Documente Academic
Documente Profesional
Documente Cultură
Submitted By:
Kaushik Jayaram, Shashank Shekhar, Shreeraj Pawar,
Sidhant Gupta
company. The next thing is that they are also not spending anything for the marketing which is
very important as a company. Kodak is already known as an expensive manufacturer of film rolls
and if they do not advertise about this model, then the customers will not know about this and
there would be no use of making such a product available in the market. Also, there is a huge
dependency of Kodak on the two to three months of sale that it is planning to use. But the issue
is that at the same time, other manufacturers may look at that and try to emulate the same thing.
Looking at the price cut and the increase in sales needed in one year for the product, it does not
seem likely that Kodak will be able to be very successful in the first year of the launch. This is
why they have to consider more options.
2. What would be the likely competitive response from Fuji? Who has the cost advantage
and how important is it?
Fuji, seeing that Kodak is trying to capture market share by launching a brand close to Fujis
price can respond in the following manner:
Fuji can enter into a price war with Kodak in this situation. Considering that Fuji is already well
established in the economy segment, it will try everything possible to ensure that Kodak stays
out of that segment. Market share of Kodak is the highest currently(70%) but their concern after
seeing the growth rate of Fuji(18%) has made them think about launching Funtime to compete
with economy brands. In terms of cost advantage, Fuji had an advantage over Kodak because of
following reasons:
Low advertising cost- Kodak spent close to $50 Million on advertising. This was four times that
of Fujis advertising cost ($12.5 Million).
The other cost advantage that Fuji had over Kodak was the margin advantage that Fuji got (55%)
over a film of $2.91 versus the margin that Kodak got(70%) over a film of $3.49. If Kodak did
decide to launch Funtime version, their margins would also be affected because of
cannibalization and seeing the increase in product lines that Kodak has to offer, we can assume
that dealers could increase their margin on Kodak film from 20% to 25%, thus again hurting
Kodak. Kodak historically focused on increasing advertising and focusing on marketing,
however it is important that they also build in house strength and keep the price on line like Fuji
did.
Price
Gross Margin
Dealer Margin
Profit Markup
Selling Price
Profit
Sales
Profit
Gold Plus
Current
New Price
3.49
2.9665
70%
70%
20%
20%
0.698
0.5933
2.792
2.3732
1.9544
1.66124
375200000
441411764.7
733290880
733290880
Increase in Sales
17.65%
Fun Time
Price
Gross Margin
Dealer Margin
2.792
70%
20%
Profit Markup
Selling Price
Per Unit Profit
Cannibalization
Lost Profit
Breakeven Units
Mkt Share Gained
Absolute Market Share
0.5584
2.2336
1.56352
56280000
109993632
70350000
35.00%
10.50%
cannibalization of Kodak Gold Plus. Also, it shall not deteriorate the premium brand image of
Kodak with a reference to a lower-price product. On the other hand Funtime is a completely new
name, and shall not have any leverage opportunity with Kodak brand.
After listing out the pros, cons and difficulties in going ahead with the launch of Funtime, We
can say that launching Funtime would definitely help Kodak improve its positioning in the
market. In fact it would also help Kodak acquire extra market share to regain its lost position.
5. What do you recommend Eastman Kodak do? Cut the price of the Gold Plus brand,
introduce the Funtime brand, or take no action? Discuss the pro and cons of each choice.
Launching Funtime brand
Few obvious reasons (Cons) why Kodak should refrain from launching the Funtime brand would
be:
1. Suspect Pricing Strategy: The economy rage is from $2.69 to $2.91. The private labels
are priced from $2.91 to $2.49. The Funtime product is proposed to be offered right in the
middle of Economy range and not yet aggressive enough to match Private range. This
pricing is very questionable and Im not sure how far this strategy will take Kodak in
their effort to protect its market share.
2. Kodak has built its reputation on quality and by innovating. It is risking its brand image
and might end up hurting the sales in the most profitable product which is Kodak Gold
Plus.
3. If Kodak launches the Funtime brand there is no guarantee that players such as Fuji and
other private label manufacturers would not drop their price further.
4. The current idea of providing the Funtime only during the off-peak season is too complex
and will become a huge over-head when retailers and distributors will come into picture.
Cut the price of Gold Plus brand
1. Cutting down the price will clearly send a signal to the customers and competitors that
Kodak is no more the high-quality and high-price player that it was.
2. It will also hurt the margins of Kodak Company and it may never get the customers it is
afraid of losing as they would anyways get a private label which is even cheaper than the
Funtime brand.
I would recommend Kodak not to launch the new brand Funtime. Kodak is walking into a Pricewar with some of these private label brands and will end up fighting a battle that plays to their
competitors strength. Rather, if Kodak wants to continue to dominate the market with a high
brand-image, it will have to rationalize its distribution channel. It will have to double down on
the advertising to re-emphasize the quality. Also, it will have to continue investing in R&D for
long term success as a high-margin business.