ASAHI GLASS COMPANY :

DIVERSIFICATION
STRATEGY
(SYNDICATE 5)
Harris Desfianto (29113006)
Defri M. Firmansyah (29113014)
Poltak Pardamean S. (29113035)
Resti Regina (29113060)
Harry Harsa (29113083)

INTRODUCTION
First founded in 1907 by Toshiya Iwasaki
Was the oldest and the largest glass manufacturer in Japan
and the member of Mitsubishi Corp.
Through internal growth, acquisitions, and joint venture
become a multinational company in 1992 with consolidated
sales over than $10 billions (23% outside Japan).

COMPANY HISTORY
1. From Start Up to World War II (1907-1945)

1907 : Founded by Mr. Iwasaki -> although others and government failed
to manufacture glass commercially. Iwasaki still continued the
business with commitment and his pioneer spirit and mission
to succed.
1909 : Begin sheet glass production. With imported material from Belgium.
1912 : Made his first profit.
1916 : Made in house refractory bricks.

1917 : Started to make soda ash (glass raw material) internally.

1932 : Started to produce Caustic Soda (an alcali chemicals).
(Their First Related Diversification. Beside glass, they develop
expertise in chemicals and ceramics)

COMPANY HISTORY
2. From World War II to Oil Crises (1945-1973)

1950 : Pilkington (Britishs glass manufacturer) invented float glass

process with Revolutionary technology that have significant quality
compared to flat/sheet glass.
-> Asahi glass and other major glass companies licensed the
float process.
1954 : Licensed from corning glass works, started to produce TV glass bulb.
-Fiber glass1956 : Entered fabricated automobile (safety) glass business -borosilicate
Glass-, and leading in these two markets.

1962 : Began producing and marketing Autocraved Lighweight Cement

(ALC), licensing from swedish firm. (Their second diversification in
construction industry).
1973 : Licensed from Pilkington began to produce GRC (Glass Reinforced
Cement).

COMPANY HISTORY
3. From Oil Crises through Early 1990s (1973-1990s)

1970s : The revenue of glass and construction business accounted for

more 50% of total revenue, and chemical business for about 40%.
1976 : 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.
(The third diversification).
1981 : New business division established to produce Optical Lense, both
glass and plastic lense.
(The fourth diversification).

COMPANY HISTORY
4. Globalization ( Foreign Expansion)
Flat Glass Globalization

1964 : Established flat glass company in India

1964 : Established flat glass company in Thailand
1972 : Established flat glass company in Indonesia
1980s : When BSN (one of the largest glass manufacturer from France)
decided to exit the glass industry, Asahi Aquired two of four their
subsidiaries, in Belgium and Dutch.
Automobile & TV Glass Globalization

1974 : Started fabricated automotive glass in Taiwan and Indonesia

1979 : Build operation of TV glass bulbs in Singapore
1980 : Build operation of TV glass bulbs in Taiwan
1985 : Started fabricated automotive glass in USA
1988 : Took over Cornings TV glass bulb facilities in USA
Chemicals Globalization

1965 : Started produce caustic soda and chlorine in Thailand.

1989 : Started produce caustic soda, polimers in Indonesia.
1990 : JV with Tenneco in USA to mine natural soda ash.

DIVERSIFICATION STRATEGY
Level and Type of Diversification
Moderate to High Levels of Diversification.

Glass &
Construction

Electronics

Profit Share:

Chemicals

Ceramics

Related linked (mixed related and unrelated)

Glass & related : 56 %

Chemicals
: 30 %
Ceramics
:3%
Electronics
:6%

DIVERSIFICATION STRATEGY
Reasons for Diversification
Implementing Strategies

Diversification Reason

Sub Reason

1. Produce caustic soda

- Value creating diversification - Economies of scope

2. Float glass

- Value creating diversification - Market power

3. TV bulbs (fiber glass)

- Value creating diversification - Market power

4. ALC cement

- Value creating diversification - Financial economi(unrelated)

es

5. GRC cement

- Value creating diversification - Financial economi(unrelated)

es

6. Producing LCD

- Value creating diversification

(unrelated)
- Value creating diversification
(unrelated)

7. Made optical glass

- Financial economies
- Financial economies

THE ISSUES
President Hirochi Seya and other top management of Asahi Glass believed that
the company was at a critical juncture in 1993. Adversely affected by Japans
recession, the companys sales had a levelled off and net income had dropped in
the previous three years.
its original domestic glass business had matured, while the rapid globalization of
Its activities into Europe and North America challenged its management practices.

The companys diversification into electronic-related business had not meet

Expectations.
Other opportunities such as new glass were appearing on the horizon.

ANALYSIS
1. The accelerated globalization in glass
Overseas expansion was an immediate growth solution, as they had opportunity
That European government started to privatize the glass operations.
The potential growth of Asian countries also attracted attention. 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.

There still have a growth in

some markets.

This strategy could have a

positive impact to increase
companys profit, because there was
still growth in Foreign market. So,
firm might continue to implement
Overseas expansion but need truly
commitment to taking global
approach with more integration and
coordination in operations.

ANALYSIS
2. Slow gowth of electronics
In LCD business, new TFT technology had been introduced. NEC, Toshiba, Hitachi
Had entered the now large market.
Asahi and Mitsubishi electric built Advanced Display Inc. to produce TFT active
matrix LCD.
In 1991, had a new joint venture with Komag Inc. developing new thin film heads
For disk drive.
The making of disk head was an assembly business, distant from material
business which Asahi had expertises and experiences.
Electronics division share low profit for total Firms income (about 5%).

ANALYSIS
3. Emerging new glass opportunities
(New Glass = Glass with inherent function such as selective light transparency,
Photoconductivity, and electrical insulation)
Although they already joined the New Glass forum - an association established
In 1985 to promote information exchange ranged from glass manufacturer, chemical,
Metals, electronics, cable, and communication- there was no clear indication
as to what direction company should take in New glass opportunities.
Some observers said, the New Glass business is rosy expected to reach about
$20 billion.
Others observers pointed out New Glass would be in high technology fields
Whose competitive environments were far different from traditional glass business.
This strategy would make company in 50:50 position, which could get high profit
or suffered loss of efforts and money as they did not have an experience in new
high technology competition environtment.

ANALYSIS
4. Challenge of combining technological expertise
Combiing technological strategy to produce unique products. By example:

A. Bi-layer glass for automobiles which combined a layer of glass and that
urethane to improve safety.
B. Fluoropolymer-coated automotive window glass which repelled water
more effectively.
This strategy would not be an easy task, for the company was not used to such
cordination and the cultures of various divisions often differed.
This strategy would not increase the profit significantly because the new unique
products could be substitute the current technology without made any
increasing in market share.

ANALYSIS
5. Revitalizing the corporate culture
The company felt the pioneer spirit culture in their company going fade away.
Historically, the company had relied on developing new products from its technoLogies, and was not good at developing products that met the customers need.
Chairman Mr. Furomoto ( had been trying to create entrepreneurial culture in the
Company where wind can blow the organization and promote market in cusTomers focused approaches.
The revitalizing corporate culture may have significant impact for company in facing
the global competition. Good corporate value/culture may create environment that
encourage initiative and innovation inside the firm and also could create above
average return for the company.

CONCLUSION
As the President, Seya responsibled in making a policy regarding their long term
Strategy for their company (AGC). Although Japan was suffered a crisis in that moment and their domestic market reached their mature business, Seya needed to
make decision to increase the firms net income which decreased consecutively in
3 years. With the conditions occured to their company we have recommendations
in this situations (3 to 5 years plan):
Company needs to focus their strategy in expanding businesses to foreign market.
(North America, Asia, and Europe). As data resulted, many of country outside of
Japan still have a growth in their Glass market. Glass market also shared the highest
net income to the total companys profit (56%). This conditions also described the
Expertise and the experience of the company to this business.
The company should not focused in TFT & films head electronic division, which the
firms could not compete with other rivals that has expertise more than companys
had.

CONCLUSION
The emerging New Glass opportunities gives uncertain condition to the company.
This situation still need a study further before company make decision regarding this
problem whether to continue to develop the product or not.
The combining technological expertise would be hard to the company to be implemented because of the various culture of division internally . So this strategy would
not be the best option to be planned soon.
Corporate culture revitalizing gives the firm the positive impact, that should be
Implemented to increase initiative and invention among the employee in working
Environment.