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Crown Case

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Buyers * Large and powerful companies (Coke, Pepsi, Campbell etc) – bulk buyers offering long production runs * Expect just-in-time inventory, superior service * Knoweledgeable about cost to manufacture cans – negotiation strength – expect savings on can cost to add to bottom line * Backward integration possibility
Substitutes xxx * Many low cost substitutes for metal containers available: glass, plastic, paper, fiberfoil, paper and plastic combinations, etc. * Posing a threat to limit the prices. A price increase can be met with a shift to glass or plastic by brewers or soft-drink bottlers. * Second, they may limit long-term demand for metal containers. Plastic soft drink bottles, plastic orange juice cans, and paper and plastic juice boxes, are all examples of segments that moved away from metal containers for reasons of ease and convenience.
Suppliers xxx * Aluminum industry dominated by Alcoa and Alcan combined represent 65% of the aluminum can stock market – limited scope of cost negotiation * Forward integration – Reynolds * Ability to leverage costs (e.g. research, technology) spread over business
Barriers To Entry xxx * Moderate ease to enter the market - capital costs ($25 million) are small relative to the size of the market ($12 billion) * Low and deteriorating margins – need for efficient low cost operations
Rivalry xxx * Margin intensive operations – competition stiff as there is limitation to pass on cost increase upwards * Purchase is driven by price – limitation to differentiate against other rivals
Conclusion xxx Buyers have a great deal of leverage which they exercise * There are many substitutes which limit price and limit or reduce long-term demand. The suppliers are few, relatively large, and members of oligopolies. Reynolds is both supplier and competitor and may have

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