During recent
decades an explosion of technology and innovation
has occurred. Microchips processors have become
smaller and faster. Memory storage media are not
only increasing in capacity but are also shrinking
in size. For the photo printing market silver
halide days are over. The digital craze has caused
a revolution in the imaging industry. From the
prepress and photo printing operations to medical
imaging equipment, market and consumer demands
are changing. Major imaging industry leaders not
only have to adapt to changes in the market they
also have to deal with newcomers in the imaging
business. As a result market leaders like Agfa,
Kodak and Fuji have reduced prices for all their
mainstream consumer products. (Recent Trends in
Digital Imaging)
For 150 years the photography industry concentrated
on the manufacture of silver halide films. The
range of photographic products included color
negative films for hand held cameras, color papers
for photo printing, X-ray films, motion picture
films and graphic art films. Currently such products
are being manufactured by Eastman Kodak Company,
Fuji, Agfa, Konica, DuPont, 3M, Polaroid, International
Paper (Ilford and Anitec), and Mitsubishi. Kodak,
Fuji, Agfa and Konica together generate more than
80% of the silver halide industry’s revenue.
The advent of digital technology has pushed aside
the silver halide industry and has forced all
major companies to intensify competition in areas
such as sales and market share.
Research and development is essential for market
growth and competition. Companies are aiming to
achieve the highest levels of product performance
so that they can dominate and expand their market
share. Silver halide technology is 150 years old
and research and development is becoming increasingly
expensive for companies. Companies like Kodak
have reported that even after significant investment
in research and development only incremental progress
has been made. In 1994 Kodak spent 6.3% of its
revenues or $850 million on R&D with plans
to spend more in the future. Fuji and Agfa have
followed a similar route. Fuji and Kodak have
been one of the top ten companies in the United
States in terms of the number of patents awarded.
Due to high costs of research and development,
major imaging companies and hardware manufacturers
have combined their resources for the purposes
of R&D. Kodak, Fuji and three camera manufacturers
jointly developed the Advance Photographic Systems
(APS). In the past major companies would invest
in R&D for company specific standards but
now in the face of global competition companies
believe that it is in their interest to consolidate
their efforts into combined research programs.
This approach also promotes alliances between
manufacturers of equipment such as cameras and
manufacturers of photographic films making their
products mutually supporting and dependent on
each other in such a way that they become compliments.
However, the silver halide market has matured
and all investors in R&D would have to obtain
reasonable returns by competing on a global level,
this means that companies would have to reach
new markets and pursue a more aggressive product
promotion and advertising campaign. (TESTIMONY
OF TERRENCE W. FAULKNER, DIRECTOR STRATEGIC PLANNING,
EASTMAN KODAK COMPANY)
One other main reason for cooperation is the development
of worldwide standards and formats. As we have
witnessed in the software industry, a global standard
or a prevalent and popular format paves way for
more innovation and most importantly it makes
the whole industry more flexible to changes. For
these reasons and others the International Imaging
Industry Association or I3A became the accredited
Standards Developing Organization in 1991. I3A’s
technical committees develop standards; recommend
practices and issues technical reports. These
services are extended to all aspects of imaging
from traditional silver-halide photography to
advanced digital still picture imaging and recycling
of photographic materials. There are 300 ANSI
and 250 ISO standards on imaging. I3A believes
that standards are necessary because; ‘As
the pace of technological change continues to
accelerate, and we become ever more dependent
upon the interoperability of a wide variety of
products, services and systems, the need for,
and importance of, standards continues to increase.’
I3A is accredited for creating the Picture Transfer
Protocol (PTP) and JPEG 2000 which have global
implication for all imaging companies.
In some applications, silver halide based photography
has been made obsolete and has been replaced by
digital imaging. For example, during the 1970s
16mm film was replaced by Electronic News Gathering
(ENG) technology in the television market. Video
cameras and magnetic tape replaced conventional
silver halide film cameras in the home video market.
Now digital cameras are a threat to the conventional
silver halide camera. Competitors such as Kodak
which had a silver halide dependent revenue structure
of more than 70% have seen their revenues drop
as a result of consumer shift toward digital products.
Kodak forecasts that by 2006 its revenue from
silver halide related products would decrease
to 40% but in the meanwhile it intends to change
gears and head towards the digital imaging market.
The Photo Marketing Association International
has predicted that global sales of silver halide
films for the year 2004 would decrease by 8%.
This figure has staggering implication for companies
such as Kodak, Fuji, Agfa and Konica; combined
they will loose sales of more 180 million rolls.
In 2003 sales of digital cameras outnumbered
sales for film cameras for the first time. The
explosion in the digital camera market is expected
to continue. Fuji has made significant investment
in the digital camera market and is trying to
improve its cameras. Mobile phone cameras are
particularly in vogue. With improvement in technology
camera phones with two or more mega pixels have
penetrated the market. Digital cameras are being
used by professionals as well as the amateur photographer.
As a result a market gap in the global imaging
industry has been created. Although imaging giants
like Agfa and Fuji had shifted much of their attention
towards the emerging digital market but even then
they were not able to exploit the digital market
in the US, UK and Asia. Facing low entry barriers
and minimal competition from well established
imaging companies, companies like Sony, Matsushita,
Sharp, JVC, Hewlett Packard, Epson and Canon have
exploited the market gap and have created a new
market for their digital imaging products. HP,
Epson and Canon have established the Mobile Imaging
and Printing Consortium in order to develop standards
for printing from mobile phones. (TESTIMONY OF
TERRENCE W. FAULKNER, DIRECTOR STRATEGIC PLANNING,
EASTMAN KODAK COMPANY)
The advantage of digital technology is that it
enables a convergence of imaging, information
and communications. The silver halide imaging
industry has begun its decline. Due to industry
consolidation and customer demand for low priced
products small companies like Oriental have declared
bankruptcy while large companies are exiting product
lines. Agfa no longer produces motion picture
negative films and DuPont has left the industrial
X-ray film market. Kodak has left the analogue
camera manufacturing business and is trying desperately
to revive the film development market by offering
a hybrid product such as the Photo CD.
The digital imaging industry is a $385 billion
industry and although Kodak, Fuji and Agfa have
been lazy about getting themselves into the digital
market. It is very clear that the digital industry
is the future of the imaging industry. The digital
imaging industry has enormous growth potential
and in Daniel Carp’s view the industry’s
potential is limited only by "the industry's
imagination."
In-Depth Analysis of the Country: Belgium
Belgium has rich history and cultural heritage.
Belgium truly is at the crossroads of Europe,
during the past 2000 years it has felt the impact
of many races and cultures. In the medieval ages
Celtic, Roman and Germanic made an imprint on
the Belgian culture and later on the French, Dutch,
Spanish and Austrian nations influenced the Belgian
culture. In 1830 the French speaking minority
initiated the Belgian Revolution against the Dutch
speaking administration and to this day Belgian
politics is heavily influenced by the disparities
between the two communities. (US Department of
State Post Report)
Belgium is composed of 5 Dutch speaking Northern
provinces of Flanders and 5 French speaking Southern
provinces of Wallonia. In the middle rests the
central region of Brussels. The Belgian society
is divided into three communities, the French
speaking, the Dutch and the German speaking minority.
The Federal government has granted much autonomy
to regional provinces and communities. The communities
are responsible for the governance of issues relating
to language, culture and education and the regions
are responsible for land and property issues.
Belgium is a constitutional monarch with the
King as Chief of State, but it also has a parliamentary
democracy. Most of the country’s affairs
are governed by the council of ministers appointed
by the Prime Minister. Elections are held every
four years and all Belgian nationals have the
right and obligation to vote. (US Department of
State Post Report)
Brussels is the capital region of the country.
It is also the where the headquarters of the European
Community and North Atlantic Treaty Organization
is situated. The city of Brussels is unique because
one third of its inhabitants are foreigners, however
despite such foreign presence the Belgian are
very accommodating. Due to the complex cultural
heritage and the continuance of language distinction
Belgium is perhaps rightly called the center of
Europe. (US Department of State Post Report)
Belgium is a highly developed country and a welfare
state. It is also the tenth largest trading nation
in the World and belongs to the G 10 group of
leading financial powers. Belgium is a staunch
supporter of trade liberalization and eradication
of barriers to trade. A founder of the European
Community, Belgium was the first country to adopt
the single European currency of Euro in January
1999 and in 2002 the Belgian Franc was replaced
by the Euro. Belgium plays a very active role
in Benelux Economic Union, the European Union
(EU), the Organization for Economic Cooperation
and Development (OECD), and the World Trade Organization
(WTO). (US Department of State Post Report)
Belgium is heavily dependant on international
trade. Belgium is the highest per capita exporter
in the world with exports equivalent to 75% of
its GDP. Most of Belgium’s imports are raw
materials and intermediate products to which it
adds value and exports the final products. 80%
of Belgium’s foreign trade is with the EU
countries. Therefore, Belgium has a lot to gain
from the European Single Market. The economy of
Belgium is very healthy and the country is prosperous
but the economy is heavily dependent on the economies
of its trading partners. A recession in Europe
and the United States will immediately cause a
recession in Belgium. (US Department of State
Post Report)
Many international firms looking to set up operations
in Europe choose Belgium as a test market for
their products due to its ethnic diversity and
cultural differences. The United States has $18
billion worth of investment in Belgium. Furthermore
Belgian imports are high as well, 74% of its GDP
while the European average is just 25%. In 2000
Belgium imported $12 billion of American products.
(Stimulating Industrial Innovation for Sustainability)
The Flanders has traditionally been the source
of economic prosperity during the 19th and 20th
centuries due to their industrial dominance. With
the decline of the industrial era and rise of
the service sector the region has suffered a decrease
in industrial research and investment. Traditionally
small enterprises exist in the Flanders but now
under the increasing influence of the global market
many of these enterprises are faced with very
attractive incentives for expansion of trade and
production by establishing subsidiaries abroad.
The GDP of Belgium is approximately 225 billion
Eros of which industrial production accounts for
150 billion Euros. Industries in the Flemish regions
generate 100 billion Eros whereas Walloon and
Brussels account for only 25 billion in industrial
production. The industrial sector in Belgium includes
of engineering, metal products, motor vehicle
assembly, processed food and beverages, chemicals,
basic metals, textiles, glass, petroleum, and
coal. (Stimulating Industrial Innovation for Sustainability)
The research and development expenditures are
low in Belgium compared to other European countries.
In 1995 public funding of R&D in terms of
GDP was 0.5% while the same was 1% in France and
0.9% in Germany, UK and the Netherlands. However,
the Flemish government has been engaged in the
promotion of investment in high tech companies.
The Flemish regions are also well developed with
a low unemployment rate. The Belgian unemployment
rate is 9% mostly due to generous social security
payments and the bulk of this percentage is attributable
to the Walloon regions. As per European standards
the unemployment rate is high but so is the Belgian
growth rate which is at 4%; again this figure
is mostly attributable to the highly developed
industrial regions of Flanders. (Stimulating Industrial
Innovation for Sustainability)
Flemish companies account for more than a third
of all research and development expenditures.
640 private firms are performing research activities
whereas only 222 private firms in the Walloon
and 116 in Brussels are actively engaged in research
activities. The Flemish government has also played
an instrumental role in promoting R&D by setting
clear policy objectives and by creating substantial
numbers of interuniversity
laboratories in high-tech disciplines and intermediary
organizations. (Stimulating Industrial Innovation
for Sustainability)
The leading research and development companies
in Flanders are Agfa-Gevaert, Janssen Pharmaceutica
and Alcatel Bell. In Wallonia the leading firms
are Smithkline Beecham, Fina Research and Shell
Research and in Brussels the largest research
oriented private firm is Solvey. At present all
the responsibility of research and development
progress rests with communities and regional governments.(
Stimulating Industrial Innovation for Sustainability)
A very innovative scheme regarding research and
development is the establishment of Sectoral Centers
of Collective Research like VITO, IMEC and Center
for Nuclear Energy). These research organizations
are based on funding from federal government and
the regions on the basis of cooperative agreements.
Half the funding is provided by the industries
involved in the sector. The primary objective
of these research organizations is to introduce
new technology in specific industries and conduct
basic technological research in specific scientific
areas so as to fulfill the research requirements
of companies. Mostly medium sized companies are
a part of these cooperative research centers but
large companies like pharmaceuticals and imaging
industry giant Agfa also participate and contribute
towards the funding requirements. (Stimulating
Industrial Innovation for Sustainability)
Although federal government has granted autonomy
to regions with regards to research and development
but it remains the largest funding source for
research activities. The Office of Scientific,
Technical and Cultural Affairs (DWTC) supplies
two third of the federal funding to research centers.
In the Flanders the regional government is responsible
for the distribution of funds and this is done
via The Department of Science, Innovation and
Media and The Department of Education. The main
organizations in Flanders which receive these
funding are The Flemish Institute for the Promotion
of Research in Industry (IWT), The Flemish Institute
of Technological Research and (VITO) and the Administration
for Science and Innovation. The complex nature
of governance in Belgium has given rise to uncertainties
regarding the effectiveness of such a decentralized
system of implementing science and technology
policies. Some amount of federal control should
remain with the federal government regarding the
direction of progress of the Belgian industries
so that the country can implement policies that
have global implications. (Stimulating Industrial
Innovation for Sustainability)
Apart from taxes and fiscal measures which are
high in Belgium the regional government levy eco
taxes, charge investment deduction and value added
tax. The fiscal policy as a whole otherwise favors
innovation, research and development. The taxation
system in Belgium allows for investment deduction
of monies spent on R&D, energy saving and
green investments. Companies can obtain incentives
on setting up cost which amount to 14% on a regional
basis and 12% for environmental friendly investments.
In addition to this small and medium enterprises
can obtain subsidies based on regional policies.
(High Technology in Belgium)
The taxation system has been relaxed after Prime
Minister Guy Verhofstadt came to power in 1999.
His government embarked upon a path of drastic
economic reform by cutting personal and corporate
taxes and providing more social security contributions.
As a result Belgium has become one of the most
attractive places for corporate investment. 250
major Japanese companies have operations in Belgium
with 50 of them having their headquarters in Belgium.
730 German companies are operating in Belgium
and more than 1500 American companies have European
headquarters in Belgium. This overview suggests
that the Belgium industrial sector is dominated
by foreign companies. According to unofficial
figures the foreign companies hold 70% of the
manufacturing sector through shareholdings.
In-Depth Analysis of the Imaging Industry in
Belgium Including Key Success Factors and Analysis
of Successful Firms and Why They Are Successful
Belgium is home to the imaging giant Agfa-Gevaert
Group. Although other big companies like Fuji,
Kodak and Konica have markets in Belgium, it is
Agfa which dominates the imaging industry setup
in Belgium. AGFA’s history began in1867
when two German chemists established a dyestuff
factory near Berlin called ‘Aktien-Gesellschaft
für Anilin-Fabrikation’ or AGFA. In
1894 a Belgian photographer Lieven Gevaert formed
a limited commercial partnership “L. Gevaert
& Cie." in Antwerp, Belgium. Geveart
produced photographic paper in his workshop and
his operation was very successful. Later the two
businesses would combine with Rietzschel’s
lens manufacture operation and register as AGFA
in1897.
In 1900 AGFA introduced the first camera to the
consumer market and in 1903 the company started
producing the first cinematic films. In 1920 Gevaert
Photo-Producten N.V went public. In 1929 Gevaert
manufactured the first X-ray and sound films and
in 1936 AGFA added color to photography with Agfacolor
Neu. Agfa introduced the first automatic camera
and in 1956 a few years later it introduced Agfa
Optima a 35mm film camera.
The present day Agfa-Gevaert Group was formed
in 1964 and from that time onwards Agfa embarked
on a journey of high tech innovation and product
diversification. It produced the first compact
book copier in 1972; in 1983 it produced the first
digital printer and later on the scanning printer.
In 1995 Agfa introduced the Agfa Diagnostic Center
and Impax Network Systems. Agfa diversified by
entering the printing plate business in 1996.
In 1997 Agfa introduced the Agfa Ink Jet printer.
Agfa-Gevaert NV became a Belgium public limited
company when its stocks were launched in Brussels
in1999. At the Photokina expo AGfa revealed the
d-lab 3 which was Agfa’s fist digital minilab
and during the same year in 2000 Agfa entered
the medical imaging industry by the acquisition
of Krautkrämer. Krautkrämer was one
of the largest manufacturers of ultrasonic testing
devices in the world for non-destructive material
testing. The consumer imaging division of Agfa
became an independent company in 2004 now known
as AgfaPhoto. Agfa has always concentrated on
innovation, development and adaptation to market
trend. When Agfa saw that the magnetic tape industry
was hitting a decline it quickly left the market
and recently Agfa abandoned the motion picture
film market when it realized that its future is
unprofitable. Agfa has also been very quick to
capture the digital imaging gap in the medical
industry. In the years since 1999 Agfa has pursued
am aggressive acquisition campaign financed by
its own cash flows. As a result the Agfa group
has expanded its operations to the health sector,
non destructive testing sector while maintaining
its market share in consumer related products.
(Agfa on Track)
The extent of innovation and development by Agfa-Gevaert
can be gauged by the fact that it holds 1010 out
of 3990 Flemish patent applications. The top twenty
companies together hold nearly 50% of all patent
application and Agfa alone holds nearly 20%. 65%
of Agfa’s patents are located within the
top 4IPC codes. In Belgium patents are the constant
means of obtaining a competitive edge in the market
and Agfa has the largest patent portfolio in Belgium.
However, the portfolio which Agfa holds is smaller
in scope than its rivals Kodak and Fuji’s
portfolios. Belgium’s instrumentation and
printing sector is mostly held by Agfa-Gevaert
(which holds 20% of instruments patents) with
few rivals. Agfa, however is the largest exporter
of photo chemicals in Belgium but it continues
research along the lines of instrumentation and
the graphical business. This fact alone suggests
how keen Agfa is to the future of the market which
is predicted to have little to do with photo chemicals.
(Can Technology Lead to Competitive Advantage?)
Agfa continues to be the world leader in prepress,
industrial radiography, high speed printers for
wholesale photo finishing, and private label film.
After the acquisition of Sterling Diagnostic Imaging
in 1998, Agfa is one of market leaders in medical
imaging. Agfa has dedicated itself to restructuring
its corporate profile with an emphasis on entering
new markets and developing new technology. The
constant innovation led business growth is the
principal reason for Agfa’s phenomenal success
in the global imaging market.
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