+

Asahi Glass Company:

Diversification Strategy

Hanindita Guritna – 29114713

Michelle Monica A – 29114727

Edwin Lumenta – 29114760

Eska Anisa N. F. A. - 29114777

Rini Amelia – 29114857

+Company History

1. From Start Up to World War II (1907 – 1945)

1907: Founded by Toshiya Iwasaki

1909: Begin Sheet Glass production with imported materials from

Belgium

1912: Recorded its first profit

1916: Made in-house refractory bricks

1917: Started making soda ash internally

1932: Started to produce Caustic Soda

+Company History

2. From World War II to Oil Crises (1945 – 1973)

1950: Float Glass was invented; Asahi Glass got license to the

Float Glass process

1954: Got licensed from corning glass work, started to produce

TV glass bulb – Fiber Glass

1956: Entered fabricated automobile (safety) glass business –

Borosilicate Glass

1962: Began producing and marketing Autocraved Lightweight

Cement (ALC)

1973: Started production of Glass Reinforced Cement (GRC)

with technology licensed from Pilkington Brothers

+Company History

3. From Oil Crises through early 1990’s (1973 – 1990’s)

1970’s: Revenue from glass and construction business accounted

for more than 50% of total revenue

1976 : Began building electronic business to produce Liquid

Crystal Display (LCD)

1981 : Began producing Optical Lenses, both glass and plastic

lenses.

+Assignment Questions

1. How successful have Asahi Glass Company’s

diversifications been?

2. Did the company need to diversify?

Did it choose appropriate businesses?

The correct mode for diversification?

3. What should AGC do with its electronic business today?

4. Are there differences between AGC’s and a typical US

firm’s corporate strategy?

+How successful have Asahi Glass

Company’s diversifications been?

+How successful have Asahi Glass

Company’s diversifications been?

Asahi Glass Company has been successful in its

diversification businesses

Even though the growth in its business in electronic industry

is slow compare to other competitors, AGC can still become

number one company in manufacturing TV glass bulbs with

30% global market share.

In 1992, Asahi Glass Company still can make 56% market

share in the domestic market and 20% world market share.

+AGC Corporate Strategy

DIVERSIFICATIONS

1st Diverfisification: Started to produce Caustic Soda (an alcalichemicals). Beside glass, they develop expertise in chemicals and ceramics

2nd Diversification: Began producing and marketing Autocraved Lighweight Cement (ALC), licensing from swedishfirm (diversification in construction industry)

3rd Diversificaton: Began building an electronic business as the “fourth pillar”. Glass, Chemicals, Ceramics, Electronics. Because of the potential growth and the experties of the management. Producing Liquid Crystal Display

4th Diversification: in 1981, New business division established to produce Optical Lense , both glass and plastic lense.

+Did the company need to

diversify?

Yes, it did.

There were several reasons why Asahi needed to diversify its

business.

It had excess resources, capabilities, and core competencies that

had multiple uses in glass industry

It could face diminishing growth prospects if it focus only on glass

and related products

Its original domestic glass business had matured, while the rapid

globalization of its activities into Europe and North America

challenged its management practices

It could spread its business risk

+Reasons for Diversification

Business LineDiversification

ReasonSub Reason

Glass and RelatedValue creating

(Related)

• Economies of scope

• Market power

Chemicals Value creating

(Related)Economies of scope

Ceramics and

Refractories

Value creating

(Related)Financial economies

Electronics and other

businesses

Value creating

(Unrelated)Financial economies

+DIVERSIFICATION STRATEGY

Glass &

Constructi

on

Chemicals Ceramics

Electronics

75% of Asahi business line were related into each other

Glass & related : 56 %

Chemicals : 30 %

Ceramics : 3 %

Electronics : 6 %

Profit Share:

+Did it choose appropriate

businesses?

Yes it did,

Each business line had a different stage of product life cycle, so it would be safer for Asahi to spread its risk

Even though it was stated that Electronic business line had a slow growth, it still grew anyway.

75% of Asahi business line were related into each other

+Did it choose appropriate

businesses?

+Did it choose appropriate

businesses?

Each business line had a different stage of product life cycle,

so it would be safer for Asahi to spread its risk.

Even though it was stated that Electronic business line had a

slow growth, it still grew anyway.

The gross profit of each business line was increased since

1970 until 1992

+Mode for Diversification

Acquisition Internal Growth Joint venture

Diversifying into

New Businesses

+AGC’s Mode for Diversification

Division Mode for Diversification

Glass & Construction Internal Growth & Acquisition

Chemicals Joint Venture

Ceramics & Refractories Internal Growth

Electronics & Other Businesses Joint Venture

+Issues Facing Asahi Glass in 1993

1. Accelerated Globalization in Glass

Overseas expansion was an immediate growth solution.

Asahi glass & PPG joint venture to build factory in China.

In North America, the market was enhanced in 1992 when

Asahi and Glaverbel acquired AFG industries which has 6

plants in USA and 1 plant in Canada.

+Issues Facing Asahi Glass in 1993

2. Slow Growth of Electronics

In LCD business, new TFT technology had been

introduced.

Asahi and Mitsubishi electric built Advanced Display Inc.

to produce TFT active matrix LCD.

Asahi Glass decided to involve in electronics industries

and joined with Komag Inc.

Asahi Glass had established a second joint venture with

Mitsubishi Electric, Advanced Display Inc., for the

manufacture of TFT active-matrix LCDs

Asahi-Komag produced and marketed sputtered thin-film

magnetic memory (hard) disks in Japan.

+Issues Facing Asahi Glass in 1993

3. Emerging New Glass Opportunity

Established Fine Glass division, New Glass Research

Laboratory and taking leadership in the New Glass Forum.

Development in electrically-insulated ultra-flat glass

substrate for LCDs and memory disks, and architectural

glass that excluded ultra-violet light.

New Glass business is expected to reach $20 billion by the

turn of century.

+Issues Facing Asahi Glass in 1993

4. Challenge of Combining Technological Expertise

Combining technological strategy to produce unique

products.

5. Revitalizing the Corporate Culture

“Pioneer Spirit” culture going to fade away.

Chairman Furumoto had been trying to create an

entrepreneurial culture in the company.

+What should AGC do with its

electronic business today?

The company should not focused in TFT & films head electronic division.

The firms could not compete with other rivals in which theyhave more expertise and experience in electronics market

Data obtained from the case showed that the electronic business are doing quite well in the market

Difficulties in combining technological expertise between electronics and other divisions in the company

However, not to divest in electronic business entirely

It still contribute in company’s revenue

Can still become number one company in manufacturing TV glass bulbs with 30% global market share.

+General Corporate Strategy

AGC

Corporate

Strategy

+Like its glass business, Asahi Glass' chemical business rapidly

added new products and markets after the war.

Asahi Glass Company:

Electronic

Ceramics

ChemicalsGlass and

related business

+AGC Corporate Strategy to Expand the

Business

Searching for additional high volume

opportunities, the company entered into other

glass-related businesses.

Asahi Glass also entered the construction materials

business. The company already had a strong brand

identity within the construction industry, and its

wholesalers dealt directly with many builders.

+The differences of corporate

strategy between AGC and US

Typical Firm

Asahi Glass Company has diversified through

internal growth, acquisition, and joint ventures

from its origin in flat glass to broad glass-

materials, chemical, and electronics manufacturer.

It has also vertically integrated and expanded

internally to become the leading global glass

manufacturer.

Company Growth : Diversifying

+The differences of Corporate

Strategy: AGC Vs. Typical US Firms

Asahi Glass Company Typical US Firms

The glass product were directly

transported to wholesalers and

dealers

Such relationships were not common

in the North American markets

Asahi Glass Company was being the market leader with an exceptional

quality control record and distinguished technology

As AGC has many diversification, the strategies the company

used were different among all the business units.

GLASS AND RELATED BUSINESS

+The differences of Corporate

Strategy: AGC Vs. Typical US Firms

Asahi Glass Company

Asahi Glass produced 40% of the soda ash made in Japan, and was also

engaged in the joint venture (with Tenneco).

CHEMICALS AND REFRACTORIES

ELECTRONICS AND RELATED BUSINESS

The Electronics General Division supervised and coordinated the company's

electronics business activities including those of the company's relevant

subsidiaries and joint ventures such as Optrex, ELNA, Nippon Carbide, and

Asahi-Komag.