STRATEGIC MANAGEMENT

CROWN, CORK AND SEAL ANALYSIS

DR. RAKESH SINGH PROF. RUSHA DAS

GROUP 9
DEEPA THAKUR PRIYA DUBEY CHIRAG JAIN ABHISHEK SHAH JIGAR SHAH ABHISHEK SHARMA
2012010 2012012 2012020 2012041 2012044 2012046

CROWN CORK & SEAL COMPANY: OVERVIEW

FORMED BY A FOREMAN IN BALTIMORE IN 1891 CROWNS CURRENT MARKET SHARE WAS 8.3%. THEIR THREE BIGGEST COMPETITORS WERE AMERICAN CAN (16.6%), CONTINENTAL CAN (18.4%) AND NATIONAL CAN:(8.7%). THEY DERIVED 65% OF TOTAL SALES FROM TIN-PLATED CANS AND 29% FROM CROWNS; THE REMAINDER OF THEIR BUSINESS CAME FROM BOTTLING AND CANNING MACHINERY. IN APRIL OF 1957, WHEN CROWN CORK & SEAL WAS ON THE EDGE OF BANKRUPTCY, JOHN CONNELLY TOOK OVER PRESIDENCY WITH INTENT TO SAVE THE COMPANY.

CONT

IN 1989 JOHN CONNELLY STEPPED DOWN TO GIVE WAY TO WILLIAM J AVERY AVERY HAD PLANS TO ASSESS CONNELLY'S LONG-FOLLOWED STRATEGY BECAUSE OF THE INDUSTRY CHANGES THAT WERE TAKING PLACE. IF CROWN ACQUIRED CONTINENTAL CAN CANADA, CANADA WOULD BECOME CROWN'S LARGEST SINGLE PRESENCE OUTSIDE OF THE U.S. AND WOULD DOUBLE THE SIZE OF CROWN'S DOMESTIC OPERATIONS. HOWEVER, MOST MERGERS IN THIS INDUSTRY HAD NOT WORKED OUT WELL, AND AVERY HAD CONCERNS ABOUT TAKING TWO COMPANIES FROM COMPLETELY DIFFERENT CULTURES AND BRINGING THEM TOGETHER.

PORTERS 5 FORCES
THIS MODEL WAS DEVISED IN 1979 MICHAEL PORTER, ITS DEVISOR, WAS A HARVARD ALUMNI MANAGEMENT TOOL TO IDENTIFY AND TACKLE A BUSINESS
PROBLEM

MICRO ENVIRONMENT SCANNER 5 ASPECTS: 3 EXTERNAL AND 2 INTERNAL

THREAT FROM NEW ENTRANTS

INTENSIFY THE COMPETITIVENESS OF THE INDUSTRY HIGH INITIAL INVESTMENT REQUIRED TO START A CAN
PRODUCTION SYSTEM

SOFT DRINK AND ALUMINUM CANS COVERED 50% OF TOTAL

BEVERAGE MARKET

ACCOUNTED FOR 42% OF METAL CANS SHIPPED IN

1989,WHICH WAS 29% IN 1980

EXISTENCE OF PLASTIC AND GLASS CONTAINERS THEY ARE LIGHT WEIGHT

THREAT OF ESTABLISHED RIVALS

DEFINES THE LEVEL OF COMPETITIVENESS 5 BIG INDUSTRIES HOLD ABOUT 61% OF THE METAL
INDUSTRY

MARKET WAS ACTING LIKE A MONOPOLY LITTLE GROWTH POTENTIAL FOR METAL CANS IN THE 1990S MAJOR PLAYERS MANUFACTURED CANS IN-HOUSE LOOK FOR DIVERSIFICATION INTO PLASTICS AND GLASSES REGIONAL COMPETITORS VAN DORN COMPANY AND
HEEKIN CAN

BARGAINING POWER OF SUPPLIERS

INCREASE IN USAGE OF ALUMINIUM (99% FOR BEER AND 94% FOR SOFT
DRINKS)

ALUMINIUM
CANS.

71% & STEEL 20% OF SALE FOR MANUFACTURING OF

DOMINANCE

OF 3 MAJOR ALUMINIUM COMPANIES ALCOA AND REYNOLDS METALS

ALCAN AND

HIGHLY CONCENTRATED INDUSTRY IN ITSELF AND CREATING A TOTAL

DUOPOLY KIND OF SITUATION WITHIN THE WHOLE INDUSTRY.

CORK AND SEAL HAD NO CONTROL OVER THEIR SUPPLIERS LOOK FOR CAN RECYCLING, AS 55 % BEER CAN MARKET
RECYCLED CANS

WAS BY

BARGAINING POWER OF CUSTOMERS BUYER ARE VERY LARGE AND BECOME MORE AND MORE
CONCENTRATED.

BUYERS BUY IN LARGE QUANTITIES AND KEEP RELATIONSHIP WITH

MORE THAN ONE CAN SUPPLIERS.

THE PRODUCTS ARE INDIFFERENT, SO BUYERS FACE NO SWITCHING

COST.

ENSURING THAT THEY COULD PROVIDE THE CANS JIT THEREFORE, NO

CAPITAL TIED UP IN CAN STOCK.

MORE DISCOUNTS ON VOLUMES SOFT DRINKS SEGMENT OF BOTTLING INDUSTRY REDUCE FORM 8000
TO 800 IN 1989

CANS

CONSTITUTED OF 45% OF TOTAL COST OF A PACKAGED BEVERAGE

THREATS OF SUBSTITUTES ITS AN EXTERNAL ENVIRONMENT TO THE COMPANY

TWO MAJOR SUBSTITUTES TO CANS: PLASTIC CANS (GROWING FROM 9% TO 18%) GLASS (14% OF DOMESTIC SOFT DRINK SALES) ALUMINUM CANS STEEL ACCOUNTED 88% OF METAL CANS IN 1970, WHICH DROPPED
TO 29% IN 1989

PLASTIC INDUSTRY GROWING AT HIGH RATES FROM 1980 TO 1989 GLASSES WERE LONG ACCEPTED BY SOFT DRINK CONSUMERS,
LOVED GLASS BOTTLES

DIVERSIFYING IN THE PLASTICS AND GLASSES WOULD BE

APPROPRIATE

TRADE-OFF FOR PERFORMANCE BETWEEN PLASTICS AND CANS

THANK YOU!!!