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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 1990s (1973 1990s)
1970s: 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 Companys

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 AGCs and a typical US

firms corporate strategy?

How successful have Asahi Glass

Companys diversifications been?

How successful have Asahi Glass

Companys 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 alcali

chemicals). Beside glass, they develop expertise in chemicals
and ceramics

2nd Diversification: Began producing and marketing

Autocraved Lighweight Cement (ALC), licensing from swedish
firm (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 Line

Diversification
Reason

Sub Reason

Glass and Related

Value 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
75% of Asahi business line were related into each other

Glass &
Constructi
on

Electronics

Profit Share:

Chemicals

Ceramics

Glass & related : 56 %

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

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

Diversifying into
New Businesses

Acquisition

Internal Growth

Joint venture

AGCs 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 they
have 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 companys revenue

Can still become number one company in manufacturing TV

glass bulbs with 30% global market share.

General Corporate Strategy

AGC
Corporate
Strategy

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Like its glass business, Asahi Glass' chemical business rapidly
added new products and markets after the war.
Asahi Glass Company:

Glass and
related
business

Chemicals
Ceramics

Electronic

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

Company Growth : Diversifying

Asahi

Glass Company has diversified through

internal growth, acquisition, and joint ventures
from its origin in flat glass to broad glassmaterials, chemical, and electronics manufacturer.
It has also vertically integrated and expanded
internally to become the leading global glass
manufacturer.

The differences of Corporate

Strategy: AGC Vs. Typical US Firms
As AGC has many diversification, the strategies the company
used were different among all the business units.

GLASS AND RELATED BUSINESS

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

The differences of Corporate

Strategy: AGC Vs. Typical US Firms

CHEMICALS AND REFRACTORIES

Asahi Glass Company

Asahi Glass produced 40% of the soda ash made in Japan, and was also
engaged in the joint venture (with Tenneco).

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.