Corning Incorporated: A Network Of Alliances

Corning Incorporated: A Network of Alliances

by

Jeff Stats

Corning is a company with a multi million profits and a century long history. James Houghton is a current CEO of the company that is facing a few dilemmas and they have to be resolved as soon as possible in order for the company s further successful development. The core of the company s operations and main course of business was edge-cutting technology, however at this time their technology is not a market leader and they have to decide what to do with their three major branches. They need to remodel or cut off one or two of them so that they can carry on gaining leading positions in the business world and produce excellent product.

Lab sciences division is one of the three vital arteries in the body of the Corning company. Currently this branch is not being he most success, although in the course of past seven years, according to the financial statement, it has been the most profitable of the three and future forecast predicts further growth. The problem arises though, Ciba-Geigy a Swedish company who owns 50% of the Ciba Corning corporation is a partner who needs to be taken into consideration. They could buy Corning s share for 150$ million and Corning would be free to do whatever they want. Ciba is a very well developed company with reputation and mutual business. On the other hand the competitors are spending huge amounts of money on the R&D, three times as much as Corning. It s inefficient for real breakthrough and simply dangerous considering the possibility of losses if the competitors win over their market share which can happen if they do not increase R&D funding. Corning would be probably better off in case of terminating mutual business with Ciba-Geigy and turning to expanding fields such as professional testing for AIDS or chemical addiction. Combining forces with three other companies each of which is a professional in a specific field (pharmaceutical, clinical and environmental testing) Corning would be able to gain leading positions again. Spending almost 500$million on the investment into the purchase of such promising companies and getting back about 150$ million from selling of Ciba would be an optimal decision. This choice is a very risky one, although if money starts working immediately on the new products of the three new entities, it would most probably bring more profit than Ciba with its low return.

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.

Another business sector Corning is involved in is communications sector. In 1980s when this field was only developing and Corning had a lot of patents on fiber and fiber and fiber-making products, it was receiving high profits. In a few years market for fibers grew immensely and Corning as a leading producer in the field gathered big dividends. The problem in the present time is that the customer needs a new approach with the fiber technology. For instance Corning should be focusing on the local systems rather than on long distance links which was already saturated enough in the US market. Besides it was a right decision to start introducing new sophisticated terminal peripherals to large communication companies and computer corporations. This is a way of the moving progress and together with these new technologies in computer sphere and local systems. Taking into consideration the amount of money that Corning is going to spend on the development of its laboratory testing division, it should hold back from big purchases and new joint ventures. The possible PCO s partnership with IBM seems like a good project with a lot of potential but it should not be considered at the moment. PCO is able to develop on its own and thus it is on a safer side for the company to just continue doing what it was and stick to the 10$ million profit a year, even incurring operating loses.

The proposal with 100$ million investment into expending the U.S. capacity and making tough new fibers for the service homes is a prospectively successful and profitable venture. Distributing those 100$ million in three years is a smart decision and with growing market for such technologies it would bring profit without a doubt. The core strategy of the company coincides with such decision as Corning has been in this business for a long time besides it is only going to strengthen their evolving network organization. Interrelated businesses will only win from this situation and gain a supportive partner in the face of PCO, such businesses as their testing laboratories in need of local operations based on fiber produced by the same company.

The third division of Corning s business is television glass. In 1988 company had to close three big factories manufacturing television glass, the reason for it being an increasing expansion of Asian and especially Japanese competitors. Their production was of higher quality and definitely with newer high-tech features. Moreover one of the Japanese companies bought considerable shareholding in one of Corning s companies Owens Illinois. In this difficult situation of severe competition and forced reduction of business units, Corning has to make a decision as to further activities in this field. Suggestion to cooperate with Asahi and to sell 49% of its glass business would be a helping hand for a drowning company. Asahi as a Japanese entity and a former business partner for a long period of time, which guarantees a secure environment, would be perfect candidate for the creation of a new fruitful alliance. It would provide an ensured cooperation with other Japanese companies and help survive on the American market. On the other side Corning will acquire resources for the development of liquid crystal displays which are major products of the future. Timing of this venture is suitable for both companies, as the foreign wants a helper to promote itself on an unknown market and Corning wants a technologically update partner.

In case of purchase of Corning by Asahi, the company would place itself in a new position in a strategic sense. Clearly in this situation Asahi would be the one with most control, because of their connections with Japanese TV manufactures and cutting edge technology. Thus Corning is left a role of the marketer and public relations specialist. On the other side there is a wonderful possibility to spend time and money for R&D to design an innovative model of liquid crystal displays, the goal that was set when creating a mutual business with Asahi. As was already said, Corning in this partnership will not be the one in leading position, but rather in learning and in case of successful technology development it will be a profitable one.

In such egalitarian corporation as Corning it is important to keep in mind that although all children companies are independently run, there needs to be a firm controlling hand. Big money is involved in all three of possible ventures described above and by taking risk with any of them, company can lose a lot. On the other side by taking these steps or not taking them as in IBM case, they can realize huge profits and bigger market share due to increased quality (alliance of three professional laboratories) and technological innovations (in Japanese partnership).

According to their corporate strategy that follows from their strategy wheel, Corning aims at keeping businesses in four different areas. Specialty materials such as video displays, LCD, memory storage; communications- optical fibers and fiber optic cables; laboratory products and testing; consumer house ware-cookware, tableware, sunglasses are those areas. Regarding the companies current situation keeping all four of them and maintaining a 25% share of the whole company business is not a strategically secure decision. House ware division needs to be at least reduced to 15%-10% in order to lessen spending on the part which is not company s unique competency. Efforts should be focused on the other three segments to return invested money and to make profit. Narrowing down production and operations would only save company money, human resources and help maintain focus on the ultimate goal of surviving.

Jeff Stats is a writer at

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