In: Economics
Please use the economics knowledge you have learned so far to analyze the case below. You can propose your own questions and then answer them. Remember, there is no absolutely correct answer to this exercise. Its purpose is to provide you an opportunity to demonstrate your ability to think like an economist by applying economic principles to interpret the logic of a real-world phenomenon.
Economic Growth and the Business Cycle at Corning, Inc.
In 1851, Amory Houghton founded the company that became Corning, Inc. By 2015, Corning had more than 34,000 employees and sales of nearly $10 billion. Corning’s experience has mirrored two key macroeconomic facts: In the long run, the U.S. economy has experienced economic growth, and in
the short run, the economy has experienced a series of business cycles. During the 2001 recession, Corning suffered a $5 billion loss as the market for fiber-optic cable collapsed. Similarly, the recession of 2007–2009 caused a sharp decline in durable goods, which caused Corning’s sales of ceramics for automobile emissions systems and display panels for computers and televisions to decline. Despite these setbacks, Corning continued to make a profit during the recession due to sales of new products, such as Gorilla glass. A similar product, Willow glass, can be wound and shipped in rolls, which might make it possible for Apple and other firms to produce foldable electronic devices.
In this case, we see that a change in sale tactics, that is from the sale of ceramics to the sale of gorilla glass for the mobile company. The depression in US caused the sale of ceramics in the automobile industry to decline. Therefore the sale tactic or the change in sale was influenced by business cycles. Therefore we can see that due to business cycles like inflation, depression can change the total point of sale for the company.
We can say there is a change in business tactics but the question is why ? Firstly the loss occured due to the depression was enormous which was facilitated by budding industries like the telecommunication industry. Secondly the electronics industry was at the peak during this depression which allowed the company to change its business decisions. At the time of depression we can see that money in hand of public was quite less which caused a decrease in sale of cars but increased the sale of electronic products. This also caused money supply to decrease.
The long run effects of depression can also be seen in the form of production units also changing their decisions. The taste and preference of consumers also change with the supply of money or the money in hand.