John A. Lind wrote:
>Regarding Tri-X in particular, they might be thinking about how they got
>burnt pretty bad the first time around. Then again, Big Yellow seems quite
>determined to defy logic in their strategic decision-making.
>
>
About this and the Agfa story, I've been holding my tongue, but it's
sneaking out.
The organization, managment and economics of businesses doing very
different volumes of production, distribution and sales of the same
products can vary so much as to seem unrelated.
Kodak film manufacturing probably has more in common, as an overall
business, with a steel mill than a small specialty film maker. And their
management people won't have most of the skills needed to change 'gears'.
It's amazing how entrenched the specialized skills and knowledge to run
a particular business can become. In an industry I know, I and my
co-workers were just amazed when Rite-Aid, an Eastern based drug company
used to operating small, drug oriented stores, especially out on a
corner with drive through pharmacy, bought Longs Drugs, a western based
operater of much larger stores with food, sporting goods, soft goods,
garden centers, etc. As we predicted, it was a financial disaster for
Rite-Aid for years. They had no idea how to buy, price, merchandise,
etc. these stores they bought. I seem to recall they went into
bankruptcy reorganization and had to unload their pirize, but I don't
follow that stuff any more.
The big winner? Walgreens!
There are innumerable examples, but the point is, Kodak hasn't a clue
how to manufacture and sell 35mm film that has always been high volume,
at lower volumes. At a certain volume point for any film, they have to
lose money, stop production or learn to ride a unicycle while juggling
flaming swords. I'm not saying it can't be done, just that most large
enterprises find it VERY hard, and many don't even try, let alone
succeed. This is not easy stuff! You have to reorganize, close plants,
reinvent processes, build/buy new equipment, etc.
I remember when I used to buy the specialty film Kodak had originally
developed for high altitude aerial photography. Incredibly sharp and
virtually grainless at huge magnification, tricky to expose corectly and
tricky to process, really narrow niche stuff. For the first few years,
we could order it in 4x5 and expect to get it in a reasonable time
frame. Later, they started doing only two, then only one production run
a year. We had to project our needs, which was easy, actually, and 'buy
into' each run (and buy a bigger freezer). That was a creative way they
juggled the set-up and other expenses of indivuidual productions runs on
high volume equipment with a small, specialized market. Can't so that
with consumer films, atleast not and force them to buy way ahead and
carry the inventory. Although I wouldn't be surprised if films like
Tri-X are produced and kept in cold storage between infrequent
production runs. Even that plays hell with inventory costs. Probably a
room full of consumer packaged Kodak films iin the Kansas City Caves,
along with the turkeys, cheese, etc., but that's another story.
In a management buyout like Agfa, the trick is whether they try to find
a way to make the existing business model fly with changed market
conditions, almost certain to fail in a declining market, or really
reinvent themselves to be profitable in a smaller market.
Moose
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