The Kodak - Fuji Rivalry

The company's revenues had come down from $15.97 billion in 1996 to $14.36 billion in 1997, a fall of more than 10%. Kodak's net earnings had taken a big hit falling from $1.29 billion to just $5 million for the same period (Refer Exhibit I). However, the most worrying factor for Kodak's management was the more than five percent points decline (from 80.1% to 74.7%) in its US marketshare. Kodak had been consistently losing its marketshare to its competitors since the early 1980s even when it enjoyed almost a monopoly status in the photographic film and paper industry in the US with more than 85% marketshare. However, the fall of 5-percentage points in just one year was alarming. Market observers wondered what had happened to Kodak, which had built a strong presence in the US markets and had established a household brand name synonymous for films.

Though Fuji was able to build just 10% marketshare till the early 1990s, the increase in the marketshare was faster during 1993-1997 when Fuji's marketshare increased to 17%. Moreover, Fuji had intensified its efforts to gain share in the US, the largest market for photographic film and paper. The company established a production plant in the US, marketed aggressively and brought down prices significantly. In the late 1990s, the rivalry between Kodak and Fuji further intensified. Fuji had become the world's second largest manufacturer of photographic film and paper after Kodak. Analysts felt that for the first time in Kodak's century-long history had emerged a challenger who could dethrone Kodak in the US and hence Kodak should not take its home market for granted. According to Ray Pryor, Vice President, Gamma Labs, "Fuji is not just winning over cost conscious-consumers. Fuji is steadily eroding Kodak's lead in the professional photography market."