Position Paper Kodak

Mary Jane J. Mollenido Managerial Accounting Graduate School, San Pedro College of Business Administration POSITION PAPER ON KODAK’S RE-EMERGENCE AFTER 2 YEARS OF BEING GONE IN THE PHILIPPINES I.

Introduction Upon reading the headline of an article circulated last November 5, 2009 from the

Philippine Daily Inquirer, entitled “After 2 years, Kodak back in RP” by Ms. Abigail L. Ho, what immediately came to mind is the question “Did Kodak left the Philippines?” so I read the article and was later on, presented with an answer, that “It did 2 years ago and is now coming back”. Kodak is a multinational corporation & a diversified manufacturer of photographic imaging equipment and supplies, chemicals, health-care products, and information systems. Also, it is a world famous brand in the imaging industry primarily because of its long standing presence in photography, film and health businesses. Kodak’s distinguished mark of being a product leader, complemented with competitive prices and high regard for customer needs and satisfaction has placed the company along the pages of history. II.

Background Information

a. History Eastman Kodak Company was founded by George Eastman, a bank teller, in April, 1880. After three years of diligently working on the camera plates, Eastman invented the first portable camera which is considered as the birth of snapshot photography. Among the company’s pioneer ideas in the field of photography, film and health industries are the Kodak Calvalcade - the first completely automatic projector, one time use cameras, film for the first X-Ray (Roentegen), brownie camera which were mass produced and was sold at $1.00, aerial cameras used during World War II, photo CD player, variety of easy to use cameras e.g. instamatic camera, films, paper products, All-in-one printers, copiers, blood analyzers, alkaline battery, the current digital photoframe and photo

mosaic, and the ever famous Kodak instant pictures from kiosks distributed nationwide for use to meet the demands of its clients. b. Company Structure Currently, Eastman Kodak Company is composed of 13 Directors that comprises a Board with different Committees – the Audit, Finance, Executive, Corporate Responsibility & Governance and the Executive Compensation and Development Committee.

III.

Issues surrounding Kodak’s comeback (Market Analysis) As a Kodak user for both camera and film, I strongly believe that Kodak’s

reopening of its Philippine office could only mean good business for the company specially during its financial predicament that have almost brought the company to its knees. a. Political, Economical, Socio-Cultural, Technological (PEST) Analysis Political Philippine copyright laws may be a problem for Kodak specially in the film business as pirated films from giant corporations, as well as, independent film makers are mass produced. Economical Existence of affordable mobile phones with cameras have promoted the Film, Photofinishing and Entertainment Group segment because the market realized that printing their pictures is the best way of keeping them rather than digitally storing them at the computer. Socio-Cultural

Rising population in the country may pose as a positive thing for Kodak’s reopening because of the Filipino’s sociable personality as well as, strong attachment towards relatives and occasions. Technological With Kodak’s 2007 plan of refocusing its attention in the digital industry thru efforts made in their Research and Development as well as increased supplier diversity, Kodak was able to come up with competitive gadgets that kept pace with other suppliers’ products both in technology and prices.

b. Threats, Opportunities, Weaknesses and Strengths (TOWS) Analysis Threats • High Competition

Weaknesses • At the brink of recovery from the strategic failures the company has realized during the past decade (financial condition is not at the healthiest level – might suffer a big blow if it will commit another ineffective business strategy)

Opportunities • Partnership with Philippines in the reproduction of official ballots during the conduct of the 1st Automated Philippine Elections in May 10, 2010 Strengths • Strong brand name • Product leader backed with long years of experience • Ability to rise amidst all financial & economic crisis.

IV. Key Success Factors •

A strong brand name o Associated with the Filipino culture and has taken a definition of an act of taking a picture/photograph as evidenced by the words “Kodakan” tayo, I’kodak” kita, magpa”Kodak” ka?

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A strong management team o Employs highly competitive and creative management & marketing team that are able to grab people’s memory retention by bringing the psychology of a “smile” and tugging at people’s emotions through memories.

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Leader in distributed photo print outputs o Product ideas and innovation on digital photo frames & mosaics makes the delivery of products & services more personal

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Existence of several kiosks nationwide, o A total of 350 outlets are scattered nationwide by distributor Techtrends alone considering that there are but 120 cities in the Philippines.

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Booming independent film making industry in the country o This could pose as a success factor for Kodak as their FPEG segment is already suffering from losses. The movie industry and the television series are keeping up with the slow yet steady increase in market demand.

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Existence of several Holidays in the country o Kodak’s seasonality of business is addressed here as the country has an array of festivities nationwide within the whole year coupled with the influx of both foreign and local tourists whenever festivities are celebrated which calls for a “Kodak Moment”

a. Traditional vis a vis Activity Based Costing approach A multinational company like Kodak cannot rely on traditional standard cost systems to address the expected key success factors it should expect upon its decision to return in RP simply because the variety of its products and services offerings are focused to attend to the specific needs of its clients which come in diversity. Kodak’s wide array of products and services calls for a combination of an Activity Based Costing approach and the Full Cost Accounting Systems approach. V.

Measures of Key Success Factors & using such measure for Operational Control with the Company’s Current Structure

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Market Share o Product demand (projected in sales) can be a good measure of Kodak’s brand name. Market share can also be a means of internal control as projected sales dictates the Master Budget for the company’s future business with the help of Finance & Audit Committees

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Advertisement recall o A measure of a strong management team and brand name. Planned reopening of business in the country highly affects the demand for the product and can also be used as a venue to promote value adding benefits to the consumers such as their former marketing strategy of reprinting old & faded photo prints for free.

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Business Sustainability o Kodak’s years of experience in the industry has gained a positive impression on the company and was perceived by the market as a “Leader Giant” in the imaging business. To avoid lawsuits on Environmental issues, the company must keep this in mind and engage its Corporate Responsibility and Governance Committee in active issues involving environmental laws to AVOID fines/penalties, which have been in the past harmed the company’s financial condition and reputation.

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Number of franchise/kiosks o With Techtrends as its current distributor, and 350 kiosks distributed nationwide, it is necessary for the Executive and Finance Committees to strategically cost its products and services accordingly (price discrimination)

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Profitability o Sales & Revenue are good indicators of a successful business venture hence, it is of utmost importance that said documents be accurate, up to date and reflects the true financial condition of the company so as to adequately plan and strategize the company’s actions.

VI. Assessment of Kodak’s Planning System Kodak’s plan to re-establish its presence in the Philippines is a sound marketing strategy and in line with its CY2010 objective of expansion in new areas. Its product reintroduction into the Philippines, through an agreement with the Philippine government by supplying the printing of electronic ballot through their printers as delivered by Smartmatic-TIM, will put the company in a new light in terms of advances in digital imaging industry. Also focusing its attention in Asia could help Kodak recover sales and revenue loss realized in U.S. Market as a result of their economic slowdown. Technological advances coming from an established company like Kodak which are priced competitively have high chances of increased product demand in Asia due to the numerous increase technology savvy populace. VII. Extent of Reliance on Financial Reporting and Control to achieve objectives A multinational company like Kodak should equally rely on accurate financial systems reporting data and experience. Its multiple operations in different countries, wide array of products and services, research and development efforts in the three business

segments –Consumer Digital Imaging (CDG), Film, Photofinishing & Entertainment (FPEG) and the Graphics Communications (GCG), have made the company reliant on figures (Statement of Operations & Cash Flow) to plan for its market strategies –whether expansion or cost cutting, product diversification or sale of an asset like its health group in 2007. Accurate and on-time consolidation of reports is the basis of sound management policies. VIII. Recommended Changes •

On Kodak’s planning system, it is absolutely necessary that Kodak map out its strategic development plan for its products and services in Asia in order to be competitive amidst the dynamic imaging industry. Also, it should weigh the long term valuation of re-establishing its Philippine office against market demand and viability of sales because it would mean investments on long term assets. On other management systems, With Techtrends as Kodak’s sole distributor for two years in the country, Kodak should give Techtrends time to adjust to Kodak’s plans so they could realign their objectives with Kodak’s plans. It is important to establish relationship and professionalism among distributors and consumers. Also, Kodak should adapt to market changes e.g. buying power, needs/demands of consumers. On improvement of management processes, human resource hiring and training should be one of Kodak’s utmost priorities, they must return to their original concept of treating their employees fairly and with respect. Since, during the last three worldwide cost cutting issues, Kodak has always resorted to workforce reduction which is in contradiction to George Eastman’s belief that an organization’s prosperity was not necessarily due to its technological achievements, but more to its workers’ goodwill and loyalty.

“Its time for a KODAK Moment, let the pictures be remembered as memories of times we fall then we cry, and we learn to share a SMILE”