TO: Taylor Keen, Strategic Management Professor

FROM: Amber Franco, Strategic Management Student

DATE: September 28, 2016
SUBJECT: Crown Cork & Seal Case Write-Up
Key Strategic Issues that Avery needs to consider:
Continental Can for sale, by whole or part.
o Should Avery bid/buy-in to the business?
Metal-container industry = slow growth, plastics making significant progress
Should Avery expand product line?
o Not just making metal containers for beverages.
Diversifying the companys products and diversify in businesses that are not correlated to
packaging/bottling.
Competition in the metal container industry:
Porters Five Forces:
o Buyers:
Large breweries (Anheuser Busch, Miller, etc.)
Soft drink bottlers (Coca-Cola, PepsiCo, etc.)
Food companies
- Canning is very important to buyers and companies, such as Coca-Cola and
PepsiCo, buy in large volumes, which will affect the economics for Crown
Cork and Seal. So, in this case, Buyers Power is High.
o Substitutes:
Low switching cost
Glass/Plastic/Paper etc.
- Substitutes limit prices, and increase in prices for raw materials could be
switched with such materials as paper or plastic. Here, Substitute threats is
Moderate.
o Supplier:
Few big suppliers
71% of the market is aluminum (Cans produced)
- Supplier is High.
o Barriers:
Entry was difficult in 1989, but possible
2-piece line available for $12 million
Low profit margins
- Barriers to entry here are Low
o Rivalry:
Commodity product
Low market concentration
Excess capacity
- Crown Cork and Seal, even though they have been known for superior
service, Rivalry is High.
Crown Cork and Seal, according to the Porters Five Forces model, they are not a strongly
attractive. Buyers have a lot of leverage, many substitutes are available which limits price and
reduces long-term demand, few suppliers, barriers are moderate, and rivalry in the business
makes it unattractive to new entrants. Reynolds is a company that is both a supplier and
competitor in the metal industry, which results in a competitive advantage on Reynolds terms.

Crown Cork under John Connelly:

During Connellys 32 years at Crown Cork and Seal, his performance was outstanding. Connelly
revived Crown, Cork and Seal, and when he stepped up to become president of the company, the
company was on the verge of bankruptcy. Connelly changed the vision, emphasized cost
efficiency, quality and customer service. Due to Crown, Cork and Seal being a small producer,
and developed a product line built around the companys traditional strengths, Connelly was able
to make these changes to the company. Here are a few key strategies that Connelly used in the
revival of Crown, Cork and Seal:
Product-Line:
o Exiting the oil can segment when fiber foil came in.
Marketing:
o Fast answers get customers.
Quick responses to customers, high levels of customer service, and just-intime inventory
Manufacturing:
o 26 plants built around the United States
Research and Development:
o Connelly did a lot of research and development for cost reduction and solving
customer problems.
Organization:
o Plant managers developed to be owner-operators.
Global expansion:
o Targeting developing countries, obtaining pioneering rights
Pioneering rights
Guaranteed limited or no competition, tax holidays, low wages,
and a market for their products
Significant changes in the industry:
Metal containers are slowing and the industry will decline to plastics in the 1990s. Plastics are a
threat for the coming years, and in the United States, beverage manufacturers consolidated from
8,000 to 800, which shows a major decrease. Reynolds introduced a new can making technology,
which forces Crown to make capital investments. So, how should Avery respond?
1. Stick to the strategy Connelly had done for the past 32 years, due to its success.
a. Expanding more internationally
2. Buy in to Continental Can
a. Buying it whole would make them and equal leader with Pechineys American
National.
3. Diversifying in to the plastic packaging, it may be a good opportunity for the company
a. Diversifying elsewhere as well, such as other metals, designing, etc.
4. Selling the business as whole or in part as well.
a. If business analysis convinces Avery to an unattractive future, selling business
before deterioration is a good strategy.
Sincerely,

Amber Franco