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EQA

Brief Integrative Case 1

Cross-Cultural Conflicts in the

Corning–Vitro Joint Venture
Vitro is a Mexican glass manufacturer located in Monterrey, ventures. The first is to gain access to markets that it cannot
Mexico. Vitro’s product line concentrates on drinkware but penetrate quickly enough to obtain a competitive advan-
includes dozens of products, from automobile windshields tage. Corning currently has multiple ventures that exem-
to washing machines. Vitro has a long history of successful plify market penetration. Samsung–Corning is an alliance
joint ventures and is globally oriented. in which Corning provided its distinctive competency of
Corning Inc. is most famous for its oven-ready glass- television tube production while Samsung provided expan-
ware; however, Corning has diversified into fiber optics, sion into the television market. Corning was able to achieve
environmental products, and laboratory services. Like a strong market share in the Asian market, with sales in ex-
Vitro, Corning has a long history of successful joint ven- cess of $500 million.
tures and globalization. Vitro and Corning share similar The second reason is to bring its technology to market. For
corporate cultures and customer-oriented philosophies. example, the strategic alliance of Corning with Mitsubishi
After realizing such similarities and looking to capitalize led to the creation of Cometec Inc. Corning produces the
on NAFTA by accessing the Mexican market, Corning Inc. ceramic substrates in automotive catalytic converters.
entered into a joint venture with Vitro in the fall of 1992. The venture employs coating technology developed by
The similarities in history, philosophy, culture, goals, and Mitsubishi that extends Corning’s business into station-
objectives of both companies would lead to the logical con- ary pollution control. Corning reports that the venture is
clusion that this alliance should be an instant success. How- quite successful.
ever, as Francisco Chevez, an analyst with Smith Barney Corning’s CEO, James R. Houghton, summarizes the
Shearson in New York, said, “The cultures did not match major criteria for deciding whether an equity venture is
. . . it was a marriage made in hell.” As history reveals, likely to succeed as follows:
Corning and Vitro dissolved the joint venture 25 months
after the agreement. Both companies still have an interest 1. You need a solid business opportunity.
in maintaining the relationship and continue to distribute 2. The two partners should make comparable contribu-
each other’s products. tions to the new enterprise.
A further look at the strategic history of Corning and the 3. The new enterprise should have a well-defined
joint venture between Corning and Vitro will lead to a bet- scope and no major conflicts with either parent
ter understanding of the difficulties that are involved in cre- company.
ating and maintaining foreign alliances. A more in-depth 4. The management of each parent firm should have the
investigation also will reveal the impact of culture on busi- vision and confidence to support the venture through
ness transactions. its inevitable rough spots.
5. An autonomous operating team should be formed.
The Strategic History of Corning
6. Responsibility cannot be delegated.
Corning Inc. has been an innovative leader in foreign al-
liances for over 73 years. One of the company’s first suc- Houghton also emphasizes that the most important
cesses was an alliance with St. Gobain, a French glassmaker, dimension of a successful joint venture is trust between
to produce Pyrex cookware in Europe during the 1920s. the partners.
Corning has formed approximately 50 ventures over the Corning’s track record indicates that it has been able to
years. Only 9 have failed, which is a phenomenal number establish and run a large number of joint ventures success-
considering one recent study found that over one-half of fully. What went wrong with the recent Vitro venture? Vitro
foreign and national alliances do not succeed. Over the and Corning seemed to have similar operating procedures,
last five years, Corning’s sales from joint ventures were and Vitro’s product line complemented Corning’s consumer
over $3 billion, which contributed more than $500 million business. Therefore, how could a seemingly perfect alliance
to its net income. fail so miserably? Probing deeper into the Corning–Vitro
Corning enters into joint ventures for two primary rea- joint venture reveals the important role that culture may
sons, which are best explained through examples of its past play in international alliances.

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EQA

212 Part 2 The Role of Culture

Background on the Corning–Vitro The Aftermath of the Breakup

Joint Venture
Vitro and Corning each responded publicly to the dissolu-
The Corning–Vitro venture seemed to be ideal. However, a tion of their alliance, and each indicated the strong differ-
strong Mexican peso, increased overseas competition, and ences in culture. Corning wanted to discuss the problems
strong cultural differences spelled trouble for the alliance. and learn from them, while Vitro was hesitant to criticize
The economic problems are understandable, but the cul- anyone, especially a visible U.S. partner like Corning.
tural differences should have been given more attention be- The Mexicans preferred to concentrate on continuation of
fore the alliance was entered into. the marketing arrangement between the companies.
Although both companies appeared so similar on the Houghton, the Corning CEO, openly spoke of the alliance
surface, they really were quite different. Cultural clashes as one that stopped making sense. He stated that cross-
erupted from the very beginning of the venture because of cultural differences inhibited the potential of the alliance.
differing approaches to work. One example was in the mar- Corning’s chief executive of the venture, Mr. Loose,
keting area. Vitro’s sales approach was less aggressive than openly acknowledged the different decision-making styles
the Americans at Corning thought necessary; the slower, between the two cultures. Vitro executives were defensive
deliberate approach to sales in Mexico was a result of the and disappointed that Mr. Loose had expressed his views
previously highly controlled Mexican economy. Corning’s so frankly in public. “It is unfortunate that he made those
more quick-action oriented and aggressive sales approach comments,” said an anonymous Vitro executive. The pres-
had developed from decades of competition. ident of Vitro, Eduardo Martens, flatly denied that the
Once in the venture, the Mexicans thought the Americans cultural differences were any greater than in other al-
were too forward, and the Americans believed that their liances. In an interview with the Harvard Business
Mexican partners wasted time being too polite. The Review, however, he admitted, “Business in Mexico is
Americans perceived the Mexican characteristics to in- done on a consensus basis, very genteel and sometimes
clude an unwillingness to acknowledge problems and slow by U.S. standards.”
faults. With respect to speed, the Mexicans thought Corn- Corning feels they learned a lesson in the failed Vitro
ing moved too quickly, while the Americans thought Vitro alliance; both foreign and domestic alliances require addi-
moved too slowly. tional skills and more management time. CEO Houghton
Another obvious cultural difference was the conflicting says that alliances carry a lot of risk and misunderstandings,
styles and time allotment for decision making. Vitro is bu- but they can be significantly beneficial to the operations of
reaucratic and hierarchical, and loyalty is to family mem- a company if they are done carefully and selectively. Corn-
bers and patrons in the ranks of the company. Decisions ing continues to analyze why the cultural differences with
often are left either to a member of the controlling family Vitro were too strong to overcome.
or to top executives, while middle-level managers seldom
are asked to contribute their opinions, let alone to make im- Questions for Review
portant decisions. Mr. Loose (Corning’s chief executive of 1. Identify and discuss Corning’s strategic predisposi-
the joint venture) observed, “If we were looking at a distri- tion toward a joint venture with Vitro.
bution decision, or a customer decision, we would have a 2. Cultural clashes among partners in joint ventures
group of people in a room, they would do an assessment, are not a new issue. Discuss why an MNC, and
figure alternatives and make a decision, and I as chief ex- specifically Corning, would be interested in fully
ecutive would never know about it. My experience on the understanding the culture of a potential partner
Mexican side is that someone in the organization would before deciding on an alliance.
have a solution in mind, but then the decision had to be
3. If Corning and Vitro had decided to remain in the
kicked up a few levels.”
alliance, how could they have overcome their
These examples indicate that culture was an especially
differences to make the partnership a success?
sensitive issue between Corning and Vitro, and the alliance
was not able to overcome these problems. Corning felt that 4. Discuss why both companies would continue to
the cross-cultural differences were depriving both companies distribute each other’s products after the joint venture
of the flexibility to take the fast management action that is failed. What impact might the public statements
necessary in the dynamic business climate of both countries. about the failure have on this relationship?
Vitro basically agreed. Corning gave Vitro back its $130 mil-
lion investment, and the joint venture was called off. The
companies still recognize the opportunity to continue busi- Source: This case was prepared by Professor Cara Okleshen of the
University of Georgia as the basis for class discussion. It is not intended
ness with each other, however. They have changed their to illustrate either effective or ineffective managerial capability or
relationship into a mutual distribution of each other’s administrative responsibility.
products.