Many symptoms can be served as an indicator that a particular firm may have some strategic problems. One such symptom is when a firm is having too much debt. When a firm is having too much debt it usually lead to a weak financial performance. Having too much debt in a financial statement will cause a firm's debt to equity ratio to increase which will increase the business risk. Too much debt will increase the likelihood that an individual creditor will not be paid in full if the company is unable to meet its obligation or a firm may simply liquidate to pay for the debt. Another symptom that indicate strategic problems could be a firm with a low market share in a commodity product. Lower market share within a industry serves as a weakness for a firm since lower market share result in lower sales.
Kodak Company mainly sells consumer and professional imaging products. Kodak have been losing market share in the US digital camera market from being the first to the third place. Competitors like Canon and Nikon have been stealing Kodak market share due to their innovative product, like the new low-cost digital single lens reflex cameras. Kodak needs to invest more money in R&D and try to keep up with its competitors by launching products that can distant its brand with the other brand in the industry. Kodak recently reported a high debt of $2,714 million when compared with the total shareholders' equity of $1,388 million. Also, the company have other high liabilities such as pension and other post retirement liabilities. As a result, high debt and other liabilities combined with the declining of market share which lead to decreasing net cash from operating activities could end up with a liquidity crisis for the company.
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5 comments:
You have a good point with Kodak needing to invest in R&D. Other than their disposable cameras, I haven't really heard anything else cool from them. A lot of other disposable cameras are out there too like Fuji or something.
I definitely didn't know about their debt though, interesting point to bring up.
This is a good post. Is kodak the company that put out the disposable digital cameras? I think they were trying to gain market share with this silly idea, but they always seem to be one step behind the rest. What do you think the company should do to be back on top?
I agree with Jonathan, saying that when I see disposable cameras I might think about Kodak. I would never even assume that they might have been in the first place in the US digital camera market... Do they even have any digital cameras?:)They should invest big in R&D before their name becomes a part of the history!
Wow, just looking at the data you provide for Kodak I can tell that they are really in trouble. Poor financial performance means lack of cash flow. It is indeed a good indicator of business problem within the organization. Investors will lose confident just on this fact.
I agree that Kodak should invest in R&D. They have so many strong competitors that I rarely hear about kodak anymore. I remember back when I was a kid I would use to buy kodak film but that was till the digital cameras came out =)
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