Reference no: EM132191053

PPG Industries, the Pittsburgh-based manufacturer of paints, coatings, optical products, specialty materials, chemicals, glass, and fiber glass, has paid dividends every year since 1899 and has maintained or increased dividends every year since 1972. With sales over $13 billion and operations in more than 60 countries, PPG is truly a global player. Although considered a very successful company, PPG has had its share of strategic errors. Realizing that business was slowing down in its core businesses, PPG acquired medical electronics businesses from Honeywell and Litton Industries in 1986 and from Allegheny International in 1987. However, these efforts at diversification proved to be failures, as the firm's competence in low-cost, standardized production in stable, mature industries was of little help in the highly volatile biomedical industry, where customization was vital. Seven years later, PPG exited the medical electronics business by selling off these units. To profit from the construction boom in China, PPG entered the Chinese market with a focus on glass. After years of losses, the company realized that it would have to focus on coatings.

These costly failures led PPG to a new emphasis on strategic planning. One of the key tools it uses today is scenario planning. PPG has developed four alternative futures based on differing assumptions about two key variables: the cost of energy (because its manufacturing operations are energy-intensive) and the extent of opportunity for growth in emerging markets. In the most favorable scenario, cost of energy will stay moderate and stable and opportunities for growth and differentiation will be fast and strong. In this scenario, PPG determined that its success will depend on having the resources to pursue new opportunities. On the other hand, in the worst-case scenario, cost of energy will be high and opportunities for growth will be weak and slow. This scenario would call for a complete change in strategic direction. Between these two extremes lies the possibility of two mixed scenarios. First, opportunity for growth in emerging markets may be high, but cost of energy may be high and volatile. In this scenario, the company's success will depend on coming up with more efficient processes. Second, cost of energy may remain moderate and stable, but opportunities for growth in emerging markets may remain weak and slow. In this situation, the most viable strategy may be one of capturing market share with new products.

Developing strategies based on possible future scenarios seems to be paying off for PPG Industries. The company's net income soared to $3.2 billion in 2013—nearly a 200 percent increase over the prior two-year period.

Questions

1. Discuss the SWOT Analysis from this case

2. Discuss the Porter’s Model based on this case.