The Corning-Vitro Story
- Introduction
In my individual project I will start by a brief description of the case in order to present the situation and the facts, then I will continue with an analysis of the cultural differences that impacted the joint-venture and I will end by presenting my recommendations regarding a better preparation before a joint-venture process and what could have been done differently.
- The business worldwide context
Once with the liberalization of the markets a new phenomenon started to get shape: the global expansion. For companies is getting more and more important to access foreign markets by acquisition, mergers or joint-ventures not only in order to increase their profits but also to survive and keep their market share. To successfully perform a merger or a joint-venture you have to study in depth several aspects of the market that you want to access: economical, political, legal and also cultural, which I call the ‘’invisible’’ one because usually in business is not really considered. But as we will see in the case, sometimes the cultural factor is really important and ignoring it can lead even to failure.
- Case Presentation
In the fall of 1991,Corning, N.Y.-based Corning Inc. and Vitro S.A., Monterrey, Mexico announced the agreement in order to establish a joint-venture that will generated sales of more than $800 million. The result: two separate companies in Mexico (Vitro-Corning) and in United States(Corning-Vitro). Corning will own 51% in the U.S Company while Vitro will own 51% in the Mexico Company, and each will own 49% of the company that the other controls.
Vitro Sociedad Anonima was founded in 1909 in Monterrey, has 40,000 employees and is the Mexico's largest glassmaker, divested its glassware products to focus on two core segments: flat glass and glass containers. Prior to the joint-venture with Corning the CEO Ernesto Martens-Rebolledo declared that: ‘’ We don’t want to lose our identity as a Mexican company with a unique culture and relationship with our employees, but we don’t want to be battered in the world marketplace either.’’
Corning was founded in the mid-1800s and it is known as one of the most innovative american maker of glass and is also known for the large number of joint-ventures that Corning successfully performed for more than 73 years. Corning and Vitro are family owned companies.
After the joint-venture was completed Vitro merged its tableware glass divisions with Corning’s consumer-goods cookware and dinnerware divisions and Corning transferred its Brazilian laboratory to Vitro-Corning, Vitro paid $131 million to close the deal. The two companies combined their technical know-how in order to become more competitive towards their competitors. Also every company expanded their sales by adding their specific products to the products already existents in the catalogue of each company; we can see that in a declaration of Juan Manuel Holguin, chairman of Vitro's Glassware Div: "As a result of our alliance, we have complemented the line of products in our consumer glassware business". The business started well and for all the economists seemed to be the perfect match, Harley Shaiken(labor economist) declared : ‘’Mexico initially appears to be United States except that people speak Spanish’’. A team of Mexican managers went to Corning’s headquarters to discuss several business projects. The first contact with the American colleagues was pleasant, they friendly had shaken hands and everybody was wearing a suit. While they were visiting the headquarters they observed first the architecture, a modern glass enclosed building almost in contradiction with Vitro’s headquarters, often thought as Mexico’s Pittsburgh, with artwork, arched ceilings and antique reproductions. During the discussions the Mexican managers were surprised by the speed the decision were taken, they didn’t understand how middle managers could take certain decisions without informing their superiors. In Mexico, the decisions are taken by members of the controlling family or top executives. They began to feel confused everybody was addressing them by the first name without using the usual ‘’licenciado’’. They left New York with several questions unanswered and with their trust shattered. On the other side a team of American managers visited the headquarters from Monterrey. The first impression was an unpleasant one, they arrived at 07.30 to start the work but nobody was there, the program was starting at 09.00. Once they started the discussions they felt that their Mexican colleagues were moving slow and always undecided about the decisions, they were waiting for a superior to approve them. For the Americans the launch break seemed to last an eternity, Mexicans having a long schedule with long launch breaks. After passing through the technical issues the Americans didn’t understand the sales process which was taking too long. When a sale was made the product had to be delivered by the company and if all the papers where in order on delivery, the company representative was told to come back on another day with the invoice and is everything was in order another meeting was settled in order to collect the payment.
