Essay About Range Of Businesses And Related Products

Asahi Glass and Co
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Case Analysis: Asahi Glass Co
Group F5
Sunil Kumar Murmu 0402/52
Sunil V M 0403/52
Suraj S K 0404/52
Surbhi Singh 0405/52
Suresh Chopra 0406/52
1. How successful have AGCs diversification been?
Asahi Glass Company has been through different crisis like World War II (1945) and Oil crisis
(1973). It has not only survived through these crisis but also has grown from startup to a
company worth $10.5 billion (Exhibit 1). All this it has been able to achieve through
diversification. After establishing a leading position in the domestic glass industry, AGC
gradually expanded its range of businesses and its geographical scope through internal
growth, acquisitions and joint ventures. And in 1992 AGC sales came from glass and related
products(56%), chemicals (30%), electronics (6%), ceramics and refrigerators (2%) and the
remainder from other areas (Exhibit 6 and 7). Even though the growth in electronic industry
has been slow, AGC has scope to do well in manufacturing TV glass bulbs. Hence it can be
concluded that diversification has not only helped AGC survive through crisis but had
definitely helped it grow.
2. Did the company need to diversify?
There were many factors which favored AGC as it was doing well in its domestic market and
once it matured, it has to see for more opportunities. Major reason for diversification was
value creation. Whereas it was supported by other advantages like AGCs market power,
economies of scale and financial economies.
There were resources available in excess, as a result AGC had the capabilities and core
competencies that had multiple uses in glass industry. So due to economies of scale and
market power, AGC diversified in Glass and related products.
Also it could face diminishing growth if it would had only focused on glass and related
products.
As the original domestic market of glass business has matured, there was a need to go for
globalization of its activities. But in that too it faced challenges in its management practices
into Europe and North America.
The most important advantage of diversification was that it could spread its business risk.
Diversification would thus lead to superior means of reducing investment risk or improving
capital returns.
3. Did it choose appropriate businesses and the correct mode of diversification?
It can be said that AGC chose appropriate businesses for the following reason:
Spreading risk across different businesses- Different business line had different stages of
product life cycle, hence minimizing investment risk.
The gross profit of each business line increased over the period from 1970 to 1992 (Exhibit
AGC diversified into following divisions using acquisition, internal growth and Joint venture
mode of diversification. For the Related business companies where it had expertise, it used
internal growth. Whereas for unrelated business companies where it had limited resource
and expertise it preferred joint venture.