Kodak Expands Plan for Job Cuts
In 2007, Kodak keeps boosting the plan for restructuring and layoffs, stepping into the last step of the whole plan as scheduled. With a high increase in unemployment, Chief Executive Antonio Perez said that “the company would emerge as a smaller company with a profitable business model…. providing Kodak with an additional $500 million a year in cash flow afterwards.”
By this notion, this move reflects the principle—Markets usually lead to efficiency—so well. During the recent years, with a slight increase in economic growth and highly developed technology, many firms are inclined to make less hierarchical but more flexible and efficient organizations by removing layers of management. This general trend forces Kodak to restructure. Furthermore, a better chance to get much money in cash flow also provides an incentive to Kodak. Therefore, Kodak decided to fix attention on job cuts, which behavior relates to another principle of microeconomics. That is “people usually exploit opportunities to make themselves better off.”
5 comments:
I think you make some very nice points but my only concern is whether or not the Kodak market is actually leading to efficiency. Our books tells us that "An economy is efficient if it takes all opportunities to make some people better off without making other people worse off." In this case, Kodak is making some people worse off by cutting jobs.
Yes, you expand this news to a new point that I did not realize. Basically, I agree with you. You just mentioned something about the efficiency in market. However, I think there might be a misunderstanding. You described a situation that has already run in an efficient way, but Kodak market is still on the way to look for a more efficient organization. Usually, when a firm wants to make its economic situation jump into a further level, it is unavoidable to make some others worse off. At least, as a firm is pursuing more benefits, some firms will absolutely lose profits.
I think you made a good way to think about the economic market. First, all firms want to get the most profit. It is a efficiency in market. Second, in fact, i wonder that if they want to make the most profit, it is unavoidable to make some better off and others worse off. So in the real economic market, does the book's principle still work?
Jobs cutting is of course a bad news of some people but as a company whose mainly and even only perpuse is to maximize profits. So the company has to "lose weight" sometimes so that they can move fast and keep healthy.
Yes Kodak is exploiting an oppurtunity to make themselves better off. With growing technology in the photography industry it takes less man power to build their products. Therefore Kodak is taking advantage of this and cutting jobs so they can maximize their profits.
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