Optical Fiber Corporation
Fiber optics is a new technology that uses rays of light instead of electricity to transmit information over optical fibers at very high speeds. The optical fibers are usually thin strands of glass that are combined into cables and used to send information and computer data in the form of pulses of light. The optical fibers provide much clearer transmission than conventional copper cable and satellite links. The world market for optical fiber continues to grow rapidly, with shipments increasing 14 percent from an estimated 7.0 million kilometers of fiber in 1990 to approximately 8.0 million in 1991. The demand for multimode fiber is predicted to continue to expand through the mid-1990s, with some market analysts indicating that 15 to 20 percent annual growth over the next three years is reasonable. Strong demand is expected for singlemode and multimode fiber to be used in cables for local area networks, telecommunications, cable television (CATV), and transoceanic fiber-optic systems.
About 20 companies are involved in the manufacture of optical cable in the United States. It is a highly competitive industry requiring sophisticated design and engineering capabilities. As the market for optical fiber expands, copper cable manufacturers will extend their product lines to include fiber-optic cable. Facing increasing competition, these cable companies will prefer extremely responsive optical fiber suppliers. The ability of OFC to provide excellent customer service has enabled it to establish business relationships with some copper cable manufacturers.
OFC specializes in multimode fiber for data communications and telecommunications markets. The markets are extremely competitive and OFC’s main rivals are the two licensers to whom it pays royalties. Each has substantially greater resources and operating experience. To date, OFC has been successful because of the licensing requirements that limit competition and because of its competitive advantages of outstanding customer service, product performance, and competitive pricing.
The Firm Itself
Several years ago OFC entered the fiber optics industry by obtaining patent licenses that allowed it to manufacture and market optical fiber and cable. Current success with record sales and earnings and the addition of 30 percent more manufacturing capacity. Order backlog for the company’s optical glass fiber products has already reached $20 million and was steadily increasing.
OFC primarily markets its optical fibers through direct sales made by a small sales and marketing department. The company also advertises in trade publications, distributes product brochures and other technical material to its mailing list of potential customers, and demonstrates its product at technical conferences and trade shows. Its present customers are cable manufacturers that purchase optical fibers and assemble them...