Concept of economic darwinism
Course:- Business Management
Reference No.:- EM1355406

Assignment Help
Assignment Help >> Business Management

Kodak's Organizational Architecture: Discuss mistakes made in the 1980s

For many years, Eastman Kodak had a virtual monoply in film production. This market power resulted in large profits. It also permitted Kodak to control the timing for introducing new products to the marketplace and responding to changes in consumer demands.

By the 1980's, Kodak market environment had changed materially. The Fuji Corporation produced high-quality film that eroded Kodak's market share. Increased competition also came from generic store brands. In addition, the 1980's witnessed a technological explosion. Improved communications, design capabilities, and robotics allowed companies to bring new products to market within months rather than years. These changes in the market environment placed significant pressure on Kodak.

Kodak's stock price dropped from over $85 per share in 1982 to just over $71 in 1984. This 16 percent decline in stock price appears particularly dramatic when it is compared to the substantial increase in stock prices for the market as a whole.

Earnings per share at Kodak also dropped substantially. The company realized it had to change its organization to regain profits and market share. To quote Colby Chandler, former CEO of Kodak, at the 1984 annual meetings:

Like many companies, we are not used to working in an environment
where there is rapid technological transfer from laboratory to the
marketplace. But we know that will be important in our future.

During 1984, Kodak undertook a major corporate restructuring. Prior to the restructuring, decision making at Kodak was quite centralized. Top-level approval was required for most major decisions. The restructuring created 17 new business units with profit-and-loss responsibility. Business-unit managers were given increased decision-making authority for new products, pricing, and other important policy choices. By decentralizing decision rights, senior management hoped to make the company more responsive to changing customer demands and market conditions. To quote the 1984 annual report:

In short, Kodak is finding new ways to stimulate the innovative nature of its
people. The result: a spirit of independence, new ideas and a quickened
pace in the process which turns new ideas into commercial realities.

Unfortunately for Kodak, changing the assignment of decision rights did not have a significant impact on the company's performance. In response, Kodak adopted the Management Annual Performance Plann (MAPP) in 1987. Under this plan, the base salary of management employees was reduced by 10 percent and replaced with a variable bonus. The bonus was to average 10 percent, ranging from 0 to 20 perfent. Bonus payments were based on individual, unit, and company objectives.

The idea behind MAPP was that changing the performance-evaluation and reward systems would motivate managers to be more crative and industrious. The plan, however, did not have a large impact on managerial incentives or corporate profits. In 1993, Kodak officials were quoted as saying (1) that management had to develop tougher work standards and demote failing employees, and (3) that in the past, managers who advanced at Kodak had excelled in office politics but not necessarily leadership. Frustrated by the continued lack of success, Kodak's board of directors fired its CEO in late 1993.

1. What factors motivated Kodak to change its organizational architecture?

2. What mistakes did Kodak make in changing its architecture?

3. What might it have done differently?

4. How does this example relate to the concept of economic Darwinism?

Ask Question & Get Answers from Experts
Browse some more (Business Management) Materials
Describe the learning process in your organization. Does it take into account the varying generations? What does it do to capture learning and knowledge? What can your organiz
Prepare a piece of writing in which you define the four functions of management (planning, organizing, leading, and controlling). Include an explanation of how each function
Define and explain the term recruitment. Before selecting the right candidate, organisations should ensure that they Fit with the organisation. Have functional & Team
Discuss the pros also cons of using SPSS as a tool for data analysis. Compare its performance/characteristics to other alternative analytical tools which you may have used i
Identify the leaders in this case and describe their leadership styles. Evaluate the effectiveness of the leaders in the case. If applicable, identify the specific areas in
The last section of the report should discuss the future opportunities and challenges of solving the problem. What will help solutions improve? What limitations remain
Do you think that mark reps would view the website as competing for their consumers' purchases and a source of conflict or would they think that it helps them to promote mar
Assume that Francey Gordon goes to Karen Gross and Frank Johnson to discuss the matter Gordon tells Gross and Johnson that just because the freight forwarder indicates the mer