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Brief Integrative Case 1

Cross-Cultural Conflicts in the Corning–Vitro Joint Venture

Vitro is a Mexican glass manufacturer located in Monterrey,Mexico. Vitro’s product line concentrates on drinkware butincludes dozens of products, from automobile windshieldsto washing machines. Vitro has a long history of successfuljoint ventures and is globally oriented.

Corning Inc. is most famous for its oven-ready glass-ware; however, Corning has diversified into fiber optics,environmental products, and laboratory services. LikeVitro, Corning has a long history of successful joint ven-tures and globalization. Vitro and Corning share similarcorporate cultures and customer-oriented philosophies.

After realizing such similarities and looking to capitalizeon NAFTA by accessing the Mexican market, Corning Inc.entered into a joint venture with Vitro in the fall of 1992.The similarities in history, philosophy, culture, goals, andobjectives of both companies would lead to the logical con-clusion that this alliance should be an instant success. How-ever, as Francisco Chevez, an analyst with Smith BarneyShearson in New York, said, “The cultures did not match. . . it was a marriage made in hell.” As history reveals,Corning and Vitro dissolved the joint venture 25 monthsafter the agreement. Both companies still have an interestin maintaining the relationship and continue to distributeeach other’s products.

A further look at the strategic history of Corning and thejoint venture between Corning and Vitro will lead to a bet-ter understanding of the difficulties that are involved in cre-ating and maintaining foreign alliances. A more in-depthinvestigation also will reveal the impact of culture on busi-ness transactions.

The Strategic History of Corning

Corning Inc. has been an innovative leader in foreign al-liances for over 73 years. One of the company’s first suc-cesses was an alliance with St. Gobain, a French glassmaker,to produce Pyrex cookware in Europe during the 1920s.Corning has formed approximately 50 ventures over theyears. Only 9 have failed, which is a phenomenal numberconsidering one recent study found that over one-half offoreign and national alliances do not succeed. Over thelast five years, Corning’s sales from joint ventures wereover $3 billion, which contributed more than $500 millionto its net income.

Corning enters into joint ventures for two primary rea-sons, which are best explained through examples of its past

ventures. The first is to gain access to markets that it cannotpenetrate quickly enough to obtain a competitive advan-tage. Corning currently has multiple ventures that exem-plify market penetration. Samsung–Corning is an alliancein which Corning provided its distinctive competency oftelevision tube production while Samsung provided expan-sion into the television market. Corning was able to achievea strong market share in the Asian market, with sales in ex-cess of $500 million.

The second reason is to bring its technology to market. Forexample, the strategic alliance of Corning with Mitsubishiled to the creation of Cometec Inc. Corning produces theceramic substrates in automotive catalytic converters.The venture employs coating technology developed byMitsubishi that extends Corning’s business into station-ary pollution control. Corning reports that the venture isquite successful.

Corning’s CEO, James R. Houghton, summarizes themajor criteria for deciding whether an equity venture islikely to succeed as follows:

1. You need a solid business opportunity.

2. The two partners should make comparable contribu-tions to the new enterprise.

3. The new enterprise should have a well-definedscope and no major conflicts with either parentcompany.

4. The management of each parent firm should have thevision and confidence to support the venture throughits inevitable rough spots.

5. An autonomous operating team should be formed.

6. Responsibility cannot be delegated.

Houghton also emphasizes that the most importantdimension of a successful joint venture is trust betweenthe partners.

Corning’s track record indicates that it has been able toestablish and run a large number of joint ventures success-fully. What went wrong with the recent Vitro venture? Vitroand Corning seemed to have similar operating procedures,and Vitro’s product line complemented Corning’s consumerbusiness. Therefore, how could a seemingly perfect alliancefail so miserably? Probing deeper into the Corning–Vitrojoint venture reveals the important role that culture mayplay in international alliances.

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212 Part 2 The Role of Culture

Background on the Corning–VitroJoint Venture

The Corning–Vitro venture seemed to be ideal. However, astrong Mexican peso, increased overseas competition, andstrong cultural differences spelled trouble for the alliance.The economic problems are understandable, but the cul-tural differences should have been given more attention be-fore the alliance was entered into.

Although both companies appeared so similar on thesurface, they really were quite different. Cultural clasheserupted from the very beginning of the venture because ofdiffering approaches to work. One example was in the mar-keting area. Vitro’s sales approach was less aggressive thanthe Americans at Corning thought necessary; the slower,deliberate approach to sales in Mexico was a result of thepreviously highly controlled Mexican economy. Corning’smore quick-action oriented and aggressive sales approachhad developed from decades of competition.

Once in the venture, the Mexicans thought the Americanswere too forward, and the Americans believed that theirMexican partners wasted time being too polite. TheAmericans perceived the Mexican characteristics to in-clude an unwillingness to acknowledge problems andfaults. With respect to speed, the Mexicans thought Corn-ing moved too quickly, while the Americans thought Vitromoved too slowly.

Another obvious cultural difference was the conflictingstyles and time allotment for decision making. Vitro is bu-reaucratic and hierarchical, and loyalty is to family mem-bers and patrons in the ranks of the company. Decisionsoften are left either to a member of the controlling familyor to top executives, while middle-level managers seldomare asked to contribute their opinions, let alone to make im-portant decisions. Mr. Loose (Corning’s chief executive ofthe joint venture) observed, “If we were looking at a distri-bution decision, or a customer decision, we would have agroup of people in a room, they would do an assessment,figure alternatives and make a decision, and I as chief ex-ecutive would never know about it. My experience on theMexican side is that someone in the organization wouldhave a solution in mind, but then the decision had to bekicked up a few levels.”

These examples indicate that culture was an especiallysensitive issue between Corning and Vitro, and the alliancewas not able to overcome these problems. Corning felt thatthe cross-cultural differences were depriving both companiesof the flexibility to take the fast management action that isnecessary in the dynamic business climate of both countries.Vitro basically agreed. Corning gave Vitro back its $130 mil-lion investment, and the joint venture was called off. Thecompanies still recognize the opportunity to continue busi-ness with each other, however. They have changed theirrelationship into a mutual distribution of each other’sproducts.

The Aftermath of the Breakup

Vitro and Corning each responded publicly to the dissolu-tion of their alliance, and each indicated the strong differ-ences in culture. Corning wanted to discuss the problemsand learn from them, while Vitro was hesitant to criticizeanyone, especially a visible U.S. partner like Corning.The Mexicans preferred to concentrate on continuation ofthe marketing arrangement between the companies.Houghton, the Corning CEO, openly spoke of the allianceas one that stopped making sense. He stated that cross-cultural differences inhibited the potential of the alliance.Corning’s chief executive of the venture, Mr. Loose,openly acknowledged the different decision-making stylesbetween the two cultures. Vitro executives were defensiveand disappointed that Mr. Loose had expressed his viewsso frankly in public. “It is unfortunate that he made thosecomments,” said an anonymous Vitro executive. The pres-ident of Vitro, Eduardo Martens, flatly denied that thecultural differences were any greater than in other al-liances. In an interview with the Harvard BusinessReview, however, he admitted, “Business in Mexico isdone on a consensus basis, very genteel and sometimesslow by U.S. standards.”

Corning feels they learned a lesson in the failed Vitroalliance; both foreign and domestic alliances require addi-tional skills and more management time. CEO Houghtonsays that alliances carry a lot of risk and misunderstandings,but they can be significantly beneficial to the operations ofa company if they are done carefully and selectively. Corn-ing continues to analyze why the cultural differences withVitro were too strong to overcome.

Questions for Review1. Identify and discuss Corning’s strategic predisposi-

tion toward a joint venture with Vitro.

2. Cultural clashes among partners in joint ventures are not a new issue. Discuss why an MNC, andspecifically Corning, would be interested in fully understanding the culture of a potential partner before deciding on an alliance.

3. If Corning and Vitro had decided to remain in thealliance, how could they have overcome theirdifferences to make the partnership a success?

4. Discuss why both companies would continue todistribute each other’s products after the joint venturefailed. What impact might the public statements about the failure have on this relationship?

Source: This case was prepared by Professor Cara Okleshen of theUniversity of Georgia as the basis for class discussion. It is not intendedto illustrate either effective or ineffective managerial capability oradministrative responsibility.

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