Description
Corning Inc
Corning Incorporated A Network of Alliances
Strategic Alliance
Corning
• • • • • Began as maker of specialty Glass Technology-Based research as core of operations Personal, informal and caring style “Multiply gains by co-operating” 1937 – Pittsburgh Corning combined technology with PPG Industries for construction Industry • 1938 – Owens Corning Fiberglas • 1943 – Dow Corning for silicone products (oral agreement)
Amory Houghton
• 1964 – Amory Houghton as chairman • Focus on US market • Foreign operations managed as satellites of parent company
– Benefit: Market access against technology transfer – Hindrance:
• Own worldwide strategy not determined • Integration of domestic and international was time consuming and distracting
• 1982 – Replaced international Matrix organization with product line operations
James Houghton
• 1983 – James Houghton as CEO with “talk, listen and feel the atmosphere” approach • Organization Restructure – split president’s role and set up a Management Committee • Management Committee:
– – – – Create discipline Boost morale Quality Creative Diversity
Emphasis on Quality
• Focus on establishing quality as competitive advantage • “Quality as centerpiece of strategy” and “Company’s central long term value” • Fund allocation to quality despite financial crunch • Senior Executive as Corporate Director of Quality • 1984 – Quality Institute • 1986 – Met quality goals and set higher corporate quality goals for 1991 • Encouraged flexibility and initiative – Self managed teams
Corning Strategy Wheel
•
• • •
Difficulty in funding wide diversity of business with technology becoming more complex and fast changing Need to communicate clearer objective and priorities as well as redefine business portfolio Qn: What mix of business should Corning be in? Traditional technology driven v/s market driven Four business segments:
– – – – Consumer House wares Specialty materials Telecommunications Laboratory Sciences
•
Formal Linkages:
– Technology – Common Values – Shared Resources
•
Helped dispose mature and cyclical businesses
Achievements and Challenges
• “Country Club” ? “High tech company” • Unable to translate innovations into profits
– – – – Electric Bulb Capacitor and Resistor Ophthalmic Tableware
• Continued R&D funding in diverse businesses • But low success ? Getting late to the market • Partnerships have become increasingly important
Network of Alliances
• 1980 – US and European companies strategic alliance boom • However 57% alliances had not succeeded • Corning formed 40 alliances in 60 years
– Speed is the key along with added expertise in manufacturing and marketing – However it requires excessive effort and management involvement – Corning culture helps: letting new venture operate independently and with freedom – Insisted on results and not on process
The Network Organization
• Thought for organizational complexity ? “evolving network of wholly owned businesses and JV” • No company dominates ? JV as a part of Strategic Wheel • Sector strategies:
– Technology from hub and spread across each sector of network – Loosely linked at CEO and tightly integrated at operating management level – Managers responsible for operations they do not have full authority over – Managers role: Decision making ? Negotiations – Flatter organizations – Required flexible style as well as broad skill set – Needs team orientation, interdependence – Cross network knowledge transfers – Financial approvals at board level
Three Proposals – (1/3)
• Laboratory Sciences Sector – 1970: Mature business of lab glass ? porous glass (hardware) with help of R&D – Reagents (software) was more important – Three Segments:
• Clinical Laboratory Testing [1982: Acquired Metpath] • Pharmaceutical Testing [1987: Acquired Hazleton] • Environmental Testing
– 1985: JV with Ciba-Geigy ? Ciba Corning
• Corning: manufacturing and marketing proficiency • Ciba: Biological Research capabilities, paid $75mn for 50% share in Corning’s medical diagnostics business
– 1988: Corning becomes leader in lab testing industry – 1988: R&D raised to $40mn but still far behind the leaders – Abbott’s $150mn
Three Proposals – (1/3) contd…
• Alternative: Sell off to Ciba-Geigy and use proceeds for R&D [$150mn]
– Cons:
• Company with same values as Corning • Deeply Committed, fast growing • Would accept lower returns
– Pros:
• Would help generate much needed investment fund needs
• Options for acquisition in Three Segments [$475mn]:
– Clinical Laboratory Testing: International Clinical Laboratories [$300mn] – Pharmaceutical Testing: G.H. Besselar Associates [$50mn] – Environmental Testing: Enseco [$125mn]
• Debate: “Strategic Fit and organizational commitment”
Opinion: Laboratory Sciences Sector
• Considering the history of the company and its quality orientation, a new redirection of funds into a more perspective business would be a better idea than sticking with a more or less safe but slowly dying company. • Corning is a company with a big experience in laboratory testing and important connections and partnerships that will help maintain high profit levels
Three Proposals – (2/3)
• Communication Sector – Optical Fiber
– 1970: Corning develops optical fibers and enters Europe while in US, AT&T covered 75% of cabling business
• Joint development through fees and license with cable manufacturers
– Siecor GmbH: JV with Siemens (Germany) – JV with french and U.K.
• Unable to convince independent copper cablers to try optic
– 1981: Forward integration to form SieCor Corporation (JV with Siemens with companies pooling $50mn each) – 1983: AT&T broken up, market open to outside suppliers – 1986: Market triples and prices falls by 70%: Siecor becomes largest manufacturer of optic cables
Three Proposals – (2/3) contd…
• Corning held 150 patents which expire in 1990s • Looking for international JV
– PlessCorporation Optronics (PCO)
• 1984: JV with Plessey Corp, UK for peripherals. • 1986: Faced with an unfriendly takeover bid Plessey exits PCO. • Contemplating on partnership with IBM in PCO
• Proposals:
– Invest $100mn in 3 years to expand US optical fiber capacity (home segment) – Offer IBM partnership in PCO
• Debate: “How much focus on huge, core potential and how much on expansion opportunities”
Opinion: Communication Sector
• Distributing those $100 million in three years with growing market is likely to bring profit. • Glass Fibers would be the core segment for Corning and efforts must be taken to enhance it. Interrelated businesses would also gain from this investment and R&D. • IBM deal is inline with the network alliance strategy of Corning and would strengthen their evolving network organization.
Three Proposals – (3/3)
• Television Glass Business
– Increasing dominated by Japanese
• Superior technology and lower cost
– Asia:
• Corning partners with Samsung
– Europe:
• Corning and Schott vie for customers Philips and Thomson • Needed to sustain low cost manufacturing • Corning offers to sell 80% of its business to Thomson
– US:
• Japan enters and competition increases. Corning closes 3 TV glass factories. Only one plant left in 1988 • NEG (Japanese company) enters US and acquired Corning’s competitor Owens Illionis
Three Proposals – (3/3) contd…
• Iwaki: A 1930, 50-50 JV of Corning and Japanese glass company Asahi
– Vision difference on growth v/s returns led to Corning plans on diluting holding in Iwaki
• Proposal to revitalize television business
– Sell 49% of Corning Business to Asahi and use proceeds ($100mn) to develop LCD – Asahi gains by market access while Corning gains from technology as well as “Japanese Connection”and improve relations for knowledge gains
• Debate: “Is Alliance appropriate and managed properly”
Opinion: Television Glass Business
• By stake of Asahi in Corning, situation Asahi would be the one with most control, because of their connections with Japanese TV manufactures and cutting edge technology. • Corning would (seemingly) only participate in marketing and public relations. • However, the funds can be utilized for R&D (LCD) as well as technology transfers would help Corning as well as entire network
Conclusion
• All three proposals involve huge money investment. • Corning has independent run associates but a centralized funding structure which adds to its benefit as mis-management of funds can lead to potential long-term losses • Corning should stick to its “Strategic Wheel” and enhance businesses that align with it. R&D must be focused where cross network implications and gains are high as well as where operation cost and quality gains stand to be achieved.
doc_861783628.ppt
Corning Inc
Corning Incorporated A Network of Alliances
Strategic Alliance
Corning
• • • • • Began as maker of specialty Glass Technology-Based research as core of operations Personal, informal and caring style “Multiply gains by co-operating” 1937 – Pittsburgh Corning combined technology with PPG Industries for construction Industry • 1938 – Owens Corning Fiberglas • 1943 – Dow Corning for silicone products (oral agreement)
Amory Houghton
• 1964 – Amory Houghton as chairman • Focus on US market • Foreign operations managed as satellites of parent company
– Benefit: Market access against technology transfer – Hindrance:
• Own worldwide strategy not determined • Integration of domestic and international was time consuming and distracting
• 1982 – Replaced international Matrix organization with product line operations
James Houghton
• 1983 – James Houghton as CEO with “talk, listen and feel the atmosphere” approach • Organization Restructure – split president’s role and set up a Management Committee • Management Committee:
– – – – Create discipline Boost morale Quality Creative Diversity
Emphasis on Quality
• Focus on establishing quality as competitive advantage • “Quality as centerpiece of strategy” and “Company’s central long term value” • Fund allocation to quality despite financial crunch • Senior Executive as Corporate Director of Quality • 1984 – Quality Institute • 1986 – Met quality goals and set higher corporate quality goals for 1991 • Encouraged flexibility and initiative – Self managed teams
Corning Strategy Wheel
•
• • •
Difficulty in funding wide diversity of business with technology becoming more complex and fast changing Need to communicate clearer objective and priorities as well as redefine business portfolio Qn: What mix of business should Corning be in? Traditional technology driven v/s market driven Four business segments:
– – – – Consumer House wares Specialty materials Telecommunications Laboratory Sciences
•
Formal Linkages:
– Technology – Common Values – Shared Resources
•
Helped dispose mature and cyclical businesses
Achievements and Challenges
• “Country Club” ? “High tech company” • Unable to translate innovations into profits
– – – – Electric Bulb Capacitor and Resistor Ophthalmic Tableware
• Continued R&D funding in diverse businesses • But low success ? Getting late to the market • Partnerships have become increasingly important
Network of Alliances
• 1980 – US and European companies strategic alliance boom • However 57% alliances had not succeeded • Corning formed 40 alliances in 60 years
– Speed is the key along with added expertise in manufacturing and marketing – However it requires excessive effort and management involvement – Corning culture helps: letting new venture operate independently and with freedom – Insisted on results and not on process
The Network Organization
• Thought for organizational complexity ? “evolving network of wholly owned businesses and JV” • No company dominates ? JV as a part of Strategic Wheel • Sector strategies:
– Technology from hub and spread across each sector of network – Loosely linked at CEO and tightly integrated at operating management level – Managers responsible for operations they do not have full authority over – Managers role: Decision making ? Negotiations – Flatter organizations – Required flexible style as well as broad skill set – Needs team orientation, interdependence – Cross network knowledge transfers – Financial approvals at board level
Three Proposals – (1/3)
• Laboratory Sciences Sector – 1970: Mature business of lab glass ? porous glass (hardware) with help of R&D – Reagents (software) was more important – Three Segments:
• Clinical Laboratory Testing [1982: Acquired Metpath] • Pharmaceutical Testing [1987: Acquired Hazleton] • Environmental Testing
– 1985: JV with Ciba-Geigy ? Ciba Corning
• Corning: manufacturing and marketing proficiency • Ciba: Biological Research capabilities, paid $75mn for 50% share in Corning’s medical diagnostics business
– 1988: Corning becomes leader in lab testing industry – 1988: R&D raised to $40mn but still far behind the leaders – Abbott’s $150mn
Three Proposals – (1/3) contd…
• Alternative: Sell off to Ciba-Geigy and use proceeds for R&D [$150mn]
– Cons:
• Company with same values as Corning • Deeply Committed, fast growing • Would accept lower returns
– Pros:
• Would help generate much needed investment fund needs
• Options for acquisition in Three Segments [$475mn]:
– Clinical Laboratory Testing: International Clinical Laboratories [$300mn] – Pharmaceutical Testing: G.H. Besselar Associates [$50mn] – Environmental Testing: Enseco [$125mn]
• Debate: “Strategic Fit and organizational commitment”
Opinion: Laboratory Sciences Sector
• Considering the history of the company and its quality orientation, a new redirection of funds into a more perspective business would be a better idea than sticking with a more or less safe but slowly dying company. • Corning is a company with a big experience in laboratory testing and important connections and partnerships that will help maintain high profit levels
Three Proposals – (2/3)
• Communication Sector – Optical Fiber
– 1970: Corning develops optical fibers and enters Europe while in US, AT&T covered 75% of cabling business
• Joint development through fees and license with cable manufacturers
– Siecor GmbH: JV with Siemens (Germany) – JV with french and U.K.
• Unable to convince independent copper cablers to try optic
– 1981: Forward integration to form SieCor Corporation (JV with Siemens with companies pooling $50mn each) – 1983: AT&T broken up, market open to outside suppliers – 1986: Market triples and prices falls by 70%: Siecor becomes largest manufacturer of optic cables
Three Proposals – (2/3) contd…
• Corning held 150 patents which expire in 1990s • Looking for international JV
– PlessCorporation Optronics (PCO)
• 1984: JV with Plessey Corp, UK for peripherals. • 1986: Faced with an unfriendly takeover bid Plessey exits PCO. • Contemplating on partnership with IBM in PCO
• Proposals:
– Invest $100mn in 3 years to expand US optical fiber capacity (home segment) – Offer IBM partnership in PCO
• Debate: “How much focus on huge, core potential and how much on expansion opportunities”
Opinion: Communication Sector
• Distributing those $100 million in three years with growing market is likely to bring profit. • Glass Fibers would be the core segment for Corning and efforts must be taken to enhance it. Interrelated businesses would also gain from this investment and R&D. • IBM deal is inline with the network alliance strategy of Corning and would strengthen their evolving network organization.
Three Proposals – (3/3)
• Television Glass Business
– Increasing dominated by Japanese
• Superior technology and lower cost
– Asia:
• Corning partners with Samsung
– Europe:
• Corning and Schott vie for customers Philips and Thomson • Needed to sustain low cost manufacturing • Corning offers to sell 80% of its business to Thomson
– US:
• Japan enters and competition increases. Corning closes 3 TV glass factories. Only one plant left in 1988 • NEG (Japanese company) enters US and acquired Corning’s competitor Owens Illionis
Three Proposals – (3/3) contd…
• Iwaki: A 1930, 50-50 JV of Corning and Japanese glass company Asahi
– Vision difference on growth v/s returns led to Corning plans on diluting holding in Iwaki
• Proposal to revitalize television business
– Sell 49% of Corning Business to Asahi and use proceeds ($100mn) to develop LCD – Asahi gains by market access while Corning gains from technology as well as “Japanese Connection”and improve relations for knowledge gains
• Debate: “Is Alliance appropriate and managed properly”
Opinion: Television Glass Business
• By stake of Asahi in Corning, situation Asahi would be the one with most control, because of their connections with Japanese TV manufactures and cutting edge technology. • Corning would (seemingly) only participate in marketing and public relations. • However, the funds can be utilized for R&D (LCD) as well as technology transfers would help Corning as well as entire network
Conclusion
• All three proposals involve huge money investment. • Corning has independent run associates but a centralized funding structure which adds to its benefit as mis-management of funds can lead to potential long-term losses • Corning should stick to its “Strategic Wheel” and enhance businesses that align with it. R&D must be focused where cross network implications and gains are high as well as where operation cost and quality gains stand to be achieved.
doc_861783628.ppt