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December 1997 Volume 2.04
"We did nothing special"
Those were words used by George Tanaka (head of Fuji America) to
describe what I believe must be one of the major customer value
movements that have occurred this decade in the U.S. market.
The story begins in 1984 when Kodak turned down sponsorship of
the Los Angeles Olympics. At that time Fuji was just a blip on the
Value Map. The sponsorship raised their profile so successfully
that within months they had signed up 50,000 new distributors. From
that time on, Fuji slowly built its market share by building a reputation
based on both superior price and quality so that by early 1996 it
had 10% of the U.S. market with Kodak holding 80%. A highly profitable
duopoly had evolved with Fuji pricing its film just a little bit
lower than Kodak. In terms of product and service quality Kodak
was generally regarded as being vastly superior to Fuji.
(This story is based on published news reports. The Value Map positions
shown are assessed from the published information.)
Plotting their positions on the Value Map we see that both companies
were lined up in the Fair Value Zone, with Kodak in the premium
position, and Fuji in the economy position:
With this positioning, both companies were offering similar relative
value. A slow loss of market share from Kodak to Fuji would have
continued until the market had achieved stability around the number
of customers wanting the economy or premium option.
In late 1996 Fuji began slashing its prices by up to 25%. At the
same time it launched a new market campaign based around the slogan,
'You can see the future from here.' The campaign exploited the high
quality blues and greens that professional photographers were starting
to rave about, as well as the superb service from the ever-growing
chain of Fuji Image Plazas.
Fuji had chosen its new position on the Value Map, delivered that
Value, and then communicated it to the market. The result was that
it had moved from the Economy position on the Value Map into the
better value position. On the Value Map everything is relative.
Fuji's move to the better value position meant that Kodak was pushed
into the Worse Value position:
This change in position had a dramatic impact in the market place
with Fuji's market share increasing from 10% to 16%, while Kodak's
dropped from 80% to 75% (135 million dollars a year of sales). These
changes flowed through to the stock market with Fuji's stock going
up by 40%. Kodak's stock went down by 12%.
In November 1997, Kodak announced a one billion-dollar restructuring
charge with 10,000 jobs being shed. On the other hand Fuji runs
a low cost operation that has allowed it to double sales over the
last 10 years while keeping its staff levels flat.
While this fierce competition between chemical photography continues,
a new blip on the Value Map has appeared with Epson, Canon, and
Hewlett Packard selling 1.8 million digital cameras in 1997. Fuji
and Kodak must both keep an eye on these new competitors while they
pursue each other.
Greatest Invention of the Century
One of the pleasures of my boyhood was that our mother made homemade
bread on special occasions. It was all quite magical. She used this
little cake of compressed yeast. First she would mix the ingredients
and form the dough. The dough was then put in a large pottery bowl
and placed in the airing cupboard above the hot water cylinder,
where it was left to rise. After a couple of hours mum took the
dough out and kneaded it again. When it had risen again she put
it in the baking trays and placed them in the oven. While it was
cooking the delicious smell of baking bread pervaded the house.
Eventually it would be ready and 3 eager sons would quickly devour
it.
Well these days it is all a lot simpler, thanks to Panasonic and
their Bread Bakery. The story of how the Panasonic engineers built
the first automatic bread maker is now legendary. They went through
tonnes and tonnes of flours before they eventually made one that
would work. Watching an expert baker make bread, they observed the
special kneading needed to make really great bread. They simulated
this in their design by embedding the expert knowledge of the baker
on a silicon chip. So now all you have to do is put the right ingredients
in the Bread Bakery, then push the start. The silicon chip takes
over kneading the dough, letting it rise, then baking it till a
beep tells you it is ready.
The recipe I use in the Bread Bakery is:
Put 2 t of dried yeast in first. Follow this with 2 cups of stone
ground wholemeal flour, and 1 cup of white flour. Then add 3 T of
gluten flour and 3 T of milk powder. Next add 2 T of olive oil followed
by 2 T of sugar, and 2 t of salt. Finally add 1 ¸ cups of water,
place the baking pan in the Bakery, and then push the start button.
(t = teaspoon, T = Tablespoon.)
Regards,
Rodger Gallagher
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