Wilmington Corporation Market Entry Analysis

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

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on

Strategic Situation




RecommendationWilm

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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


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


• 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


• 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®


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


1974 Market Share: Heat-Resistant Glass Bakeware

58%18%

13%

8%

3%

PYREX® American Glass Ajay Corporation

Wilmington Others

Strategic Situation




RecommendationWilm

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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%


Our Strategy is Built on FourKey Strategic Factors


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


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




RecommendationWilm

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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


One dominant playerLow switching costs

Industry Rivalry: Moderate

Factors Driving the Glass-Ceramic Industry Point to Challenges


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


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%


1974 US Population Income Distribution

CORNING WARE® Customer Income Distribution


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


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


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


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


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


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


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


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


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®


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


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


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


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


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


Products Compete on Five DimensionsStyle

Flexibility

PriceBrand

Quality


Limited Functionality is an Issue for PYREX®

Style

Flexibility

PriceBrand

Quality


Metals Are Viewed as High Quality but not Versatile

Style

Flexibility

PriceBrand

Quality


CORNING WARE® Brand Equity Drives Sales, can be Beat on Price

Style

Flexibility

PriceBrand

Quality


Stoneware is Highly Flexible but Viewed as Low Quality

Style

Flexibility

PriceBrand

Quality


Wilmington Can Compete on Style, Flexibility, and Price

Style

Flexibility

PriceBrand

Quality


Strategic Situation




RecommendationWilm

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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


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


Strategic Situation




RecommendationWilm

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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


Metrics Point to a Clear Winning Strategy


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


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


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


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


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


If We’re Not First, We Lose


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


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


Wilmington Entry Into CORNING WARE® Market Request for Funding

Initial Investment: 2013 Dollars

Factory refurbishment $10 M $43,482,080


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

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Crystal Ball Analysis

Appe

ndix


Corning


NPV Analysis


Wilm

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Appe

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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


Corning


NPV Analysis


Wilm

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Appe

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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



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®


Corning


NPV Analysis


Wilm

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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


Corning


NPV Analysis


Wilm

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Appe

ndix

Stealth Medium Discount Strategy Breakeven Point


-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


(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


(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


Corning


NPV Analysis


Wilm

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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


Corning


NPV Analysis


Wilm

ingt

on


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



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?

Documents

Wilmington Corporation Market Entry Analysis