Analyzing Managerial Decisions: Eastman Kodak

With the slogan “you press the button, we will do the rest”, George Eastman (a high school dropout) put the very first simple camera into the hands of a world of consumers in 1888 (“History of Kodak,” n. d. , para. 1). For many years, Eastman Kodak was virtually the only film manufacturer around so they had a monopoly in film production. Kodak was able to control the timing for introducing new products into the market and was able to make changes due to customer demand. Until the early 1980’s, Kodak owned the film production market with very little competition.
This suddenly changed when Fuji Corporation and many other generic store brands began producing high quality film as well (Brickley, Smith, & Zimmerman, 2009, p. 358). Technological advances, robotics, new design capabilities and better communications made it possible for the other companies to bring new products to the market in much less time. It was now months instead of years (Brickley et al. , 2009, p. 358). Film and related products became more readily available, resulting in a more competitive film production industry. Kodak’s monopoly was gone.
This caused Eastman Kodak to make changes to its organization architecture in 1984; the design of the current organization architecture no longer fit the business environment for the film industry. One of the largest factors to motivate Eastman Kodak to make these changes, were increased competition and decreased market share. The stock price of Eastman Kodak went from $85 a share in 1982 to just over $71 in 1984. This is a drop of 16% in their stock price (Brickley et al. , 2009, p. 358). When compared to the increases in stock for the other companies in this market as a whole, the decrease was disturbing.

Kodak made some rapid and unbalanced changes to its architecture, in order that they might regain some of the market share it lost. While making changes to one section of the company, they did not coordinate the changes to the other sections. In 1984, Kodak decentralized the organization by restructuring and changing its decision making process. “The restructure created 17 new business units”. These new business units had profit–and-loss responsibilities, and the corresponding managers were given the responsibility to decide on new products, pricing and other important policies (Brickley et al.
, 2009, p. 359). Unfortunately the result of this major organizational architecture, had a very small impact on the companies plan to regain its market share and profits. In reaction to the lack of impact, Eastman Kodak implemented the Management Annual Performance Plan (MAPP). This was to be the new performance-evaluation and reward system. There are many types of Management Annual Performance Plans ( The government Performance Results Act of 1993 requires each state agency to develop and publish an Annual Performance Plan (“Annual Plans,” 2003, para. 14)).
The company felt by changing the methods of rewarding individual and business units, it would help them to be more innovative and more responsive to the customers’ needs and demands (Brickley et al. , 2009, p. 359). And again, this change was a mistake and unfortunately it did not have the affect Kodak thought that it would. The new Performance Evaluation System did not motivate the employees. When changing organizational architecture, it is extremely important to remember that the three legs of the stool (or the three components) of organizational architecture are interdependent and need to be coordinated (Brickley et al., 2009, p. 350-1).
Kodak should have designed it with the three following characteristics in mind: 1) assignment of decision rights, 2) methods of rewarding individuals, and 3) structure of systems to evaluate the performance of both individuals and business units (Brickley et al. , 2009, p. 341). This left Kodak’s “three legged stool” unbalanced. In short, the company did not implement a rewards method and performance evaluation system at the same time it began changing the assignment of decision rights. When one component is changed, the other components should be changed too.
Kodak could have improved the effectiveness of the change in organizational architecture by holding employees accountable while also implementing a decentralized decision making approach. Kodak was set in its ways for a long time and when Fuji and the other companies came along with the advanced technologies; it did not know how to make these changes in the most effective and efficient way possible. Finally, I believe they should have fired the CEO earlier, he was definitely not thinking along the same lines with the market performance and changing industry.
When he discovered the three legged stool was not balanced it was too late. By firing the CEO this may have provided the “shake up” that management needed to get the company going in the right direction. “An interesting view in economics asserts that the foundations for behavioral assumptions such as profit or utility maximization at an individual level or behavior in accordance with Nash equilibrium at the strategic level should be found in evolutionary selection against those who do not behave as assumed. This view, could be called economic Darwinism” (Sloth & Whitta-Jacobsen, 2005, para. 2).
This example perfectly illustrates the concept of economic Darwinism, especially from the perspective of “survival of the fittest” (Brickley et al. , 2009, p. 8). Kodak failed to stay competitive with Fuji by failing to adapt to the changing industry of film production, also by not effectively changing their organizational architecture. Due to this, Kodak lost significant profits and the market share. Although Kodak survived, it definitely was not the “fittest” in the film industry in the 1980’s and early 1990’s. In 1993, the CEO of many years was fired, further exemplifying economic Darwinism at Kodak.