Asahi Glass Company Diversification Strategy Case Study

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Problem Statement

The company Asahi Glass Co. has evolved as a broad glass material manufacturer, electronics manufacturer, chemical from a simple glass sheet manufacturer. Along with this, the company has also vertically expanded and also integrated internally to actually become the market leader in the global glass market in the world. However, recently, the company is planning to review its future direction. The company needs to identify the direction it should focus on in the future particularly whether it should divest the electronic business or not.

Analysis

The company Asahi Glass Co. made quite a lot of different efforts to actually become a global company. For instance, for different geographic markets Asahi made different decisions to explore the market. The acquisition between Asahi Glass Co., Mitsubishi Electric and Advanced Display Inc. was actually established for TFT active matrix.

However, Asahi also made a joint venture with Komag to develop the thin film heads for the disk drivers. The decision for acquisition was solely based on developing and transforming Asahi Co. into a global leader in diverse businesses. Asahi entered the electronic business because it was looking to explore the growth potential. The joint venture with Mitsubishi was to lend over the expertise and raw materials from the company. Along with this, the joint venture with Komag was to explore the LCD market.

Asahi Glass did not actually manage the joint venture in the right direction. The company was unsure about its flanker business. As the case states, the glass sector was the cash cow for Asahi Glass, whereas, the electronics section in spite of all the ventures and support was unable to compete in the market because of the indifferent customer demographics. Along with this, the technical features of the company were not potent and effective to establish themselves in the Japanese electronic market. The defense tactics that were used were that Asahi should lend the technical expertise to the ventured company that is the Mitsubishi Limited.

The transactional structure of Asahi Glass and its joint venture conglomerates is that the company usually holds on with the leadership role and the decision making, while passing on the authority and line manufacturing to the merged or the venture company. This is a common practice at Asahi Glass, but since now the company has developed joint venture with Mitsubishi which is again a multinational company and it will obviously have its own say and direction strategy. The company being a glass manufacturer where it has the skills and expertise but with the electronic section, Asahi is still a young organization. It has to develop a certain direction where the company can decide and make decisions in order to broaden the scope of business and to develop a diverse portfolio for the company as it helps in becoming a part of related and unrelated industries. Basically companies try to invest in different markets to establish themselves in different markets.

If the joint venture fails and the companies are unable to match the expected requirements from one another it will eventually lead to a reduction of the profit margins in the market. The market of Japan is highly competitive and has all the ingredients to grow in the future needs to be explored today.............................

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Describes the history and strategy of diversification of the Japanese manufacturer Asahi Glass Co, the company diversified through internal growth, acquisitions, and joint ventures of its origin in the production of sheet glass in a wide glass materials, chemical, and electronics manufacturer. He also vertically integrated and expanded internally to become a leading global manufacturer of glass. In 1993, Asahi Glass is reviewing its future directions, in particular, whether he should take his electronics business. "Hide
by David J. Collis, Tsutomu Noda Source: Harvard Business School 22 pages. Publication Date: February 24, 1994. Prod. #: 794113-PDF-ENG

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