Fuji Photo Film Co., Ltd.

views updated May 11 2018

Fuji Photo Film Co., Ltd.

26-30, Nishiazabu 2-chome
Minato-ku, Tokyo 106
Japan
(03) 3406-2444
Fax: (03) 3406-2173

Public Company
Incorporated: 1934
Employees: 19,677
Sales: ¥928.54 billion (US$6.46 billion)
Stock Exchanges: Tokyo Osaka Nagoya Fukuoka Niigata Sapporo

Fuji Photo Film originated as a cinematic-film producer and grew by serving the consumer film market through the 1970s. Fuji’s traditional products are motion picture and consumer films and magnetic tapes. Research into electronics has allowed the company to branch into other forms of imaging, including relatively new areas combining multi-layer emulsion coating, photochemistry, and photo-engineering. Although electronic systems are somewhat new to Fuji, it is building on its experience in office and medical technology and graphic communications.

In 1934 Dainippon Celluloid, Japan’s first cinematic film manufacturer, spun off its troubled photographic division. Named Fuji Photo Film Company, the new company already employed 340 people and named Shuichi Asano as its first president. Its product line included motion picture film, dry plates, and photographic paper. The company struggled for three years, mainly due to the poor quality and high prices of its products relative to imports.

Fuji’s first task was to build a reputation in the domestic market. Brand reliability proved critical in the photosensitive-materials industry, since buyers were not willing to risk losing a desired image to inadequate materials, regardless of cost. During its first three years, the company continued to lose sales, increase debt, and struggle to meet research expenses. Fuji could not expand without first addressing quality, so it employed a German specialist to assist in the area of emulsion technology.

The combination of outside consultation and its own research allowed the company to introduce its first film as an independent in 1936, as well as a motion picture negative film. The negative film was much harder to produce, and demonstrated Fuji’s new technical competence to Japanese studios.

Fuji built a second factory in Odawara in 1938. Color research began in a new laboratory in 1939, but World War II halted such work. During the war the government set aside all sensitized materials for the military, so consumer-film development had to wait out the war. In 1945 Allied bombing raids partially damaged two Fuji factories, but recovery during the postwar era involved more than infrastructural repair.

The Allied powers allowed civilian trade to resume in 1947, and Fuji immediately began exporting to outlets in South America and Asia. Japanese producers still enjoyed a good reputation in optical products, enabling Fuji to export its cameras and binoculars. In the area of film and other sensitized materials, however, Japanese technology still lagged behind U.S. and European producers.

Although it produced x-ray and cinematic film, Fuji did not produce large amounts of film for the amateur consumer market until the 1950s. In the meantime, it resumed color research and produced its first color film in 1948. In 1949 Indian buyers received a shipment of Fuji motion picture film, the company’s first substantial postwar sale.

As the 1940s ended, so did a shortage of raw materials— including silver, paper, and petroleum-based chemicals—that kept Fuji from producing amateur photographic products in large quantities. Licensing agreements between Fuji and Eastman Kodak of the United States allowed Fuji to equal Western producers in terms of black-and-white amateur roll film quality. Fuji, now able to supply its products in large quantities, introduced its first amateur roll film in 1952. By 1958 Fuji had introduced three additional black-and-white roll films.

Fuji enjoyed burgeoning domestic demand for the next 20 years, due in part to tariffs on film imports. During the 1950s Fuji captured the Japanese market for consumer films—a market which would quickly comprise 15% of the world’s total film sales.

After setting up an export sales division in 1956, Fuji reached 27 export agreements by 1958 in Asia, North America, and Central America. Fuji first entered North America in 1955, and established its U.S. subsidiary ten years later.

As Fuji’s international base grew, it still had to fight a perception of poor quality. In order to make a serious drive abroad, the company first had to develop film and paper compatible with the processing systems most commonly used worldwide. In 1966 Fuji introduced its first amateur slide film compatible with overseas processors. By 1969 all its films, photo paper, and chemicals were fully compatible. Employing the sales network it had established in the 1950s, exports began to flow.

In 1970 Fuji had nine overseas offices, and by the end of the decade it had 14 offices and subsidiaries abroad. These subsidiaries then branched out. Fuji’s U.S. subsidiary, for instance, opened six offices between 1971 and 1982.

Recognition in these markets proved more difficult. Eastman Kodak’s dominance in consumer films forced all producers to make compatible products in the postwar decades. Fuji learned this after it introduced a cartridge-film eight-millimeter home movie system in 1967. Fuji’s product had the support of 14 Japanese and European manufacturers, including AGFA-Gevaert, Europe’s largest photographic manufacturer. Kodak introduced its own system shortly after, which quickly gained control of the world market. Fuji had to abandon its system and rushed to develop compatible films. Fuji’s overseas growth was slow during the 1970s, adhering to the industry’s pace of product development.

In 1970 Kodak held more than 90% of the $400 million U.S. market, but Fuji’s color films were already faster than Kodak’s—meaning they required less light for adequate exposure. In addition, Fuji films were better on warmer tones, including red, orange, and flesh tones. While Kodak pursued the convenience-based mass market, Fuji targeted professionals and serious amateurs. Although it would take several years before Fuji posed a serious threat to Kodak, its quality created a position of strength.

Relative to its competition, Fuji strengthened itself during the 1970s, partially due to the appreciation of the yen between 1971 and 1980. One factor in the growth of Fuji’s non-Western markets was its development of manufacturing facilities. Operations in Brazil, Korea, and Indonesia began with Fuji assistance. The operations began with package assembly, but eventually produced pre-sensitized materials, color processing chemicals, and optical products for export. Such manufacturing bases made the company less vulnerable to currency fluctuation and reduced overhead.

Where Fuji saved on manufacturing it spent heavily on research. Fuji began magnetic research in 1954, introduced products by 1960, and in 1963 produced video tape for domestic television. Magnetic products became the key to Fuji’s long-term growth. In 1977 this research led to the introduction of Japan’s first eight-inch floppy computer discs.

Fuji also developed products related to the photographic process for other industries. In 1967 for instance, Fuji, Mitsubishi Heavy Industries, and Konan Camera Institute developed a system to photographically trace blueprints onto construction materials. In addition to such new applications for heavy industry, Fuji continued to develop new technology for x-rays and other electronic systems for medical technology.

Fuji’s core business continued to be film, however, and it pushed for additional access to lucrative Western markets just as Japanese film sale growth began to slow. Fuji had first entered the U.S. market as a private-label film supplier in 1960, and produced its first color film there in 1970. In 1972, it marketed the first film under its own brand name. Fuji went directly to retailers with its new film and received a 2% share of the American market, which more than doubled during the 1970s. Fuji’s marketing well timed, and in 1976 Fuji also caught the attention of professionals and serious amateurs when it beat Kodak with an introduction of faster film, something it accomplished in 1984 as well.

Fuji spent heavily to build its U.S. share but had relatively little success. Kodak’s research expenditures were still large by comparison, and when Kodak introduced Kodacolor II film in 1972, Japanese companies had to hurry to put comparable films on the market. The recession during the late 1970s complicated Fuji’s international drive. Industrywide production overcapacity and price increases for silver and oil-based chemicals cut into earnings.

While silver was still necessary for photographic imaging, its price jump demonstrated the wisdom of Fuji’s research into electronic imaging technologies and its mid-1970s hiring campaign for electronics engineers. While many companies posted declines, Fuji’s profits were only stagnant for 1977 and 1978.

Fuji was then the third-largest film maker behind Kodak and AGFA-Gevaert, but the Japanese companies responded to the setbacks more aggressively. Fuji and its domestic competitor, Konishiroku, raised their film prices only 7%—while competitors raised their prices from 10% to 30%—despite silver prices skyrocketing from $6 to $49 an ounce in 1979.

Silver inflation alone had cost Fuji ¥15 billion in 1979, and exchange losses on export sales cost an additional ¥4.6 billion. By 1979 consumer demand for magnetic products like audio and video tape began to climb dramatically, providing Fuji a faster recovery than its competition. Despite continued increases in raw material costs, Fuji’s earnings improved quickly due to escalating demand served by the new magnetic-products division.

In 1980 earnings jumped 130%. Silver prices dropped, and sales for magnetic products still grew. Magnetic products, now 9% of sales, pushed exports up to 32%, where they remained for the entire decade. Fuji was well poised for a renewed assault on Western film markets.

In the 1980s the U.S. amateur film market changed rapidly. Consumers preferred higher-quality 35-millimeter over Kodak’s disc, cartridge, or instant photography. Although the market changed to the advantage of manufacturers like Fuji, who specialized in 35-millimeter films, consumers still demanded convenience. Autofocus cameras and faster film required more sophistication from manufacturers.

Despite this favorable shift in consumer preferences, the photo industry as a whole had matured. Further, while Fuji hoped to gain ground in the U.S. market, that market was only twice as big as the Japanese market in terms of photo sales. Fuji entered the 1980s resolved not only to increase its portion of film sales worldwide, but also to find growth for its products in imaging and electronics.

Minoru Ohnishi replaced Kusuo Hirata and became Fuji’s youngest president ever in 1979. Ohnishi had worked for five years in the late 1980s as head of the U.S. subsidiary. His nontraditional appointment overlooked older officers, but he was able to use his experience in the U.S. market to establish a sales network for new products like magnetic tape, optics, and hybrid electronic systems.

Fuji’s growth through the early 1980s had come at the expense of smaller manufacturers like 3M and AGFA-Gevaert. Now the second-largest film manufacturer, it set its sights on Kodak’s core. By 1982 Fuji’s share of the U.S. market had slowly climbed to 5%, and Ohnishi set a 10% goal.

There were several factors behind Fuji’s confidence. First, Kodak’s product development in the 1970s was weak. Fuji had kept up with increasingly sophisticated demand by introducing faster and higher resolution films for both cinematic and amateur uses several times. Second, Fuji’s research investments had been well placed. Kodak turned from chemical research to electronics late, while Fuji had already recognized the technology’s long-term value in processing and imaging. Although Kodak’s research expenditures dwarfed Fuji’s, Fuji spent a larger share of its earnings on research. In 1979, Kodak applied for 255 patents in the U.S. and Japan, compared to Fuji’s 270.

Fuji was the first non-U.S. company to produce videotape. The consumer and trade press praised Fuji tape quality from its introduction. By 1982 magnetic products were already 12% of revenues. With broad distribution, a good reputation, and a skyrocketing market, Fuji made large gains.

Magnetic products, like film, provide high margins. Unlike its position in the consumer film market, Fuji enjoys a prominent role in the magnetic-products marketplace. Between 1978 and 1982 magnetic-division sales increased almost fivefold to $97 million. By 1983 films were only half of Fuji’s business.

Newer areas like biotechnology and office automation had been paid for not with debt but with cash generated from film products and stock sales. Such electronic systems, like microfilm records for offices and electronic imaging for x-rays, began to contribute to earnings on their own. In addition, Fuji enjoyed high profit margins in all areas. Pretax operating margins increased one-third to 24.4% from 1976 to 1981. Fuji’s film, tape, and computer-disc manufacturing was highly automated, allowing workers to circulate among factories for increased productivity.

The climate for high-technology industries proved intense in the 1980s, due in part to trade friction and yen appreciation. In addition, Fuji was relatively new to electronic systems, and other companies had a large lead in areas like medical technology. In order to remain competitive in these new areas, Fuji had to keep cash available and increase momentum in film sales. Fuji steadily increased its U.S. advertising budget, peaking when it outbid Kodak as sponsor to the 1984 Olympics in Los Angeles. Eventually spending $7 million on the campaign, Fuji entered the event with a 6% share of the U.S. market.

Simultaneously, the company strengthened distribution. In 1979 Fuji sold film in 30% of all film outlets in the United States; by 1984 it sold in 60%, expanding beyond specialty photo outlets. By the end of the Olympic year its share jumped to 8%, allowing Ohnishi to predict not only a 15% share in ten years, but also to carry out a more aggressive approach late in the decade. As Fuji stepped up its efforts to reach the professional market in 1986, its market share approached 10%.

Fuji did not face the same battle abroad that it faced in the United States. It already sold over half of the film and photo paper in Southeast Asia, and the 1984 opening of a Chinese office gave it a lucrative foothold in an untapped and huge market. Brand loyalty was not as significant outside the United States, and in 1982 Fuji enjoyed a 10% share in Europe, Fuji’s second-largest market. One year later it captured 15% of that market, prompting the company to construct its first European plant, in the Netherlands, in 1984. Producing selected sensitized materials, the plant paved the way for continued growth on the continent and lessened difficulty with currency fluctuation.

By the mid-1980s the U.S. market had begun to open to Fuji. Despite growth, profits there were still elusive. Videotape prices dropped sharply due to overproduction, and advertising costs continued to climb. While a U.S. market that declined overall was bad for Kodak, it helped Fuji, which was not as reliant on photography. Fuji could still pursue market share while continuing to find growth industries for other forms of imaging.

Fuji’s renewed drive in the late 1980s came with more confidence. After a surprisingly successful introduction in Japan, Fuji was first on the U.S. market with a disposable camera. In Japan, a market less receptive to instant-photography items, Fuji sold 1.5 million cameras in six months. While the traditional market declined, Fuji managed to discover a completely new segment of consumer photography.

By 1988 Fuji had achieved its 10% share and the exchange rate was favorable for building in the United States. It built a plant in South Carolina to make presensitized plates. Fuji can expand these facilities, as it has other overseas plants, to serve the consumer market. Such a move would provide faster delivery, immunity from currency exchange losses, and eliminate charges of dumping. Fuji also announced plans to open a U.S. video tape factory in 1991.

With a double-digit market share firmly in place, Fuji sought to increase use of its processing systems, since Kodak’s Colorwatch processing network still provided an obstacle, steadily increasing its share of the photofinishing market. Increases in vendor use of a company’s processors create demand for its paper and chemicals. Fuji launched its own system, Fujicolor Circle, offering technical support and promotional discounts. For the first time in 15 years of U.S. activity, Fuji put its logo on the back of its paper, no longer fearing consumer preference for Kodak. Fuji’s distribution was now strong enough, and it had been successful with its mini photoprocessing labs. Quicker to respond than retailing, processing systems allowed Fuji to capture 16% of the U.S. market for photo paper.

Fuji entered the 1990s with strength and conservative confidence, favoring profitability over mass sales. Despite problems created by the strength of the yen, Fuji has kept earnings stable during its overseas expansion. With a double-digit market share in the United States and Europe, the subsidiaries need to maintain efficient distribution to make further gains. In addition, market share can grow for its electronic systems given the company’s record of successful product introductions, broader demand for imaging systems, and its ability to stay competitive in new areas.

Having achieved prominence in consumer film sales—still 49% of its total sales including cameras—Fuji has as much to lose from smaller companies as it does from the market leader. Domestic tariffs were eliminated in 1990, so Fuji’s traditional core business of domestic films may erode. Since film manufacturers make large margins on film, price wars that lower earnings are not likely. When competition in electronic systems intensifies, Fuji may need that traditional cash flow.

Fuji’s is the world’s second-largest film supplier and positioned for further growth in all markets of consumer film sales. Its award-winning cinematic film continues to earn a large share of the purchases made by professional studios. Less reliant on its traditional film business, the company looks for gains in electronic systems involving imaging for medical, office record-keeping, and industrial uses. It faces experienced competition in these new areas and a recession in the early 1990s in industries like printing, but its high-margin cash flow generated from its core business should allow it to overcome difficulties in these costly new areas.

Principal Subsidiaries

Fuji Photo Optical Co., Ltd.; Fuji-color Service Co., Ltd.; Fuji Photo Equipment Co., Ltd.; Fuji Color Trading Co., Ltd.; Fuji Medical Systems Co., Ltd.; Fuji Special Paper Co., Ltd.; Fuji Magnetape Co., Ltd.; Fuji Micrographics Co., Ltd.; Fuji-Hunt Electronics Technology Co., Ltd.; Fuji Magne-Disk Co., Ltd; Fuji Film Battery Co., Ltd.; Fuji Sangyo Co., Ltd.; Fuji Technics Co., Ltd.; Fuji Service Co., Ltd.; Fuji Photo Service Co., Ltd.; Fuji Photo Film U.S.A., Inc.; Fuji Photo Film Hawaii, Inc. (U.S.A.); Fuji Medical Systems U.S.A., Inc.; Fuji Photo Film, Inc. (U.S.A.); Fuji Hunt Photographic Chemicals, Inc. (U.S.A.); Fuji Photo Film Canada, Inc.; Fuji Hunt Photographic Chemicals, Ltd. (Canada); Fuji Photo Film do Brasil Ltda. (Brazil); Fuji Photo Film (Europe) GmbH (Germany); Fuji Magnetics GmbH (Germany); Fuji Photo Film (U.K.) Ltd.; Fuji Photo Film Finance (U.K.) Ltd.; Fuji Photo Film B.V. (Netherlands); Fuji Hunt Photographic Chemicals, N.V. (Belgium); Fuji Hunt Photographic Chemicals (Deutschland) GmbH (Germany); Fuji Hunt Photographic Chemicals (U.K.) Ltd.; Fuji Hunt Photographic Chemicals (France) S.A.; Fuji Hunt Photographic Chemicals (Italia) Sri (Italy); Fuji Hunt Photographic Chemicals (Sverige) A.B. (Sweden); Fuji Film España, S.A. (Spain); Fuji Photo Film (Singapore) Pte Ltd.; Fuji Hunt Photographic Chemicals Pte Ltd. (Singapore); Fuji Photo Film (Thailand) Ltd.

Fuji Photo Film Co., Ltd.

views updated Jun 08 2018

Fuji Photo Film Co., Ltd.

26-30, Nishiazabu 2-chome
Minato-ku
Tokyo, 106-8620
Japan
Telephone: (03) 3406-2111
Fax: (03) 3406-2193
Web site: http://www.fujifilm.co.jp

Public Company
Incorporated: 1934
Employees: 76,430
Sales: ¥2.53 trillion ($23.62 billion) (2005)
Stock Exchanges: Tokyo Osaka Nagoya
Ticker Symbol: 4901
NAIC: 325992 Photographic Film, Paper, Plate, and Chemical Manufacturing; 333314 Optical Instrument and Lens Manufacturing; 333315 Photographic and Photocopying Equipment Manufacturing; 334119 Other Computer Peripheral Equipment Manufacturing; 334613 Magnetic and Optical Recording Media Manufacturing; 339112 Surgical and Medical Instrument Manufacturing

Fuji Photo Film Co., Ltd. originated as a cinematic-film producer and has grown into a multidimensional manufacturer and marketer of imaging and information products. Fuji is by far the largest maker of photographic film in Japan while running neck-and-neck with Eastman Kodak Company for the lead in the world market. While still producing a wide range of film for still cameras, as well as motion picture film, photofinishing equipment, and color paper, chemicals, and services for photofinishing, Fuji has made a concerted push into the digital world, producing digital cameras, printers and office copiers, digital recording media, medical imaging products, and materials for flat panel displays. A little over half of revenues are derived in the Japanese market, while the Americas account for about 20 percent, Europe, nearly 14 percent, and the Asia-Pacific region (except for Japan), the Middle East, and Africa, another 14 percent.

EARLY HISTORY

In 1934 Dainippon Celluloid Company, Japan's first cinematic film manufacturer (and later renamed Daicel Chemical Industries, Ltd.), spun off its troubled photographic division. Named Fuji Photo Film Co., Ltd., the new company already employed 340 people and named Shuichi Asano as its first president. Its product line included motion picture film, dry plates, and photographic paper. The company struggled for three years, mainly because of the poor quality and high prices of its products relative to imports.

Fuji's first task was to build a reputation in the domestic market. Brand reliability proved critical in the photosensitive-materials industry, since buyers were not willing to risk losing a desired image to inadequate materials, regardless of cost. During its first three years, the company continued to lose sales, increase debt, and struggle to meet research expenses. Fuji could not expand without first addressing quality, so it employed a German specialist to assist in the area of emulsion technology.

The combination of outside consultation and its own research allowed the company to introduce its first film as an independent in 1936, as well as a motion picture negative film. The negative film was much harder to produce, and demonstrated Fuji's new technical competence to Japanese studios.

Fuji built a second factory in Odawara in 1938. Color research began in a new laboratory in 1939, but World War II halted such work. During the war the government set aside all sensitized materials for the military, so consumer-film development had to wait out the war. In 1945 Allied bombing raids partially damaged two Fuji factories, but recovery during the postwar era involved more than infrastructural repair.

The Allied Powers allowed civilian trade to resume in 1947, and Fuji immediately began exporting to outlets in South America and Asia. Japanese producers still enjoyed a good reputation in optical products, enabling Fuji to export its cameras and binoculars. In the area of film and other sensitized materials, however, Japanese technology still lagged behind U.S. and European producers.

Although it produced X-ray and cinematic film, Fuji did not produce large amounts of film for the amateur consumer market until the 1950s. In the meantime, it resumed color research and produced its first color film in 1948. In 1949 Indian buyers received a shipment of Fuji motion picture film, the company's first substantial postwar sale.

DOMESTIC AND OVERSEAS GROWTH

As the 1940s ended, so did a shortage of raw materials, including silver, paper, and petroleum-based chemicals, which kept Fuji from producing amateur photographic products in large quantities. Licensing agreements between Fuji and Eastman Kodak of the United States allowed Fuji to equal Western producers in terms of black-and-white amateur roll film quality. Fuji, now able to supply its products in large quantities, introduced its first amateur roll film in 1952. By 1958 Fuji had introduced three additional black-and-white roll films.

Fuji enjoyed burgeoning domestic demand for the next 20 years, due in part to tariffs on film imports. During the 1950s Fuji captured the Japanese market for consumer films, a market that would quickly comprise 15 percent of the world's total film sales. Branching out, Fuji joined forces with Xerox Corporation to create a Japan-based 50-50 joint venture called Fuji Xerox Co., Ltd., which concentrated on selling copies in Japan and the Pacific Rim.

After setting up an export sales division in 1956, Fuji reached 27 export agreements by 1958 in Asia, North America, and Central America. Fuji first entered North America in 1955, and established its U.S. subsidiary (Fuji Photo Film U.S.A., Inc.) ten years later.

As Fuji's international base grew, it still had to fight a perception of poor quality. In order to make a serious drive abroad, the company first had to develop film and paper compatible with the processing systems most commonly used worldwide. In 1966 Fuji introduced its first amateur slide film compatible with overseas processors. By 1969 all its films, photo paper, and chemicals were fully compatible. Employing the sales network it had established in the 1950s, exports began to flow.

In 1970 Fuji had nine overseas offices, and by the end of the decade it had 14 offices and subsidiaries abroad. These subsidiaries then branched out. Fuji's U.S. subsidiary, for instance, opened six offices between 1971 and 1982.

Recognition in these markets proved more difficult. Eastman Kodak's dominance in consumer films forced all producers to make compatible products in the postwar decades. Fuji learned this after it introduced a cartridge-film 8-millimeter home movie system in 1967. Fuji's product had the support of 14 Japanese and European manufacturers, including AGFA-Gevaert, Europe's largest photographic manufacturer. Kodak introduced its own system shortly after, which quickly gained control of the world market. Fuji had to abandon its system and rushed to develop compatible films. Fuji's overseas growth was slow during the 1970s, adhering to the industry's pace of product development.

COMPANY PERSPECTIVES

Fujifilm will constantly strive to develop superior technologies and to continue to cultivate an imaging and information culture. As a global company fully trusted by both customers and society itself, we aim to make innovative use of the most advanced technologies to create beautiful images and wide-ranging information and provide the imaging, information, and document solutions that will best meet the increasingly sophisticated needs of the world community.

In 1970 Kodak held more than 90 percent of the $400 million U.S. market, but Fuji's color films were already faster than Kodak's, meaning they required less light for adequate exposure. In addition, Fuji films were better on warmer tones, including red, orange, and flesh tones. While Kodak pursued the convenience-based mass market, Fuji targeted professionals and serious amateurs. Although it would take several years before Fuji posed a serious threat to Kodak, its quality created a position of strength.

Relative to its competition, Fuji strengthened itself during the 1970s, partially due to the appreciation of the yen between 1971 and 1980. One factor in the growth of Fuji's non-Western markets was its development of manufacturing facilities. Operations in Brazil, Korea, and Indonesia began with Fuji assistance. The operations began with package assembly, but eventually produced presensitized materials, color processing chemicals, and optical products for export. Such manufacturing bases made the company less vulnerable to currency fluctuation and reduced overhead.

Where Fuji saved on manufacturing it spent heavily on research. Fuji began magnetic research in 1954, introduced products by 1960, and in 1963 produced videotape for domestic television. Magnetic products became the key to Fuji's long-term growth. In 1977 this research led to the introduction of Japan's first eight-inch floppy computer discs.

Fuji also developed products related to the photographic process for other industries. In 1967 for instance, Fuji, Mitsubishi Heavy Industries, and Konan Camera Institute developed a system to photographically trace blueprints onto construction materials. In addition to such new applications for heavy industry, Fuji continued to develop new technology for X-rays and other electronic systems for medical technology.

Fuji's core business continued to be film, however, and it pushed for additional access to lucrative Western markets just as Japanese film sales growth began to slow. Fuji had first entered the U.S. market as a private-label film supplier in 1960, and produced its first color film there in 1970. In 1972 it marketed the first film under its own brand name. Fuji went directly to retailers with its new film and received a 2 percent share of the American market, which more than doubled during the 1970s. Fuji's marketing was well-timed, and in 1976 Fuji also caught the attention of professionals and serious amateurs when it beat Kodak with an introduction of faster film (400 ISO speed), something it accomplished in 1984 as well (1600 ISO speed).

Fuji spent heavily to build its U.S. share but had relatively little success. Kodak's research expenditures were still large by comparison, and when Kodak introduced Kodacolor II film in 1972, Japanese companies had to hurry to put comparable films on the market. The recession during the late 1970s complicated Fuji's international drive. Industrywide production overcapacity and price increases for silver and oil-based chemicals cut into earnings.

While silver was still necessary for photographic imaging, its price jump demonstrated the wisdom of Fuji's research into electronic imaging technologies and its mid-1970s hiring campaign for electronics engineers. While many companies posted declines, Fuji's profits were only stagnant for 1977 and 1978.

Fuji was then the third largest filmmaker behind Kodak and AGFA-Gevaert, but the Japanese companies responded to the setbacks more aggressively. Fuji and its domestic competitor, Konishiroku (later Konica Corporation), raised their film prices only 7 percent, while competitors raised their prices from 10 to 30 percent, despite silver prices skyrocketing from $6 to $49 an ounce in 1979.

KEY DATES

1934:: Dainippon Celluloid Company spins off its photographic division as Fuji Photo Film Co., Ltd.
1952:: Fuji Photo begins producing film for the amateur consumer market.
1962:: Fuji and Xerox Corporation create the joint venture Fuji Xerox Co., Ltd.
1965:: U.S. subsidiary Fuji Photo Film U.S.A., Inc. is established.
1972:: Company begins selling film under its own brand name in the United States.
1986:: Fuji begins selling disposable cameras.
1988:: Fuji produces its first digital camera.
1996:: Production of specialized films for LCD screens commences.
2001:: Company buys half of Xerox's stake in Fuji Xerox, increasing its stake to 75 percent.
2006:: Fuji launches a major restructuring of its photo film and digital camera operations.

Silver inflation alone had cost Fuji ¥15 billion in 1979, and exchange losses on export sales cost an additional ¥4.6 billion. By 1979 consumer demand for magnetic products such as audio- and videotape began to climb dramatically, providing Fuji a faster recovery than its competition. Despite continued increases in raw material costs, Fuji's earnings improved quickly because of escalating demand served by the new magnetic-products division.

DIVERSIFICATION DRIVE

In 1980 earnings jumped 130 percent. Silver prices dropped, and sales for magnetic products still grew. Magnetic products, now 9 percent of sales, pushed exports up to 32 percent, where they remained for the entire decade. Fuji was well poised for a renewed assault on Western film markets.

In the 1980s the U.S. amateur film market changed rapidly. Consumers preferred higher-quality 35-millimeter over Kodak's disc, cartridge, or instant photography. Although the market changed to the advantage of manufacturers such as Fuji, who specialized in 35-millimeter films, consumers still demanded convenience. Autofocus cameras and faster film required more sophistication from manufacturers.

Despite this favorable shift in consumer preferences, the photo industry as a whole had matured. Further, while Fuji hoped to gain ground in the U.S. market, that market was only twice as big as the Japanese market in terms of photo sales. Fuji entered the 1980s resolved not only to increase its portion of film sales worldwide, but also to find growth for its products in imaging and electronics.

Minoru Ohnishi replaced Kusuo Hirata and became Fuji's youngest president ever in 1979. Ohnishi had worked for five years in the late 1980s as head of the U.S. subsidiary. His nontraditional appointment overlooked older officers, but he was able to use his experience in the U.S. market to establish a sales network for new products such as magnetic tape, optics, and hybrid electronic systems.

Fuji's growth through the early 1980s had come at the expense of smaller film manufacturers such as 3M and AGFA-Gevaert. By this time Fiji was the second largest firm in the industry, and it set its sights on Kodak's core. By 1982 Fuji's share of the U.S. market had slowly climbed to 5 percent, and Ohnishi set a 10 percent goal.

There were several factors behind Fuji's confidence. First, Kodak's product development in the 1970s was weak. Fuji had kept up with increasingly sophisticated demand by introducing faster and higher resolution films for both cinematic and amateur uses several times. Second, Fuji's research investments had been well placed. Kodak turned from chemical research to electronics late, while Fuji had already recognized the technology's long-term value in processing and imaging. Although Kodak's research expenditures dwarfed Fuji's, Fuji spent a larger share of its earnings on research. In 1979 Kodak applied for 255 patents in the U.S. and Japan, compared to Fuji's 270.

Fuji was the first non-U.S. company to produce videotape. The consumer and trade press praised Fuji tape quality from its introduction. By 1982 magnetic products were already 12 percent of revenues. With broad distribution, a good reputation, and a skyrocketing market, Fuji made large gains.

Magnetic products, like film, provided high margins. Unlike its position in the consumer film market, Fuji enjoyed a prominent role in the magnetic-products marketplace. Between 1978 and 1982 magnetic-division sales increased almost fivefold to $97 million. By 1983 films were only half of Fuji's business.

Newer areas such as biotechnology and office automation had been paid for not with debt but with cash generated from film products and stock sales. Electronic systems, including microfilm records for offices and electronic imaging for X-rays, began to contribute to earnings on their own. In addition, Fuji enjoyed high profit margins in all areas. Pretax operating margins increased one-third to 24.4 percent from 1976 to 1981. Fuji's film, tape, and computer-disc manufacturing was highly automated, allowing workers to circulate among factories for increased productivity.

The climate for high-technology industries proved intense in the 1980s, due in part to trade friction and yen appreciation. In addition, Fuji was relatively new to electronic systems, and other companies had a large lead in areas such as medical technology. In order to remain competitive in these new areas, Fuji had to keep cash available and increase momentum in film sales. Fuji steadily increased its U.S. advertising budget, peaking when it outbid Kodak as sponsor to the 1984 Olympics in Los Angeles. Eventually spending $7 million on the campaign, Fuji entered the event with a 6 percent share of the U.S. market. Meanwhile, Fuji had become a sponsor of soccer's World Cup in 1982, and has continued to sponsor the event from then on.

Simultaneously, the company strengthened distribution. In 1979 Fuji sold film in 30 percent of all film outlets in the United States; by 1984 it sold in 60 percent, expanding beyond specialty photo outlets. By the end of the Olympic year its share jumped to 8 percent, allowing Ohnishi to predict not only a 15 percent share in ten years, but also to carry out a more aggressive approach late in the decade. As Fuji stepped up its efforts to reach the professional market in 1986, its market share approached 10 percent.

Fuji did not face the same battle abroad that it faced in the United States. It already sold over half of the film and photo paper in southeast Asia, and the 1984 opening of a Chinese office gave it a lucrative foothold in an untapped and huge market. Brand loyalty was not as significant outside the United States, and in 1982 Fuji enjoyed a 10 percent share in Europe, Fuji's second largest market. One year later it captured 15 percent of that market, prompting the company to construct its first European plant, in the Netherlands, in 1984. Producing selected sensitized materials, the plant paved the way for continued growth on the continent and lessened difficulty with currency fluctuation.

EXPANDED U.S. PRESENCE

By the mid-1980s the U.S. market had begun to open to Fuji. Despite growth, profits there were still elusive. Videotape prices dropped sharply because of overproduction, and advertising costs continued to climb. While a U.S. market that declined overall was bad for Kodak, it helped Fuji, which was not as reliant on photography. Fuji could still pursue market share while continuing to find growth industries for other forms of imaging.

Fuji's renewed drive in the late 1980s came with more confidence. After a surprisingly successful introduction in Japan in 1986, Fuji was first on the U.S. market with a disposable camera. In Japan, a market less receptive to instant-photography items, Fuji sold 1.5 million cameras in six months. While the traditional market declined, Fuji managed to discover a completely new segment of consumer photography. By 1992, Fuji was the number one maker of cameras worldwide. In the meantime, Fuji was a pioneer in the field of digital cameras, introducing its first model, the DS-1P, in 1988.

By 1988 Fuji had achieved its 10 percent share and the exchange rate was favorable for building in the United States. The company built a plant in Greenwood, South Carolina, to make presensitized plates and related products. In 1989 a factory opened in Bedford, Massachusetts, to manufacture 3.5-inch floppy discs in a joint venture with BASF Corporation (Fuji bought out BASF in 1994 so that the facility was then wholly owned by Fuji). Another factory opened in Greenwood in 1991 to make videotapes. Moving production to the market served by the factory provided faster delivery and immunity from currency exchange losses, and eliminated charges of dumping.

With a double-digit market share firmly in place, Fuji sought to increase use of its processing systems, since Kodak's Colorwatch processing network still provided an obstacle, steadily enlarging its share of the photofinishing market. Launching its own system, Fujicolor Circle, Fuji offered technical support and promotional discounts. For the first time in 15 years of U.S. activity, Fuji put its logo on the back of its paper, no longer fearing consumer preference for Kodak. Fuji's distribution was now strong enough, and it had been successful with its mini-photoprocessing labs. Quicker to respond than retailing, processing systems allowed Fuji to capture 16 percent of the U.S. market for photo paper.

TURBULENT TIMES

Fuji entered the 1990s in a very strong position in its home market and enjoying increasing success in foreign markets as well. The company then posted three consecutive years of record sales in the early 1990s, culminating in 1992's ¥1.14 trillion in sales. Net income fell 18.7 percent in 1992 from 1991 levels, however, as Fuji began to feel the combined effects of the prolonged recession in Japan and the sharp appreciation of the yen. Nevertheless, Fuji continued to develop and introduce innovative new products, such as 1991's Fujix Digital Still Camera DS-100, which used a memory card to store images; the Fujix Simple-Hi 8 camcorder, introduced in 1993 as the smallest and lightest camcorder in the world; and the Pictrostat instant color print system, also launched in 1993, which could produce color prints from prints, slides, and objects in one minute without using any processing chemicals.

From 1993 to 1995, Fuji saw its sales stagnate. The company was affected overseas by the continuing strength of the yen and at home by unexpected competition, highlighted in 1994 when the largest Japanese supermarket chain, Daiei, began selling store-brand 35-millimeter film made by AGFA-Gevaert. Fuji's share of the Japanese film market fell from 74 to 69 percent from 1993 to 1994. Meanwhile, Kodak charged Fuji in 1993 with dumping color photographic paper in the U.S. market. To avoid having to pay threatened punitive tariffs, and to counter the effects of the strong yen, Fuji added to its Greenwood facility a factory to make color photo paper. This factory began operation in 1995. The Greenwood complex also saw the addition of a factory to produce Fujicolor QuickSnap disposable cameras that same year and a fifth factory, opening in 1996, for packaging and shipping 35-millimeter Fujicolor film manufactured at its plant in the Netherlands.

The long-term war between Kodak and Fuji was far from over, however. On the U.S. front, Fuji aggressively sought throughout the 1990s to capture more of the wholesale photofinishing market. It was largely successful as its network of U.S. photofinishing labs grew to 21 in 1996 when it spent $464 million to buy six labs from Wal-Mart Stores, Inc. The deal also included a ten-year contract through which Fuji was to supply all photofinishing services to the more than 2,250 Wal-Marts nationwide, taking business away from Kodak's photofinishing business, Qualex Inc. Wal-Mart was the leading photofinisher in the country at the time. Later in 1996, Fuji scored another coup when it signed an exclusive agreement with Ritz Camera Centers Inc. to supply paper to Ritz's chain of 550 minilabs, the third largest minilab chain in the country.

On the Japanese front, the battle was being conducted as another trade dispute. This time, Kodak accused the Japanese government and Fuji of illegally restricting access to the Japanese market for film and photographic paper. The U.S. government took the case to the newly formed World Trade Organization (WTO) in 1996, with the European Union soon joining the Kodak side. Fuji contended that Kodak's policies in pricing and marketing its products in Japan were to blame for the company's low market share, and that Kodak faced an environment in Japan similar to what Fuji faced in the United States. In fact, both companies held about 70 percent of their respective home markets, while Kodak held about 12 percent of the Japanese market and Fuji still only 10 percent of the U.S. market. Observers offered no consensus on how the WTO might rule in the case.

Ironically, while these battles were being waged, Fuji had joined the Kodak-led consortium of film and camera companies (the others were Nikon Corporation, Minolta Co., Ltd., and Canon Inc.) to develop the Advanced Photo System (APS), an effort to revitalize the stagnant still photography market. APS offered easy film loading and the ability to select from three photo sizes (4 inch by 6 inch, 4 inch by 7 inch, and a panoramic 4 inch by 10 inch) as photos are taken. In 1996 Fuji introduced a full range of APS products: films, compact cameras, disposable cameras, photofinishing equipment, a Digital Image Workstation, a Photo Player for displaying images on a television, and an Image Scanner for converting images to their digital equivalent for manipulation on a PC.

In 1996 Fuji enjoyed its best year since 1993, although it still had not recovered to the levels of the early 1990s. Also in 1996, Minoru Ohnishi became chairman and CEO; Masayuki Muneyuki, who had been one of two senior executive managing directors, became president. Under this leadership team, Fuji penetrated deeper into the U.S. market, boosting its market share as high as 20 percent during 1997, a year in which it cut the prices for its film in the U.S. market and began manufacturing color film at its Greenwood complex. In early 1998 Fuji won another battle in its long war with Kodak when the WTO issued a final ruling rejecting Kodak's claims that Fuji and the Japanese government had engaged in protectionism in the Japanese film market.

Throughout the late 1990s, Fuji pushed aggressively into the burgeoning digital camera market. The company not only developed innovative new cameras, including the MX-1700, which debuted as the world's smallest high-resolution digital camera, it also adopted a strategy of making many of the key components of digital cameras itself rather than relying on larger competitors. These included lenses, image processors, and signal-processing chips. Through its FUJIFILM Microdevices Co., Ltd. subsidiary, which was created in 1990, Fuji developed the Super CCD (supercharged coupled device), a small image-capturing chip that used octagonal pixels rather than rectangular ones in order to significantly increase the sharpness of a digital image while at the same time enabling the cameras themselves to be smaller in size overall.

DEALMAKING AND FURTHER DIVERSIFYING

While Ohnishi remained firmly in charge as chairman and CEO, Shigetaka Komori was named president in mid-2000. The early years of the new decade were marked by a series of significant deals. Early in 2000 Fuji Photo Film entered into an alliance with Xerox and Sharp Corporation whereby the three companies pledged to invest more than $2 billion over five years to develop a new line of inkjet printers. Xerox, meanwhile, in the midst of a huge restructuring, sold its subsidiaries in Hong Kong and China to the Fuji Xerox joint venture in late 2000 for about $550 million. Then in March 2001 Xerox sold half of its stake in Fuji Xerox itself to Fuji Photo Film for more than $1.3 billion in cash, increasing Fuji's interest in the joint venture to 75 percent. Fuji Xerox thus became a consolidated subsidiary of Fuji Photo Film, sparking a 73.6 percent increase in revenues in fiscal 2002 to ¥2.4 trillion ($18.05 billion). Fuji also continued its aggressive push into the Chinese market, establishing a holding company to invest in new businesses and entering into a joint venture involved in manufacturing and marketing digital cameras, both in April 2001. In July 2002 Fuji bolstered its stranglehold on the Japanese photo market by outbidding Kodak for Jusphoto Co., Ltd., one of the nation's leading film-processing chains. The price of the transaction was approximately ¥16 billion ($133 million). Fuji also gained a larger presence in the graphic arts systems area in April 2003 by acquiring Process Shizai Co., Ltd., which was subsequently renamed FUJIFILM Graphic Systems Co., Ltd.

As a result of Fuji's concerted diversification drive, by the end of 2003 the company's traditional line of products—silver-halide film, photo paper, developing chemicals, and the like—accounted for only 42 percent of sales. Chief rival Kodak, while itself moving aggressively into the digital world, still relied on film, paper, and processing for 61 percent of its revenue. In July 2003, meanwhile, Ohnishi retired as Fuji's CEO while retaining the largely honorary chairmanship. Komori was promoted to president and CEO. The new leader quickly set an ambitious goal of doubling profits by 2007, vowing to cut costs by $1.9 billion by then to help do so.

In another key growth area, Fuji by this time had become the world's largest supplier of specialized films for liquid crystal display (LCD) screens, a sector it had entered in 1996. Exploding demand for flat-panel computer monitors and televisions prompted Fuji in early 2005 to launch a massive capital investment program totaling ¥67 billion ($642 million) to build three new plants and two new production lines to increase the company's capacity to produce the specialized films. On the acquisition front, Fuji in November 2004 acquired U.S.-based Arch Chemicals, Inc.'s microelectronic materials division, producer of semiconductor-related chemical products. Fuji also acquired the U.K.-based Sericol Group Limited in February 2005, thereby gaining one of the world's top manufacturers of screen printing inks and industrial UV inks for inkjet use. About one year later, Fuji purchased another U.K. firm, Avecia Inkjet Ltd., maker of ink dyes for inkjet printers.

Aided by strong demand for materials used to make flat-panel displays, Fuji saw its net profits increase 2.7 percent in 2005, totaling ¥84.5 billion ($789.7 million). Revenues of ¥2.53 trillion ($23.62 billion) were a slight decrease from the previous year. Late in 2005 Fuji announced plans to turn itself into a holding company by October 2006. Responding to shrinking demand for photo film and slower growth in the global digital camera market, Fuji in early 2006 launched a dramatic restructuring of its operations in these areas involving 5,000 job cuts (4,000 abroad and 1,000 at home) and the streamlining of production, development, and sales functions. With demand for color film dropping at an annual rate of more than 20 percent, Fuji also began whittling down its range of photo film but said it had no plans to withdraw from the field altogether. This restructuring was expected to cost approximately ¥165 billion ($1.4 billion). In the meantime, Fuji also announced that it planned to bolster its research and development spending, earmarking ¥600 billion ($5.2 billion) for 2007 through 2009. The company was aiming to aggressively invest in such high-growth fields as flat-panel display materials, medical imaging products, electronic materials, and optical parts.

Ray Walsh

Updated, David E. Salamie

PRINCIPAL SUBSIDIARIES

Fujinon Corporation; FUJIFILM Techno Products Co., Ltd.; FUJIFILM Electronic Materials Co., Ltd.; FUJIFILM Microdevices Co., Ltd.; FUJIFILM Photonix Co., Ltd.; FUJIFILM Opto Materials Co., Ltd.; FUJIFILM Kyushu Co., Ltd.; FUJIFILM Medical Co., Ltd.; FUJIFILM Business Supply Co., Ltd.; FUJIFILM Imaging Co., Ltd.; FUJIFILM Graphic Systems Co., Ltd.; Jusphoto Co., Ltd.; FUJIFILM Logistics Co., Ltd.; FUJIFILM Techno Service Co., Ltd.; FUJIFILM Software Co., Ltd.; FUJIFILM Computer System Co., Ltd.; Fuji Xerox Co., Ltd. (75%); Suzuka Fuji Xerox Co., Ltd. (75%); Niigata Fuji Xerox Manufacturing Co., Ltd. (75%); Fuji Xerox Office Supply Co., Ltd. (75%); Fuji Xerox Information Systems Co., Ltd. (75%); Fuji Xerox Printing Systems Co., Ltd. (75%); Fuji Xerox Imaging Materials Co., Ltd. (75%); Fuji Photo Film U.S.A., Inc.; Fuji Photo Film Hawaii, Inc. (U.S.A.); FUJIFILM Medical Systems U.S.A., Inc.; Enovation Graphic Systems, Inc. (U.S.A.); Fujicolor Processing, Inc. (U.S.A.); Fuji Photo Film, Inc. (U.S.A.); FUJIFILM Microdisks U.S.A., Inc.; Fuji Hunt Photographic Chemicals, Inc. (U.S.A.); FUJIFILM Electronic Materials U.S.A., Inc.; Fuji Photo Film Canada Inc.; Fuji Graphic Systems Canada Inc.; Fuji Photo Film do Brasil Ltda. (Brazil); Fuji Photo Film (Europe) GmbH (Germany); Fuji Magnetics GmbH (Germany); Fuji Photo Film (U.K.) Ltd.; FUJIFILM Electronic Imaging Ltd. (U.K.); FUJIFILM Sericol UK Limited; Fuji Photo Film B.V. (Netherlands); FUJIFILM Medical Systems Benelux N.V. (Belgium); Fuji Hunt Photographic Chemicals, N.V. (Belgium); FUJIFILM France S.A.S.; Fuji Graphic Systems France S.A.S.; FUJIFILM España, S.A. (Spain); FUJIFILM Italia S.p.A. (Italy); FUJIFILM CZ, s.r.o. (Czech Republic); FUJIFILM Polska Distribution Sp. Zo.o. (Poland); Fuji Photo Film (China) Investment Co., Ltd.; FUJIFILM Imaging Systems (Suzhou) Co., Ltd.; FUJIFILM Starlight Co., Ltd. (China); Fuji Photo Film Printing Plate (Suzhou) Co., Ltd. (China); FUJIFILM Medical Systems (Shanghai) Co., Ltd. (China); Hong Kong Fuji Photo Logistics Ltd.; Fuji Photo Film (Singapore) Pte Ltd; Fuji Hunt Photographic Chemicals, Pte Ltd (Singapore); Fuji Photo Film (Malaysia) Sdn. Bhd.; Fuji Photo Film (Thailand) Ltd.; FUJIFILM Australia Pty Ltd; FUJIFILM NZ Ltd. (New Zealand).

PRINCIPAL COMPETITORS

Eastman Kodak Company; Agfa-Gevaert N.V.; Canon Inc.; Ricoh Company, Ltd.; Konica Minolta Holdings, Inc.; Olympus Corporation; Sony Corporation; Nikon Corporation; Hewlett-Packard Company.

Fuji Photo Film Co., Ltd.

views updated May 18 2018

Fuji Photo Film Co., Ltd.

26-30, Nishiazabu 2-chome
Minato-ku, Tokyo 106
Japan
(03)3406-2111
Fax:(03) 3406-2193
Web site: http://www.fujifilm.co.jp/index_g.html

Public Company
Incorporated: 1934
Employees: 29,903
Sales: ¥1.08 trillion (US$10.20 billion) (1996)
Stock Exchanges: Tokyo Osaka Nagoya Fukuoka Niigata Sapporo
SICs: 2796 Platemaking & Related Services; 3695 Magnetic & Optical Recording Media; 3861 Photographic Equipment & Supplies; 5043 Photographic Equipment & Supplies; 5065 Electronic Parts & Equipment

Fuji Photo Film Co., Ltd. originated as a cinematic-film producer and has grown into a multidimensional manufacturer and marketer of imaging and information products. Fuji is the second-largest maker of photographic film in the world, trailing only Eastman Kodak, and the largest in Japan. In addition to its wide variety of film for still cameras, Fuji also makes motion picture film, videotape, audiotape, and floppy discs; still cameras—including its highly successful disposable cameras—camcorders, and digital cameras; photofinishing equipment, paper, and chemicals; and various related imaging and information products for office and medical use. The company is also a leading supplier of photofinishing services.

Early History

In 1934 Dainippon Celluloid Company, Japan’s first cinematic film manufacturer, spun off its troubled photographic division. Named Fuji Photo Film Co., Ltd., the new company already employed 340 people and named Shuichi Asano as its first president. Its product line included motion picture film, dry plates, and photographic paper. The company struggled for three years, mainly due to the poor quality and high prices of its products relative to imports.

Fuji’s first task was to build a reputation in the domestic market. Brand reliability proved critical in the photosensitive-materials industry, since buyers were not willing to risk losing a desired image to inadequate materials, regardless of cost. During its first three years, the company continued to lose sales, increase debt, and struggle to meet research expenses. Fuji could not expand without first addressing quality, so it employed a German specialist to assist in the area of emulsion technology.

The combination of outside consultation and its own research allowed the company to introduce its first film as an independent in 1936, as well as a motion picture negative film. The negative film was much harder to produce, and demonstrated Fuji’s new technical competence to Japanese studios.

Fuji built a second factory in Odawara in 1938. Color research began in a new laboratory in 1939, but World War II halted such work. During the war the government set aside all sensitized materials for the military, so consumer-film development had to wait out the war. In 1945 Allied bombing raids partially damaged two Fuji factories, but recovery during the postwar era involved more than infrastructural repair.

The Allied powers allowed civilian trade to resume in 1947, and Fuji immediately began exporting to outlets in South America and Asia. Japanese producers still enjoyed a good reputation in optical products, enabling Fuji to export its cameras and binoculars. In the area of film and other sensitized materials, however, Japanese technology still lagged behind U.S. and European producers.

Although it produced x-ray and cinematic film, Fuji did not produce large amounts of film for the amateur consumer market until the 1950s. In the meantime, it resumed color research and produced its first color film in 1948. In 1949 Indian buyers received a shipment of Fuji motion picture film, the company’s first substantial postwar sale.

Domestic and Overseas Growth in the 1960s and 1970s

As the 1940s ended, so did a shortage of raw materials—including silver, paper, and petroleum-based chemicals—that kept Fuji from producing amateur photographic products in large quantities. Licensing agreements between Fuji and Eastman Kodak of the United States allowed Fuji to equal Western producers in terms of black-and-white amateur roll film quality. Fuji, now able to supply its products in large quantities, introduced its first amateur roll film in 1952. By 1958 Fuji had introduced three additional black-and-white roll films.

Fuji enjoyed burgeoning domestic demand for the next 20 years, due in part to tariffs on film imports. During the 1950s Fuji captured the Japanese market for consumer films—a market that would quickly comprise 15 percent of the world’s total film sales.

After setting up an export sales division in 1956, Fuji reached 27 export agreements by 1958 in Asia, North America, and Central America. Fuji first entered North America in 1955, and established its U.S. subsidiary ten years later.

As Fuji’s international base grew, it still had to fight a perception of poor quality. In order to make a serious drive abroad, the company first had to develop film and paper compatible with the processing systems most commonly used worldwide. In 1966 Fuji introduced its first amateur slide film compatible with overseas processors. By 1969 all its films, photo paper, and chemicals were fully compatible. Employing the sales network it had established in the 1950s, exports began to flow.

In 1970 Fuji had nine overseas offices, and by the end of the decade it had 14 offices and subsidiaries abroad. These subsidiaries then branched out. Fuji’s U.S. subsidiary, for instance, opened six offices between 1971 and 1982.

Recognition in these markets proved more difficult. Eastman Kodak’s dominance in consumer films forced all producers to make compatible products in the postwar decades. Fuji learned this after it introduced a cartridge-film eight-millimeter home movie system in 1967. Fuji’s product had the support of 14 Japanese and European manufacturers, including AGFA-Gevaert, Europe’s largest photographic manufacturer. Kodak introduced its own system shortly after, which quickly gained control of the world market. Fuji had to abandon its system and rushed to develop compatible films. Fuji’s overseas growth was slow during the T970s, adhering to the industry’s pace of product development.

In 1970 Kodak held more than 90 percent of the $400 million U.S. market, but Fuji’s color films were already faster than Kodak’s—meaning they required less light for adequate exposure. In addition, Fuji films were better on warmer tones, including red, orange, and flesh tones. While Kodak pursued the convenience-based mass market, Fuji targeted professionals and serious amateurs. Although it would take several years before Fuji posed a serious threat to Kodak, its quality created a position of strength.

Relative to its competition, Fuji strengthened itself during the 1970s, partially due to the appreciation of the yen between 1971 and 1980. One factor in the growth of Fuji’s non-Western markets was its development of manufacturing facilities. Operations in Brazil, Korea, and Indonesia began with Fuji assistance. The operations began with package assembly, but eventually produced presensitized materials, color processing chemicals, and optical products for export. Such manufacturing bases made the company less vulnerable to currency fluctuation and reduced overhead.

Where Fuji saved on manufacturing it spent heavily on research. Fuji began magnetic research in 1954, introduced products by 1960, and in 1963 produced videotape for domestic television. Magnetic products became the key to Fuji’s long-term growth. In 1977 this research led to the introduction of Japan’s first eight-inch floppy computer discs.

Fuji also developed products related to the photographic process for other industries. In 1967 for instance, Fuji, Mitsubishi Heavy Industries, and Konan Camera Institute developed a system to photographically trace blueprints onto construction materials. In addition to such new applications for heavy industry, Fuji continued to develop new technology for x-rays and other electronic systems for medical technology.

Fuji’s core business continued to be film, however, and it pushed for additional access to lucrative Western markets just as Japanese film sale growth began to slow. Fuji had first entered the U.S. market as a private-label film supplier in 1960, and produced its first color film there in 1970. In 1972, it marketed the first film under its own brand name. Fuji went directly to retailers with its new film and received a 2 percent share of the American market, which more than doubled during the 1970s. Fuji’s marketing was well-timed, and in 1976 Fuji also caught the attention of professionals and serious amateurs when it beat Kodak with an introduction of faster film (400 ISO speed), something it accomplished in 1984 as well (1600 ISO speed).

Company Perspectives:

We will explore the farthest reaches of technology and continue to create a dynamic Imaging and Information culture. This is our corporate philosophy as well as the conceptual foundation of our technological research.

“Imaging” expresses Fujifilm’s commitment to design and create new image-recording systems and to research technologies that can continually upgrade the quality of captured images.

“Information” represents a broader challenge of adapting the captured image, via computer technology, to create advanced information systems that can serve a wide variety of filing, presentation, and communication needs.

Today, Fujifilm is more than a photographic enterprise, with growing involvement in the wider realm of Imaging and Information. We, the Fujifilm Group of the world, are about to take a great leap forward into the 21st century.

Fuji spent heavily to build its U.S. share but had relatively little success. Kodak’s research expenditures were still large by comparison, and when Kodak introduced Kodacolor II film in 1972, Japanese companies had to hurry to put comparable films on the market. The recession during the late 1970s complicated Fuji’s international drive. Industrywide production overcapacity and price increases for silver and oil-based chemicals cut into earnings.

While silver was still necessary for photographic imaging, its price jump demonstrated the wisdom of Fuji’s research into electronic imaging technologies and its mid-1970s hiring campaign for electronics engineers. While many companies posted declines, Fuji’s profits were only stagnant for 1977 and 1978.

Fuji was then the third-largest filmmaker behind Kodak and AGFA-Gevaert, but the Japanese companies responded to the setbacks more aggressively. Fuji and its domestic competitor, Konishiroku, raised their film prices only 7 percent—while competitors raised their prices from 10 to 30 percent—despite silver prices skyrocketing from $6 to $49 an ounce in 1979.

Silver inflation alone had cost Fuji ¥15 billion in 1979, and exchange losses on export sales cost an additional ¥4.6 billion. By 1979 consumer demand for magnetic products such as audio- and videotape began to climb dramatically, providing Fuji a faster recovery than its competition. Despite continued increases in raw material costs, Fuji’s earnings improved quickly due to escalating demand served by the new magnetic-products division.

Diversification Drive in the Early 1980s

In 1980 earnings jumped 130 percent. Silver prices dropped, and sales for magnetic products still grew. Magnetic products, now 9 percent of sales, pushed exports up to 32 percent, where they remained for the entire decade. Fuji was well poised for a renewed assault on Western film markets.

In the 1980s the U.S. amateur film market changed rapidly. Consumers preferred higher-quality 35-millimeter over Kodak’s disc, cartridge, or instant photography. Although the market changed to the advantage of manufacturers like Fuji, who specialized in 35-millimeter films, consumers still demanded convenience. Autofocus cameras and faster film required more sophistication from manufacturers.

Despite this favorable shift in consumer preferences, the photo industry as a whole had matured. Further, while Fuji hoped to gain ground in the U.S. market, that market was only twice as big as the Japanese market in terms of photo sales. Fuji entered the 1980s resolved not only to increase its portion of film sales worldwide, but also to find growth for its products in imaging and electronics.

Minoru Ohnishi replaced Kusuo Hirata and became Fuji’s youngest president ever in 1979. Ohnishi had worked for five years in the late 1980s as head of the U.S. subsidiary. His nontraditional appointment overlooked older officers, but he was able to use his experience in the U.S. market to establish a sales network for new products like magnetic tape, optics, and hybrid electronic systems.

Fuji’s growth through the early 1980s had come at the expense of smaller film manufacturers such as 3M and AGFA-Gevaert. Now the second-largest firm in the industry, it set its sights on Kodak’s core. By 1982 Fuji’s share of the U.S. market had slowly climbed to 5 percent, and Ohnishi set a 10 percent goal.

There were several factors behind Fuji’s confidence. First, Kodak’s product development in the 1970s was weak. Fuji had kept up with increasingly sophisticated demand by introducing faster and higher resolution films for both cinematic and amateur uses several times. Second, Fuji’s research investments had been well placed. Kodak turned from chemical research to electronics late, while Fuji had already recognized the technology’s long-term value in processing and imaging. Although Kodak’s research expenditures dwarfed Fuji’s, Fuji spent a larger share of its earnings on research. In 1979, Kodak applied for 255 patents in the U.S. and Japan, compared to Fuji’s 270.

Fuji was the first non-U.S. company to produce videotape. The consumer and trade press praised Fuji tape quality from its introduction. By 1982 magnetic products were already 12 percent of revenues. With broad distribution, a good reputation, and a skyrocketing market, Fuji made large gains.

Magnetic products, like film, provided high margins. Unlike its position in the consumer film market, Fuji enjoyed a prominent role in the magnetic-products marketplace. Between 1978 and 1982 magnetic-division sales increased almost five-fold to $97 million. By 1983 films were only half of Fuji’s business.

Newer areas such as biotechnology and office automation had been paid for not with debt but with cash generated from film products and stock sales. Such electronic systems, such as microfilm records for offices and electronic imaging for x-rays, began to contribute to earnings on their own. In addition, Fuji enjoyed high profit margins in all areas. Pretax operating margins increased one-third to 24.4 percent from 1976 to 1981. Fuji’s film, tape, and computer-disc manufacturing was highly automated, allowing workers to circulate among factories for increased productivity.

The climate for high-technology industries proved intense in the 1980s, due in part to trade friction and yen appreciation. In addition, Fuji was relatively new to electronic systems, and other companies had a large lead in areas such as medical technology. In order to remain competitive in these new areas, Fuji had to keep cash available and increase momentum in film sales. Fuji steadily increased its U.S. advertising budget, peaking when it outbid Kodak as sponsor to the 1984 Olympics in Los Angeles. Eventually spending $7 million on the campaign, Fuji entered the event with a 6 percent share of the U.S. market. Meanwhile, Fuji had become a sponsor of soccer’s World Cup in 1982, and continued to sponsor the event into the mid-1990s.

Simultaneously, the company strengthened distribution. In 1979 Fuji sold film in 30 percent of all film outlets in the United States; by 1984 it sold in 60 percent, expanding beyond specialty photo outlets. By the end of the Olympic year its share jumped to 8 percent, allowing Ohnishi to predict not only a 15 percent share in ten years, but also to carry out a more aggressive approach late in the decade. As Fuji stepped up its efforts to reach the professional market in 1986, its market share approached 10 percent.

Fuji did not face the same battle abroad that it faced in the United States. It already sold over half of the film and photo paper in Southeast Asia, and the 1984 opening of a Chinese office gave it a lucrative foothold in an untapped and huge market. Brand loyalty was not as significant outside the United States, and in 1982 Fuji enjoyed a 10 percent share in Europe, Fuji’s second-largest market. One year later it captured 15 percent of that market, prompting the company to construct its first European plant, in the Netherlands, in 1984. Producing selected sensitized materials, the plant paved the way for continued growth on the continent and lessened difficulty with currency fluctuation.

Expanded U.S. Presence in the Late 1980s

By the mid-1980s the U.S. market had begun to open to Fuji. Despite growth, profits there were still elusive. Videotape prices dropped sharply due to overproduction, and advertising costs continued to climb. While a U.S. market that declined overall was bad for Kodak, it helped Fuji, which was not as reliant on photography. Fuji could still pursue market share while continuing to find growth industries for other forms of imaging.

Fuji’s renewed drive in the late 1980s came with more confidence. After a surprisingly successful introduction in Japan, Fuji was first on the U.S. market with a disposable camera. In Japan, a market less receptive to instant-photography items, Fuji sold 1.5 million cameras in six months. While the traditional market declined, Fuji managed to discover a completely new segment of consumer photography. By 1992, Fuji was the number one maker of cameras worldwide.

By 1988 Fuji had achieved its 10 percent share and the exchange rate was favorable for building in the United States. It built a plant in Greenwood, South Carolina, to make presensitized plates and related products. In 1989 a factory opened in Bedford, Massachusetts, to manufacture 3.5-inch floppy discs in a joint venture with BASF Corporation (Fuji bought out BASF in 1994 so that the facility was then wholly owned by Fuji). Another factory opened in Greenwood in 1991 to make videotapes. Moving production to the market served by the factory provided faster delivery and immunity from currency exchange losses, and eliminated charges of dumping.

With a double-digit market share firmly in place, Fuji sought to increase use of its processing systems, since Kodak’s Colorwatch processing network still provided an obstacle, steadily enlarging its share of the photofinishing market. Launching its own system, Fujicolor Circle, Fuji offered technical support and promotional discounts. For the first time in 15 years of U.S. activity, Fuji put its logo on the back of its paper, no longer fearing consumer preference for Kodak. Fuji’s distribution was now strong enough, and it had been successful with its mini photoprocessing labs. Quicker to respond than retailing, processing systems allowed Fuji to capture 16 percent of the U.S. market for photo paper.

Turbulent Times in the 1990s

Fuji entered the 1990s in a very strong position in its home market and enjoying increasing success in foreign markets as well. The company then posted three consecutive years of record sales in the early 1990s, culminating in 1992’s ¥1.14 trillion in sales. Net income fell 18.7 percent in 1992 from 1991 levels, however, as Fuji began to feel the combined effects of the prolonged recession in Japan and the sharp appreciation of the yen. Nevertheless, Fuji continued to develop and introduce innovative new products, such as 1991’s Fujix Digital Still Camera DS-100, which used a memory card to store images; the Fujix Simple-Hi 8 camcorder, introduced in 1993 as the smallest and lightest camcorder in the world; and the Pictrostat instant color print system, also launched in 1993, which could produce color prints from prints, slides, and objects in one minute without using any processing chemicals.

From 1993 to 1995, Fuji saw its sales stagnate. The company was affected overseas by the continuing strength of the yen and at home by unexpected competition, highlighted in 1994 when the largest Japanese supermarket chain, Daiei, began selling store-brand 35mm film made by AGFA-Gevaert. Fuji’s share of the Japanese film market fell from 74 to 69 percent from 1993 to 1994. Meanwhile, Kodak charged Fuji in 1993 with dumping color photographic paper in the U.S. market. To avoid having to pay threatened punitive tariffs, and to counter the effects of the strong yen, Fuji added to its Greenwood facility a factory to make color photo paper. This factory began operation in 1995. The Greenwood complex also saw the addition of a factory to produce Fujicolor QuickSnap disposable cameras that same year and a fifth factory, opening in 1996, for packaging and shipping 35mm Fujicolor film manufactured at its plant in the Netherlands.

The long-term war between Kodak and Fuji was far from over, however. On the U.S. front, Fuji aggressively sought throughout the 1990s to capture more of the wholesale photofinishing market. It was largely successful as its network of U.S. photofinishing labs grew to 21 in 1996 when it spent $464 million to buy six labs from Wal-Mart Stores Inc. The deal also included a ten-year contract through which Fuji was to supply all photofinishing services to the more than 2,250 Wal-Marts nationwide—taking business away from Kodak’s photofinishing business, Qualex Inc. Wal-Mart was the leading photofinisher in the country at the time. Later in 1996, Fuji scored another coup when it signed an exclusive agreement with Ritz Camera Centers Inc. to supply paper to Ritz’s chain of 550 minilabs, the third largest minilab chain in the country.

On the Japanese front, the battle was being conducted as another trade dispute. This time, Kodak accused the Japanese government and Fuji of illegally restricting access to the Japanese market for film and photographic paper. The U.S. government took the case to the newly formed World Trade Organization (WTO) in 1996, with the European Union soon joining the Kodak side. Fuji contended that Kodak’s policies in pricing and marketing its products in Japan were to blame for the company’s low market share, and that Kodak faced an environment in Japan similar to what Fuji faced in the United States. In fact, both companies held about 70 percent of their respective home markets, while Kodak held about 12 percent of the Japanese market and Fuji still only 10 percent of the U.S. market. Observers offered no consensus on how the WTO might rule in the case.

Ironically, while these battles were being waged, Fuji had joined the Kodak-led consortium of film and camera companies (the others were Nikon, Minolta, and Canon) to develop the Advanced Photo System (APS), an effort to revitalize the stagnant still photography market. APS offered easy film loading and the ability to select from three photo sizes (4 inch by 6 inch, 4 inch by 7 inch, and a panoramic 4 inch by 10 inch) as photos are taken. In 1996 Fuji introduced a full range of APS products—films, compact cameras, disposable cameras, photofinishing equipment, a Digital Image Workstation, a Photo Player for displaying images on a television, and an Image Scanner for converting images to their digital equivalent for manipulation on a PC.

In 1996 Fuji enjoyed its best year since 1993, although it still had not recovered to the levels of the early 1990s. Also in 1996, Minoru Ohnishi became chairman and CEO; Masayuki Muneyuki, who had been one of two senior executive managing directors, became president. It would be this new leadership team which would have to deal with the resolution of the WTO suit and the overall battles with Kodak. Having weathered the worst of the difficult economic conditions that faced all Japanese companies in the 1990s, Fuji’s future appeared bright. It seemed certain that Kodak would have a serious adversary to contend with for years to come.

Principal Subsidiaries

Fuji Photo Optical Co., Ltd.; Mito Fuji Koki Co., Ltd.; Sano Fuji Koki Co., Ltd.; Okaya Fuji Koki Co., Ltd.; FUJIFILM Microdevices Co., Ltd.; FUJIX Co., Ltd.; FUJIFILM AXIA Co., Ltd.; FUJIFILM Battery Co., Ltd.; F.F.P. Co., Ltd.; Fuji Photo Equipment Co., Ltd.; F.I.T. Co., Ltd.; Fuji Color Trading Co., Ltd.; Fujicolor Service Co., Ltd.; Tochigi Fujicolor Co., Ltd.; Pro-lab Create Tokyo Co., Ltd.; Pro-lab Create Osaka Co., Ltd.; Tokyo Chuoh Genzosho Co., Ltd.; Ibaraki Fujicolor Co., Ltd.; Sanin Fujicolor Co., Ltd.; Hokuriku Fujicolor Co., Ltd.; Fuji Micrographics Co., Ltd.; Fuji Technics Co., Ltd.; Fuji Magne-Disk Co., Ltd; Fuji-Hunt Electronics Technology Co., Ltd.; Fuji X-ray Film Manufacturing Co., Ltd.; FUJIFILM Software Development Center AKITA Co., Ltd.; Fuji Medical Systems Co., Ltd.; Chiyoda Medical Co., Ltd.; FUJIFILM Business Supply Co., Ltd.; FUJIFILM Logistics Co., Ltd.; Fuji Service Co., Ltd.; Fuji Photo Service Co., Ltd.; Fuji Photo Film Canada Inc.; Fuji Graphic Systems Canada Inc.; Fuji Photo Film U.S.A., Inc.; Fuji Photo Film Hawaii, Inc. (U.S.A.); Fuji Medical Systems U.S.A., Inc.; Fuji Photo Film, Inc. (U.S.A.); FUJIFILM Microdisks U.S.A., Inc.; Fuji Hunt Photographic Chemicals, Inc. (U.S.A.); Fuji Photo Film do Brasil Ltda. (Brazil); Fuji Medical Systems Benelux N.V. (Belgium); Fuji Hunt Photographic Chemicals, N.V. (Belgium); Fuji Photo Film (Europe) GmbH (Germany); Fuji Magnetics GmbH (Germany); Fuji Hunt Photographic Chemicals (Deutschland) GmbH (Germany); Fuji Hunt Photographic Chemicals (Italia) Sri (Italy); Fuji Photo Film B.V. (Netherlands); FUJIFILM España, S.A. (Spain); Fuji Hunt Photographic Chemicals (Sverige) A.B. (Sweden); Fuji Photo Film (U.K.) Ltd.; Fuji Hunt Photographic Chemicals (U.K.) Ltd.; Fuji Photo Film (Malaysia) Sdn. Bhd.; Fuji Photo Film (Singapore) Pte Ltd; Fuji Hunt Photographic Chemicals Pte Ltd (Singapore); Fuji Photo Film (Thailand) Ltd.

Fuji Photo Film Co., Ltd.

views updated May 14 2018

Fuji Photo Film Co., Ltd.

founded: 1934

Contact Information:

headquarters: 26-30, nishiazabu 2-chome
minato-ku tokyo 106-8620, japan phone: 81-3-3406-2444 fax: 81-3-3406-2173 url: http://www.fujifilm.co.jp

OVERVIEW

Fuji Photo Film is best known as one of the largest photo film producers in the world. The company makes many other products, however, which it divides into three segments. Products in the Information Systems segment include floppy disks, medical imaging systems, and office automation systems. The Photofinishing Systems segment includes instant color print systems and photographic papers, equipment, and chemicals. The Imaging Systems segment includes photo film, cameras, optical products, and motion picture film. Fuji also produces copiers through its Fuji Xerox joint venture.

COMPANY FINANCES

In the year ended March 1997, Fuji Photo Film recorded sales of 125.21 trillion yen, up 15.4 percent from the prior year. Domestic sales totaled 677.3 billion yen, and overseas sales 574.8 billion yen. Net income rose 17.1 percent to 85.3 billion yen, or 166 yen on a per-share basis. Cash dividends for the period were declared at 22 yen per share. Between April 1997 and April 1998 the company's stock traded on the NASDAQ exchange from a low of $33 to a high of $43.

HISTORY

Dainippon Celluloid, a Japanese company, established Fuji Photo Film in 1934 near Japan's famous Mount Fuji. Fuji Photo Film initially produced motion picture film, dry plates, and photographic paper. By the early 1940s the company was operating four factories and a research facility in Japan. In the 1950s it began to make large amounts of film for the amateur consumer market. Following the creation of an export division in 1956, the company began to sell more film overseas. Fuji Photo Film added magnetic tape to its product line in 1960. In 1962 it formed the joint venture Fuji Xerox with Rank Xerox of the United Kingdom to sell copiers. (Rank Xerox is an affiliate of America's Xerox and the United Kingdom's Rank Organisation).

In the 1970s Fuji emerged as a more serious challenger to Eastman Kodak, the market leader in photo film. Minoru Ohnishi became president of the company in 1980 and started a sustained attack on the U.S. market. Fuji Photo Film was a sponsor of the 1984 Olympics in Los Angeles, which helped give it a stronger presence in the United States. The company's market position in the United States continued to strengthen in the late 1980s and 1990s.

STRATEGY

During its first few years of operation in the 1930s, Fuji Photo Film was plagued by a reputation for poor quality and high prices for its photographic products. In 1936 it brought in a German emulsion specialist who helped the company produce quality black-and-white photo film and motion picture negative film. The improved offerings raised the company's standing in the domestic market. World War II delayed any further development of consumer products, however, as all sensitized materials were dedicated to the Japanese war effort.

In 1947 Japan was allowed to resume normal trade, and Fuji Photo Film began exporting its products to South America and Asia. Most of these shipments were cameras and binoculars, Japanese products that enjoyed a good reputation. But film exports were low, because the company's technology lagged behind those of U.S. and European producers. In the early 1950s licensing agreements with Kodak enabled Fuji Photo Film to produce high-quality black-and-white amateur roll film. With the continuing expansion of the Japanese economy in the 1950s and 1960s, demand for the company's film products grew at a steady pace. Fuji Photo Film also benefited from tariffs on film imports, which gave the company a protected home market.

At the same time, the company worked to expand overseas sales. It entered the North American market in 1955, and by 1958 it had reached 27 export agreements in Asia. However, Fuji Photo Film faced one major obstacle in foreign markets: its film and paper products were not compatible with the most commonly used processing systems in the world. By 1969 Fuji had eliminated this problem, and its film, photo paper, and chemicals were fully compatible.

During the 1970s Fuji Photo Film further expanded its presence in overseas markets, opening manufacturing operations in Brazil, Korea, and Indonesia. The company also spent heavily to generate more sales in the United States, but had difficulty building customer loyalty. While its U.S. market share did double during the 1970s, it still stood at only 4 to 5 percent at the end of the decade. The company had better success, however, at developing new products related to the photographic process. It developed new technology for x-rays and other electronic systems for the medical industry. Fuji Photo Film also was able to enter new markets related to its magnetic research; in 1977 the company introduced Japan's first eight-inch floppy computer disks.

FAST FACTS: About Fuji Photo Film Co., Ltd.

Ownership: Fuji Photo Film is a publicly owned corporation traded on the Tokyo and other Japanese stock exchanges. In the United States, it is traded on NASDAQ.

Ticker symbol: FUJIY

Officers: Minoru Ohnishi, Chmn.; Masayuki Muneyuki, Pres.

Employees: 29,903

Chief Competitors: Fuji Photo Film's competitors include: Canon; Minolta; Hitachi; Sony; Sharp; and Toshiba.

In 1980 Minoru Ohnishi became Fuji Photo Film's youngest president at the age of 55. Ohnishi was determined to reduce Fuji Photo Film's dependence on the Japanese market and increase sales in the United States. In 1979 the company sold film in only 30 percent of U.S. film outlets; by 1984, the level had increased to 60 percent. A major boost to Fuji's fortunes in the U.S. market was its sponsorship of the 1984 Olympics held in Los Angeles. After those games, Fuji Photo Film's U.S. market share in photo film had grown to 8 percent. The company's share of the European film market was also growing, reaching 15 percent by the mid-1980s. The magnetic products division was doing nicely too: between 1978 and 1982, worldwide sales rose fivefold. In fact, by 1983 film sales represented only half of Fuji Photo Film's revenues.

During the second half of the 1980s Fuji Photo Film enjoyed continued success in its U.S. operations. By 1988 its U.S. market share in the film segment was 10 percent. It became the first company to offer a disposable camera in the United States. It built a plant for making printing plates in South Carolina, where it continued to expand local production of other products throughout the 1990s. Fuji Photo Film also managed to increase use of its processing systems in the United States, which helped boost demand for its papers and chemicals.

INFLUENCES

Fuji Photo Film has built its business on price, quality, and strong marketing. Its film has a strong following among professional photographers, and their loyalty gives Fuji prestige among amateur camera buffs. The company is tightly managed with a lean staff: while Fuji's sales doubled between 1987 and 1997, the number of white-collar employees remained about the same. Fuji Photo Film is also an aggressive competitor, which has led to charges of unfair trading practices. It tries to portray itself as a technologically advanced company that is hipper and less stodgy than its main competitor, Kodak.

In the American market, Fuji Photo Film's strategy centers on opening local film and paper production facilities. Building plants in the United States reduces costs, lessens trade friction, and makes Fuji more responsive to changes in the local market. With a net cash position of $4.5 billion in 1997, Fuji was well able to afford new capital investment. The company also has consistently spent 7 percent of its sales on research and development.

CURRENT TRENDS

In the mid-1990s Fuji Photo Film's rivalry with Kodak grew into a major trade dispute between the United States and Japan. In a case before the World Trade Organization (WTO), the U.S. government charged that unfair barriers kept Kodak from expanding its share of the Japanese film market. In 1995 Kodak had 9 percent of this market, versus 70 percent for Fuji Photo Film. Kodak's primary complaint was that Fuji Photo Film had a lock on the Japanese distribution system which, in effect, prohibited competitors from penetrating the Japanese market. Kodak film was sold in just 15 percent of retail outlets in Japan, mostly in large cities. In contrast, Fuji Photo Film sold its film in outlets that accounted for 70 percent of the U.S. market.

In its defense, Fuji Photo Film said that its distributors were not prevented from selling the film of competitors, and that Japan places no tariffs on imported film. The company contended that Kodak's low market share was due to marketing mistakes. Independent observers had mixed views about the case. While noting that Kodak made some good arguments, several analysts pointed out that some of its domestic marketing practices were very similar to those of Fuji Photo Film in Japan. In 1995 Kodak's share of the American film market was 70 percent, compared with 11 percent for Fuji Photo Film. Ultimately, in early 1998, the WTO ruled in favor of Fuji Photo Film. It found that the United States and Kodak had not proved its case that Japan's government had unfairly protected Fuji from foreign competition.

Meanwhile, Fuji Photo Film was taking important steps to boost its U.S. market share. The company scored a significant coup in 1996 by winning contracts to provide supplies to all of Wal-Mart's in-store one-hour labs. Wal-Mart was the largest photofinishing supplier in the United States, with about 2,250 stores. As part of the agreement, Fuji Photo Film bought six off-site wholesale finishing plants from Wal-Mart.

CHRONOLOGY: Key Dates for Fuji Photo Film Co., Ltd.

1934:: Fuji Photo Film is established by Dainippon Celluloid
1947:: Begins exporting to South America and Asia
1955:: Enters the North American market
1956:: Creates an export division
1962:: Begins joint venture with Rank Xerox (U.K.) to sell copiers
1977:: Introduces Japan's first 8-inch floppy computer disk
1984:: Sponsors 1984 Olympics in Los Angeles
1997:: Opens $300 million dollar paper plant in Greenwood, South Carolina
1998:: World Trade Organization rules in favor of Fuji Photo Film in suit filed by Kodak

In April 1997, Fuji Photo Film opened a $300 million photographic paper plant in Greenwood, South Carolina, and further capacity enhancements were planned. Some analysts believed the new capacity would give the company added pricing and supply flexibility. According to some estimates, by the end of 1997 Fuji's share of the American market reached 14 percent, significantly above the 1995 level. Kodak attributed much of the increase in the Japanese company's share to aggressive pricing practices. Fuji countered that its low pricing was a "temporary" measure to trim excess inventories.

In the late 1990s Fuji Photo Film faced significant challenges in its home market. Traditionally, profit margins in color film had been high in Japan—as much as 12 percent compared with 6 percent overseas. By year-end 1997, retail prices of film in Japan were 30 to 40 percent below those in the United States. Overall, Fuji Photo Film estimated that its share of the Japanese market had fallen to 67 percent in 1997 against 74 percent in the early 1990s. The company attributed the decline to increased penetration of foreign brands as well as "own-label" film sold by supermarkets and discount stores. During the 1998 Winter Olympics held in Nagano, Japan, Fuji Photo Film and Kodak battled for the loyalty of the consumer. Kodak enjoyed the advantage of being a sponsor of the Games, but Fuji matched Kodak's price cuts and erected big billboards near the Olympic site.

A major threat facing Fuji Photo Film is the rise of the digital camera. Some analysts estimated that in 1997 1.8 million digital cameras were sold, and that number was expected to grow sharply. In this sphere Fuji Photo Film faces competition from not only Kodak, but also companies such as Sony, Canon, and Casio. The company also faces competition in the photographic paper and processing business from Canon, Epson, and Hewlett-Packard, whose newest ink-jet printers produce high-quality prints of digital images on plain and coated paper.

PRODUCTS

In 1996 Fuji Photo Film and four other large film-equipment makers (including Eastman Kodak) launched an "Advanced Photo System," or APS. The collaboration among such bitter rivals was itself unusual, since in the past major innovations had been introduced by one company working on its own. In February 1997 Fuji Photo Film announced its new top-of-the-line APS camera, the Endeavor 400ix Zoom MRC. Using this camera, pictures on the same roll of film can be taken in three formats: C (standard), H (high-vision), and P (panorama). Moreover, photographic data are recorded on the film's magnetic layer when the picture is taken, so that photofinishing labs can determine the optimum color balance and density for each photo. The MRC (Mid-Roll Change) feature on the Endeavor allows amateur photographers to remove and reinsert a partially exposed roll of APS film, so they can use the most appropriate film for the shooting conditions. And in conjunction with other equipment Fuji Photo Film offers, users can display their photos on a TV or scan and input them into a PC.

GLOBAL PRESENCE

In 1987 only 3.5 percent of Fuji Photo Film's production was outside Japan, compared to 31 percent in 1997. Fuji Photo Film has significant overseas facilities in the United States, Canada, Brazil, and Europe.

SOURCES OF INFORMATION

Bibliography

desmond, edward. "what's ailing kodak?" fortune, 27 october 1997.

johannes, laura. "a film war breaks out in nagano." wall street journal, 3 february 1998.

——. "fuji photo ties price cuts to inventories." wall street journal, 25 august 1997.

maremount, mark. "next, a flap over film?" business week, 10 july 1995.

nakamoto, michiyo. "fujifilm snaps up market share in the u.s." financial times, 9 december 1997.

nelson, emily. "fuji, challenging kodak, to make film in u.s." wall street journal, 8 may 1997.

"negative vibes." the economist, 26 august 1995.

ryan, ken. "p-o-p goes fuji: the computer products division takes merchandising, brand strategy to higher levels." hfn the weekly newspaper for the home furnishing network, 20 february 1995.

"shuttered." the economist, 5 august 1995.

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. fuji's primary sics are:

3695 magnetic and optical recording media

3861 photographic equipment and supplies

Company Profiles for Students

Fuji Photo Film Co., Ltd.

Fuji Photo Film Co., Ltd.

Principal Subsidiaries

Further Reading

Fuji Photo Film Co., Ltd.

Fuji Photo Film Co., Ltd.

EARLY HISTORY

DOMESTIC AND OVERSEAS GROWTH

COMPANY PERSPECTIVES

KEY DATES

DIVERSIFICATION DRIVE

EXPANDED U.S. PRESENCE

TURBULENT TIMES

DEALMAKING AND FURTHER DIVERSIFYING

PRINCIPAL SUBSIDIARIES

PRINCIPAL COMPETITORS

FURTHER READING

Fuji Photo Film Co., Ltd.

Fuji Photo Film Co., Ltd.

Early History

Domestic and Overseas Growth in the 1960s and 1970s

Company Perspectives:

Diversification Drive in the Early 1980s

Expanded U.S. Presence in the Late 1980s

Turbulent Times in the 1990s

Principal Subsidiaries

Further Reading

Fuji Photo Film Co., Ltd.

Fuji Photo Film Co., Ltd.

Contact Information:

OVERVIEW

COMPANY FINANCES

HISTORY

STRATEGY

FAST FACTS: About Fuji Photo Film Co., Ltd.

INFLUENCES

CURRENT TRENDS

CHRONOLOGY: Key Dates for Fuji Photo Film Co., Ltd.

PRODUCTS

GLOBAL PRESENCE

SOURCES OF INFORMATION

Bibliography

For additional industry research:

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Fuji Photo Film Co. Ltd

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