James Houghton, Chairman and CEO of Corning, has some tough decisions to make regarding the direction he wants Corning to take going forward. From the early 1900’s when Corning started the first research lab, there was no clear direction for the company. The company was successful but there was never a clear business plan laid out for Corning’s growth. It appeared that a number of decisions were made based on market trends, the economy and gut instinct. What James Houghton needs to do is lay out a plan for the future of Corning. Corning has already defined its goals, but how to achieve these goals is not clear. James Houghton has already been successful with his plan to “talk, listen and feel the atmosphere”, when it came to visiting the Corning sites. Corning also has seen significant success with the changes Houghton has implemented in the overall work environment. When Corning clearly defined the roles and responsibilities of its managers, morale improved and quality went up. If Corning can incorporate this same clear direction into their business plan, the management committee and all the other internal and external managers in their alliances would have a better understanding of what is expected of them and what they can do to continue to grow Corning Incorporated into a market leader in their four sectors of business.
There are some great proposals that have been presented to the management committee. The management team needs to decide if Corning wants to strive to be the front runner in just one business market or continue to grow each of the business sectors more conservatively.
Corning’s joint venture with Ciba-Geigy is a good example of capability complementation. Both companies have complementary products and they both benefit from their strategic alliance in the medical diagnostics industry. While there is concern about the $40 million that is budgeted for R&D, this doesn’t necessarily take Ciba Corning off the market as a competitor in this product area. Ciba-Geigy, like Corning, has a vested interest in making this alliance profitable. Ciba-Geigy is willing to invest its own money back into Ciba Corning to assure that this happens. Neither of these companies poses a threat to the other, but both can transfer knowledge and work together to continue building their company within this segment of the laboratory sciences sector. The key thing about Corning’s relationship with Ciba-Geigy is that they share the same business fundamentals when it comes to their values and total quality management plan.
When we take at look at Corning’s current position in the other three segments of this sector, clinical laboratory testing, pharmaceutical testing and environmental testing, we see that they are profitable in these areas. These are Corning’s largest and fastest growing segments. Corning needs to continue to grow these segments, keeping in mind their long term plan to build on their “strategy wheel” and create a more organizational discipline. They can achieve this by evaluating the companies they are looking to acquire and determine if they can offer Corning something they don’t already have as far knowledge or a service. Acquiring another company may take that company out off the market, but it won’t assure profitability for Corning if the acquired company “doesn’t bring anything to the table”, so to speak.
Within the Communications Sector, Corning is looking for a way to market their fiber optic cables and presently, internationally is their best option, since AT&T has the market advantage in the US. Corning is looking to partner with IBM as a second source for their cable terminal peripherals. What Corning hasn’t considered is approaching AT&T to form an alliance. AT&T hasn’t yet introduced fiber optic cabling to the market and they can only benefit from being the first to come out with this new technology in the US, since they currently control about 75% of the cabling business. Corning would be able to enter the market through AT&T, having shared their knowledge in an area that AT&T has not yet fully developed and this would allow AT&T to hold on to their position as the market leader.
In the third sector, Specialty Materials/Television Glass, Corning has been struggling due to Japanese dominance in this market. If Corning were to partner with Asahi, a Japanese glass company, they would be able to pool their resources and gain access to the Japanese market. It would be mutually beneficial to Asahi because they would gain access to the US market. Corning and Asahi share their level of commitment, but they lack cultural knowledge that could potentially hurt them both if their managers can’t communicate effectively, learn the culture and adapt accordingly. If they are able to overcome this hurdle, this could prove to be a valuable partnership that can help bring Corning, along with Asahi, back to the top of the television glass market. With this new partnership, knowledge can be shared and they can potentially take over the market with their glass design for LCD’s. Based on the provided information, it is my recommendation that the management committee accept all of the proposals with the following modifications. In the laboratory sciences sector, the joint venture with Ciba-Geigy should remain intact. There is a good working relationship here and a good bit of knowledge sharing that can still be done to grow the medical diagnostics segment. While this segment is not the most profitable, it is not losing money. Ciba Corning’s R&D spending has historically been the lowest in the industry. They need to focus on market research and bring the best product to the market. While they may not be the first to the market, they can still be second and be the best out there. Also in the laboratory sciences sector, I would recommend evaluating the three companies that Corning is looking to acquire to see if they have a knowledge that Corning doesn’t already possess. Currently, two of the companies that are being suggested for acquisition are at the bottom of the market and there could be a reason for that. Of the $475 million being proposed on acquisitions, $325 million still remains after the sale of Ciba-Corning comes off the table. This is plenty of money to invest in acquisitions or to increase the R&D budget, in order to continue growing these market segments. In the Communications Sector, while I see IBM as a lucrative step toward gaining visibility in the US market, I recommend Corning approach AT&T and offer to partner with them on fiber optic cabling. If they can pull together this alliance it would be a huge advantage for them in gaining the US market. AT&T would benefit by maintaining their market position and saving on R&D by using Corning’s fiber optic cabling. AT&T could also go to market with this immediately and not have to wait until Corning’s patents expire. My final recommendation is in the Specialty Materials Sector. Corning should partner with Asahi in the area of television glass. While there is risk involved due to the cultural differences, it is a risk I feel Corning needs to take to reestablish them in the specialty glass segment. In the early days of Corning, specialty glass had been their most profitable segment. It was this success that they measured all their future successes. Corning needs to take this risk because it is what they have known the longest and with the help of Asahi and their access to the Japanese market, Corning and Asahi can turn the specialty glass market around and make it profitable for both companies.