How Can a Company Continue an Unprofitable Business?:Case Study of a Japanese Functional Chemical Company

IntroductionDevelopment of new products and businesses is a time-consuming process (Afuah, 2003; Crawford & Di Benedetto, 2014; Ulrich & Eppinger, 2003). For example, Toray Industries, Inc.'s carbon fiber business took 10 years from the start of research through commercialization and took another 30 years to generate profits (Miyaki, 2015). 1 Business resources and research and development resources are limited (Tidd, Bessant, & Pavitt, 2013; Trott, 2011). As such, companies wish to avoid continuing investments in technologies that are not promising (Cooper & Kleinschmidt, 1995; Wheelwright & Clark, 1992) and go or no-go decisions for projects and businesses are important issues for companies (Cooper, 2008, 2011; Kuwashima, 2003, 2004). This paper uses a case analysis of Nippon Steel Chemical Co., Ltd.'s2 two-layered copper clad laminate (CCL) product called "Espanex" to explore this issue. Espanex is a material in flexible printed circuits (FPCs). It is one of the functional chemicals where Japanese companies have shown a high degree of international competitive advantage in recent years. Being the first to introduce a product such as Espanex to the market, Nippon Steel Chemical maintains the top market share in the two-layered CCL market globally (approximately 30%) till date. In 2016, Espanex won the 62nd Okochi Prize from the Okochi Memorial Foundation due to its highly regarded technology.However, the Espanex business generated deficits for the first 10 years, starting in 1989. Within Nippon Steel Chemical, some individuals strongly expressed the opinion that the company should abandon the business. Some competitors that had been working on two-layered CCL research and development left the market as they could not easily expand their business. Under those circumstances, Nippon Steel Chemical decided to continue the Espanex business. This paper identifies the reason why the company made that decision.3Business Development Process of EspanexResearch and development processResearch on Espanex (a two-layered CCL) at Nippon Steel Chemical began in 1985. During that time, the primary type of CCL, a material for FPCs, was a three-layered variety, which combined a polyimide film and copper foil using an adhesive. In comparison, two-layered CCLs used no adhesive,4 which created fewer defects and greater performance. Furthermore, companies expected to design thinner products with two-layered CCLs than they could using three-layered CCLs. However, products for practical use had not yet been introduced to the market.Three methods existed at the time for manufacturing two-layered CCLs: the sputtering, laminate, and casting methods. Of these, Nippon Steel Chemical chose to use the casting method. This required overcoming several technical problems, the biggest of which was improvements to the polyimide material. Normal polyimide has a greater coefficient of thermal expansion than copper. Thus, when adhering the two together in a manufacturing process, differences in thermal expansion leads to warpage. Solving this problem required matching the coefficients of thermal expansion for both polyimide and copper foil.With two years of research, the research team at Nippon Steel Chemical in 1987 successfully developed a polyimide. This project later encountered various technical issues such as stabilizing the adhesiveness of copper foil and polyimide; however, it subsequently overcame them and introduced Espanex to the market in 1989.Commercialization processAt the time it began its research, despite the two-layered CCL being higher priced than the existing three-layered CCLs, Nippon Steel Chemical forecasted a certain level of demand for a two-layered CCL (Espanex) in the aerospace and military markets that demanded high precision. Moreover, in private markets, including those for electronics material, the company anticipated a shift from three-layered CCLs to two-layered CCLs in conjunction with higher-quality, higher-functional products. …