Waterford Crystal A Case Analysis

Waterford Crystal

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 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 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,