Case Study Analysis Crown Cork and Seal Company, Inc.

CASE ANALYSIS: Problem Statement Moving forward from 1976, what is the best direction for the Crown Cork and Seal Company to take: implementing a new strategy or reaffirming Connellys basic strategic choices? Strategy Development and Justification Moving forward from1976, Crown Cork and Seal needs a combination of strategies originally put in place by Connelly as well as new strategic initiatives. A competitive advantage that is crucial to the continuing success of Crown Cork and Seal is the quick adaptation to customer needs and the strong tradition of excellent customer service put in place by Connelly. This includes having customer service employees readily avaible to solve customer issues or answer any questions thoroughly and swiftly. This has been historically proven successful for Connelly and should continue to do so in the future. Additionally, the ability to meet the customers needs faster than any other competitor will continue to be a differentiator between Crown Cork and Seal and other companies. The ability to meet the customers needs includes a strategy of globalization and expansion. By ensuring that the plants are locating in the appropriate and strategic locations, customers will continue to return due to fast delivery and convenience. The company should also continue to expand globally, especially by grasping the market in developing countries. Expanding globally is one of the largest opportunities available for the company. I would also recommend expanding and engineering a new type of bottling for beverages like plastic. Plastic appears to the best option because it is the fastest growing sector of the packing industry and is proving to be the driving force in the packaging revolution. The change could be made slowing by investing in some architecture to allow for the manufacturing of plastic, and continuing to utilize other companies R&D. Although a sizeable investment into R&D will need to be made unlike when Connelly was CEO. Aluminum, although closer in manufacturing style to Crown Cork and Seals current mission, has a high overhead cost and the market has been grasped by giant, Reynold Metal and Aluminums. Through customer service, globalization, and new products, Crown Cork and Seal can continue to gain market share and increase in profitability. QUESTIONS: When John Connelly assumed the CEO position at Crown, Cork, and Seal (question 1), he faced a culture crisis within the company. The company had taken the focus off the customer, and the employees on the line had become lazy and inefficient due to poor leadership and management. The executives within the company were out of touch, oblivious to day-to-day plant operations, and only concerned with a lavish lifestyle. A restructuring attempt modeled after the much larger Continental company failed. This combination of issues resulted in Crown, Cork and Seal being on the verge of bankruptcy. John Connelly even remarked that no one at Crown, Cork, and Seal seemed to remember that the purpose of a business was to make money. What John Connelly called common sense was in actuality a strategic plan to reduce waste within the company and restructure the company (question 2). Immediately after assuming the position of CEO, Connelly began downsizing the inflated management staff and non-value adding vice presidents. According to the case study, Connelly reduced the headquarters staff from 160 to 80, which included 11 vice presidents. He also downsized by reducing inventory, which is a source of waste, and developing sales forecasting. Connelly then restructured the company by gaining a competitive advantage and playing to the traditional strength of Crown, Cork, and Seal which was metal forming and fabrication. Connelly concentrated on tin-plated cans and crowns for special uses and international markets. This was demonstrated when Crown, Cork, and Seal gave up over 50% of the market for motor oil cans because the industry moved to a fiber-foil can. Connelly decided to stick with beverage cans and the aerosol market. Another competitive advantage Crown Cork and Seal gained was becoming the leader at catering to the customer needs quickly and effectively. In one instance, Connelly flew to a customer personally to diffuse a complaint (pg. 12). The restructuring of the company also took place on a low level in that the managers were placed responsible for plant profitability and incentivized to perform well. For the market that Connelly specifically chose for Crown Cork and Seal, I think the company performed decently at the end of the case (question 3) based on data from sales and profits. As shown in Exhibit 3, the company has the largest return on equity and lowest debt ratio. The company only held an 8.3% market share; however, that is a sizeable share when factoring in the size of the companies. After Connelly took over the company, the strengths, weaknesses, opportunities, and threats of the company changed (question 4). The strength of the company was clearly metal forming and fabrication with speed and efficiency

that customers appreciated. On the other hand, the strength of the company could also be viewed as a weakness. The Crown Cork and Seal Company lacked diversification. It was subject to the sometimes unpredictable market and relied on the demand for tin-plated cans and crowns. A major opportunity for the company was expansion globally where it could receive tax breaks and various investment incentives. The company also was opportunistic in that it exploited the research and development of other companies. Crown Cork and Seal would simply allow other companies to poor money into R&D, then take the initial findings and perfect the new manufacturing process, as it did with two-and companies also government interference. It faced threats from large companies making substitute products including Continental Group, American Can, and National Can. These companies were more diversified than Crown Cork and Seal and made a variety of products. The main materials that posed a threat to the companys tin products were aluminum and plastic. Aluminum had the advantage of being light-weight and cheaper to ship while also allowing for easier lithography for the rise in marketing and packaging design. Plastic was also light-weight and could be formed into a plethora of different shapes and designs. Political, economic, social, and technological factors also affected the Crown Cork and Seal Company (question 5). In the 1970s, political factors were beginning to become a greater issue for the company. A study was released that proposed the fluorocarbons used as a propellant for aerosol cans (which Crown Cork and Seal produced) were destroying the ozone layer and would result in damage to crops, climate change, etc. Legislators then began proposing laws which would ban the use of fluorocarbon aerosols, a dangerous proposition for Crown Cork and Seal. The ozone layer also proved to be a social issue as the public become more aware of the ozone layer issue. Thankfully, a new technological innovation developed a dual-duct for aerosol that kept the product separate from the propellant, safely utilizing hydrocarbons. The government also proposed issues for Crown Cork and Seal when several states moved for legislation on banning nonreturnable containers. This was projected to be an economic issue in that it would most likely result in an increase in soft drink and beer price, and eliminate a sizeable number of jobs (pg. 17). As discussed earlier, Crown Cork and Seals main competitive advantage was that is concentrated on adapting to customer needs faster than its competitors (question 6). This competitive advantage did play a role in the strategic development in the company. In order to reduce transport time for delivery and be closer to customers, Crown Cork and Seal placed plant all over the county. Also, these plants serviced a range of customers, which was somewhat unusual for that time period. With these geographically strategic plants, the company had a quick response time to customer needs. Connolly managed to change the attitude of Crown Cork and Seal from originally blaming the customer for not being satisfied with a fair number of defects to the policy that the customer is always right. The strategy diamond includes 4 elements: areas, vehicles, differentiators, staging, and economic logic (question 7). In the context of the Crown Cork and Seal, Connelly made a strategic decision to focus solely metal forming and fabrication specifically tin-plated cans and crowns for the beverage and aerosol can industries. Connelly placed plants scattered across the U.S. close to customers as well as placing plants all over the world. For vehicle, Crown Cork and Seal chose not to engage in any type of research and development. Instead, as mentioned previously, the company waited for another competitor to develop a new manufacturing method, learned by their competitors mistakes, and then refined the concept. What differentiated Crown Cork and Seal from its competitors was the speed at which it provided the product to customers and its customer service. Crown Cork and Seal concentrated on expanding fairly quickly in order to be able to be close in customers domestically and internationally. Crown Cork and Seal appears to run on a high volume, low margin philosophy.