...Crown Cork & Seal in 1989 As many successful companies do, Crown Cork & Seal began with an idea—one that had the potential to improve the world in which we live. In 1891, a machine shop foreman conceptualized a superior method for creating bottle caps, and set about to do so. Crown Cork & Seal was born, and what followed were intermittent periods of triumphant achievements and costly missteps, soaring profits and depressing losses, eventuating in a successful company with rich tradition and history. However, the competitive business environment slows for no one, and the company finds itself constantly reevaluating its strengths, its competitive advantages, and the viability of the industry in which it has built its legacy. Industry Outlook One of Crown Cork & Seal’s foundational questions involves their industry in general—is it an attractive industry in which to compete? Like most industries, there are things that make the metal container industry an advantageous one, and there are elements of the nature of the industry that are troublesome to its members. The low potential for new entrants does provide somewhat of a safeguard against fresh competition; however, the strong buyer power, high threat of substitutes, and intense competition from rivals makes the industry relatively unattractive on several key levels. For potential new entrants, the metal container industry does not seem to be attractive due to the high barriers to entry. Most of all,...
Words: 1534 - Pages: 7
...Crown Cork & Seal | March 18 2013 | | | TEAM 10: Lindsay Fisher, Adam Hines, Lovro Plejic, Steven Werman, Anirud Varadraj TEAM 10: Lindsay Fisher, Adam Hines, Lovro Plejic, Steven Werman, Anirud Varadraj * Metal Container Industry Analysis When judging the metal container (“MC”) industry using Porter’s Five Forces, we have concluded that the industry is not very attractive. Suppliers and buyers both wield power over MC manufacturers such as Crown Cork & Seal (“Crown”) and rivalry among existing competitors is intense. The industry has high barriers to entry and a fairly low threat of substitutes; however, these criteria do not outweigh the impacts of the other forces. As such, we believe the MC industry is not very attractive. The buyers in the metal container industry wield a great deal of power for several reasons. Buyers of MC were consolidating and growing larger, as evidenced by the 90% reduction in the number of buyers in the 1980s. Additionally, these buyers face low switching costs and the threat of buyers integrating backwards is real, as many former and potential buyers manufacture their metal containers in-house. The buyers are also typically price sensitive as the metal container represents just under half of the total cost of a packaged beverage. When dealing with buyers with these characteristics, buyers are a strong force in the metal container production industry. As such, John Connelly, the Crown chairman, strategically positioned Crown...
Words: 1960 - Pages: 8
...1. What are the key strategic issues that Avery needs to consider? What strategic options are open to him? 2. How attractive has the metal container been over the years? (Hint: use the Five-Force Framework for industry analysis) 3. How well did CCS do under John Connelly? What were the keys to the their success? 4. What significant changes are taking place in the industry? How should the new CEO, Bill Avery, respond? Is it finally the time to change the Connelly strategy that has been successful for over 30 years? The main changes and challenges faced by the container can industry are the increment in the aluminum price, increment of the in-house manufacturing (especially in the case of glass with respect to the beers), growth of plastic as a substitute for the container cans, and diversification of the industry into totally unrelated fields. Debido al aumento del alumnio y del in-house manufacturing, las container cans ya no son tan rentables como lo fueron en el pasado, por lo tanto debería considerar ampliar el negocio hacia otras áreas como el plástico y el vidrio ya que son los principales sustitutos de las latas y por lo tanto se especializaría más en el negocio de beverages containers. En vista de la tendencia de la industria hacia la diversificación, Avery debería ser parte de este cambio buscando la coopetencia con el resto de los participantes del mercado, tanto sustititors como complementators. La posición financiera de CCS permite una reestructuración...
Words: 346 - Pages: 2
...American National 44%, Ball Corp 5%, Crown Cork and Seal, 5%, Reynolds Metals 5%, Continental Can 13%, Other 28%. -Industry trend—>In-house manufacture (brewers advantageous due to single-label), emergence of plastics (which was weakened in 84, 85. Still 1980 9% share to 18% share in ’89). Glass, for beer. Soft drink producers biggest customer for packaging producer. Diversification and consolidation among packing producers -Diversification of related fields rather than unrelated ones. A response to low profit margins, excess, capacity, rising labor and RM costs. American can and insurance, failure. Analysis Portion: -Rivalry among existing firms (high), 5-6 big competitors. Reynolds Metals—>supplier route. New production tech—>Reynolds. New product design—> Ball Corp -Bargaining power of buyers (high). Top 5 soft drink companies -Bargaining power of suppliers (high)—>Alcoa, Alcan, Reynolds -Threat of Substitutes (high): plastic and glass, -Threat of New Entrants (low)—>the industry is already in long run MC. Smaller firms have been eliminated. 4Ps: -Price, rising COGS due to rise of price of alum by 15%, 65% COGS is RM. TC=7.5%, Labor=12% In house manufacturing, 55%. Consolidation of soft drink bottling. Machinery=2-piece can, 20-25 M per line, 3 piece=8,5-9M/line. Most plants 12-15 lines. -Customer. #1, Coke, #2 Anheuser-Busch, #3 Pepsi, #4 Seagram -Distribution. Manufacturer locate plants close to customer. Crown cork and seal locate plants to multiple customers...
Words: 428 - Pages: 2
...When evaluating the attractiveness of an industry, there are elements that make an industry an advantageous one, as well as elements indicating that an industry is unattractive and difficult to compete in. Analyzing the industry for Crown Cork & Seal provides an overview of where the firm stands relative to its competition, and helps determine the strategic moves necessary to have a sustainable competitive advantage. In the metal container industry, it is difficult for new entrants to infiltrate due to the intensive capital requirements, incumbency advantages, and threat of vertical and horizontal integration. In 1989, five firms were dominating the metal industry, with a total 61% market share, presenting an obstacle to potential entrants...
Words: 321 - Pages: 2
...1, What are the key strategic issues that Avery needs to consider? What are his options? Avery got a few options regarding key strategic issues he needs to consider. He could grow the company and enter into other segments of the business. This segment would be the plastics containers that would have potential. Other option is whether to acquire Continental Can Canada or not. The company generates $400 million in sales per year and it is the largest manufacturer in the Canadian region. That does not seem a whole lot. However, Continental’s USA business has estimated revenues of $1.3 billion which would double the size of Crown’s domestic operations. Also, Continental’s European operations generated estimated sales of $1.5 billion. Potential bidders for the acquisition are the major competitors of CCS. Avery is concerned about both options because they both have pros and cons. Entering the plastic can business segment would have the following pros: • Entering a new business segment, great for diversification • Decreasing shipping cost because of lighter weight • Made of natural resources • Plastic material can easily be formed/shaped Entering the plastic business segment would have the following cons: • Unknown business territory, no experience • Carbonation leaks after 4 month – major issue • Cannot be fully recycled Acquiring Continental Can Canada would have the following pros: • Double in size domestically, increase market share rapidly • Plastic container line...
Words: 993 - Pages: 4
...Article: Crown Cork & Seal in 1989 1. What key strategic issues face Avery in 1989? What strategic options are open to him? Avery faced strategic issues about whether Crown should break with tradition and expand its product line beyond the manufacture of metal cans and closers. And he had to decide whether or not to get involved in the bidding for Continental Can. The acquisition of Continental Can Canada would make Canada Crown's largest single presence outside of the United States. Also it would double the size of Crowns domestic operations. 2. How attractive is the metal container industry? (Try to use Porter's 5-forces model.) l Bargaining power of buyers The products are indifferent so it means there is low switching cost. Also buyers are very large and become more concentrated through consolidation. And they buy in large amount and maintain relationships with more than one can supplier. In addition, there can be the threat of backward integration. But metal producers are unlikely to put the threats of forward integration => High l Bargaining power of suppliers There are three largest aluminum suppliers; Alcoa, Alcan and Reynolds Metal. Aluminum is classic oligopoly dominated by Alcan and Alcoa. Reynolds may benefit from R&D synergies. Also there is a threat of forward integration. =>High l Threat of new entrants It seems that barriers to entry are low. Product differentiation and switching cost is not that high. Capital costs for three-piece can product...
Words: 523 - Pages: 3
...“CROWN CORK CASE AND SEAL IN 1989” Takeaways: Main aspects of strategy-> who are the customers, what is the need, what is the technology Strategic issues and options:- * Diversification into plastics * Acquisition of continental can (domestic and/or international) * Continue same business * Backward integration * Foreign markets expansion * EXIT * Forward integration Incentive Compatibility: For sustainable partnerships incentives to both the company and the potential partner must be compatible. Lack of these rules out ‘Partnership’ as a viable option. In the case, this is why a partnership between Crown Cork and Seal and steel bottlers is ruled out. Potters five force analysis- Bargaining powers of buyers: * Bargaining power of buyers is high * Timeliness (service quality) is the key factor on the basis of which buyers buy the product * Another important factor is price. Buyers have very high price sensitivity. * Some facts substantiating the above- large volume and long term contract, most of the buyers cost contributed by metal containers Bargaining power of suppliers- * High as aluminum supplier have 71% market share making it an oligopolistic market * Also Reynolds has lower transaction cost in the market and it has already completed forward integration ( spun aluminum top). So high competitiveness. Threat of substitutes:- * High- 1. In...
Words: 288 - Pages: 2
..., h.12.20 January 25th, h.12.40 January 25 , h.13.00 January 25 , h.13.20 th th th th th th th th th th th th th th Name SALICE Valentina MARRONE Emanuela SPAMPINATO Giulia REITANO Boris D’ARRIGO Roberto ARDITA Giuseppe CARIOLA Elena FILIPPELLO Gloria FILOCAMO Andrea ALI’ Andrea RIZZO Emanuele ARENA Annamaria AIELLO Sebastiano SPORTARO Prospero CONTI Maria Cristina LUISI Paola FAILLA Stefania ALAIMO Massimo Maria AYARI Neila CALVAGNA Giorgia CRUCITTI Alessia Case study Cola Wars continue: Coke and Pepsi in 2006 Google Inc. Nucor at Crossroad Caterpillar Tractor Co Komatsu Ltd. Crown Cork and Seal Apple Inc. in 2010 Cola Wars continue: Coke and Pepsi in 2006 Google Inc. Nucor at Crossroad Caterpillar Tractor Co Komatsu Ltd. Crown Cork and Seal Apple Inc. in 2010 Cola Wars continue: Coke and Pepsi in 2006 Google Inc. Nucor at Crossroad Caterpillar Tractor Co Komatsu Ltd. Crown Cork and Seal Apple Inc. in 2010 Seminar guidelines 1. Each student has 20 minutes for presentation. You are required to provide a Powerpoint presentation (please download your Powerpoint file before presentations start) 2. Presentation must be organized as follows: - first, a summary of the case must be given; then - answer to each question (see below) must be provided. The answer must make explicit reference to the relevant parts of the theory and of the data provided by the case study. 1 QUESTIONS: 1. Coca Wars...
Words: 809 - Pages: 4
...| Syllabus | | | |Year |2014/2015 | |Semester |VIII Spring | | | |Course ID |MGT405080 | |Course Name |Strategic Management | | | |Type |core | |ECTS Credits |5 | | | |Language |Georgian/English | |Classroom Number | | | ...
Words: 1114 - Pages: 5
...Crown Cork & Seal in 1989 Teaching Note I introduce the class by remarking that John Connelly ran Crown Cork & Seal for over 30 years and followed essentially the same strategy for the entire period. The total return to shareholders over the 32-year period was just under 20% compounded. Now that Connelly has stepped down as CEO and given control to William Avery, is it finally time for a change? I begin by asking what are the key strategic issues facing Avery in the summer of 1989. Question 1. What are the key strategic issues that Avery needs to consider? What strategic options are open to him? Here I just want to develop the list and save the analysis of the issues until the end of class. The list of issues should include some of the following: (1) The old Continental Can is apparently for sale either in whole or in part. Should Avery consider bidding on some or all of the business? (2) Metal containers are very slow-growth and plastics is forecast to make significant inroads. Should Avery consider entering plastics? If so, in what segments, and should they build their capability or acquire someone? Who? (3) Expand the product line to a full line of metal containers, not so focused on beverage and aerosol? (4) Diversify into other packaging materials and product categories? (5) Diversify into other less-related businesses? (6) Exit, or sell the business? How should we go about addressing these issues? Presumably we should analyze the appropriateness...
Words: 5439 - Pages: 22
...* Refer to the spreadsheet on BB about the valuation of Carnaud Metalbox (CMB). The key variables that will determine how much Crown Cork & Seal (CCS) should offer are listed at the top. As you change these variables, the implied value of the company per share will adjust at the bottom right. I have input values for the three highlighted (in blue) assumptions about sales growth and cost reductions to arrive at one realistic scenario for the current valuation of Carnaud Metalbox at approximately Ffr. 186.58 per share. Play around with these values to see how much changing the sales to something different each year, or making the cost savings higher or lower, affects the implied value. Here, we are seeking to understand how continued improvement within CMB after the recent merger might justify their current valuation. <!--[if !supportLists]-->a. <!--[endif]-->Next, vary the assumptions to match Avery’s estimates of the cost savings provided by an acquisition by CCS, to make the implied value equal approximately the proposed offer price of Ffr. 225. Here, you are evaluating the synergy Avery plans to create, resulting in his willingness to pay a premium for ownership of CMB. Copy and paste the three highlighted lines into your Word document so I can see your answer. Do not upload the spreadsheet. <!--[if !supportLists]-->b. <!--[endif]-->Write a short paragraph summarizing your interpretation of the offer price, considering the spreadsheet...
Words: 376 - Pages: 2
...Caso Crown Cork & Seal en 1989 1. Identificar los rasgos estructurales del sector de envases de metal a finales de los años ochenta Representan un volumen importante e negocio, en concreto el 61% del total de productos envasados en EE.UU. en 1989, muy por encima del plástico que representaba un 18% y del vidrio que representaba un 21%. 5 empresas dominaban el sector y representaban el 61% del mercado con una participación de $ 12.200 millones. El 39% restante del mercado era abastecido por unas 100 empresas. Se trata de un mercado maduro, muy competitivo donde la rentabilidad se obtenía con grandes lotes de artículos estándares, esto significaba que debido a la necesidad de cubrir la mayor parte posible de la capacidad productiva de una empresa, solía hacerse descuentos para los grandes pedidos. Los márgenes caían desde 1986 debido al incremento del precio de la materia prima (alrededor de un 15%) sin posibilidad de trasladarlo a los clientes, debido a la producción propia de envases por parte de uno de los nichos de clientes más importantes (las cerveceras), y a la concentración de las embotelladoras de refrescos. Los clientes más importantes están muy concentrados y son grandes empresas con altas capacidades de negociación. Se prima la calidad del producto y el servicio. El envase representa aproximadamente el 45% del total de la bebida envasada. El transporte representa un 7,5% del producto (envase), lo que llevaba a que las empresas cambien su estrategia...
Words: 1334 - Pages: 6
...Advances in Piston Ring Technology Piston rings have one of the toughest jobs inside an engine. They’re slammed up and down between the ring lands thousands of times a minute, they’re subjected to searing temperatures and extreme pressures, and they’re constantly scraping back and forth against the cylinder walls. In spite of all of this, the rings are expected to seal combustion and vacuum, prevent blowby, control oil consumption, keep the cylinder walls lubricated, cool the pistons, and last but certainly not least, last almost forever (150,000 miles plus in a passenger car/light truck engine or up to 1 million miles in a heavy-duty over-the-road diesel)! It’s a demanding list, yet most rings are up to the task and hold up pretty well — assuming the “right” rings are used for the application, the cylinders are finished properly and the rings are installed on the pistons correctly. Obviously, the ring sealing requirements of a high-revving racing engine or a hard-working diesel engine are much more demanding than those of a mild stock engine. So with that in mind, let’s look at some of the latest thinking as it applies to piston ring designs, materials and coatings. Stock Rings With so many late-model engines running thinner, low-tension moly-faced ductile iron and steel rings, one might think cast iron rings are fading into history. They are at the OEM level, but it looks like cast iron rings will be around for a long, long time in the aftermarket. According to several...
Words: 2873 - Pages: 12
...Strategy Formulation and Implementation MBA 980 Spring, 2009 Professor Jay Dial Office 860 Fisher Hall Email dial.12@osu.edu Phone 292-5438 Reading packet There is a required reading packet available at Uniprint-Tuttle Park that includes course readings, cases and lecture notes for classroom discussion. This is copyrighted material and each student must purchase an individual copy of the reading packet. Additional highly recommended readings will be selected from Management Skills: A Jossey-Bass Reader (ISBN # 0-7879-7341-6). It is available from both BarnesandNoble.com and Amazon.com. Course Overview This course is about the creation and maintenance of long term value for the organization. It is concerned with both the determination of the strategic direction of the firm and the management of the strategic process. The course builds on prior studies of functional areas while recognizing that most real business problems are inherently multi-functional in nature. Thus, this course employs an explicitly integrative approach in which we adopt the role of the general manager who has the responsibility for the long-term health of the entire organization. The course would be taught primarily through the case method of instruction. Course Objectives 1. Understand the nature of strategic competitiveness and develop the ability to analyze the competitive environment facing a firm, assess the attractiveness of the industry and isolate potential...
Words: 6376 - Pages: 26
