Waterford Crystal a case analysis
Waterford Crystal a case analysis

Waterford Crystal a case analysis

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  • Pages: 6 (3052 words)
  • Published: November 10, 2018
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HISTORY OF WATERFORD CRYSTAL

Waterford Glass was started by two brothers, George and William Penrose, in 1783. It was the most notable of all Irish crystal companies. In 1799, the Penrose brothers sold Waterford Glass to the Gatchell family. The crystal industry was prosperous until 1825. Irish glass manufacturers began to slowly close due to high export duties, the economic depression, and a lack of capital. Waterford Glass was the last to close in 1851. It was reestablished nearly a century later by Charles Bacik and Bernard Fitzpatrick. In 1947, they set up a factory in Waterford, Ireland.

A turning point in the company’s history came in 1950 when Joe McGrath made a sizable investment in Waterford Glass. He invested the capital needed to convert the small crystal manufacturing company into one with the potential to become a major player in the crystal industry. This investment gave his family control for the next thirty-five years. Joe McGrath was committed to Ireland and providing jobs for his country. He wanted to reduce the country’s high unemployment level. His focus for Waterford Glass was on growing the company through exports to the United States. In 1966, Joe McGrath’s son, Paddy McGrath, took over management of Waterford Glass. Like his father, he was dedicated to Ireland and to providing employment opportunities for the Irish. McGrath’s quest to provide more jobs for the Irish led him to diversify the company. By 1983, the company had acquired more than thirty non-core businesses. To reflect the expansion, management changed the company’s name to Waterford Glass Group. In 1985, Paddy McGrath resigned as

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chairman of Waterford Glass.

Concurrent with Paddy McGrath’s resignation, Paddy Hayes was appointed chairman and CEO of Waterford Glass Group. He immediately began to sell off the non-core businesses in an effort to reduce the company’s high debt level. Waterford Glass’s debt was virtually eliminated with the issue of American Depository Shares (ADS) on the United States NASDAQ market. On November 28, 1986, Waterford Glass acquired Wedgwood, a two hundred year old manufacturer and marketer of fine bone china. Paddy Hayes was named the chairman and CEO of both companies and Paddy Byrne was appointed CEO of Wedgwood. In 1989, the company’s name was changed to Waterford Wedgwood. Three divisions were created as a result of this acquisition: the Waterford Crystal division, the Wedgwood division, and the Creative Tableware division. In 1989, Paddy Hayes resigned from his position as chairman and CEO of Waterford Wedgwood.

Paddy Hayes was succeeded by Paddy Byrne as CEO of Waterford Wedgwood. Paddy Galvin was appointed as CEO of Waterford and Paddy Byrne continued as the CEO of Wedgwood. In 1990, the ownership of the company began to shift from Ireland. This was the result of an equity investment made by the Morgan Stanley/Fitzwilton consortium. On April 5, 1990, the workers at Waterford Wedgwood went on strike. The strike occurred when management took steps to reduce high labor costs. The strike lasted fourteen weeks causing significant problems for the local community. In December 1990, Waterford Wedgwood became two independent entities. Concurrent with the restructuring of the company, Paddy Byrne resigned. In September

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1991, Waterford introduced a new brand of crystal called “Marquis by Waterford Crystal.”

THE CRYSTAL BUSINESS

Today, the craftsmen of Waterford are supreme artists as they were in the 18th century. Having craft and design skills is the critical element in establishing and maintaining a competitive advantage. The combined skills of the craftsmen create the distinctive patterns known all over the world. The exceptional clarity of Waterford Crystal is achieved through several steps that have remained almost unchanged for over two centuries.

Waterford products are manufactured by a strict process of mixing, blowing, cutting and polishing. Manufacturing crystal is very labor intensive. Labor costs are generally 50 to 55 percent of the manufacturing costs. Chemicals are mixed to create a unique formula that gives Waterford crystal its special sparkle and light refractive qualities. It is then heated to 1400 degrees centigrade in a natural gas fired furnace for at least 36 hours to produce molten crystal. A blower, using the traditional tools and techniques as in the 18th century, gathers a quantity of crystal from the furnace on the end of a blowing iron with a twisting motion. This is then smoothed with a wooden block that has been soaked in water and resembles the shape of the desired item. The craftsman then blows the piece, either by machine or by mouth, to its full shape. Crystal pieces are similarly cut to its unique pattern by either machine or by hand. Those crystal pieces that are mouth blown and hand cut have the highest quality of all crystal products. No other crystal is cut as deeply as Waterfords. Some of the companys core competencies are its crystals sparkle of light refractive qualities and unique 18th century designs.

The assembly and packing of the crystal for distribution takes a considerable amount of time to complete. After the crystal is polished, everything is carefully checked and measured. Every possible step is taken to ensure that every piece of crystal arrives at its destination safely and securely. With its quality craftsmanship and design expertise, Waterford has gained a reputation for quality around the world.

Based on price and brand name recognition, crystal products are divided into three market segments: high-end (in which Waterford Crystal was dominant in), medium, and low-end. These markets can be further divided into three subgroups: stemware and giftware, premium and incentive, and catalog mail order. The major distribution channels of these crystal products are department stores. Waterford Crystal is unique among other crystal manufacturers in that its stemware patterns are never discontinued. If a replacement is needed for a stem pattern bought many years ago, it can be specially made.

1950 – 1985 THE MCGRATH FAMILY ERA

Joe McGrath, being intensely pro-Ireland, was more concerned with growing the company in order to provide jobs for his country than making a profit. He focused on doing so through exports to the United States, so in 1961 Waterford established a marketing subsidiary in the United States. A distributing company was established in the United Kingdom three years later. Sales revenues and profits were on the rise. Employment had grown and the company moved its operations to a

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