INSTANT COLOR PHOTOGRAPHY

The battle between Polaroid and Kodak

Brett Cameron
Simon Fox
Jelle de Jong
Sharon Mombr
Mani Nagasundaram
Fontainebleau, February 2002

Table Of Contents
EXECUTIVE SUMMARY ........................................................................................................2
INTRODUCTION ......................................................................................................................3
PART I: SETTING THE STAGE............................................................................................4
1. POLAROID CORPORATION...............................................................................................4
1.1 Brief history ...................................................................................................................4
1.2 Business and Customers ................................................................................................5
1.3 Strategy and Business Model.........................................................................................5
1.4 Culture ...........................................................................................................................6
2. THE EASTMAN KODAK COMPANY................................................................................7
2.1 Brief history ...................................................................................................................7
2.2 Business and Customers ................................................................................................8
2.3 Strategy and Business Model.........................................................................................8
2.4 Culture ...........................................................................................................................9
3. OVERVIEW OF THE PHOTOGRAPHY MARKET IN 1969 ...........................................10
3.1 Segmentation ...............................................................................................................10
3.2 Instant vs. Non-instant .................................................................................................10
3.3 Value Chain .................................................................................................................12
3.4 Change in Competitive Landscape ..............................................................................12
PART II: WHY THE WORLD CHANGED.........................................................................13
1. STRATEGIC ACTIONS ......................................................................................................13
1.1 Polaroid........................................................................................................................13
1.2 Kodak...........................................................................................................................14
1.3 Outcome for both parties .............................................................................................14
2. ANALYSIS OF POLAROIDS STRATEGY......................................................................16
2.1 Choice of strategy ........................................................................................................16
2.2 Risks involved .............................................................................................................18
2.3 Evaluation of options...................................................................................................19
3. KODAKS REACTION .......................................................................................................21
3.1 Choice of strategy ........................................................................................................21
3.2 Risks involved .............................................................................................................21
3.3 Evaluation of other options..........................................................................................22
CONCLUSIONS .......................................................................................................................23
EPILOGUE ...............................................................................................................................24
References..................................................................................................................................25
Appendix A:

Kodak and Polaroid product range 1963-80 ..............................................27

Appendix B:

Dates Of Significant Events .........................................................................28

Appendix C:

How Instant Color Photography Works.....................................................29

Page 1

EXECUTIVE SUMMARY
The photography industry has undergone many changes in the 20th century. Eastman Kodak
dominated the industry during the pre-war years. The post-war era saw the rise of Polaroid and
instant photography. Edwin Land, the ingenious founder of Polaroid, lived and breathed
technology and built an organization that reflected his passion. Kodak, initially Polaroids
customer, became a partner producing negatives for Polaroids instant film. As the market
evolved in the 1960s with the invention of instant color photography, the dynamics of the
relationship between the two companies changed.
In 1963, Polaroid launched the first camera and film that produced instant color pictures. This
was a revolutionary product and marked a significant change from the existing black and white
technology. Polaroid outsourced the manufacture of the camera to third parties and subcontracted the film manufacturing to Kodak. From 1963 through to 1969, Kodak and Polaroid
enjoyed a successful partnership. However, when Polaroids patents on the Colorpack cameras
and Polacolor film expired in 1969, the business landscape changed significantly. This event,
coupled with the invention of instant color photography, had major impacts on Polaroid and
Kodaks strategies regarding instant photography.
In 1969, Polaroid entered into a long-term agreement with Kodak extending the exclusive
manufacture of Polacolor film negative. At the same time, Polaroid invested heavily in R&D
towards the development of the ultimate litter-free photographic system, the SX-70. Keeping
this project very secret, Polaroid built a vertically integrated manufacturing structure to
manufacture both the cameras and film entirely in-house. This was a significant shift from its
existing outsourcing and subcontracting practices and thus posed a major risk to the success of
the project. Polaroids launch of the SX-70 in 1972 caused Kodak to sever existing
subcontracting ties with Polaroid and embark on its own development of instant color
photography equipment. Kodak would eventually enter the market three years later in 1976.
Unfortunately, even with a three-year head start over Kodak, Polaroid was unable to convert
the SX-70 into a resounding business success.
Three factors significantly negatively impacted Polaroids success: (1) the SX-70 initially
failed to deliver the right value proposition to amateur photographers and thus very high initial
market expectations didnt materialize, (2) the company had no experience with large scale
manufacturing of film and cameras, (3) Polaroids vertical integration cut Kodak out of instant
color photography and ultimately caused the two companies compete head to head. A more
viable option with higher chances of success for Polaroid would have been to continue working
with Kodak and thus leverage their complementary skills in manufacturing processes and avoid
direct competition. Furthermore, partnering with Kodak would substantially reduce some of
Polaroids risk and allow the company to focus on what they did best, technology
development.

Page 2

INTRODUCTION
Polaroid n. (P) material in thin sheets polarizing light passing through
it; camera able to develop negative and produce print within short time
of exposure
Oxford Dictionary
The idea of instant photography occurred to Edwin Herbert Land in 1944, when his three yearold daughter asked why she could not immediately see the picture he had just taken. Land was
a prolific inventor. In terms of the number of U.S. patents granted he is second only to Thomas
Edison. After patenting filters that could polarize light in 1929, Land developed a wide range
of applications, including sunglasses, glare-free automobile headlights and stereoscopic
photography. Instant photography was another innovation in the area of light and vision that
came to dominate his life. By 1947 Land had developed a one-step instant camera. After Land
demonstrated the camera at the Optical Society of America in New York, the photographic
community was astonished by instant photography. Instant photography was to have a lasting
influence on the industry.
In this paper we discuss the different approaches of Polaroid and its chief rival in the
photography business, Kodak, to tackling the innovation of instant photography and, in
particular, instant color photography. The document consists of two parts. The first part
analyzes the evolution of both firms, exploring their history and core competencies. We then
consider the market environment in which the firms
were operating in order to establish the context of the
innovation. The discussion on industry dynamics takes
us to the point where changes in the competitive
landscape begin leading the confrontation between the
firms. In the second part, we compare the approaches
followed by Polaroid and Kodak in exploiting the
market opportunity, and analyze their expectations in
the context of the innovation and the different strategies
that were used. We further investigate alternative
options that could have been considered and the
strategic choices the firms were facing. Based on the
analysis, we draw some conclusions about the
effectiveness of the approaches followed.
The main focus of the paper is the period during the late
1960s and early 1970s when innovative development
changed the rivalry between Polaroid and Kodak
forever.

Diagram of Lands first camera

Given the setting, accurate descriptions of the companies and their markets during the period
considered were at times scarce. While we have tried to base our conclusions on as robust
information as possible, we have at times needed to make assumptions in the light of limited
sources of information, particularly with regard to financial and statistical data.

Page 3

PART I: SETTING THE STAGE

My motto is very personal and may not fit anyone else or any other
company; it is: Dont do anything that someone else can do. Dont
undertake a project unless it is manifestly important and nearly
impossible. If it is manifestly important, then you dont have to worry
about its significance. Since its nearly impossible you know that no one
else is likely to be doing it, so if you do succeed, you will have created a
whole domain for yourself.
Edwin H. Land
1. POLAROID CORPORATION
High technological drama was the way Edwin Herbert Land described his companys
situation in the spring of 1971. This chapter gives a brief overview of how Polaroid evolved to
become the company it was at the beginning of the 70s.
1.1 Brief history
The history of Polaroid is the history of Edwin Land. In the late 1920s, as a Harvard
undergraduate, Land began the research that led him to develop the worlds first synthetic
light-polarizing material, which he named Polaroid. The new polarizer was patented in 1929.
Together with his Harvard physics instructor, George Wheelwright III, he set up the LandWheelwright Laboratories in 1932. Already in 1936 Land-Wheelwright provided sick pay and
Christmas bonuses to employees, initiating a pattern which earned Land a reputation as an
innovative and forward-thinking employer. In 1937 he established the Polaroid Corporation. A
variety of products were developed from the polarizer technology, such as day glasses and desk
lamps. The companys first two clients were Eastman Kodak, which bought polarizing filters,
and the American Optical Corporation, which
used Lands polarizers in sunglasses.
During the Second World War, the company
focused its efforts on defense products,
including goggles and vectograph 3D pictures.
Sales rose tenfold from $142,000 in 1937 to
$1,481,000 in 19481 while the company grew
from 36 employees in 1937 to 1,250 employees
in 1944.
In 1948 Polaroid entered the photography
business with the launch of the Polaroid Land
Camera Model 95 and Type 40 Land film. This
was the beginning of instant photography as we
know it today. The initial system was essentially
a black and white print system. It was, however, Land demonstrating Polaroid film at the Optical Society
very different from anything the market had seen before and offered the customers a truly

Excluding sales made to the government during World War II

Page 4

unique way of making pictures. Until 1950 the camera could produce only sepia pictures of
uneven quality. The pictures took about 60 seconds to develop but needed the chemicals to be
washed off and a protected layer to be manually painted over the image. From 1951 Polaroid
started releasing progressively faster film and by 1960 had perfected instant black and white
photography to an extent that the development time for the film had been reduced to 10
seconds.
Edwin Land realized the need for color film early on and continued to work on the possibility
of capturing images in color in an instant. In 1957, Polaroid listed on the New York Stock
Exchange in order to help raise money to finance this development. Polacolor film was finally
launched in 1963 along with the Automatic 100, priced at $160. Until this time, Polaroid had
focused on the more sophisticated end of the market, but as the amateur market was growing
strongly Polaroid saw potential in introducing a low-cost camera and launched the Swinger in
1965 at $19.95, using black and white film. This camera was immensely popular and seven
million units were sold by 1968. It was replaced in 1968 by the Big Swinger, that enabled the
use of more film types. In 1969 Polaroid launched a low-priced Colorpack camera with fully
automatic exposure and the ability to use Polacolor film. The film contained a layer of
chemicals that was activated once the film was pulled through the rollers, automatically
developing the image. Within a minute, the photograph could be pulled away from the
negative. The company was now set to become a serious competitor in the photography
market.
1.2 Business and Customers
Polaroids focus was the amateur segment of the photography market. Lands vision was to
make photography as easy as possible and enable camera users to take a picture and enjoy its
printed version in an instant, altogether removing the development form the picture-taking
process.
In the market place, the company reached out directly to customers by advertising. It
concentrated on direct sales to large retailers. Dealers and distributors were looked upon
merely as a means to deliver the product to the consumer. Salespeople were mere ordertakers and the company believed that innovation would bring the consumers to Polaroid
irrespective of the sales channel.
1.3 Strategy and Business Model
Polaroids strategy in the 1960s was driven by Edwin Lands vision and his strong belief that
technological innovation would drive the business in the market for photographic products. He
believed in talking to the consumer directly and hence the practice of advertising directly to the
end consumer. The companys financial strategy was to preserve capital for investment in
aspects of business that would yield the higher possible returns. Plant and equipment were
always rented or leased, camera manufacturing subcontracted to outside manufacturers and the
production of negatives subcontracted to Kodak: this last partnership illustrating the mutually
beneficial working relationship between the two giants. At the same time, Polaroid had
historically phased out old products whenever new versions or a radically new technology was
introduced. Polaroids strategy was well aligned with the strengths and weaknesses of the
company at that point in time.

Page 5

Assets

Edwin Lands determination and drive was one of Polaroids core assets. Both his
creative vision and relentless persistence towards perfecting the art of one-step
photography was largely responsible for the companys success.

The scores of patents for different photographic processes, film and cameras protected
Polaroid from aggressive competitors and proved to be invaluable assets to the
company.

Polaroids financial assets however were not strong, with Polaroid on a number of
occasions having to raise funds in order to support their key projects.

Skills

Polaroid derived its strength from the technical R&D skills of its scientists, engineers
and Land himself, who contributed significant experience in the field of light and
vision.

Having outsourced its manufacturing, Polaroid had insufficient resources and lacked
experience to produce film and cameras in-house.

Relationships

Polaroid had built good relationships with its upstream suppliers and manufacturers.
For example, Kodak exclusively manufactured Polaroid negatives and other
manufacturers produced the cameras.

Land believed that Polaroids products would sell through demand pull and as such did
not value the dealers and distributors role in the process. As such the company did not
develop strong relationships with its dealers and distributors. However it remained
close to the large retailers with whom it dealt directly.

Polaroid valued customer relationships and hence advertised directly to the consumers,
cutting out any co-advertising with its dealers and distributors.

1.4 Culture
Polaroid displayed every ounce of Lands zeal and enthusiasm for technology and innovation.
As Land passionately believed that innovation would drive sales, rather than market research,
the companys efforts were centered on research. The Sales function within the company was
dispirited given the lack of esteem for its role within the organization. Decisions were driven
from the top and Land wielded unlimited power. Being a philanthropist, Land spent a
considerable amount of his wealth on charities and applied the same policy to the company.
Polaroid treated its employees well and its cameras were often developed more to fulfill the
needs of its customers than to meet profit requirements In essence, Polaroid was an extremely
focused research-driven organization where creativity and innovation mattered the most.

Page 6

2. THE EASTMAN KODAK COMPANY

My dreams are limited only by my imagination
George Eastman
2.1 Brief history
The history of Kodak goes back much longer than that of Polaroid and finds its origin in the
late 19th century when its legendary founder George Eastman envisioned to bring a camera to
the masses at a low cost. From his discovery of dry plates to the introduction of the first
convenient pocket camera, George Eastman endeavored to simplify photography and set out to
bring it to the masses. The Eastman Kodak Company, creating photographic equipment and
film, was established in 1884 and introduced its first camera in 1888. The user-friendly
Brownie camera followed in 1900. Three years later
Kodak introduced a home movie camera, projector,
Kodaks Innovations
and film. Kodaks early success lay partly behind
George Eastmans discovery of an amateur
1888 First pocket camera
photography market. The simplification and mass1900 Brownie camera
production of his cameras opened up the market for
1903 Home movie camera
amateur photography worldwide. By 1900, Kodak
1935 Color film
had already established an international distribution
1951 Handheld movie camera
network with manufacturing facilities in the US, UK
1963 Instamatic camera
and Canada.
1992 APS (with Japanese firms)
In addition to the amateur market, the proliferation of
2000 Digital photo (with Compaq)
photojournalism during the 1930s and of the film
industry contributed to the companys growth.
Through a continuous process of technological innovation and milestone-setting, Kodak grew
to become the leading manufacturer of photographic film and cameras, and established itself as
a global brand. Kodak captured the footsteps of the first man on the moon, sponsored leading
international events such as the Olympic games, and won numerous awards (including Oscars
and Emmys) for its animated film technology.
Ailing and convinced that his work was done, Eastman committed suicide in 1932. Kodak
continued to dominate the photographic industry with the introduction of color film
(Kodachrome, 1935) and a handheld movie camera (1951). The company established US
plants to produce the chemicals, plastics, and fibers used in its film production.
By 1962, Kodaks U.S. sales reached in excess of $1bn and
the company employed over 75,000 people.

Kodaks Instamatic 100

In line with the companys desire to simplify photography,

the Instamatic, introduced in 1963, became Kodak's biggest
success. The camera's foolproof film cartridge eliminated the
need for loading in the dark. By 1976 Kodak had sold an
estimated 60m Instamatics, 50m more cameras than all its
competitors combined. The cameras became the de facto
standard in the amateur photography market and became
popular Christmas presents.
Page 7

2.2 Business and Customers

From early in its growth, Kodak entered both amateur and professional photography, film
imaging, and document imaging (creating the first microfilm and microfilm machines). In
addition, Kodak also had a chemicals business that manufactured the chemicals necessary for
developing photographic film. Cameras and film however, formed the bulk of Kodaks
business.
As opposed to Polaroid, Kodak focused primarily on non-instant cameras and film and on
exploiting the mass-market rather than developing sophisticated technology. With its range of
Instamatic cameras, Kodak controlled over 80% of the camera market. Having been the first to
introduce color film in 1935, it had developed outstanding expertise in film production. By the
end of the 1970s Kodak sold 90% of all photographic film. Its expertise was recognized by its
competitors. For example, Polaroid used Kodak as the supplier of negative material for its
Polacolor film. Yet another segment of the photography market that Kodak exploited was the
development and processing business, where it had a 50% market share.
Kodak had excellent relationships with its dealers and distributors. Like Polaroid Kodak also
advertised directly to its consumers. In addition, Kodak worked closely with its dealers and
distributors as they formed an important channel for the film processing business. In addition,
Kodak was a highly competitive company and given the size of the operations could compete
aggressively on price with any competitor in the business.
2.3 Strategy and Business Model
Kodaks dominance of the photographic industry stemmed from its leadership in film
technology. It was also a highly process and manufacturing driven company. In contrast to
Polaroid, Kodak strived to manufacture every component of its film making apparatus inhouse. By doing so, Kodak could take advantage of the synergies and translate them into
handsome profits.
Assets

Kodaks primary assets were its manufacturing capabilities which were used to
manufacture Kodaks own products as well as those of other companies.

With its huge market share, Kodak was able to achieve economies of scale that made it
very difficult for competitors to match, particularly at the lower end of the market.

Kodak had an excellent international distribution network. This helped it generate sales
not only from the US but also from other parts of the world.

Kodak was extremely customer focused. As discussed earlier, its film processing
business helped tie in its customers.

Skills

Kodak possessed excellent engineering capabilities. Additionally, it had the ability to

scale its manufacturing facilities up and down depending on the demand for its
products.

Kodak had been an innovative company for a long time. However in the 1960s and the
1970s the company had become more process driven and concentrated on making good
things better. Hence the R&D division was relatively weak when compared to smaller
competitors like Polaroid.
Page 8

Relationships

Kodak was a customer-focused company, investing heavily in advertising and sales

promotion. By doing so, the company developed close relationships with its customers,
its dealers and distributors.

Kodak also built relationships through contract manufacturing for companies like
Polaroid. This helped Kodak gain insight into innovative technologies and enhanced
Kodaks economies of scale.

2.4 Culture
Kodaks ability to innovate was hampered by its insular,
tradition-bound management style. The company was
organized along functional lines, so marketing and
manufacturing acted as separate fiefdoms and decisions waited
until issues percolated to the top. Promotions came through a
paramilitary system in which seniority and fealty to Mother
Kodak counted nearly as much as ability. The company had
only a handful of senior managers who had ever worked
anywhere else. Hence Kodak had been historically risk-averse.
From its inception Kodak considered employee satisfaction
and loyalty as key drivers of the companys success, and had
established a wage dividend scheme as early as 1899.
George Eastman

Page 9

3. OVERVIEW OF THE PHOTOGRAPHY MARKET IN 1969

Polaroid and Kodak were operating in a fast-growing market. As shown in the charts below,
total US domestic retail sales to amateurs grew from $1.4bn in 1962 to $6.6bn in 1975. At the
same time the number of snapshots being taken annually by amateur photographers increased
rapidly from 2.2bn to 7bn. Sales for both Polaroid and Kodak followed suit.
TREMENDOUS SALES GROWTH FOR
BOTH POLAROID AND KODAK
7

4
3

2
1

1962

1969

Source: Harvard Case No. 376.266

1975

Retail sales ($ billion)

Retail sales ($ billion) - line

Snapshots (billion) - bars

STRONG GROWTH IN AMATEUR US

PHOTOGRAPHY MARKET

Kodak
Polaroid

1962

1969

1975

Source: Harvard Case No. 376.266

Kodak did not view Polaroid as a dangerous competitor until the late 1960s. Any cameras that
Polaroid managed to sell merely helped expand the size of the market. One reason for Kodaks
confidence was that Polaroids products were more suited to the sophisticated end of the
market, while Kodak focused on the mass market.
3.1 Segmentation
The two key segments in the photography market were the amateurs (ranging from mass
market low-end consumers to more sophisticated users) and the professionals. There was also a
growing segment for commercial uses that included areas such as x-ray photography and
document imaging.
Various factors were important to both the amateur and professional consumers when
purchasing the camera:

Exposure settings, ranging from manual to fully automatic.

Focus settings, including manual, automatic and fixed-focus.
Camera size
Ease of processing
Total cost, including the cost of the camera, film and processing
Camera appearance; with cheap plastic versions to high quality metal and leather

With Kodak emphasizing ease of use and Polaroid concentrating on easing processing and
reducing waiting time, the market was also effectively delineated between non-instant and
instant photography.
3.2 Instant vs. Non-instant
Before 1963 amateur photographers could choose between three types of cameras: instant
black & white and non-instant color or non-instant black & white. Polaroid in these days was
synonymous with instant photography. The cost of instant film made Polaroid instant cameras
more expensive to use. In return it added convenience for the user since there was little time
between taking the photo and development. However, the Polaroids black and white film
Page 10

required the application of a protective coating by hand. This was a messy and often difficult
procedure in which the right moment needed to be timed quite securely (approx. 60 seconds).
The non-instant cameras were much easier to handle. In the words of Kodaks founder: You
push the button, we do the rest. In addition to this the price of film was less and the quality of
the pictures better. The diagram below depicts the differing value curves of Kodak and
Polaroids cameras.
V ALU E CU R VES FO R INS TAN T AN D N ON -IN STAN T

VALUE
High
Conventional colour photography

Instant black & w hite

Low
P rice
cam era

Price
pictures

Q uality
pictures

Color

Litter free

Convenience

Source: Team problem solv ing

With the introduction of instant color photography in 1963 one of the main down sides of the
Polaroids instant camera disappeared. This was particularly important for Polaroid as the
market was moving strongly towards color photography as the amateur market grew.
STRONG INCREASE IN COLOR PHOTOGRAPHY
Percentage of pictures taken

8.00
7.00

10%

6.00
Black and White

5.00
4.00

90%

3.00
2.00
1.00

Color

50%
50%

Source: Harvard Case No. 376.266

1962

1975

Page 11

3.3 Value Chain

The photographic industry involved the coordination of a number of players:

Companies developing new cameras/film (e.g., Kodak, Polaroid)

Camera manufacturing
Film manufacturing
Dealers and retailers
Film and print developers
Manufacturers of other components such as lenses, batteries, flashes etc.

The pace of development in photographic technology meant that most of the power lay with
the companies conducting research. Photographic products were sold through a variety of
channels ranging from the specialty photographic dealers to the mass-market distribution
through supermarket chains and similar general stores. Dealers often used the profits from the
development businesses to subsidize the camera and film loss leaders.
3.4 Change in Competitive Landscape
During the 1960s the competitive landscape changed significantly. These changes were driven
by two main factors:

Introduction of instant color photography in 1963: This brought together the ease of
instant development and the quality of color photography. In the past there had always
been a clear trade-off between instant and non-instant photography. With the coming of
reasonable quality instant color photography that divide was evaporating.

End of patents on Polaroids color film technology in 1969: This made it possible for
competitors to start producing Polacolor film. Polaroid had always been protected by
their patents and as of 1969 was exposed to new entrants in their market segment.

These changes were both a threat and an opportunity to Kodak and Polaroid. The opportunity
for Kodak was that it could now produce film for the Polaroid camera under its own brand
name. This way Kodak could capture much more margin on the film as opposed to the
subcontracting agreement they had worked with until then. The threat for Kodak was that with
the introduction of instant color photography, the Polaroid cameras became significantly more
attractive for the amateurs that used non-instant photography because they wanted pictures in
color. Why wait for development if you could also have the picture right away? Obviously
Kodaks threat was Polaroids opportunity and vice versa.

Page 12

PART II: WHY THE WORLD CHANGED

Photography will never be the same again
Land at the introduction of the SX-70
1. STRATEGIC ACTIONS
As concluded in part I, both Kodak and Polaroid faced an opportunity and a threat. This
chapter analyzes the competitive actions of both parties.
1.1 Polaroid
With Polaroids patents for the Colorpack cameras and Polacolor film expiring in 1969, the
company found itself in unfamiliar territory. Looming on the horizon for the first time in
company history was the possibility that Polaroid would no longer be the sole producer of
instant cameras and film. To compound the companys problems, Polaroid was experiencing
softness in demand after enjoying many years of high growth since the launch of instant color
photography in 1963. In response to this increased competition and the need for a new high
growth product Land came up with two solutions.
SX-70 Project
Design: Required a fully automated camera.

Fully foldable to fit into a pocket or purse

Single lens reflex viewing and focusing
Focus from less than a foot to infinity
Totally automated exposure (required built
in battery to the film), processing, etc
Litter free film
No waiting time for full development

Manufacturing: Full vertical integration

Other: Extremely secretive

First, Polaroid decided to enter into a six-year

agreement with Kodak retaining them as the
exclusive supplier of the negative material for
Polacolor film, ensuring Polaroid a continuous
supply of these sophisticated materials, whilst
theoretically discouraging Kodak from
extending the market with its own line as it
was still getting a slice of the pie.
Furthermore,
this
agreement
virtually
guaranteed that the technology would stay
only in the hands of Polaroid and Kodak. The
agreement allowed Kodak to begin
manufacturing its own version of Polacolor
film as of 1976.

Second, the company embarked on a challenging and costly R&D project named the SX70
program. The programs target was to search for the absolute form of one-step photography.
Land believed that if successful, the SX-70 camera would make
obsolete all previous instant camera systems and guarantee
Polaroids solo position in the instant photography market. The
timing of the endeavor was favorable. On the one hand, the
company had reached an agreement with Kodak ensuring a
continued partnership between the companies. On the other, and
even though the softness in demand demonstrated slow growth,
existing sales of Colorpack were still very high and provided a
steady stream of profits for the company. Finally, the stock price
level was at an all time high providing the opportunity to raise
$99m through a rights offering.
The original SX-70

Page 13

1.2 Kodak
By 1969 the instant photography market had proven to be an attractive and growing new
segment of the amateur photographic market, particularly with the introduction of color film in
instant photography. Kodak had been the sole supplier of negative material for Polaroids
Colorpack film and was faced with an attractive opportunity given Polaroids patent expiry.
Kodaks technological developments were proving to have alternative applications. The
company was large enough (both financially and in terms of capabilities) to diversify into
related businesses that showed strong growth. It had invested in the development of a highspeed copier, the Ektaprint (a ten-year, $10m investment). The company also faced interesting
opportunities in the chemicals business, with blood analysis. It now had to decide whether to
enter the instant picture business. Thus far, photographers were the most profitable end-users
of all the companys products, and these customers had shown growing demand towards ease
of use, rather than sophistication. Additionally, the amateur market was proving to be a
growing segment of the photographic industry.
In parallel to these market opportunities the company was facing a number of threats from new
entrants in their other profitable businesses. Kodak was threatened by the entry of new
competitors in the photographic paper segment as well as the photographic film market, both
from Japanese low cost suppliers and manufacturers. Both of these industries were the highestearning segments of Kodaks businesses. Finally there remained the growing threat of Polaroid
with their instant photography eroding Kodaks market share of the amateur market. With onestep photography Polaroid had removed key elements of the production process where Kodak
enjoyed leadership, namely the development process (i.e.: the paper, processing and chemicals
businesses).
Kodak agreed to continue manufacturing Polacolor film negative, showing a certain intention
to remain involved in the instant picture segment. In parallel, the company invested $200m in
R&D to develop a Polacolor-type film for use in Colorpack cameras. By continuing to
manufacture Polaroid negatives for a further 6 years after the patent expiry, Kodak avoided
Polaroid striking a similar agreement with another film manufacturer. The introduction pf the
SX-70 in 1972 came as a major surprise to Kodak. It rendered all of Kodaks investments in
the Polacolor film obsolete. Kodak terminated its development of Polacolor-type film and
embarked on the development of a new instant camera and film by itself.
1.3 Outcome for both parties
Polaroid launched the SX-70 in 1972 with a list price of $180. For the first full year of sales in
1973, Polaroid sold only 470,000 cameras. Polaroid did not earn a satisfactory profit on this
model. When sales failed to measure up, Polaroid was forced to cancel the planned
construction of additional manufacturing facilities and lay off workers. Second, the first three
years of SX-70 production were plagued with manufacturing problems. Modules were always
in short supply. The precision plastics and the film batteries also created a great deal of trouble.
These problems chipped away at both Polaroids profit margins and its public image. The
company had been aiming for a profit margin of 40 to 50% on cameras and between 50 and
60% on film, but it never came close to achieving these goals. In 1974, Polaroid still sold SX70 film at a loss. In that same year the company introduced the SX-70 Model II at the lower
price of $140 with an all plastic versus chrome-plated plastic and genuine leather for the
original. Sales increased to 750,000 units. For 1975, the Model III was introduced at $99 with
Page 14

the complicated reflex viewing arrangement replaced with a conventional and far simpler
viewfinder type. A reported one million cameras were sold. Finally, for 1976 the company
introduced the Model IV (Pronto!), a non-folding, non-reflex, molded-plastic-body priced at
$66 which retailed at $49. This model eventually sold 1.8m units in 1976. In 1977, the instant
photography business continued to grow rapidly and exploded in 1978 when Polaroid sold over
2m of its SX-70/Pronto! models. Starting 1979, the market for instant cameras started to
decline. As Polaroid had built up capacity based on the levels of 1978, they had to close down
manufacturing facilities and lay off 800 workers in 1980.
The result of Kodaks strategic decision was the launch of the EK-4 and EK-6 cameras in 1975
to rival Polaroids SX-70. Kodaks products offered the similar as the SX-70. Both cameras
were priced more competitively than Polaroids, at less than half the price of the SX-70, in
order to gain market share from Polaroid. Kodak, used to be market leaders, would probably
not have accepted second place in the instant picture market and as such entered the market
aggressively in order to break Polaroids dominance. Kodak continued launching improved
versions of its instant cameras and film throughout the late 1970s and early 1980s (see
Appendix A) but ten years after the introduction of its first instant camera was forced to
withdraw from the instant picture market, at a withdrawal cost of $900m, leaving its customers
with unusable cameras.

Page 15

2. ANALYSIS OF POLAROIDS STRATEGY

The SX-70 must already be counted as one of the most remarkable
accomplishments in industrial history. The camera demanded inventions,
discoveries and technical innovations in fields as disparate as chemistry, optics and
electronics
Fortune, January 1974
2.1 Choice of strategy
Here we analyze the implications of the road taken by Polaroid. The analysis spans across
functional lines (marketing and sales, research and development, manufacturing) to better
capture how Land and Polaroids strategic actions filtered down through the company and into
the external environment.
Marketing and Sales: From the value curves below, in comparison to Polaroids Colorpack,
the prevailing market leader, it was clear that the SX-70 was far superior. However, the camera
failed to deliver on two very important issues. First, the films quality was slightly inferior to
that of Polacolor. The color tended to fade quicker. Second, and most importantly, the camera
was far more expensive than the Colorpack. The initial $180.00 price of the camera towered
over the Colorpacks $29.99 price. Poor first full year sales of only 470,000 in 1973 indicate
that the SX-70s price was out of the amateur photographers price range. Hence, the company
clearly overestimated the attractiveness of the new features vis--vis the higher price and lower
film quality.

Value Curves: Colorpak vs. SX-70

VALUE
High

SX-70

Low

COLORPAK

Automation

Zoom

Litter
Free

Time to
Develop

Film
Quality

Price

Source: Team problem solving

Given the enormity of the investment and of the companys resources placed behind the SX70, it was imperative to have accurate forecasts. Polaroid failed even to attempt to correctly
estimate what the market demand would be for the new SX-70 within the known amateur
photography segment. The main reason for this failure was Lands influence on the company
and his insistence that innovation would drive demand. Euphoria for the technological
Page 16

brilliance of the SX-70 took over the company and subdued marketing and sales fundamentals
with regards to forecasting. As supported in the outcome, Polaroids inability to understand the
value proposition of the SX-70 for the amateur photographer created highly unrealistic demand
forecasts and was the key driver of company problems between 1973 and 1976.
Finally, from a marketing and sales perspective, Polaroids vertical integration cut Kodak out
of instant photography. Whereas Kodak was previously a partner with Polaroid through
subcontracting, Kodak would now become a possible competitor. The day the SX-70 was
launched, Kodak stopped producing the Polacolor film and embarked on its own R&D for
instant color photography. The SX-70 with a high degree of patent protection as well as a three
-year R&D advantage wasnt enough to deter Kodak from entering the market. Ultimately,
Kodak entered the market in 1976 with cameras and film and, as mentioned in the epilogue,
significantly influenced Polaroids future.
Research & Development: At completion the SX-70 from a camera and film exposure
technological perspective was commonly viewed as a masterpiece of innovative technology.
Unfortunately, due to marketing and sales failure to provide specific target cost levels for the
SX-70 and due to the existing company euphoria towards the SX-70, the R&D program from
its inception had no spending controls. Hence, it seems that R&D was given a blank check with
the order to come back as soon as possible with the finished product. With the possible
exception of defense contractors with national security priority, to put it mildly, this approach
didnt fit well with the competitive business environment. Polaroids need to price the SX-70
at $180 clearly demonstrates the misalignment of R&D development with market reality. A
clear understanding of the market attractiveness of the SX-70s attributes versus their
development and future cost should have been in place from the beginning. Had they existed, it
is reasonable to assume that very early in the project the company would have seen the
enormous investment required for SX-70 and therefore scaled back/prioritized on some of the
camera and films attributes.
Manufacturing: The full vertical integration adopted by Polaroid was an enormous gamble.
First, lower leverage in manufacturing exposed the company to uncertain demand. Unlike its
previous flexible subcontracting arrangement, full vertical integration required massive
investments in fixed assets and capacity. Unfortunately, as mentioned before, demand was far
below expectations, which resulted in over 50% idle capacity through 1974 and significantly
impacted Polaroids bottom line. Second, the company switched from relying on very
competent and experienced subcontract manufacturers such as Kodak to relying on
inexperienced in-house manufacturing. Unfortunately, the company experienced production
difficulties especially in the cameras film-pack batteries, which caused havoc with production
schedules at one of the plants and further negatively impacted the companys profitability.

Page 17

2.2 Risks involved

Beyond analyzing just Polaroids choice of strategy, understanding the risks behind the
decision provides insights into possible alternative courses of action.
POLAROID TRANSFERRED RISK FROM INTERDEPENDENCE
AND INTEGRATION RISK TO INTERNAL RISK

Impossibility risk Risk was increased

substantially by doing
everything in-house

Staggering target
features for the SX-70

Incentives and
control
In hindsight too much
money was spent on
R&D indicating a flaw
in the system of
incentives and control

Interdependence Risk was decreased

by doing everything
risk
in-house

Initial market
choices

Expectations for
innovation
outcome

Polaroid continued to
target the amateur
photography segment

Expectations were
very high, e.g.,
photography will
never be the same
again

Integration risk

Low risk because of

existing downstream
relationships

Source: Lecture notes high tech strategy

Impossibility Risk: First, from a manufacturing side, complete vertical integration demanded
unknown competencies from Polaroid. Having very little prior experience in manufacturing,
the company now wanted to mass manufacture cameras and film. Second, from a Research and
Development perspective, Land required that the engineers start from scratch on a totally new
design. Not being enough, the proposed target specifications for the SX-70 were staggering as
mentioned in the program design.
Incentives and Control: From a Research and Development perspective the risk lay in
accomplishing the programs goals at any cost.
Initial Market Choices: From a marketing and sales perspective the target for the SX-70 were
amateur photographers. Land had always felt that this segment best valued the virtually hassle
free, affordable, good quality of film and swift aspects of instant photography. These
consumers essentially did not want to bother with timely film development, complicated
camera features that required some knowledge of photography to use efficiently and were
willing to pay a small premium on film to receive instant visualization of their photos. Hence,
the market choice risk was that the SX-70 might not continue to deliver the same value
proposition to the amateur photographers.
Interdependence: The SX-70s project proposal effectively eliminated external
interdependence risks. As is desired by many firms, the company would be in full control of its
operations. However, the downside of eliminating external dependencies was that it transferred
these risks in house to R&D and manufacturing.

Page 18

Integration: Since the downstream infrastructure was already in place Polaroid had low levels
of integration risk.
Expectations: From a company wide perspective and under the control of marketing and sales,
expectations were extremely high. However, they hinged on the ability of every functional
group successfully completing their goals. Expected first year sales would be at least several
million for the SX-70.
2.3 Evaluation of options
Polaroids options relate directly to how the company should handle the risks involved with the
SX-70 project and its introduction into the market. The degree of risk was divided along the
complexity of the organizational structure and along the complexity of the product offering
(See Risk of Failure Exhibit). The first choice involved the degree of vertical integration within
the company and the second referred to which COMPANY RISK
features to include in the launch of the SX-70.
The chance of success was directly related to
these two choices. Increased complexity of the
product offering increased the impossibility risk
that the R&D department couldnt create the
product. In addition, complexity also increased
the initial market choice risk that the SX-70
failed to deliver the value proposition to the
amateur photographers. At the same time,
increasing the complexity of the organizational
structure supporting the innovation raised the
impossibility risk of breakdown.

High

Medium

High

Low

Medium

Complexity of
organizational
structure

Low
Low

High

Complexity of
product offering
Source: Team problem solving

The complexity of the organizational structure depended on the competencies of the company.
In Polaroids case the choice for complete in-house development and manufacturing resulted in
high complexity. As mentioned before, Polaroid possessed no prior experience in
manufacturing and operations. Hence, Polaroids actual choice for both the highest degree of
complexity of product offering and a high complexity of organizational structure meant that the
risk of failure was relatively high.
POLAROID HAD MULTIPLE OPTIONS TO STRUCTURE THE
ORGANIZATION
Options

Pros

Cons

Complete control by Polaroid

No need for technology sharing
Capture full margin on product

Lack of experience in manufact.

Competitive threat from Kodak
High uncertainty mkt size

2a Development in old
fashion (with Kodak)

Proven concept
Does not upset Kodak

Historically small margins

Need for technology sharing

2b Development in old
fashion (with other
party)

Chance to squeeze margins to

subcontractor
Potential flexibility in pricing
products

Will upset Kodak

Smaller margins
Potential integration issue

Co-development with
Kodak

Ability to leverage market power

Kodak
Access to manufacturing knowhow Kodak
Risk sharing
Good response to be expected
from financial markets

Smaller margins than completely

in-house
Potential cultural conflicts

License technology to No need to get into

others (e.g., Fuji)
manufacturing
Great offer to outside parties to
enter US market

Complete in-house
development and
manufacturing

High
Low
Pot.
payoff

Chance of
success

Will upset Kodak

Smaller margins than in-house
Need for technology sharing

Page 19
Source: Team problem solving

The option taken was the complete in-house development and manufacturing. The main
advantage of this option was that Polaroid would reap the full profits of vertical integration.
However, as mentioned in the risk analysis section, this involved significant risk and high
uncertainty towards the chance of success.
Another option was to develop the SX-70 the same way Polaroid had always done it, by
outsourcing the manufacturing of both cameras and film. The clear advantage of this was the
fact that this was a proven concept and that it would enable Polaroid to simply focus on
development. Manufacturing impossibility risk would be zero. The negative aspect of this
option was that this could still form a threat to Kodaks conventional market and trigger
possible retaliatory action thus reducing the chance of success.
A third option was to co-develop the SX-70 together with Kodak. The main disadvantage of
this option was the reduced potential payoff and possible cultural conflicts. However, joining
forces with Kodak would provide significant legitimacy to the project and access to Kodaks
manufacturing know-how. Risks would have been shared between the companies and the need
for secrecy avoided. Our conclusion is that this would have been the most viable option for
Polaroid.
A last option for structuring the organization around the development of the SX-70 was to
license the technology to other parties. This was something Polaroid had never done. The
advantage was that Polaroid could spread the manufacturing risks and still capture the upside
from sales. However, the disadvantages were the information sharing and the need to still do
all the development in-house.
The second choice Polaroid made was the choice of complexity of the product offering.
Polaroid chose to upgrade their offering from the Colorpack to the SX-70 in one massive,
single sweep (see exhibit).
Instead of introducing the SX-70 as the
complete one-step instant camera the
company could have adopted a
Polaroids choice
continuous rollout of ever improving
SX-70
cameras. By launching the SX-70 with
Automatic
some features and then every year
exposure
Single lens
introduce more the company could
reflex
afford to charge lower prices and avoid
Foldable
deep discounting over time. This method
would allow time for marketing to better
Litter-free
understand the consumers perception of
Polacolor
value versus price for each feature and
therefore the risk of misaligning product
offering
with
market
demand.
Furthermore, this would provide much
needed learning time for manufacturing as well as more flexibility in the supply chain. Also, it
would lessen the burden on R&D to deliver on all features prior to launch probably resulting in
much more efficient use of resources and lower development costs. Clear downside of this
approach was that Kodak would have more time to respond. Hence, the potential for reaping
major profits was reduced in favor of much lower risk.
POLAROID CHOSE FOR MAXIMUM COMPLEXITY IN
PRODUCT OFFERING

Source: Team problem solving

Page 20

3. KODAKS REACTION
Theyre probably pretty good. But Ive found you always end up with Kodak.
Professional photographer
3.1 Choice of strategy
Not being accustomed to taking second place, Kodak decided to challenge Polaroids
leadership head on. The company had the resources and capabilities to enter the market with a
competing product and in terms of marketing had strong global brand recognition. Kodaks
only challenge was to improve on the Colorpacks shortcomings, and the company was
recognized as being technologically innovative (see innovations p.6). Anticipation in the
market was high for Kodak to enter the instant picture business. In addition to its technical
ability, Kodak was a vertically integrated company while Polaroid outsourced manufacturing,
focusing on R&D. The agreement struck with Polaroid for Kodak to remain as its sole
manufacturer of Polacolor film may have contributed to Kodaks belief that Polaroid would
maintain its position as a non-integrated firm dependent on its suppliers. Kodak already
benefited from lower transaction costs and enabled the company to potentially create
competitive advantages through low cost (due to backward integration in the manufacturing
process) and differentiation (through their strong relationships with distributors).
3.2 Risks involved
The 5-I framework helps analyze Kodaks decision. Even though this decision meant that
Kodak was splitting its resources between two new product launches, therefore reducing the its
flexibility and ability to develop (or sustain) its position in other areas, the above-mentioned
factors made the impossibility risk for Kodak fairly low and may have lead the company to
believe that it stood a strong chance of successfully creating and launching a competitive
product for the instant picture market.
In terms of incentives and controls, the patent regulation was potentially the largest concern for
Kodak, however the photographic market was per se a heavily patented industry and as such
Kodak may not have perceived the patents as much of a realistic threat.
If Kodak was to compete head on with Polaroid it would target the amateur market. The
benefits of instant photography appealed to the growing amateur photographers, and
professional photographers were more focused on film quality and flexibility of picture taking
than one-step photography. Part of the low risk in Kodaks initial market choices was due to
the fact that both interdependence and integration risk were limited. Kodaks vertical
integration, making it internally reliant on and able to control the required complements) and
downstream intermediaries (the good relationships with its distribution channels) were both
strengths of the company.
Finally, in terms of expectations for innovation outcomes, in addition to the high market
expectations, Kodak was internally driven to produce a market leader and to overthrow
Polaroids dominance of the market with a superior innovation.

Page 21

3.3 Evaluation of other options

The number of viable options open to Kodak, taking into account its culture, capabilities and
the external environment were limited. Limited as they were the most viable options for Kodak
were:

Stay out of the market and focus on other growth segments: By staying out of the market
Kodak would have sent strong signals that it did not believe in the future of instant
photography as a sustainable market and hence challenged Polaroids position. Given
Kodaks strength as an industry leader it was in a position to discredit the potential of
instant photography by attacking Polaroids weaknesses - namely high-priced cameras and
questionable quality of color pictures and play on the strengths of its own product range
mass market access of low price photography, and strong relationships with its distributors.
In addition to promoting its simpler range of products such as the Instamatic for the mass
market, Kodak could have invested in developing the 35mm film industry to appeal to a
larger group of consumers. Further, outside the photographic industry, Kodak could have
allocated its resources in what might have been potentially more lucrative segments such as
the printer and chemical businesses.

Enter just the instant color film market: Kodaks more challenging alternative was to
enter the instant market. As a leading manufacturer of film the company could have
invested in making its own branded range of instant color film. By continuing to
manufacture film Kodak would maintain its lock on the high margin film business while
expanding its share into instant film. As Kodak had traditionally manufactured film for
Polaroid it had the operational capacity and technology to develop the film independently.
Additionally, this presented an opportunity for Kodak to strengthen its bargaining power
over its clients (namely Polaroid). Under this scenario, Kodak would have to compete with
Polaroids new supplier (as at the time Polaroid did not have the capacity to develop the
film in-house), which was not presented as a threat given Kodaks brand recognition.

Acquire Polaroid: Another option available to Kodak would have been to acquire its
competitor, and as such buy its leadership into the instant market. However, this option
conflicted with the prevailing company culture. Historically the company had grown
organically as opposed to through acquisitions. Furthermore, Kodak was accustomed to
beating out competitors through its own superior and continuous R&D.

The only feasible alternatives open to the company were to enter the market, as it did, and to
stay out and use its influence to diminish the importance of the instant market. Kodak was the
industry leader and as such was compelled to enter what was perceived at the time to be the
largest growing new market in the photographic industry.

Page 22

CONCLUSIONS
Two changes in the competitive landscape modified the old rules of engagement for both
Polaroid and Kodak. These two changes were the introduction of instant color photography in
1963 and the expiration of Polaroids patents on color film in 1969. The introduction of color
photography was a significant threat to Kodaks market of conventional non-instant
photography and an opportunity for Polaroid to break into that market. The expiration of
Polaroids patents was an opportunity for Kodak to sell Polaroid color film under their own
brand name. Needless to say this was a significant threat to Polaroid. As a response to this
second change Kodak and Polaroid agreed in 1969 that Kodak was to produce color film under
the Polaroid brand name until 1975. After that date Kodak was free to produce its own brand.
With this truce Polaroid started to develop the SX-70 in the utmost secrecy. The SX-70 was a
complex product offering (i.e. foldable, litter-free instant color camera) that was to target
Kodaks conventional market. Another key strategic choice for Polaroid was to do all
development and manufacturing completely in-house. This implied substantial risks for (1)
marketing and sales, (2) research and development and (3) manufacturing. In addition to this
by shutting especially Kodak out from this new development Polaroid was sure to upset a
major player with substantial market power. Polaroid was gambling that by the time the giant
would awake they had captured enough market share to fight this market dominator. Culture
played an important role since Polaroids organization was centered around Land who was
over-focused on technological innovations.
Polaroids approach was not successful. After the launch of the SX-70 Polaroid endured
operational problems in the production of the camera. Even as late as 1975 the SX-70 was only
breaking-even with its marginal cost. Furthermore, Kodak started to develop its own instant
camera to compete with the SX-70. Further, the growth of the instant market did not meet
Polaroids expectations. What becomes apparent during this battle is that patenting and vertical
integration are key determinants in defending and maintaining competitive advantage in the
photographic industry.
In hindsight we can conclude that Polaroid was taking too many risks with this approach. The
potential pay-off of this option was very high due to the fact that Polaroid would not have to
share margins with any other party. However, the chance of success was relatively low mainly
due to three factors: (1) they had no experience with large scale manufacturing of film and
cameras, (2) they were starting a David & Goliath fight with Kodak and (3) their marketing
plan was based on very high market estimates that were hard to validate. A more viable option
for Polaroid would have been to co-develop the SX-70 together with Kodak. The main
disadvantage of this was that the potential pay-off would have been less. However, the chance
of success would have been substantially increased. By sharing the gains on instant color
photography they could have shared the risk, Polaroid would have been able to focus on
development and foremost Polaroid could have leveraged Kodaks market power. In addition
to this Polaroid should have considered a more gradual product development. By not trying to
revolutionize the original Polacolor completely the innovation could have progressed more
smoothly.

Page 23

EPILOGUE
In 1976, Kodak launched its version of instant cameras the EK-4 and EK-6 and the PR-10 film
for these cameras. Immediately Polaroid sued Kodak for infringement of 12 of its patents for
film and other photographic apparatus. This case lasted for 9 years in the district courts of
Massachusetts and is considered a landmark case in the history of Intellectual Property related
disputes.
Although the SX-70 sold in large numbers during the first 2 years of its existence, it truly
became profitable only in 1974 on a variable cost basis and in 1976 including the investments.
In 1978 the SX-70/Pronto! became the largest selling camera ever. Meanwhile, Kodaks EK-4,
EK-6 and the EK-8 cameras were also immensely successful. By 1986 when the judge ruled on
the patent infringement case, Kodak had captured 25% of the market for instant cameras and
film.
In November 1985, Judge Zobel ruled that Kodak had violated 7 of the 12 patents that
belonged to Polaroid and advised the parties to seek the advise of another court for settlement
of damages. He also ordered Kodak out of the instant photography business and instructed
Kodak to withdraw all it instant cameras from the market. This was a major blow to Kodak,
despite the fact that by that time market for instant cameras was decreasing and the markets for
other Kodak products like the 35mm film was on the rise. The costs for the call back and a
generous exchange program were estimated at that time to be about $800m.
From 1986 till 1991, Kodak and Polaroid were engaged in a lengthy litigation to agree on the
damages to be awarded to Polaroid. Polaroid claimed that Kodaks forays into the instant
camera business competing with the SX-70 cost it $4bn in sales and lost sales. And as Polaroid
believed that Kodak had willfully violated the patents, Kodak should pay three times the
amount i.e. $12bn in compensation. The judge disagreed with this position of Polaroid and
finally ordered Kodak to pay $909m in compensation to Polaroid in 1991, the largest monetary
award ever in an Intellectual Property case.
What happened to Kodak?
The instant photography market never picked up after 1982, so Kodaks forced exit from the
instant photography business was a blessing in disguise. Kodak invested in other technologies
and went on to become the leader in 35mm film and Advanced Photo Systems (APS) in late
1980s and early 1990s. Today Kodak Gold is the No.1 selling brand of film worldwide. Apart
from this Kodak has also expanded into other areas like scanners, digital printers, projectors,
photo CDs etc. Revenues stood at $13.9bn in 2001.
What happened to Polaroid?
Instant photography never picked up as Land had anticipated. The market started declining in
1982 and despite being the market leader, Polaroid could not generate sufficient sales to
enthuse the analysts and financiers.
The damages paid by Kodak in 1991 gave a small boost to Polaroid and they launched the 600
series of cameras that were briefly popular in early 1990s. Polaroid refocused itself on its core
business of instant photography made consistent efforts to rationalize its operations. A new
threat was developing towards the end of the 1990s, digital photography. In response, Polaroid
became involved in the digital printing business, cooperating with Olympus to produce the first
instant digital printing camera in 2000.
Page 24

According to Polaroids website, the company strategy for the future is to:
1) Continue revitalizing the core instant business with product and service innovations; and
2) Accelerate growth by linking instant with digital imaging. Three priorities are:
Leverage core instant picture technology platform in the digital marketplace;
Stake out a position in the mobile, digital, wireless market via fast, easy and affordable
input and output solutions in areas where Polaroid has a competitive advantage: and
Utilize the Internet and other value-added features and services to enhance customer
relationships, particularly with "Generation Internet" (Gen-I) and with commercial
users.
Unfortunately these efforts have not paid off. In October 2001, Polaroid filed for Chapter 11
bankruptcy protection and restructuring in the US. As of today, Polaroid has sold it
Identification Business Division to Digimarc and its Digital Solutions division to Appareo
Systems. As we write this report it is rumored that either Canon or Olympus might take over
Polaroid and develop its digital printing technology further. We will have to wait and see.

References
Anon, The SX-70 camera deglamorizes Polaroid, Business Week, November 30, 1974.
Anon, Three Living Leaders, Fortune, March 23, 1981.
Cordtz, Dan, How Polaroid Bet Its Future on the SX-70, Fortune, January 1974.
Hayes, L.S., Whats Kodak Developing Now?, Fortune, March 23, 1981.
Mazzone, A.D., Judgment in Polaroid Corporation v. Eastman Kodak Company, No. 761634-MA, United States District Court of the District of Massachusetts (12 October 1990).
[Damages phase of trial]
McElheny, V.L., Insisting on the Impossible: The Life of Edwin Land, Perseus Books, 1998.
Merry, G.W., PolaroidKodak, Harvard Business School Case 376-266, 1984.
Olshaker, Mark, The Instant Image: Edwin Land and the Polaroid Experience, Stein and Day,
1978.
Porter, M.E. and Fuller, M.B., PolaroidKodak, Harvard Business School Case 9-378-173 to
177, 1979.
Taylor, Alex, Kodak Scrambles to Refocus, Fortune, March 3, 1986.
Tedlow, R.S., The Beginning of Mass Marketing in America: George Eastman and
Photography as a Case Study, Journal of Macromarketing, Fall 1997.
Zobel, D.J., Judgment in Polaroid Corporation v. Eastman Kodak Company, No. 76-1634-Z,
United States District Court of the District of Massachusetts (11 October 1985). [Liability
phase of trial]
Websites
http://www.hoovers.com
http://www.kodak.com
Page 25

http://www.polaroid.com
http://www.pmai.org/research.htm
http://www.dpreview.com
http://www.pdnonline.com/news/arts_1201/art6.html
http://www.landlist.org
http://www/rowland.org/land
http://www.howstuffworks.com/question605.htm
http://www.howstuffworks.com/film.htm

Page 26

Appendix A: Kodak and Polaroid product range 1963-1980

CAMERAS
Model

Original
price

Year
introduced

Kodak Instant Line Cameras

$20.00
$140.00

1963

Kodak EK6

$69.50

1976

Kodak EK4

$53.50

1976

Kodak EK2 (The Handle)

$39.95

1977

Kodak EK8 (Not sold in the US)

$115.00

1977

Polaroid Automatic 100

$160.00

1963

Polaroid Swinger

$19.95

1965

Polaroid Big Swinger

$24.95

1968

Polaroid Colorpack II

$29.99

1969

Polaroid SX-70

$180.00

1972

Polaroid SX-70 Model II

$120.00

1974

Polaroid SX-70 Model III

$97.00

1975

Polaroid SX-70 Model IV/Pronto!

$69.99

1976

FILM
Film Speed
Kodak Instant Print Film PR-10

$7.79

1976

Polaroid Panchromatic Type 47

$2.29

1959

ASA 3000

B&W

Polaroid Panchromatic Type 48

(Polacolor film)

$3.55

1963

ASA 75

Color

Polaroid Orthochromatic Type 38

(Polacolor film)

$2.65

1963

ASA 75

Color

Polaroid SX-70 Film

$6.90

1972

ASA 40

Color

Polaroid SX-70 film

$4.04

1980

ASA 40

Color

Page 27

Appendix B: Dates Of Significant Events

POLAROID

1932

Land-Wheelbright Laboratories
established to commercialize Polaroid
filters.

1934

Kodak enters into contract to buy

polarizers to use as filters

KODAK
1888

First pocket camera launched

1900

Brownie camera launched

1903

Home movie camera launched

1935

Color film developed

1951

Handheld movie camera launched

1937

Polaroid Corporation established

1944

Instant photography research begun

1948

Land camera launched

1951

Instant X-ray film introduced

1957

Listed on NYSE

1959

Beginning of international expansion

1962

Sales exceed $1bn

1963

Introduction of Polacolor film

1963

Instamatic launched (one of the most

successful photo product introductions)

1969

April, Colorpack camera launched

1969

Specially designed Kodak camera

records astronauts first steps on the
moon.

1972

Instamatic camera reduced to pocket size

1976

Launched instant line cameras in the

Canada (May) and US (July)

1991

Final settlement of $909m agreed to with

Polaroid

1992

APS developed (with Japanese firms)

2000

Digital camera launched (with Compaq)

November, $99m raised for R&D

Expiry of Polaroids basic patent
protection
1972

SX-70 camera launched at $180

1974

SX-70 Model introduced

1976

March, Pronto! (SX-70) launched at $66

May, Polaroid files patent suit in US
June, Polaroid files patent suit in UK

1977

Sales exceed $1bn

1978

SX-70 is the #1 selling camera worldwide

1983

Land retires from Polaroid

1986

Polaroid wins lawsuit with Kodak

2001

Files for bankruptcy protection

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Appendix C: How Instant Color Photography Works

To understand how Polaroid film works, one needs to understand normal photographic film.
Photographic film (the black & white version) consists of one layer of silver halide crystals
which, when exposed to light, react to form silver ions. Color film has three layers, with the
different layers being sensitive to different colors of light blue, green and red. Developing
the latent images formed on the film into the photographic print requires a number of steps. A
developer chemical to the film to convert the exposed particles into metallic silver.
The film is then treated with three different dye developers containing dye couplers each of
which reacts with one of the color layers in the film. With slide film, the couplers attach to the
non-exposed areas of the film, whereas with ordinary print film, they attach to the particles that
have been exposed.
Next, the film is rinsed with water or a stop bath to stop the developer chemical from over
developing the negative. The unexposed silver halide crystals are then removed in a fixing
bath, which dissolves only the silver halide crystals and leaves the silver metal behind. The
film is washed to remove as much of the chemicals and reaction products as possible and then
dried to produce the final negative.
The negatives are then used to create to expose the color print paper, which consists of a
similar arrangement of silver halide crystals. An enlarger is used to make the image larger than
the negative, effectively projecting the image from the negative onto the print paper. After it
has been exposed the final prints are developed in a similar way to which the negative film was
developed.
Photographic film, as we know it today, made of dried gelatin, was only developed in the late
19th century. Prior to this the silver nitrate crystals were placed on a copper plate or a glass
plate or tinned iron and even soaked
into a sheet of paper. The initial gelatin
film tended to curl and was flammable,
problems that were ironed out over
time. Color film was only developed in
the 20th century.
Instant Photography
Instant photographs are developed in a
similar way, except that all the
chemicals for developing the image are
contained in the film itself. A number
of these chemicals are contained in a
reagent layer. This reagent layer
actually sits in a blob on the edge of
the film. After the photograph is taken,
the film sheet passes out of the camera
between a pair of rollers that spread
the reagent chemical out into the
middle of the film sheet.

Source: www.howstuffworks.com

Page 29

The reagent layer contains a mix of opacifiers (which stop light from further exposing the light
sensitive layers after the picture has been taken), developing chemicals (which pass downwards
through the light sensitive layers, converting the exposed particles into metallic silver) and
other chemicals (which dissolve the developer dye). The developer dye then diffuses upwards.
The metallic silver areas grab the dyes and prevent the from moving up onto the image layer,
so only the dyes from unexposed layers will move up to the image layer.
In the last part of the process, the acid layer reacts with alkali in the reagent and in turn reacts
with the opacifiers so that they become clear and the image can be seen. Obviously this cannot
happen before the image below has been developed, so the timing layer controls mixing of
these chemicals.

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