Managers' Forum ~ Business Case Reviews
The Kodak- Fujifilm Trade Dispute
Business Case Review by: Hongcheol Park
The Eastman Kodak Company
and Fuji Photo Film Co. are the main companies in
their domestic markets and the worldwide leaders in film and photographic
paper.
Each had about 70% of its home market, and outside Japan and the United
States
Kodak has 36% of the market, and Fujifilm had 33%. Kodak had long been
the worldwide
market leader, but in the past few decades Fujifilm had achieved major
gains
in market share as Kodak struggled to overcome a series of strategic
mistakes
outside its core lines of business. Fujifilm and Kodak had been intense
rivals
for nearly fifty years.
In 1889, Kodak moved into
Japan, operating through a Japanese distribution
system. This initial entry developed substantial business and was fairly
successful,
until foreign firms ran into trouble around the end of the Second World
War.
In order to protect the domestic firms of Japan, their government implemented
restrictions on the entry of foreign firms by limiting direct investments
and
imposing tariffs and quotas on imports. This gave Kodak a competitive
disadvantage
in the Japanese market. Moreover, in 1960 the Japanese government specifically
told Kodak that they would have operate through a single importer,
which forced
Kodak to stop supplying wholesalers directly. Consequently, Kodak developed
a relationship with Nagase&Co. as their import partner. By the
mid-eighties
Kodak took greater control of their operations in Japan, sending American
managers
to run the business. In 1984 they formed a joint venture with Nagase's
Kodak
division, and listed shares on the Tokyo Stock Exchange, Kodak began
to develop
film to suit the demands of the Japanese consumers, introducing Ektar
100 film
to meet the requirements of shaper images. Kodak's struggle to compete
with
Fuji was apparent in the late eighties and early nineties as they to
keep up
with Fuji¡¯s developments. For example, Kodak introduced
the one time use camera
in1988, two years after Fuji. Similarly, Kodak's introduction of high-resolution
film ISO 400 in1991 also came two years after Fuji had already developed
it.
By 1992 Kodak had invested
$750 million in Japan, built their own distribution
system, and employed over 3,00 people. Unfortunately, Kodak's market
share
still suffered, decreasing by 10%. In effort to turn this around, Kodak
developed
a new strategy in1994 that had four main goals:
¡¤ To achieve and maintain product leadership through
innovation
¡¤ To leverage its brand name
¡¤ To build more effective organization in Japan
¡¤ To obtain greater access to the market
Also, Kodak¡¯s Japan strategy had four components. The first
was to achieve
and maintain product leadership through innovation and rapid introduction
of
new products. Second, Kodak needed to leverage its brand name. Third,
Kodak
needed to build a more effective organization in Japan. The forth component
was to obtain greater access to the market.
Kodak's market strategy was
to file a petition under section 301 of the World
Trade Organization agreement to gain greater market access. This also
involved
pressuring the United States government to give attention to the issue
and place
a high priority on resolving the dispute. Important characteristic
of this approach
is how the government of U.S. and Japan functioned.
Source: The Kodak-Fujifilm Trade Dispute, Graduate School of Business
Stanford
University
