Kodak Funtime Ans2 1v2p

2. Fuji, seeing that Kodak is trying to capture market share by launching a brand close to Fuji’s price can respond in the following manner: Fuji can enter into a price war with Kodak in this situation. Considering that Fuji is already well established in the economy segment, it will try everything possible to ensure that Kodak stays out of that segment. Market share of Kodak is the highest currently(70%) but their concern after seeing the growth rate of Fuji(18%) has made them think about launching Funtime to compete with economy brands. In of cost advantage, Fuji had an advantage over Kodak because of following reasons: Low advertising cost- Kodak spent close to $50 Million on advertising. This was four times that of Fuji’s advertising cost ($12.5 Million). The other cost advantage that Fuji had over Kodak was the margin advantage that Fuji got (55%) over a film of $2.91 versus the margin that Kodak got(70%) over a film of $3.49. If Kodak did decide to launch Funtime version, their margins would also be affected because of cannibalization and seeing the increase in product lines that Kodak has to offer, we can assume that dealers could increase their margin on Kodak film from 20% to 25%, thus again hurting Kodak. Kodak historically focused on increasing advertising and focusing on marketing, however it is important that they also build in house strength and keep the price on line like Fuji did. 3. Considering introduction of Funtime, we calculated the breakeven points in of increase in market share and breakeven units needed. As per the

below calculations, Kodak would gain market share of almost 24% if it goes ahead with the introduction of Funtime. Also, for cannibalization we assumed the rate to be 10%. The other assumption we made was the split of unit sales from Kodak gold plus would be 80%. Fun Time Price Gross Margin Dealer Margin Profit Markup Selling Price Per Unit Profit Cannibalization Lost Profit Breakeven Units Mkt Share Gained Absolute Market Share

Price Gross Margin Dealer Margin Profit Markup Selling Price Profit Sales Profit

2.792 70% 20% 0.5584 2.2336 1.56352 37520000 73329088 46900000 23.33% 7.00% Gold Plus Current New Price 3.49 2.9665 70% 70% 20% 20% 0.698 0.5933 2.792 2.3732 1.9544 1.66124 375200000 441411764.7 733290880 733290880 Increase in Sales 17.65%