Wednesday, January 25, 2012

Gary North on the Fall of Kodak

He calls it "a classic story of a fat and sassy firm with a near monopoly in its field that did not bother to adjust to changing customer demand" — Kodak Moments: Out of Focus. A particularly perceptive excerpt:
    Kodak's executives made a fundamental mistake in 1975. This mistake is almost universal. It did not understand what business it was in. If you had asked a Kodak executive what business the company was in, he would have said "the film business." Kodak was famous for its film. But it was not in the film business. It was in the photography business. Kodak film buyers bought the film in order to get pictures.
Far worse than such short-sighted foolishness is this:
    In 1995, Kodak charged Fuji with trade violations in Japan. Kodak complained to the U.S. government under section 301 of the U.S. Trade Representative's rules. The government in 1996 prudently turned the case over to the World Trade Organization, which had opened for anti-business in 1995. This was the first case where the WTO decided on an antitrust issue, took Fuji before the World Trade Organization. It lost the case in late 1997. From the beginning, Kodak had a hard time proving its case. Japan had eliminated all tariffs on imported film in 1994. It had been slowly reducing tariffs on film for years, yet Kodak could not increase its market share in Japan. Fuji blamed Kodak's lack of competition.

    Here is the irony of Kodak's case. In 1994, Kodak had brought a lawsuit against the U.S. government asking that the antitrust limits placed on the firm in 1921 and again in 1954 be removed. Kodak had a dominant share of the U.S. market, the government claimed. "Only because we offer better products," Kodak replied. Kodak won the case. The limits were removed. Then Kodak asked the government to go after Fuji in Japan.

    The hypocrisy of Kodak is obvious to anyone who understands economics. The company believed in domestic dominance apart from antitrust, but it also believed in antitrust intervention in Japan. It was focused on government, not customers.

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1 Comments:

Blogger Pints in NYC said...

Wilco's "Kamera"

This video, I think, is oddly appropriate for the post at hand, as well as the Dr. Strangelove-esque tenor of your blog in general.

http://www.youtube.com/watch?v=eS4HQxP0kQ0

January 26, 2012 at 12:21 AM  

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