Beyond the Core: Expand Your Market Without Abandoning Your Roots by Chris Zook

Author:Chris Zook [Zook, Chris]
Language: eng
Format: mobi
Publisher: Harvard Business Review Press
Published: 2003-11-13T05:00:00+00:00

The Defensive Side of Adjacencies

Sometimes an adjacency move is dictated by a competitor’s threat. Occasionally, such a threat demands only monitoring; other times, it requires immediate action.

Eastman Kodak Company traces its core product line of film, developing materials, and cameras back to 1879, when George Eastman filed for his first patent, a method to make dry gelatin plates for cameras—a method that he had developed in his mother’s kitchen at the age of twenty-four. In 1884, he devised a way of capturing images on film and wrote in a letter, “I believe in the future of the film business.”12 By 1888, he had added cameras to the product line and named them Kodak, a synthetic name starting with the first letter of Kilbourn, his mother’s family name. One of his early customers, the warden of the Illinois State Penitentiary, wrote to him about the use of the camera in mug shots to track criminals or to circulate images of those who escaped. From that early start until one hundred years later, in 1990, Kodak grew to dominate its segment, with over 80 percent U.S. market share in film and developing agents, nearly 50 percent of processing, and a product line mirroring the original three areas of George Eastman. But then things began to change. Competitors along virtually every expansion vector changed, putting Kodak on the defensive around its total perimeter (figure 3-2).

The first competitor was Fuji, entering the U.S. market for film in 1984 with lower prices, the aggressive sponsorship of the Olympics, and the defiant act of floating its blimp over Kodak’s headquarters in Rochester, New York. Fuji gained market share from zero to 18 percent in 1997, when it further dropped prices at the low end of the market—attack vector one. Kodak has matched prices and launched a two-tiered film strategy. At the same time, 1997 was the year that digital cameras began to noticeably take off, led by Sony. Kodak has made digital camera technology its top R&D priority, and has captured the number two camera position, but does not yet make money in digital products—attack vector two.

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