Business Analysis of Corning Incorporated - Research Paper Example

? Business Analysis of Corning of of Introduction For over 160 years, Corning has been at the forefront oftechnology, innovation and research (Graham and Shuldiner, 2001 p2). The company has been an important convergence point for many research professionals and experts. Through Corning, a lot of innovations and additions have been made to household products and appliances throughout the world. This include electric lighting, television and housewares. One of the most fundamental innovations of Corning that changed the world was the 1970 discovery of optical-fiber glass which became an important tool for the transmission of information (Hecht, 1999). The optical-fiber system enabled the easy transmission of data and voice over extremely wide distances, or billions of kilometers around the globe (Hecht, 1999). The optical-fiber technology was used by telecommunication companies and systems in different parts of the world. It was evolved to support mobile technology and the transmission of satellite information, data and voice messages throughout the world. With time, Corning became a global leader in the production of optical-fiber materials around the world. They became the pioneering entity from 1984 to 2000 where their revenue rose from $100 million to $900 million in the year 2000 (Miller, 2011 p1). However, the telecom bubble burst caused other forms of communication to take over from the fiber-optic technology that Corning had a monopoly over (Matthews, 2002 p445). This led to the quick decline of profits in Corning because they had invested a lot of their capital into controlling the fiber-optic market that they had a full grip on. This led to the decline of the company. There was the need for a quick turnaround in the company and its operations. This paper analyzes Corning as a business entity. The paper will undertake a critical analysis of the organizational systems, strategic patterns and important elements of the organizational structure. This will be discussed in conjunction with the company's history, the 21st Century turnaround and current trends of the company. Organizational Summary (WWR) From its stable growth of about $70 million in turnover each year from the mid-1980s to year 2000, the company now makes higher profits above the $900 million level they reached in 2000 before dipping into a decline. According to Corning, (2012), there has been a tremendously increased volume of trade and revenue. Annual sales for 2011 was $7.9 billion. This shows that a lot has changed in the company to merit such high levels of revenues. The sales figure of $7.9 billion represent 19% increase from the $6.6 billion earned in 2010. Sales volume increased by 7%. This shows that there is a strategy that is supporting the growth and evolution of the company. Earnings per share was $1.77 in 2011. Although this was lower than the increase that was made in 2010, the company again shows that it is increasing investor wealth and this presents a strong case that justifies the fact that it is a growing company. Aside this, the company had free cash flow of $544 million. This implies that they have enough cash in their possessions to finance working capital and other needs that can support it to expand and meet its future objectives and obligations. These indicators announces to the world that Corning is making a lot of improvement in its operations and financial position. The company has had an incredible turnaround that makes it a major player in the global electronic industry. On further analysis of the 2011 financial statements, the information given by Flaws, a Board Member and Chief Financial Officer of the company indicates that there are some important themes that define Corning's current strategy and long-term vision. Growth The company is now focusing on growth. This is based on its vision to capture a larger market share. In order to attain this end, it aims at expanding its asset base. This is being done through mergers, acquisitions and other international arrangements and strategic alliances with the hope of supporting Corning's core function, which is steeped in innovation, research and development. Profitability The company seeks to produce things that would boost its profitability positions. In other words, it is trying to get products that customers would appreciate and demand. This is steeped in the company's innovation and changes that are meant to produce important additions to the customer base and expand its market share. Focus The company's focus has changed from a static strategy on management and control of fiber-optic technology only. Rather, it seeks to diversify its markets and systems in order to compete successfully in the markets and get better results for customers and other users of their technologies. Supply Chain Management Supply chain management refers to the acquisition of materials from suppliers and the dispatch of processed goods to consumers (Ranjit, 2009 p7). Procurement, delivery and dispatch of goods is a major situation that can help a business to cut down on its costs of operations significantly. This is because there are cost savings to be made in sourcing, timely delivery [which prevents idle time], storage cost cuts and timely dispatch of goods to consumers [to prevent stock outs] (Ranjit, 2009 p7). Thus, the management of this can enhance a business' operations. Flaws identify that supply chain management is an important element of the company's growth and profitability strategy. This is because the company has important and significant arrangements that are meant to cut back on spending in this direction through vertical integration and other things that have traditionally inflated costs of production. Globalization Corning has also been very successful through the employment of a strong global strategy. This strategy has involved the strategic acquisition and control of important businesses and firms around the world that have supported the growth of their earning potential. This is because such arrangements have enabled Corning to get a successful grasp of foreign markets and allowed them to get their products onto the local markets in a manner that keep them ahead of local competitors. Investor Confidence Another aspect of Corning's strategy is to create and maintain investor confidence. This is because they seek to get investors to remain committed to the company and continue supporting the company. With a high investor confidence level, Corning can venture into more profitable risks when the need arises. This is because investors are likely to rely on the past successes and trust in the decision of the managers. Business Analysis In order to understand the Corning, it would be appropriate to understand the external environment that it operates within. This can best be done through the use of the PEST analysis tools which evaluates political, economic, social and technological factors relevant to a company (Johnson and Scholes, 1993) . Political This include the policies and systems of governments and relevant authorities which affect a business. In the past decade, there have been major anti-trust rulings which limit Corning's monopoly over the fiber-optic technology. On the other hand, the past ten years have come with important transitions in the European Union. This has made it easier for business activities to be carried out in the European Union and access to other nations that were formerly part of the Soviet Union has opened. However, there have been systematic reductions in the support for research, particularly on the institutional level (Keinonen and Takala 2009). As such, companies like Corning needs to invest more in the education, training, and development of staff. Also, they need to spend more money on research projects and hence need to economize. On the other hand, globalization has come with several things like the opening up of Asia and other nations that were previously not accessible to a company like Corning. Also, the harmonization of standards makes it easier for products to be sent to other parts of the world. Standards authorities like ISO makes it easy for the transmission of ideas and concepts to be done to other nations. Economic Economic elements of PEST Analysis includes the financial changes that occurred in a given period of time. The most significant matter is the financial slump that hit America and Europe after the invasions of Iraq and Afghanistan which supported the global financial crises or credit crunch. This inevitably affected Corning. After 2010, it was reported that the US government has been getting on the right footing. Gross Domestic Product has increased but at a slow rate. Also, interest rates have falling whilst the US has managed to survive without a financial downgrading on the Standards and Poors scale. On the other hand, there is a major financial crises in the Eurozone that has strengthened the US Dollar. This means that Corning has an advantage and can benefit from this disparity. Sociological The sociological changes in the business environment of Corning involves changes in the trends in demand for electronic and electrical products. On one hand, there have been a lot of competitors who have entered the market due to the telecommunication boost and changes in demands for hitech products. Although this served as a negative thing for Corning in the beginning, it appears that it could be a benefit in the long run. This is because the company has more niches to focus on and improve its operations. Technological Technologically, there have been a lot of changes and improvements have occurred. Products are designed for specific period of time and they lose their appeal after a shortwhile. This provides an opportunity for the development of new products and services that would help Corning to meet its demands. Summary of Opportunities and Threats Opportunities 1. European Union opens a new market 2. Globalization and standardization gives opportunity for International Expansion. 3. Stabilization and growth of the US economy 4. Growth of the US Dollar. 5. Increased demands for new products and services gives room for more research Threats 1. Anti-trust prevents monopoly 2. Reduction in support for research and development 3. Global financial crises 4. Massive competition and entrance of new international competitors Current Vision and Mission In 2011, the CEO of Corning announced that the company had the following strengths (Collins, 2011): 1. Financial strengths 2. Growth opportunities and potentials 3. Balanced diversification. A year on, in 2012, he announced that the core drivers of the strategy of Corning are (Collins, 2012) : 1. Innovation and Evolution 2. Solution oriented leadership Based on these important strengths, the company has developed the following vision to attain the ends that it aims to attain: 1. Re-establish positive momentum in display technologies 2. Capture opportunities. 3. Create new revenue and income streams 4. Deliver costs and financial excellence Cultural Summary and Analysis In an attempt to attain the ends of the current strategy, Corning has come up with the following six important elements that defines its culture and forms the pillar through which the company's vision and objectives are attained (Miller, 2011). They include: 1. Centralization of Research and Development Function: The company has closed down its research facilities in many parts of the world. They have relocated most of their researchers to the Corning Headquarters in New York. There are 600 principal investigators who are experienced PhDs. There are also 2,200 researchers who work under them. The company however, has satellite laboratories and research centers in other parts of the world. 2. Strengthening Core Competencies: The companies seek to maintain its focus on what it does best: glass, ceramics and optics physics. This has caused Corning to specialize in its activities and operations. The company has top notch talent who fit into this category. 3. Improving the innovation processes: The company seeks to grow its innovation systems and structures organically. This means that it seeks to promote the growth and development of the strategic units of the company in a gradualist fashion whereby non-performing units would be phased out naturally. 4. Responsive Innovation: The company seeks to change its systems and strategies as and when necessary in response to changes in demands and relevant adjustments. 5. Unique materials and unique processes: The company seeks to install and keep a different outlook from other organizations around the world. 6. Intellectual property control: Corning seeks to ensure that it retains its rights to intellectual properties and use them to earn high revenues from the public. Recommendation for Growth and Expansion. For the growth and expansion of Corning, there are some important things that need to be integrated into its current strategy and business systems. These would ensure that the company becomes successful in the next seven years. Maintain tradition and maintain focus. For Corning to succeed, it would need to focus on what it is best at. It would need to do what it has a competitive advantage in. This would involve the focus on the development of optical-fiber technology and the focus on glass technology. However, the traditions of the company should be transmitted systematically to the coming generation to ensure that they remain committed to the core ideas and components of the business and cooperate with the top level management and researchers who seem to be quite old and experienced and meet objectives in their niche of specialization. Innovation must be key Since it is apparent that Corning got into trouble because of its strong adherence to traditional systems and methods, it should always look out for changes in the markets and adjust to meet them. In other words, it would be wrong to remain focused on just one product or a single line of business. Rather, they should focus on several revenue generation streams and always remain innovative and change their systems and strategies to meet new trends, systems and structures. The main need for the maintenance of innovation are competitive advantage and survival. If Corning wants to remain a viable business, it would need to maintain its market share and ensure that its customers are satisfied and willing to come back to them. This can be done by studying the systems and making changes where necessary to products to enhance their competitiveness. Additionally, they will need to maintain their grip over their customer base. In other words, they need to ensure that companies that produce similar products do not snatch their customers. The only way of guaranteeing this is to remain innovative. That is the main source of competitive advantage. It must also be pointed that innovation is going to trigger research. This will ensure that the company would remain committed to its vision of remaining a leader in research in the glass niche. This will ensure that research and development will be fundamental and enhance the company's outlook and ensure efficient use of resources. Increase turnover by expanding to developing country Another element of growth and expansion would be to find ways and strategies of entering developing countries and remaining there. This can be done through a strategy to grow and expand into newer markets in the New Industrialized Countries (NICs) like Taiwan, , Singapore, and Malaysia. There are also emerging opportunities in the BRICS; Brazil, Russia, India, China and South Africa. This can be done through acquisitions and strategic alliances in important regions and zones to ensure that the company grows and thrives in these new markets. Blend of Global and Local Strategy In the bid to expand into foreign countries and internationalize, it would be prudent and beneficial if the management of Corning draw a balance between globalization and localization. In other words, they might need to open up local branches and units of their operations to transpose their universal strategies to local niches and markets to ensure that optimal results are attained in all situations. Gradual Decentralization Although Corning has closed down most of its research units around the world, it would be commendable for them to open up local branches of their research units in other countries around the world. This can be done after the company acquires more and more resources and revenue is assured. This will enable them to successfully promote their culture and brand in different countries and also conduct research that are suitable for local settings. Focus on intellectual property to counter anti-trust rules The company might need to focus on intellectual property rights and how to keep them in their operations. This is desirable because the company has an inalienable right to making royalties from its operations. This is thus a strength that they can capitalize on without any interference by the state or any other entity. Steady growth in line with financial slump recovery. The company must also grow on a gradualist pace in sync with the global financial recovery. This is because the growth of the US economy seem to be moving at a slow pace. And based on the outcome of the November 2012 elections and possible changes in policies, Corning can make gradual changes. Otherwise, if they make daring changes now, it is likely that they would face severe problems and consequences in the future. Ageing management needs to be curbed It is also apparent that the management and top-tier board members of Corning are old. Most of the crucial staff members are over age 70. As such, it would be important for the company to set up a succession plan that would enable younger managers to be groomed to have a significant say in the affairs of the company. This will ensure that Corning would thrive as a going concern into the future. References Collins, D. F. (2011) Corning CEO: This is one of the most Exciting Times in the Company's History” [Online] Available at: http://www.businesswire.com/news/home/20110428005639/en/Corning-CEO- %E2%80%9CThis-exciting-times-company%E2%80%99s-history%E2%80%9D Collins, D. F. (2012) Corning CEO: We're Succeeding at Building a Bigger More Balanced company Businesswire [Online] Available at: http://www.businesswire.com/news/home/20120426005652/en/Corning-CEO- %E2%80%9CWe%E2%80%99re-succeeding-building-bigger-balanced Retrieved: July 1, 2012. Corning (2012) Corning Announces Fourth-Quarter and Full-Year Results [Online] Available at: http://www.corning.com/news_center/news_releases/2012/2012012501.aspx Retrieved: July 1, 2012. Graham, M. B. W. and Shuldiner, A. T. (2001) Corning and the Craft of Innovation New York: Oxford University Press. Hecht, J (1999) City of Life: Story of Fiber Optics New York: Oxford University Press. Johnson, G. and Scholes, K. (1993) Exploring Corporate Strategy – Text and Cases, Hemel Hempstead: Prentice-Hall. Keinonon, T. and Takala R. (2009) Product Concept Design: A Review of Conceptual Design of Products Berlin:Birklauser Publishing. Matthews, J. J. (2002) “The Generations of Corning: The Life and Times of a Global Corporation (review)” Technology and Culture Vol 43 No 2. Miller, J. A. (2011) “Out of a Near-Death Experience into a Chaotic Global Economy: How Corning Rediscovered its Innovation Roots” Industrial Research Institute [Online] Available at: http://www.iriweb.org/Public_Site/RTM/free/Out_of_a_Near_Death_Experience_into_a_ Chaotic_Global_Economy.aspx Retrieved: July 1, 2012. Ranjit, S. (2009) Supply Chain Management and Business Success in the 21st Century. Delhi: Tata-McGraw Hill. Read More