Case Study

1.

What are the most significant factors affecting competition in the metal container industry? What strategy does Crown Cork have for competing in this industry? What advantages, if any. Does a firm the size of Crown Cork have over American Can and Continental Can? How do to you explain the comparisons shown in Exhibit 3 in the case? What recommendations would you make to management?

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1.

Identification of industry characteristics. Identification and analysis of Crown Cork & Seals strategy. An explanation of Crown Cork & Seals performance relative to its competitors. Identification of the major problem facing Crown Cork & Seal. Development of recommendations for dealing with Crown Cork & Seals problems.

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Suppliers

Manufacturers

Customers

There are very few suppliers These suppliers are large, powerful
Supplier

Probably dictate prices to the manufacturing firms

Manufacturer

Few firms Growth is slow It is a very large market Tough price competition Fixed costs are relatively high Little product differentiation Little value added High transportation costs Close substitutes exist Two-piece cans have brought change to the industry

Large and
Customers

powerful customer base

Where the power lies.???

The answer seems obvious..

With the suppliers, & - With the customers

1.

The metal can manufacturers are caught between strong suppliers and customers.

2.

Industry growth is slow.

3.

Close substitutes exists.

4.

The cost structure of the industry.

Organizing the Strategy into Six major functional Areas

1.

Products concentration on aerosols and beer and soft drinks

Manufacturing many smaller plants with extra can-forming line

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3.

Research and development follower strategy

Marketing use of sales engineers International emphasis on less-developed countries Finance reduce debt and buy back shares

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Organizing the Strategy into Six major functional Areas

1.

Products concentration on aerosols and beer and soft drinks Why do

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these Manufacturing Are all of particular many smaller plants with extra can-forming line market these segments strategies Research and development make so follower strategy are obvious much sense ? Marketing ?
use of sales engineers International emphasis on less-developed countries Finance reduce debt and buy back shares

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6.

1.

Beer and soft drinks represent growth areas in the metal container industry.

2.

Although beer and soft drinks face threats from aluminum, these market segments face only minimal threats from other materials such as fiber foil, plastic, or glass.

3.

Aerosol cans build on existing strengths of Crown Cork & Seal.

In term of Crowns research and development Strategy

What a follower strategy is ?????

On the marketing side .

What extent sales or selling is important in the metal container industry.

Selling per se is done rather infrequently in the metal container industry and can probably be handled by a few sales executives with a lot of help from top management.

On the international side..

1.

These countries are most likely to make the most of Crown Cork & Seals entire product range, beginning with crowns and gradually moving up to three piece and two-piece metal cans.

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Growth is rapid in these areas.

Suppliers and buyers are unfamiliar with the technology in these countries, making forward or backward integration very unlikely. There are very few competitors in these countries.

4.

What are the risks of diversification?

Three major risks. First: There is no guarantee that a firm will enjoy success in new business.

Second: Diversification brings with it the risk of neglecting the core business.

Third: This neglect can be especially harmful if there is technological change in the industry.

Crown Cork & Seals current problems..

1. 2. 3.

The retirement of John Cannelly The banning of aerosol containers that use fluorocarbons Legislative regulation of nonreturnable containers

Two points should emerge:

1.

The strategy is indeed risky. Crown sees itself as being in the tin-plate container business for aerosol and beverage cans. Broader definitions tin-plate containers, metal containers, or packaging imply less risk for the company. On the other hand, Crown has been earning above-average returns. DO these returns justify the risks?

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Three broad categories of recommendations :

1.

Recommendations to radically change Crown Cork & Seals strategy - moves into different types of materials and markets - diversify from Crowns narrow base in metal cans

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Political Action/Lobbying
- Crown Cork & Seal should support the efforts of its trade association to prevent the ban on fluorocarbons and - to prevent the enactment of legislation regulating use of nonreturnable cans

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Pressure on both its suppliers and customers

- to respond to both the ozone and nonreturnable threats

I like to end the case and finally with a discussion of some broad questions:
1.

Has Connelly chosen an appropriate balance between risk and return in his corporate strategy? Can you make this or any other business strategy risk-free? Will Crown Corm & Seal become another Head Ski or Volkswagen? Would you bet against the future success of Crown Cork & Seal?

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