Asahi Glass

TABLE OF CONTENTS Executive Summary3 Recognizing Opportunities4 Company Structure 5 Issues Facing Asahi Glass5 Questions to Answer6 Conclusion6 Recommendations6 Executive Summary Asahi Glass Company was founded in the early 1900’s to relieve Japan’s dependence on foreign imports. It was the first successful endeavor into the flat glass industry. The company was able to continue to succeed through mergers, acquisitions, and organic growth. The company’s core businesses are: 1. Glass and related products, 2. Chemical products, 3. Ceramics and refractory products, 4. Electronic products, and 5. All other miscellaneous products The synergies that were created by combining management’s expertise with the company’s knowledge, resources, and technologies have contributed to the success of Asahi Glass Company throughout the years. The organizational structure of Asahi Glass’ domestic productions are effective for their business’. There is a top down management system, with each division having its own managers and balance sheet. However, globalization efforts have been depleting company resources in past years. Management has yet to be able to perfect their foreign operating organization. The company is unable to establish mutual trusting relationship with several overseas joint ventures. ? Asahi Glass Company was founded in 1907, by Toshiya Iwasaki, a nephew of one of the founders of the Mitsubishi business group. Iwasaki wanted to ease Japan’s dependence on imports, by establishing a flat glass industry. It took three years after production started in 1909 to make a profit, but the endeavor was well worth it; Asahi Glass Company established themselves as the dominate player in the market and has remained that way ever since. Throughout Asahi Glass’ existence, their decisions and objectives have been focused on growth. They achieve this by exploring new technologies and growing organically, as well as acquiring companies, and merging with others. Their management style is also a key factor to their success. Recognizing Opportunities During the First World War, Asahi Glass was having trouble importing the soda ash they needed for manufacturing, so they started producing it themselves. This led the company into the exploitation of the raw-materials scope economies. They soon developed technological expertise in ceramics and alkali chemicals, which became two of the three core business â€Å"pillars. † After World War II, management made a sensible strategic decision to license a new float glass process from the Pilkington Brothers in order to maintain their market position. In the 1960s, Asahi Glass took advantage of growing TV and auto industries, and moved into them, becoming a domestic leader in both industries. Soon after, they progressed into producing construction materials. When the chemical industry took off in Japan, Asahi Glass merged in with their alkalis, halogen, and other petrochemical additives. They were market leaders in every industry they infiltrated. Asahi Glass created new, unique markets and took the lead in many specialty markets. In the 1970s, the current president, Takeo Sakabe, took the initiative to introduce a fourth â€Å"pillar† to the company’s core businesses: electronics. He chose electronics because management had some expertise in it and the industry had room for growth. Asahi Glass began penetrating the global market in 1956, when they built a plant in India. Then, the company entered into joint ventures in Thailand and Indonesia in 1964 and 1972 respectively. Not long after establishing their presence in those markets for glass, Asahi Glass’ chemical business followed into the areas. Once the company began to expand, they accelerated their efforts through the 1990s. Company Structure Asahi Glass had â€Å"a matrix style organization structure. † Each of the six general divisions and the five individual divisions had their own managers and kept their own balance sheet. Asahi Glass had an International General Division, which communicated with domestic product divisions, and monitored the subsidiaries and affiliates who were abroad, as well as help formulate business plans. The company tried to localize their oversea activities, and let them manage day-to-day operations and only held executive meetings about once every four months. Issues Facing Asahi Glass In 1993, Asahi Glass’s domestic glass business was declining due to the Japanese economy. The answer for the company was to continue globalization efforts. However, the company’s quick response and accelerated efforts caused the company to lose focus of their traditional international practices. The company’s domestic operational structure was not the same as their international operating structure. Because many of the international were joint ventures, and still relatively fresh, the two companies still lacked trust and coordination. Asahi Glass was still realizing that moving into foreign markets took more integration and stronger efforts than operating domestically. Questions to Answer In 1993, president Seya was faced with a decision for the electronics department. He was analyzing a report of long term strategy for the business, and the position of its major products. The report offered proposals ranging from intense divesting, to rigorous investing. Mr. Seya needed to decide if investing the capital needed to ascertain a dominant position in the electronics business was worth the risk. His decision would be the foundation of the business’ strategic direction and he felt that direction should be aligned with Asahi Glass’ other divisions, and their overall objectives for the years to come. Conclusion Asahi Glass Company has always been an aggressive, dominant company. They exhort their knowledge, expertise, and technology in order to gain a leading position in whatever industry or market they endeavor. In the latest years, it seems that the company is trying to spread themselves too thin by globalizing. Until Asahi Glass finds a better way to organize and operate their foreign affairs, they should focus on domestic mergers, acquisitions, and internal growth. Recommendations I believe that Asahi Glass has had an excellent history of creating successful synergies that have propelled the company to success. From its beginnings in the early 1900s, the company’s management has recognized opportunities to expand their core businesses and grow organically. As their core businesses expanded, so did the company’s knowledge, experience, and technology. As these assets have interacted over the years, they have combined to make synergies that allowed the company to expand into new markets, products, and industries. Asahi Glass has an excellent foundation in the way of management as well as financial prosperity. I recommend that Asahi Glass invest in the establishment of the electronic business as a dominant position. Looking at the electronics business’ history shows that the division is among the top three in relative market position already, despite that they have a low share in the market (exhibit 10). They are also already well established, having joint ventures with at least five companies, three of which are in the top six market positions (exhibit 10). The electronic division contributed 5. 6% to sales in 1992; compared to ceramics contribution of 2. 4% (exhibit 6).