Eastman Kodak Company: Funtime Films

On my opinion that is good and right movement to have line extension and repositioning. The problem in this case is that Kodak enjoyed its overwhelming power through the years in US market without really doing anything.

There was steadily decreasing market share and shareholder value in the film rolls market. This was especially not right given the fact that the market has been growing at a small 2% annual rate and the steadily increasing threat from competitors.Kodak had to come up with a new competitive strategy for corrective action to stop this decline, regain market share and increase share holder value. Kodak's strategy was to reposition itself by targeting a new segment: economy segment customers and changing the offer for super premium segment by switching brands. Let’s consider some straight forward calculations. Kodak’s market share is declining by 1.

2% per year and the trend of market growth rate is 2%. Kodak’s US market share is 70% now.If we assume that x films have been consumed in the year 1993. Then, 1.02x films may be sold next year, assuming the constant trend.

Kodak sold 0.7x films in the year 1993 and will sell around 0.702x next year. (1.02 (market growth) x (0.

7 – 0.012) = 0.70176). The conclusions out of the calculations are as follows: if Kodak will not do anything (continue to do as used to) and market growth will remain at the level of 2% it will lead to nearly the same Kodak sales next year.

This can be considered as a non healthy brand, since it is not growing together with the market.Since Kodak stayed away from the economy segment I believe offering Funtime 20% below Kodak Gold will attract economy customers that preferred other brands like Fuji or Konika. Of course the most challenging is not just to loose sales of the premium brand. By making some calculations for Gold plus we arrive to the gross margin 1.95 = 3.49*0.

8*0.7. For Funtime it will be 1.56 = 2.79*0.8*0.

7. We assume that margin levels remain the same. If users will switch from Gold to Funtime, Kodak may loose around 0.4 USD per roll gross, but on my opinion this may be compensated by 0 advertizing costs.