Kodak's China strategy not black-and-white
By Jiang Jingjing (China Business Weekly)
Updated: 2004-05-10 14:03

The world's largest imaging producer, the US-based Eastman Kodak continues to commit itself to both traditional and digital businesses in China, although its global strategy has shifted to digital products in line with international consumption trends.

Daniel Carp, chief executive officer (CEO) of Kodak, believes China is a "diversified market," with different types of consumers, and therefore a local strategy should be adopted.

"The strategy in China is part of our global strategy, as developing the customers of traditional cameras is cultivating our future customers of digital products," Carp said during a recent trip to Changsha, capital of Central China's Hunan Province.

The company has donated a total of 5,000 traditional cameras in Lanzhou, capital of North China's Gansu Province, and Changsha, hoping the "camera seeding" project will stimulate traditional camera consumption in the region.

Currently only 20 per cent of Chinese families have cameras, while the percentage for rural areas is far behind the national level, the company's survey indicates.

In China, the per capita consumption of film was less than one roll (0.2) last year, compared with the three to four rolls per person annually in developed countries.

In more developed regions, such as Beijing, Shanghai, Guangzhou and other eastern coastal cities, the popularity of digital cameras is similar to that in Japan.

In September of 2001, Kodak divided China into two sales regions: The first region, which includes developed cities, will focus on promoting digital products; and the second region, consisting of the secondary cities, towns and vast rural areas in the country's central and west provinces, will develop the traditional business.

The second sales region has more than 1 billion people. With the rapid economic growth in China, Kodak believes the business in the region will boom, Carp said.

The company sold 2 million traditional cameras in the region last year, and the figure for the first quarter of this year is 1 million. Whole-year sales volume is expected to hit 4 million this year, according to Meng Xianguang, manager of Kodak's Chengdu branch.

Earlier this year, Kodak announced that the company would stop selling traditional cameras in the United States, Canada and some European countries. The decision indicates the imaging giant has shifted its focus from traditional cameras to its digital business in developed countries.

"It is a fact that everything in the world can become digital in the future, and Kodak is taking advantage of the transfer," Carp said.

Kodak recently announced its financial results for the first quarter of the year: Company revenues hit US$2.92 billion worldwide, up 11 per cent year-on-year. Revenues for the digital business grew by 44 per cent, while the traditional business saw revenue decrease by 2 per cent.

"Such an achievement indicates that Kodak's strategy of 'going digital' is correct," Carp said.

But in China the situation is more complicated, therefore the strategy is more comprehensive, the CEO said.

"There are three backbones for our future growth in the country: the consumers' business (cameras and imaging), the healthcare (medical imaging) area and the commercial (film/movie) use. All of which consist of both digital and traditional products," Carp said.

Since establishing its first representative office in Shanghai in 1927, Kodak has invested more than US$1.2 billion in China, manufacturing films, traditional cameras, digital cameras and photo-developing equipment.

More than 90 per cent of Kodak's digital cameras are made in China.

In March, the company established a disposable camera plant in Xiamen, in East China's Fujian Province, which transformed the coastal city into the world's largest disposable camera production base.

The factory is capable of producing 100 million disposable cameras annually, and more than 90 per cent will be exported to the United States, Japan and Europe.

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