus with Funtime. As you see our contribution margin drastically goes down however, still making a considerable amount (43% of margin vs retail price). Price Cut | 0% | 5% | 10% | 15% | 20% | Retail Price | 3.49 | 3.32 | 3.14 | 2.97 | 2.79 | Wholesalers Price (80% of retail price) | 2.79 | 2.65 | 2.51 | 2.37 | 2.23 | Cost (30% of retail price) | 1.05 | 1.05 | 1.05 | 1.05 | 1.05 | Contribution Margin | 1.75 | 1.61 | 1.47 | 1.33 | 1.19 | % vs. Present | 100% | 92% | 84% | 76% | 68% |

We have assumed a 90-10 split of Kodak’s sales in favor of Gold Plus considering only 14% of sales are in camera shops, and Ektar is mainly sold through this channel, however sharing shelve space with Gold Plus. With this in mind, Gold Plus sales should amount to US$431M in 1994 to maintain its current market position.

| 1993 | 1994 | Total Market | 670,000,000 | 683,400,000 | Kodak (70%) | 469,000,000 | 478,380,000 | Ektar (10%) | 46,900,000 | 47,838,000 | Gold Plus (90%) | 422,100,000 | 430,542,000 |

As you can see from the table below, in order to maintain our