BA 811 EXAM 2, SUMMER 2015
How is Nestle’s situation with Lean Cuisine similar to that Kodak faced with the movement toward digital photography? How is it different
Nestle knew they needed to merge and shred its fringe business while capitalizing on its size in order to combat the wave of megamergers by companies like Heinz and Craft. This is a distinguishing feature from Kodak because Kodak never realized that unless they act swiftly against their competitor, FUJI films, they would suffer. Even though Kodak had the size advantage like Nestle, they chose not to leverage this against FUJI. Nestle’s leaders recognized this advantage.
It was noted that food companies leverage their size to negotiate better deals with retailers in terms of display and pricing. Nestle began bulk buying suppliers to negotiate better deals. Kodak did not take advantage of this tactic even though they were bigger than FUJI. They could have negotiated deals in retailers where film was being developed to have a better display; but they did not do so.
Kodak’s position as hocking an antiquated product was the same as Nestle’s Lean Cuisine products. The consumer demand was shifting and their cash cow was not mooing. They both found themselves in hot water as a result of direct competition from Kraft-Heinz and FUJI film. This however is about as much as they had in common. Nestle diversified and innovated their products, expanding into complementary markets and differentiating themselves from other frozen food brands using clever marketing tactics to market themselves as “new age” to urban foodies. Kodak clung to film and refused to differentiate themselves. Kodak made no efforts to combat competition or leverage their size advantage against FUJI.
Nestle’s French trainer director of culinary innovation, Lucien Vendome recognized that in a world of hundreds of frozen food choices, he must analyze the market and the consumer preference in order to push a common product. He understood that there was a negative perception of Lean Cuisine (LC) and that in order to make sales, he must change the perception. He abandoned the old strategy of focusing on fat and calories and replaced it with the types of food that the current market is interested in: organic, high protein and gluten free meals. He incorporated trendy ingredients into the mix.
This strategy is much different than Kodak. Kodak relied too heavily on brand recognition, the loyalty of their consumers, a high profit margin of film (razor and blade strategy) and the complexity of the firm. They did not realize that they were in a rut and need to begin marketing their products in an innovative manner or simply making them more innovative. By the time second wind innovators reverse engineered and sold the product for less money, it was too late for Kodak to act; yet they still didn’t even try. Instead of going digital, which is a whole new market, Kodak should have improved their existing product. This is exactly what Lean Cuisine did with their frozen entrees. They didn’t create a new line of food; they improved their current line up and differentiated themselves from competitors. This was very unlike Kodak because Kodak made no efforts to differentiate themselves from FUJI.
Vendome conducted a great deal of research during the R&D phase. He read food magazines and consulted with chefs to understand that urban foodies looking for a healthy, cheap and quick trendy alternative. He even consulted the inventor of the Cronut. His vision was to make something new and innovative, but at a profit margin that allowed for massive scale and frozen. They didn’t cling to old notions of weight loss when the current market was demanding a new trend. To my knowledge, Kodak made no attempts in understanding their market. When they went digital, it did not seem as though they had consulted experts on what consumers are looking for when sharing their experiences with others. In other words,