Why Did Kodak Fail? | Kodak Bankruptcy Case Study

Yash Taneja Yash Taneja
Jan 24, 2021 7 min read
Why Did Kodak Fail? | Kodak Bankruptcy Case Study

Kodak, as we know it today, was founded in the year 1888 by George Eastman as ‘The Eastman Kodak Company’. It was the most famous name in the world of photography and videography in the 20th century. Kodak brought about a revolution in the photography and videography industries. At the time when only huge companies could access the cameras used for recording movies, Kodak enabled the availability of cameras to every household by producing equipment that were portable and affordable.

Kodak was the most dominant company in its field for almost the entire 20th century. But a series of wrong decisions killed its success. The company declared itself bankrupt in 2012. Why did Kodak, the king of photography and videography, go bankrupt? What was the reason behind Kodak's failure? Why did Kodak fail despite being the biggest name of its time? This case study answers the same.

Why Did Kodak Fail?
Biggest Cause Of Kodak's Failure
Kodak's Bankruptcy Protection

Why Did Kodak Fail?

Why did kodak fail?
Kodak's Failure Represented In Graph

Kodak, for many years, enjoyed unmatched success all over the world. By 1968, it had captured about 80% of the global market share in the field of photography.

Kodak adopted the 'razor and blades' business plan. The idea behind the razor-blade business plan is to first sell the razors with a small margin of profit. After buying the razor, the customers will have to purchase the consumables (the razor blades in this case) again and again; hence, sell the blades at high-profit margin. Kodak's plan was to sell cameras at affordable prices with only a small margin for profit and then sell the consumables such as films, printing sheets, and other accessories at high-profit margin.


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Using this business model, Kodak was able to generate massive revenues and turned into a money-making machine.

As technology progressed, the use of films and printing sheets gradually came to a halt. This was due to the invention of digital cameras in 1975. However, Kodak dismissed the capabilities of the digital camera and refused to do something about it. Did you know that the inventor of the digital camera, Steve Sasson, was an electrical engineer at Kodak when he developed the technology? When Steve told the bosses at Kodak about his invention, their response was, “That’s cute, but don’t tell anyone about it.” That's how you shoot yourself in the foot!

Kodak ignored digital cameras because the business of films and paper was very profitable at that time and if these items were no longer required for photography, Kodak would be subjected to huge losses and end up closing down the factories which manufactured these items.

Why did kodak fail- kodak bankruptcy case study
Steve Sasson With The First Ever Digital Camera In 1975

The idea was then implemented on a large scale by a Japanese company by the name of ‘Fuji Films’. And soon enough, many other companies started the production and sales of digital cameras, leaving Kodak way behind in the race.

This was Kodak's first mistake. The ignorance of new technology and not adapting to the changing market dynamics initiated Kodak's downfall.


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Biggest Cause Of Kodak's Failure

After the digital camera became popular, Kodak spent almost 10 years arguing with Fuji Films, its biggest competitor, that the process of viewing an image captured by the digital camera was a typical process and people loved the touch and feel of a printed image. Kodak believed that the citizens of the United States of America would always choose it over Fuji Films, a foreign company.

Fuji Films and many other companies focused on gaining a foothold in the photography & videography segment rather than engaging in a verbal spat with Kodak. And once again, Kodak wasted time on promoting the use of film cameras instead of emulating its competitors. It completely ignored the feedback from the media and the market. Kodak tried to convince people that film cameras were better than digital cameras and lost 10 valuable years in the process.

Kodak also lost the external funding it had during that time. People also realized that digital photography was way ahead of traditional film photography. It was cheaper than film photography and the image quality was better.

Around that time, a magazine stated that Kodak was being left behind because it was turning a blind spot to new technology. The marketing team at Kodak tried to convince the managers about the change needed in the company's core principles to achieve success. But Kodak's management committee continued to stick with its outdated idea of relying on film cameras and claimed the reporter who said the statement in the magazine did not have the knowledge to back his proposition.

Kodak failed to realize that its strategy which was effective at one point was now depriving it of success. Rapidly changing technology and market needs negated the strategy. Kodak invested its funds in acquiring many small companies, depleting the money it could have used to promote the sales of digital cameras.

When Kodak finally understood and started the sales and the production of digital cameras, it was too late. Many big companies had already established themselves in the market by then and Kodak couldn't keep pace with the big shots.

In the year 2004, Kodak finally announced it would stop the sales of traditional film cameras. This decision made around 15,000 employees (about one-fifth of the company’s workforce at that time) redundant. Before the start of the year 2011, Kodak lost its place on the S&P 500 index which lists the 500 largest companies in the United States on the basis of stock performance. In September 2011, the stock prices of Kodak hit an all-time low of $0.54 per share. The shares lost more than 50% of their value throughout that year.


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Kodak's Bankruptcy Protection

By January 2012, Kodak had used up all of its resources and cash reserves. On the 19th of January in 2012, Kodak filed for Chapter 11 bankruptcy protection which resulted in the reorganization of the company. Kodak was provided with $950 million on an 18-month credit facility by the CITI group.

The credit enabled Kodak to continue functioning. To generate more revenue, some sections of Kodak were sold to other companies. Along with this, Kodak decided to stop the production and sales of digital cameras and stepped out of the world of digital photography. It shifted to the sale of camera accessories and the printing of photos.

Kodak had to sell many of its patents, including its digital imaging patents, which amounted to more than $500 million in bankruptcy protection. In September 2013, Kodak announced it had emerged from Chapter 11 bankruptcy protection.

Frequently Asked Questions About Kodak

What led to the downfall of Kodak?

The ignorance of new technology and not adapting to changing market needs initiated Kodak's downfall.

Why did Kodak fail and what can you learn from its demise?

Kodak failed to understand that its strategy of banking on traditional film cameras (which was effective at one point) was now depriving the company of success. Rapidly changing technology and evolving market needs made the strategy obsolete.

When did Kodak go out of business?

Kodak faced its demise in 2012.

Why was Kodak so successful?

Kodak adopted the 'razor and blades' business plan. The idea behind the razor-blade business plan is to first sell the razors with a small margin of profit. After buying the razor, the customers will have to purchase the consumables (the razor blades in this case) again and again; hence, sell the blades at high-profit margin. Kodak's plan was to sell cameras at affordable prices with only a small margin for profit and then sell the consumables such as films, printing sheets, and other accessories at high-profit margin.

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