Amy Jaick, Adam Koch, Stefanie Macchia, Josephine Pietanza, Katherine Sleeth, Katherine Towl Glass-Ceramic Market Entry Analysis June 1975 Wilmingt on Corporat ion
Aug 11, 2015
Amy Jaick, Adam Koch, Stefanie Macchia,
Josephine Pietanza, Katherine Sleeth, Katherine Towl
Glass-Ceramic Market Entry Analysis
June 1975
WilmingtonCorporation
Strategic Situation
Recommendation Preview
Analysis of Relevant Facts
Strategic Alternatives
RecommendationWilm
ingt
on
Strategic Situation
Recommendation Preview
Analysis of Relevant Facts
Strategic Alternatives
RecommendationWilm
ingt
on
Expiration of CORNING WARE®’s Patent is a Rare Opportunity, But Loaded with Risk
• After 17 years, Corning Glass Works’ CORNING WARE® glass-ceramic cookware patent is expiring
• We have seen a 40% decrease in our EPS over the last six years
Situation Preview Analysis Alternatives Recommendation
• Industry trends indicate that there is an opportunity for a CORNING WARE® competitor
- There is a high probability that we will not be the only one to enter the market
• Corning Glass Works has signaled that they are ready to defend its position
Financials Point to the Importance of the Opportunity
Situation Preview Analysis Alternatives Recommendation
CORNING WARE® Estimated Sales in MillionsROE & EPS
1969 1970 1971 1972 1973 19740.0
10.0
20.0
30.0
40.0
50.0
60.0
CORNING WARE® Estimated Sales (in millions)
1969 1970 1971 1972 1973 19740.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Return on Equity EPS
Corning Glass Works Can Defend Against Attacks on Multiple Fronts
Situation Preview Analysis Alternatives Recommendation
• Total sales: $1,051M• Strong brand equity and loyalty• Popular with retailers; CORNING WARE® has reputation of “selling itself”• Sales promotion and advertising: $26.25M• Experience curve: 10-20% lower costs
Corning Glass Works
Corning Glass Works Dominates on Most Key Success Factors
Situation Preview Analysis Alternatives Recommendation
• Total sales: $510M
• Unknown brand
• Direct distribution: Less retailer flexibility
• Sales promotion and advertising: $7.65M
Wilmington Corporation
Not Everyone Can Succeed in a Crowded Marketplace
CORNINGWARE®
Situation Preview Analysis Alternatives Recommendation
4th Entrant
3rd Entrant
2nd Entrant
1st Entrant
We Missed this Chance 17 Years Ago and are Still Suffering the Consequences
• Speed is key in order to gain market share and avoid overcapacity
• Market share has been flat since 1961
Situation Preview Analysis Alternatives Recommendation
1974 Market Share: Heat-Resistant Glass Bakeware
58%18%
13%
8%
3%
PYREX® American Glass Ajay Corporation
Wilmington Others
Strategic Situation
Recommendation Preview
Analysis of Relevant Facts
Strategic Alternatives
RecommendationWilm
ingt
on
A Successful Strategy Has a High Likelihood of Success, Limited Downside Risk and Strong ROI
• Likelihood NPV is positive in five years70%
• Minimum Average NPV$10M
• Certainty NPV > Capital Expenditure90%
Situation Preview Analysis Alternatives Recommendation
Our Strategy is Built on FourKey Strategic Factors
Situation Preview Analysis Alternatives Recommendation
Conflict Avoidance
Speed
Decisively Allocate
Resources
Opposition Principle
Fast-acting strategies dominate
Attack only those you can beatMust
identify the right focus to
win
Use strengths
against them
Stealth Entry
Pursue Market Share that Corning does not own
Recommendation
Tactics Must Focus on Appealing to Targeted Segment
Situation Preview Analysis Alternatives Recommendation
Roundsolid colorsProduct
Place
Promotion
Price
Supermarkets and discount stores using
direct distribution
Signal market entry. Message: “All-purpose
cookware for less”
20% discount off CORNING WARE®
retail price $$$ $
Strategic Situation
Recommendation Preview
Analysis of Relevant Facts
Strategic Alternatives
RecommendationWilm
ingt
on
Strategic Thought Process
EnvironmentCompetitive
capabilities and resources
Internal capabilities and resources
Opportunities and threats
Strengths and weaknesses
Strategy options
Objectives Strategic principles
Intelligence
Analysis
Alternative Generation
Evaluation
Situation Preview Analysis Alternatives Recommendation
One dominant playerLow switching costs
Industry Rivalry: Moderate
Factors Driving the Glass-Ceramic Industry Point to Challenges
Situation Preview Analysis Alternatives Recommendation
Patent expiration opens barriers to
entryHigh start-up costs
Potential Entrants: Moderate
PYREX®Stoneware
Metal Cookware
Substitutes: Moderate
Buyer Power: High
Distributors are loyal and only carry two to three brands
Supplier Power: Low
Inputs (raw materials & freight) are 33% of total costs
Understanding Market Size is a Component of Determining the Right
Strategy1974
Total Revenues: $1,051M
Consumer Products: $235M
Housewares: $117.5M
CORNING WARE®: $51.7M
US Sales:
$35.1
On Average: CORNING WARE®
customers are spending $42
(the equivalent of $200 Today)
Personal Use Buyers:
415kMarriage and
Gift Buyers based on income
distribution 1.1M
Potential Marriage & Gift Buyers: 3.65M
US Population in 1974: 214M
Top Down Bottom Up
Total Current Customers:
1.54M
Situation Preview Analysis Alternatives Recommendation
CORNING WARE® Sales Driven Predominantly by Higher Income
Segments
$0-$25K28%
$25-$50k27%
$50-75k18%
$75-100k11%
100k+16%
$0-$25K3%
$25-$50k11%
$50-75k16%
$75-100k32%
100k+
39%
Situation Preview Analysis Alternatives Recommendation
1974 US Population Income Distribution
CORNING WARE® Customer Income Distribution
Situation Preview Analysis Alternatives Recommendation
Customer Needs are Changing
• Rise in Convenience Cooking– Technology: Microwave Sales up 25%
• “Julia Child Influence”– 45M Custom Meals Prepared Daily
• New Product Development– Focus on Fashion: Color and Design
Situation Preview Analysis Alternatives Recommendation
The Race is on to Meet Changing Consumer Preferences and New Customer Needs
CORNING WARE®
Metal Ware Stoneware Heat Resistant Glass
• High-quality
• Use: Multi-purpose-oven, stove microwave
• Expensive
• Mixed quality• Use: Moving into
“cook-to-serve” market
• Not microwaveable
• Moderate to very expensive
• Low-quality• Use: Multi-
purpose: “freezer-to-oven-to-table”
• Inexpensive
• Low-quality• Use: Not safe
for range top cooking
• Inexpensive
Not All Products Equally Positioned to Meet Changing Preferences
0 1 2 3 4 5 6 7 8 9 100
0.5
1
1.5
2
2.5
3
3.5
4
Cook & Bakeware Industry MetalHeat Resistant Glass Ceramic Microwave Sales
Time
Rela
tive
Sal
es in
Uni
ts
Market GrowthCurrent % of Sales in Cook
and Bakeware Industry
Situation Preview Analysis Alternatives Recommendation
42%
8%
21%
30%
Metal StonewareHeat-resistant Others
Others Will to Try to Capitalize on the Patent Expiration
LowHigh 3x
Low
High
.3x .22x .14x .05x
American Glass
Pyrex®
Ajay
Wilmington
Others
Gro
wth
Rat
e
Relative Market Share
Sector Growth
LowHigh
Low
High
Gro
wth
Rat
e
Relative Market Share
Sector Growth
1x
Situation Preview Analysis Alternatives Recommendation
CORNING WARE®
Heat-Resistant Glass Bakeware
Heat-Resistant Glass-Ceramic Cook and Bakeware
Current Market
One Entrant:22.5% Required Growth
Two Entrants:
45% Required Growth
Three Entrants:
67.5% Required Growth
There is Not Enough Room for Everyone in the Market
Assumes 75% Production Capacity of Corning from New Entrants
Situation Preview Analysis Alternatives Recommendation
Market Capacity: 1Market Capacity: 1.75Market Capacity: 2.50Market Capacity: 3.25
The Primary Battle Will be Over Who Wins Shelf Space
• Corning has high degree of wholesaler loyalty
• Stores only carry two to three lines
• Retailers do not want to carry inventory; they want products that fly off their shelves
• A price discount may provide incentive to retailers to stock another brand
Situation Preview Analysis Alternatives Recommendation
PYREX® Example Points to a First Mover Advantage
1957 1958 1959 1960 1961 1965 19740%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
98%90% 83%
71%60% 61% 58%
2%8%
12%18%
19% 18% 18%
2% 4%7%
11% 12% 13%
0.01 0.04 0.09 0.08 0.080.01 0.01 0.03
PYREX® American Glass Ajay Corporation Country Squire Others
Situation Preview Analysis Alternatives Recommendation
Mar
ket S
hare
The Eight Sources of Competitive Advantage
Superior technology
Superior inputs
Superior operations
Superior offerings
Superior access
Superior customers
Superior segments
Management Processes & Info
Situation Preview Analysis Alternatives Recommendation
CORNING WARE®’s Strengths Are Diverse and Deep
Economies of scale
Pressed glass-ceramic
cookwarepatent
Quality Product
Two-tier distribution, loyal wholesalers
Department stores and national chains
White collar = disposable income
Direct labor, packaging and cover
Management Processes & Info
Situation Preview Analysis Alternatives Recommendation
Up-and-Coming/Niche Leader
New/Undeveloped Eroded/Commoditized
CORNING WARE® Brand Equity Offers Significant Competitive Advantage
Bran
d St
reng
th(D
iffer
entia
tion
and
Rele
vanc
e)
Brand Stature (Esteem and Knowledge)
CORNING WARE®
PYREX®
Situation Preview Analysis Alternatives Recommendation
American Glass
Wilmington
Ajay
CORNING WARE® is a Star; PYREX® Gives Corning Cash to Defend
?
Cow $$PYREX®
CORNING WARE®
CORNING WARE®
CORNING WARE®:• 25% of sales in Consumer
Product Division• 27% sales increase from 1973-
1974; Doubled sales in last seven years
PYREX®:• Responsible for 10-15% of
Consumer Products Division• Retained 58% market share
since expiration of patent in 1957
Situation Preview Analysis Alternatives Recommendation
CORNING WARE® Will Respond and ProtectW
ilmin
gton
att
racti
vene
ss
Corning Glass Works Reactiveness
Glass-ceramic cook and bakeware
Heat-resistant glass bakeware
Potential Response:• Price Reaction• Increased promotion
– “Corning Gifts that make life easier”
• Exclusive distributor agreements
• New design launch
Situation Preview Analysis Alternatives Recommendation
Corning Glass Works’ Signals: “We Will Defend Our Position”
Signal: Specific Action Taken:Price change Price increase three times in the last
six yearsPolicy changes Discontinuation of the fair trading
rules
Messaging “Gifts that make life easier”Intent New product design may launch in
1975
Situation Preview Analysis Alternatives Recommendation
Deeper Analysis Reveals CORNING WARE® Possible Weaknesses
Price
Product Perception
Patent Expiration• Loss of strategic defense
mechanism
• 28% of potential customers would only buy if cheaper
• Not seen as stovetop product• Lack of color selection and styles
Situation Preview Analysis Alternatives Recommendation
Comparison of Wilmington and Corning Highlights Different Strategies for
Success
Wilmington CORNING WARE®
Message “Good value for the money” “Gifts that make life easier”
Distribution74% through hardware stores, discount stores, supermarkets
and chain storesStrong relationships with
department stores
Styles Two decorations, four colors (Country Squire) Two decorations, one color
Promotion Focus on in store displays and sales promotion
Equal split between advertising and promotion
Situation Preview Analysis Alternatives Recommendation
Products Compete on Five DimensionsStyle
Flexibility
PriceBrand
Quality
Situation Preview Analysis Alternatives Recommendation
Limited Functionality is an Issue for PYREX®
Style
Flexibility
PriceBrand
Quality
Situation Preview Analysis Alternatives Recommendation
Metals Are Viewed as High Quality but not Versatile
Style
Flexibility
PriceBrand
Quality
Situation Preview Analysis Alternatives Recommendation
CORNING WARE® Brand Equity Drives Sales, can be Beat on Price
Style
Flexibility
PriceBrand
Quality
Situation Preview Analysis Alternatives Recommendation
Stoneware is Highly Flexible but Viewed as Low Quality
Style
Flexibility
PriceBrand
Quality
Situation Preview Analysis Alternatives Recommendation
Wilmington Can Compete on Style, Flexibility, and Price
Style
Flexibility
PriceBrand
Quality
Situation Preview Analysis Alternatives Recommendation
Strategic Situation
Recommendation Preview
Analysis of Relevant Facts
Strategic Alternatives
RecommendationWilm
ingt
on
Do We Enter? Customer Segment
Price
Entry Decisions Must Focus On Who to Target and How
Yes
No
Corning
Non-Corning
BothHigh Discount
Medium Discount
Tactical Decisions
• Distribution method
• Product specifications
• Promotional activityCorning
Non-Corning
Both
Situation Preview Analysis Alternatives Recommendation
Limited Resources Point to Three Alternatives
CORNING WARE®
CORNING WARE®
CORNING WARE®
UntappedUntappedUntapped
Onslaught Stealth Combined• CORNING WARE®
imitation• Two-tier
distribution• 7-20% discount off
CORNING WARE®• Equal split between
advertising and sales promotion spend
• Round shape, solid colors
• Direct distribution• 7-20% discount off
CORNING WARE®• Heavy sales
promotion campaign, small amount on media advertising
• CORNING WARE® shape, solid colors
• Direct distribution• 7-20% discount off
CORNING WARE®• Equal split
between advertising and sales promotion spend
Situation Preview Analysis Alternatives Recommendation
Strategic Situation
Recommendation Preview
Analysis of Relevant Facts
Strategic Alternatives
RecommendationWilm
ingt
on
We Win by Creating the Best Total Offering for Our Customer
Customer Intimacy
Compete on customer intimacy:
• “All-purpose” - cooking, baking and microwaving
• Many colors, fashionable, round
• Price discount of 20% off CORNING WARE® retail price
• Direct distribution - focus on strongest existing channels
Operational Excellence
Product Leadership
Situation Preview Analysis Alternatives Recommendation
Metrics Point to a Clear Winning Strategy
Situation Preview Analysis Alternatives Recommendation
Potential Options
Year Five Market Share
Payback NPV Probability of Positive NPV
Terminal Value
Onslaught
Medium Discount 17.5% Never $(6,551,237) 0.0% $133,274,036
High Discount 21.2% Never $(6,797,236) 23.7% $133,274,036
Combined
Medium Discount 22.0% Year Five $1,583,424 60.1% $133,274,036
High Discount 24.3% Year Five $921,722 56.6% $117,175,977
StealthMedium Discount 20.8% Year Five $3,322,801 71.3% $140,643,623
High Discount 29.0% Year Four $11,350,628 75.1% $180,369,641
By Following Our Strategic Principles We Achieve All Objectives
Situation Preview Analysis Alternatives Recommendation
Why it will work?
• Avoids a fight we cannot win• Moving fast prevents past mistakes• Focuses our resources, capabilities
and messaging on terrain favorable to us
• 20% discount over Corning’s price will get us on more shelves
• Offers a tailored solution to an unmet customer need in a growing market
Objectives OutcomeNPV Positive in 5
Years > 70%
Average NPV > $10M
90% Confidence > ($10M)
75.1%
$11.3M
2.9%
Stealth High Discount Strategy Allows for a Reasonable Payback Period
Situation Preview Analysis Alternatives Recommendation
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
(15,000,000.00)
(10,000,000.00)
(5,000,000.00)
-
5,000,000.00
10,000,000.00
15,000,000.00
Net
Cas
h Fl
ow
Breakeven Point
In Onslaught We are Outgunned
• Direct attack will result in a more aggressive response
• There will be a price war• Product offering not
compatible with segment needs
• Challenges to get our product shelved where this segment purchases
Situation Preview Analysis Alternatives Recommendation
Combined Fails to Concentrate Resources
• Combined strategy drains focus from efforts
• Lack of concentration on specific customer segment results in ambiguous marketing message
• CORNING WARE® will respond aggressively
• Distribution challenges
Situation Preview Analysis Alternatives Recommendation
A Medium Discount Does Not Get Us in Front of Enough of Our Target Customers
• Past history shows cuts need to be significant to succeed
• Medium price cut does not offer enough incentive to retailers to shelf product
• Perceived brand difference does not offer customers enough reason to switch from CORNING WARE® or other alternatives
Situation Preview Analysis Alternatives Recommendation
If We’re Not First, We Lose
Situation Preview Analysis Alternatives Recommendation
Corning Market Share Capture
WFE Share (with competitor entry)
Corning Discount
Competitor Entry
Average Growth Rate Bet 1979-1981
Average Growth Rate
Wilmington First to Enter (WFE)
-10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
External Factors Point to Risks of Entry
• Threat from competitors– Other entrants beat us to market– CORNING WARE® or other competitors discount more
than 20% • Market growth declines
– Changes in where/how people dine– New technological development forces heat-resistant
glass cook and bakeware product obsolescence• Operations do not meet production capacity
Situation Preview Analysis Alternatives Recommendation
Signaling Enables Us to Limit Our Risk
Wilmington SignalsPrior announcement Press release announcing new factory
constructionDiscussion of own moves
Sales and advertising campaign announcing upcoming product
Industry discussion Private communication with retailers to get prominent placement on shelves
Product Discontinue Country Squire product line
Situation Preview Analysis Alternatives Recommendation
Wilmington Entry Into CORNING WARE® Market Request for Funding
Initial Investment: 2013 Dollars
Factory refurbishment $10 M $43,482,080
Situation Preview Analysis Alternatives Recommendation
Ongoing Annual Investment: $11,403,587 M $49,585,169
Manufacturing $2 M /yr
Advertising and promotion $700k /yr
General and administrative costs 2% of sales
Questions?
Environment/ Industry
Corning
Wilmington Historical Data
NPV Analysis
Wilmington Competitive Strategy
Wilm
ingt
on
Crystal Ball Analysis
Appe
ndix
Environment/ Industry
Corning
Wilmington Historical Data
NPV Analysis
Wilmington Competitive Strategy
Wilm
ingt
on
Crystal Ball Analysis
Appe
ndix
Estimated Manufacturer Shipments of Cook and Bakeware (1974)
Stainless Steel23%
Glass/heat re-sistant glass
17%
Aluminum13%
Cast Iron8%
Porcelain Clad Metal15%
Stoneware9%
Copper5%
Others10%
Percentage of Total Sales in Cookware Percentage of Total Sales in Bakeware
Stainless Steel6%
Glass/heat resistant glass
25%
Aluminum14%
Cast Iron15%
Porcelain Clad Metal24%
Stoneware6%
Others10%
Breakdown of Cook and Bakeware Market by Product Type (1974)
Percent of Total SalesCookwareCasserole (1 1/2 qt. or larger) 19%Frying pans 15%Saucepots (below 1 1/2 qts.) 8%Subtotal 42%
BakewarePans 11%Baking Dishes 13%Baking Trays 4%Special Items 2%Subtotal 30%
Measuring and MixingBowls 11%Cups 4%Subtotal 15%
Miscellaneous 13%Total 100%
Cookware42%
Bakeware30%
Measuring and Mixing15%
Miscellaneous13%
Percentage of Total Sales
Range of Products Sold: Cook and Bakeware
Company/Brand # of individual pieces # of sets # of colors # of
decorations
CORNING WARE® 24 10 1 2
PYREX® 56 20 5 4
Wilmington Country Squire 31 13 7 2
American Glass 15 5 5 3
Ajay Corporation 20 2 6
Sizing and Slicing the Market
Existing Market
- 73% of current purchasers buy CORNING WARE® as gift
- Non-price sensitive purchasers- 71% of purchasers with
income 75k and above
Untapped Market
- 28% of non-owners are price sensitive consumers
- Personal use buyers- Consumers purchasing
microwave-safe cook & bakeware
Market EvolutionPYREX® branded
ware introduced by Corning. Heat- resistant glass
1915
American Glass and Ajay enter the heat-
resistant market1957-58
CORNING WARE® cookware
introduced for range top cooking
1959Wilmington enters
heat-resistant market
CORNING WARE® Patent expiration1977
1975
1977Decision PointNOW
1975
Environment/ Industry
Corning
Wilmington Historical Data
NPV Analysis
Wilmington Competitive Strategy
Wilm
ingt
on
Crystal Ball Analysis
Appe
ndix
Comparison of Pyrex® and CORNING WARE® Retail Prices:
1975Unit PYREX®
CORNING WARE®
Cornflower
CORNING WARE®
Spice o’Life
1 qt. covered casserole ea. 2.29 7.95 8.95
1 1/2 qt. covered casserole ea. 2.59 8.95 9.95
2 qt. covered casserole ea. 2.99 9.95 10.95
3 qt. covered casserole ea. 3.99 11.95 12.95
Baking Dish ea. 1.89 9.95 10.95
3 Pc. Bake set set 8.95 22.88 25.88
4 Qt. Saucepot ea. 9.95 14.95 15.95
Corning Glass Works Financial Breakdown
Corning Glass Works (1974) ($ in millions)
Total Sales 1,051
US 714.68
International 336.32
Breakdown of Business Unit Sales
Houseware Products 117.5
PYREX® Estimated Sales (10-15%) 23.5-35.25
CORNING WARE® 58.75
(Less Electromatics) 7.05
Total CORNING WARE® Market 51.7
Total CORNING WARE® US Market 35.15
*CORNING WARE® 50% of Houseware Products* Electromatics 12% of Housewares
Corning’s Trade Margins
• Fair Trading Rules had maintained prices– Sold products to wholesale distributors at 52.5%– Wholesaler sells to retailer at 40% discount from
retail prices• 1975: Fair Trade Policy discontinued
– Wholesaler allowed to set price to retailer– Retailer allowed to set price to consumer– Corning products began selling at discounts of 20%-
40%
Year Price CPIInflation Adjusted Price Level
1958 4.5 86.6 5.21959 4.5 87.3 5.151960 4.5 88.7 5.071961 4.5 89.6 5.021962 4.5 90.6 4.971963 4.5 91.7 4.911964 4.5 92.9 4.841965 4.5 94.5 4.761966 4.95 97.2 5.091967 4.95 100 4.951968 4.95 104 4.751969 5.95 109.8 5.421970 5.95 116.3 5.121971 5.95 121.3 4.911972 6.5 125.3 5.191973 6.5 133.1 4.881974 7.95 147.7 5.38
Inflation Adjusted Pricing for CORNING WARE®
Environment/ Industry
Corning
Wilmington Historical Data
NPV Analysis
Wilmington Competitive Strategy
Wilm
ingt
on
Crystal Ball Analysis
Appe
ndix
CPG Forecasted to Increase in Importance Within Wilmington’s Product
Portfolio
1970 1971 1972 1973 197430%
35%
40%
45%
50%
55%
Consumer Products Packaging
Perc
enta
ge o
f Inc
ome
Befo
re T
axes
51%
34%
7%
8%
Consumer Products PackagingCommercial Technical
1974 % of income before taxes1970-1974 % of income before taxes
Wilmington’s Financials 1970-1974Operations 1970 1971 1972 1973 1974Net Sales 363,824,800 387,705,500 422,242,800 455,493,300 509,975,200Costs and expenses:Cost of products sold 281,590,700 303,253,900 331,191,000 366,793,000 423,282,900Selling and administratvie 34,547,200 36,604,600 40,311,100 44,296,800 48,993,500
316,138,000 339,858,500 371,502,100 411,403,500 472,277,400Income from operations 47,686,900 47,846,900 50,740,700 44,403,500 37,697,800Other Income 1,625,500 959,200 1,338,900 1,713,600 1,984,200Interest Expense -1,531,200 -1,428,200 -1,511,400 -1,755,800 -2,418,500Income before tax 47,781,200 47,377,900 50,568,200 44,361,300 37,263,500Net Income 24,246,700 23,613,900 24,832,400 21,124,700 17,032,300
Financial Position DateWorking Capital 73,385,400 85,098,000 93,209,600 95,969,300 97,556,400PP&E 2,238,244,200 232,867,700 249,155,500 270,854,700 288,970,200Accumulated depreciation 92,596,600 97,696,600 103,783,100 116,048,000 127,883,400Long-term Debt 26,255,700 24,837,400 23,919,100 24,468,800 22,009,400Common Stockholders Equity 170,181,200 185,718,200 203,887,100 214,913,500 223,614,500
StatisticsPP&E Expenditures 22,845,800 17,538,500 24,025,800 24,661,200 24,679,800Depreciation Expense 12,119,600 12,964,700 13,273,600 14,863,200 15,673,500Weighted Average No. of Common Shares8,652,421 8,666,405 8,701,510 8,705,625 8,489,195
No. of Common Stockholders 8,140 8,522 9,139 10,114 10,253No. of Employees 18,240 17,868 18,116 19,109 18,489
Wilmington Breakdown of Sales and Income by Business Unit
Percentage of Total Sales (1974)
Consumer Products
30%
Packaging54%
Com-mercial
10%
Technical6%
Percentage of Income Before Taxes (1974)
Consumer Products51%
Packaging34%
Com-mercial
7%
Technical8%
Wilmington Sales by Type of Outlet
Percentage of Total Outlets (1974)
Department Stores12%
Supermarket30%
Discount Stores24%
Hardware Stores11%
Chain Stores8%
Others14%
Total # Outlets 32,000
Percentage of Total Sales by Outlet(1974)
Total Sales $153m
Deparment Stores21%
Supermarkets12%
Discount Stores24%
Hardware Stores11%
Chain Stores8%
Other24%
Wilmington Distribution
• Direct to retailers through 15 field offices in 43 states– 13,000 retail outlets– 175 national accounts which accounted for 9,000 locations
• Network of 87 wholesalers for areas uneconomical to call on directly– Provided 10,000 additional outlets (accounted for 11% of
sales)• List Prices provided retailer with average margins of
42%
Percent of Total Variable Cost
Variable Cost Estimate
Raw material8%
Direct Labor26%
Packing and cover
25%
Freight22%
Other17%
Raw Material 0.23Direct Labor 0.73Packing and cover .70Freight .62Other .48Total Variable Cost $2.76
Two-Quart Saucepan with Decal Decoration
Variable Cost Wilmington vs. Corning
Wilmington CorningRaw Material 0.23 .23Direct Labor 0.73 .62Packing and cover .70 .60Freight .62 .62Other .48 .40Total Variable Cost $2.76 $2.47* Assumed 85% Experience Curve
Two-Quart Saucepan with Decal Decoration
Environment/ Industry
Corning
Wilmington Historical Data
NPV Analysis
Wilmington Competitive Strategy
Wilm
ingt
on
Crystal Ball Analysis
Appe
ndix
Stealth Medium Discount Strategy Breakeven Point
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
-15,000,000.00
-10,000,000.00
-5,000,000.00
0.00
5,000,000.00
10,000,000.00
15,000,000.00
Net
Cas
h Fl
ow
Breakeven
Point
Combined High Discount Strategy Breakeven Point
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
(12,000,000)
(10,000,000)
(8,000,000)
(6,000,000)
(4,000,000)
(2,000,000)
-
2,000,000
Net
Cas
h Fl
owBreakeven
Point
Combined Medium Discount Strategy Breakeven Point
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
(12,000,000)
(10,000,000)
(8,000,000)
(6,000,000)
(4,000,000)
(2,000,000)
-
2,000,000
Net
Cas
h Fl
ow
Breakeven Point
Environment/ Industry
Corning
Wilmington Historical Data
NPV Analysis
Wilmington Competitive Strategy
Wilm
ingt
on
Crystal Ball Analysis
Appe
ndix
Market Share Capture Potential
US Income Distribution $0-$25K $25-$50k $50-75k $75-100k 100k+ 28.22% 26.65% 18.27% 10.93% 15.93%
Corning Market Capture 5% 20% 30% 60% 75%
Untapped Potential 95% 80% 70% 40% 25%
Untapped Feasible Mid 28.13% 30.00% 33.75% 3.75% 0.94%
Untapped Feasible High 75.00% 80.00% 90.00% 10.00% 2.50%
Based on the percentage of the potential market that Corning owns, we believe it is possible to capture 27.86% of the untapped Glass-Ceramic Heat Resistant Cookware Market
Market Potential Revenues0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
72.14%
12.79%
27.86%
87.21%
Existing Untapped
Variable Cost Analysis
COGS Likely Best Case Worst Case
Raw material $0.23 $0.21 $0.25
Direct Labor $0.73 $0.66 $0.80
Packing and cover $0.70 $0.63 $0.77
Freight $0.62 $0.56 $0.68
Other $0.48 $0.43 $0.53
PENALTY $0.30 0 $0.30
TOTAL $3.06 $2.48 $3.34
$700,000 Budget Promotion Options
Majority on media advertising campaign; small back-up budget for sales promotion
• This allocation will not hold up to Corning’s media spend
• For a media ad campaign we would have to allocate our campaign to first obtain brand recognition and then promote the product; the budget may not be large enough
Spend equal amounts on advertising and sales promotion
• A 50/50 split would not drive enough impact to compete with Corning on either front
• We need to focus resources where Corning isn’t
Heavy sales promomotion at launch, smaller amount on media advertising
• Promotion at launch can be used to signal• Promotion can be used in stores to better
compete against other potential entrants• Con: miss opportunity on media when
television is becoming a more popular medium for advertising
Corning Leaves an Opening in Grocery
Stock Conditions Display Promo Price Well Moderate Poor Good Poor Yes No List AboveDepartment Jordan Marsh (Bos) X X X X Jordan Marsh (Burl) X X X X Sears (Camb) X X X X Sears (Burl) X X X X Coop (harv) X X X X XDiscount Lechmere (Camb) X X X Zayre (128) X X X Bradlees (Wob) X X X Turnstyle (Walt) X X X X Variety Woolworth (Bos) X X X X Woolworth (Camb) X X X X Woolworth (Harv) X X X Kresge (Bos) X X X X Kresge (Camb) None WT Grant (Bos) X X X X Grocery Stop and shop (Walt) None Broadway Super None Hardware Almys (Camb) X X X X Tags (camb) X X X X Dickson bros (camb) X X X X Pharmacy Super (Camb) X X X X
Consumer Reactions to Product Options Similar to CORNING WARE®
CORNING WARE® Imitation
Solid Color, Corning shape
See product as “Like CORNING WARE®” See product as “Like “PYREX® ware”Prefer CORNING’s brand, warranty, reputation
Looked “cheap” and “gaudy”
Might buy at 25% lower price if it has a guarantee and is made by a well-known company
Inferior to CORNING WARE® and would buy only at a lower price
Brand name more important than price differential
Would buy only if colors “suited the color scheme” of their kitchen
Would buy at a cheaper price for personal use, not as a gift
Would buy for their own use, and prefer CORNING WARE® for gifts
Consumer Reactions to Product Options Unlike CORNING WARE®
Solid Colors, Round Shape
Decorated, Round Shape
Similar views as respondents for “Solid Color, Corning Shape”
Mixed reaction
Saw product as one that could be used on top of the stove
Would use it for every day use
Looked similar to PYREX® mixing bowls Would buy only if price was cheaperBecause of round shape and colors, most found this unsuitable for baking
More appeared to like this set than dislike it
Most popular among blue collar workers
Some designs seen as looking “too much like metal utensils”Prefer CORNING WARE® for gifts
Onslaught Strategy’s 4 Ps
Product Place
Promotion Price
CORNING WARE® Imitation: Square Shape, Blue Decoration
Same stores as CORNING WARE® using two-tiered distribution
Equal split between advertising & sales promotion
7%-20% discount off CORNING WARE® price
Stealth Strategy 4Ps
Product Place
Promotion Price
Round shape, Solid colors
Where CORNING WARE® is not
sold using direct distribution
Heavy sales promotion, small amount on media advertising
7-20% discount off CORNING WARE® price
Combined Strategy 4Ps
Product Place
Promotion Price
CORNING WARE® Shape, Solid Colors
Current distribution outlets using direct
distribution
Equal split between advertising and sales promotion
7-20% discount off CORNING WARE® price
Stealth High Market Share and Profit Margin
Year 1 Year 2 Year 3 Year 4 Year 5
Market Share
19.02% 19.94% 21.96% 23.95% 25.05%
Profit Margin
-3.40% 10.86% 24.82% 35.49% 42.69%
Risk if growth rate remains parallel to the market
Median NPV: ($1,585,878)
Risk if we enter first with 50% likelihood
Median NPV: $3,105,051.45
Risk if we enter first with 25% likelihood
Median NPV: $(7,732,427.54)
There is Not Enough Room for Everyone in the Market
Capacity Required Market Growth
Current state 1 22.5%With one competitor 1.75 45.0%With two competitors 2.5 67.5%With three Competitors 3.25 90.0%
Assumes 75% production capacity of Corning from new entrants
Ongoing Investment
Year 1 Year 2 Year 3 Year 4 Year 5
SG&A 983,616
1,122,266
1,261,585
1,444,731
169,642
Manufacturing
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
Advertising and Promotion
700,000
700,000 700,000 700,000 700,000
FCF
3,683,616
3,822,266
3,961,585
4,144,731
2,869,642
WACC
2,859,451
2,614,167
2,387,182
2,200,478
1,342,309
NPV 11,403,587
Environment/ Industry
Corning
Wilmington Historical Data
NPV Analysis
Wilmington Competitive Strategy
Wilm
ingt
on
Crystal Ball Analysis
Appe
ndix
Financial Modeling Process
Build NPV
Determine Wilmington variable costs based on units sold
Distribute total new entrant capture between new entrants
Determine share of untapped market capture by new entrants
Determine share of current market capture by new entrants
Determine total untapped market size
Determine current Corning Ware® market size
Key Assumptions in ModelLikelihood that Wilmington is first to enter
Average growth rate from 1975-1978
Average growth rate from 1979-1981
Chance that competitor 1 enters market year 1
Chance that competitor 2 enters market year 1
Chance that competitor 3 enters market year 1
Avg. Non Corning Share of Existing Market Year 1
Avg. Non-Corning Share of Existing Market Year 5
Avg. Non-Corning Share of New Market Year 1
Avg. Non-Corning Share of New Market Year 5
Inflation Rate
Probable Variable Cost Year 1
Market Sizing the Current Market in 1974
Market Sizing the Current Market Post 1974
Sizing the Potential Untapped Market
Calculating Corning and Wilmington Pricing
Determining Market Potential
Filter Untapped Potential for Price and Distribution
Filter Market Share Between Corning and New Entrants for Tapped and Untapped
Filter Revenue Between Corning and New Entrants for Tapped and Untapped
Distribute Market Share To New Entrants
Calculate Expected Revenues
Calculate Variable Costs
Conduct NPV
List of Presentation SlidesJosephine 1. Title Slide2. Presentation Guide Overview3. Title Slide (A): Strategic Situation 4. Strategic Situation:5. ROE & EPS Contrasted with CORNING WARE®
Estimated Growth6. Castle: Corning Glass Works defense7. Who Deserves to Win: Corning8. Market Share Venn Diagram: Limited Space9. Learn from the past: PYREX 10. Title Slide (B): Recommended Preview11. Strategic Objectives12: Strategy: (Stealth Entry Triangle Slide)13. Tactics:
Katherine14. Title Slide (C): Analysis of Relevant Facts15. Strategic Thought Process16. Porters 5 Forces17 Market Sizing, Top Down & Bottom Up,18. US Income Distribution Graphs19. Overview of Customer Trends20. Potential Substitutes21. Opportunity to grow the marketAmy
22. Relative Market Share: Pyrex and Corning23. Market Capacity for New Entrants24. Shelf Space Battle25. PYREX® Historical Market Entry Example26. Eight Sources of Competitive Advantage27. Corning Ware Sources of Competitive
Advantage28. Brand Strength and Stature Matrix,29. BCG Matrix30. Clout Slide31. Corning’s Signals: Defend
Stef32. Targeting Potential CORNING WARE®
Weaknesses33. Contrast of CORNING WARE® and
Wilmington Messaging34. Spider: Blank35. Spider: PYREX36. Spider: Metal Ware37. Spider: Corning Ware®
38. Spider: Stoneware39. Spider: Summary
Katie40. Title Slide (D): Strategic Alternatives
41. Decision Tree42. Strategy Option Review
Adam43. Title Slide (E): Recommendation 44. How we can win (customer intimacy
diagram)45. Comparison of Key CB Model Statistics46. Why It will work47. Breakeven Analysis 48. Rebuttal to Onslaught49. Rebuttal to Combined50. Why Stealth High Discount51. Sensitivity Chart52. Risks53. Next Steps
54. End of Presentation55. Questions?