Kodak started selling photographic equipment on Japan 1889 and by the 1930s it had a dominant position in
the Japanese market. But after World War II, U.S occupation forces persuaded most U.S companies including Kodak to leave Japan to give the war torn local industry a chance to recover. Kodak was effectively priced out of the market by tariff barriers; over the next 35 years Fuji gained 70% share of the market while Kodak saw its share slip to miserable 5%. During this period Kodak limited much of its activities in Japan.
This situation persisted until early 1980s when Fuji launched an aggressive export drive, attacking Kodak in
the north American and European markets. Deciding that a good offence is the best defense, in 1984 and the
next six year, Kodak outspent Fuji in Japan by a ratio of more than 3 to 1. It erected mammoth $ 1 million near signs as land marks in many of the Japan’s big cities and also sponsored Sumo wrestling, Judo, and tennis tournaments and even the Japanese team at the 1988 Seoul Olympics. Thus Kodak has put Fuji on defensive, forcing it to divert resources from overseas to defend itself at home. By 1990’s, some of Fuji’s best executives had been pulled back to Tokyo.
All this success, however , was apparently not enough for Kodak. In may 1995, Kodak filed a petition with the US trade office, that accured the Japanese government and Fuji of “Unfair trading practices”. According to the petition, the Japanese government helped to create a ‘ profile sanctuary’ for Fuji in Japan by systematically denying Kodak access to Japanese distribution channels for consumer film and paper. Kodak claims Fuji has effectively shut Kodak products out of four distributors that have a 70% share of the photo distribution market.
Fuji has an equity position in two of the distributors, gives large year –end relates and cash payments to all
four distributors as a reward for their loyalty to Fuji, and owns stakes in the banks that finance them. Kodak
also claims that Fuji uses similar tactics to control 430 wholesale photo furnishing labs in Japan to which it is
the exclusive supplier. Moreover Kodak’s petition claims that the Japanese government has actively
encourages these practices. But Fuji a similar counter arguments relating to Kodak in U.S. and states bluntly that Kodak’s charges are a clear case of the pot calling the kettle back.
(a) What was the critical catalyst that led Kodak to start taking the Japanese market seriously?
(b) From the evidence given in the case do you think Kodak’s charges of unfair trading practices against Fuji
are valid? Support your answer.
the Japanese market. But after World War II, U.S occupation forces persuaded most U.S companies including Kodak to leave Japan to give the war torn local industry a chance to recover. Kodak was effectively priced out of the market by tariff barriers; over the next 35 years Fuji gained 70% share of the market while Kodak saw its share slip to miserable 5%. During this period Kodak limited much of its activities in Japan.
This situation persisted until early 1980s when Fuji launched an aggressive export drive, attacking Kodak in
the north American and European markets. Deciding that a good offence is the best defense, in 1984 and the
next six year, Kodak outspent Fuji in Japan by a ratio of more than 3 to 1. It erected mammoth $ 1 million near signs as land marks in many of the Japan’s big cities and also sponsored Sumo wrestling, Judo, and tennis tournaments and even the Japanese team at the 1988 Seoul Olympics. Thus Kodak has put Fuji on defensive, forcing it to divert resources from overseas to defend itself at home. By 1990’s, some of Fuji’s best executives had been pulled back to Tokyo.
All this success, however , was apparently not enough for Kodak. In may 1995, Kodak filed a petition with the US trade office, that accured the Japanese government and Fuji of “Unfair trading practices”. According to the petition, the Japanese government helped to create a ‘ profile sanctuary’ for Fuji in Japan by systematically denying Kodak access to Japanese distribution channels for consumer film and paper. Kodak claims Fuji has effectively shut Kodak products out of four distributors that have a 70% share of the photo distribution market.
Fuji has an equity position in two of the distributors, gives large year –end relates and cash payments to all
four distributors as a reward for their loyalty to Fuji, and owns stakes in the banks that finance them. Kodak
also claims that Fuji uses similar tactics to control 430 wholesale photo furnishing labs in Japan to which it is
the exclusive supplier. Moreover Kodak’s petition claims that the Japanese government has actively
encourages these practices. But Fuji a similar counter arguments relating to Kodak in U.S. and states bluntly that Kodak’s charges are a clear case of the pot calling the kettle back.
(a) What was the critical catalyst that led Kodak to start taking the Japanese market seriously?
(b) From the evidence given in the case do you think Kodak’s charges of unfair trading practices against Fuji
are valid? Support your answer.
Answers
(a) What was the critical catalyst that led Kodak to start taking the Japanese marketseriously?
Kodak: The Changing StrategiesBy 2000, Kodak, the company thatpioneered the imaging industry byinventing easy-to-use cameras andphotographic film, was in deep crisis. Withthe advent of digital cameras in the mid1990s, Kodak found its sales declining asconsumers preferred the new cameras,which did not use films. The growingpopularity of digital cameras led to a slumpin film sales, which was a major revenuegenerator for Kodak. Additionally, the newtechnology attracted a lot of competitionfrom traditional as well as new players. Inorder to maintain its lead in the industry,Kodak decided to adopt the new technologyand reinvent itself from a camera and filmmanufacturer to a digital imaging company. The case discusses the evolution of thedigital camera market and the shrinkingfilm business. It also highlights the strategies adopted by Kodak to embrace the newtechnology to sustain its leadershipposition.
(b) From the evidence given in the case do you think Kodak’s charges of unfairtrading practices against Fuji are valid? Support your answer.
On December 5, 1997 the US lost its first major trade dispute in the newly formedWorld Trade Organization(WTO). The high-profile case pitted photographic paper and film giants
Kodak and Fuji against one another along with their respectivegovernments, the US and Japan. Kodak claimed that Japan's photographic market &distribution structure, "deny[ed] [Kodak] fair and equitable marketopportunities."
Essentially, Kodak was arguing that it could not penetrate theJapanese market beyond a certain level due to structural restraints, governmentintervention, and back-room policies that favored Fuji.
On the other hand, Fuji & theJapanese government contended that Kodak's poor showing in Japan was due todeficient marketing, management, and investment in the Japanese market. Fuji and theJapanese government refused to enter into negotiations with Kodak because they perceived Kodak's allegations as groundless.This refusal to even discuss Kodak's complaint prompted a May 1995 Kodak filingwith the US Trade Representative's office under Section 301, which allows the US touse unilateral action against unfair trading practices. This was viewed to be Kodak's best chance to pry open the Japanese market. To Kodak's jeopardy, the case wasturned over to the WTO's Dispute Settlement Body in June of 1996. On December 5,1997 the WTO ruled against Kodak and the US saying it had found no evidence that,"Japan rigged its domestic markets to favor Fuji Photo Film Co. over Kodak.
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