Should Kodak compete with Fuji through slashing the price of its films?
What will be an ideal response?
Competing on price may not be desirable. Price competition will hurt both competitors, but it will hurt Kodak more for two reasons: First, Fuji appears to have a stronger financial position (in 1997) than Kodak. Kodak, therefore, cannot afford to lose revenues. Second, Fuji appears to have a cost advantage over Kodak (this is just an assumption; the case does not provide any information on this aspect). Fuji can, therefore, withstand offering lower prices longer than Kodak.
Price Competition: Pros
a. This will counteract Fuji’s strategy of offering lower prices for its films.
Price Competition: Cons
a. The typical customer does not mind paying a little more money for a quality product; so why reduce the price?
b. If both companies offer lower prices, Kodak has no unique strategy to stop Fuji from growing in the United States.
c. Kodak will suffer more than Fuji in terms of revenues and profits.
d. Lower prices may hurt Kodak’s quality image.
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