Analyzing Managerial Decisions: Eastman Kodak

Analyzing Managerial Decisions: Eastman Kodak
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Analyzing Managerial Decisions: Eastman Kodak
Factors that motivated Kodak to change its organizational architecture
The factors that motivated this firm to change its organization structure include reduced profits and the fact that its market share was declining. Eastman Kodak had for long dominated the film production industry and this market power allowed Kodak to record huge profits each year. By the 1980s however, the market environment changed significantly as more competitors started to emerge (Brickley, Smith & Zimmerman, 2009). For instance, Japanese firm Fuji Corporation produced films of high quality that actually reduced the market share of Kodak. There was also intensified competition from generic store brands. The technological explosion of the 1980s resulted in improved robotics, design capabilities, and communications which enabled Kodak’s competitors to introduce novel products into the marketplace in just a few months and not years (Brickley, Smith & Zimmerman, 2009). These major changes in the market environment negatively impacted Eastman Kodak. The management of Kodak knew that the company had to change its organization for it to regain market share as well as profits (Brickley, Smith & Zimmerman, 2009). As such, Eastman Kodak carried out a significant corporate restructuring in the year 1984.
Mistakes that Kodak made in changing its architecture
The first mistake is that Kodak decentralized the process of decision-making. Kodak’s senior management decentralized decision rights with the hope of making the firm to become more responsive to changing market condition and customer demands. In restructuring decision-making, which was previously centralized, the company’s senior management formed 17 business units each with loss-and-profit responsibility (Brickley, Smith & Zimmerman, 2009). The managers of these business units were provided with increased decision-making power for new products, pricing, in addition to other significant policy choices. Regrettably for the firm, these changes had little, insignificant impact on its performance.
The second mistake is that the firm changed the performance-evaluation and reward system. Kodak adopted and implemented an ineffective Management Annual Performance Plan (MAPP), which was in fact a response to the earlie...