Vershire Company

Vershire Company & Aluminum Industry Industry of Aluminum: Aluminum. Less spillage or breakage, ease of storage at home or when people travel, maintenance of soft drink carbonation, ease of lithograph and ease of recycling, aluminum production is one of the modern era’s great economic stories. The world’s primary aluminium industry produces over 23 millions ton of aluminium metal per year. The most important markets for aluminium products are the transport, building and packaging sectors, however aluminium also finds application in electrical and mechanical engineering, office equipment, domestic appliances, lighting, chemistry and pharmaceuticals. The United States' aluminum industry is the world's largest, annually producing about $39.1 billion in products and exports. U.S. companies are the largest single producer of primary aluminum. The U.S. industry operates over 300 plants in 35 states , produces more than 23 billion pounds of metal annually and employs over 145,000. Aluminum is one of the few products and industries left in America that truly impacts every community in the country, either through physical plants and facilities, recycling, heavy industry, or consumption of consumer goods. The aluminum industry's performance is noteworthy, particularly in light of the proliferation of alternative materials and global competition. Transportation represents the largest market for aluminum in the United States. In 2000, transportation accounted for 32.5 percent of all US shipments. In 2000, containers and packaging ranked second to transportation with 20.4 percent of the market, thanks to shipments of 4,992 millions of pounds in products such as beverage cans, food containers, and household and institutional foil. Nearly seven billion aluminum foil containers are produced every year for a variety of uses that make our lives easier. Recycling is a critical component of the industry, both from its contributions to the environment and because of the favorable economic impact on production. This dual benefit is probably the reason aluminum beverage cans now account for virtually all of the beverage can market, and most of the total single-serve beverage market . Due to more than 10,000 recycling centres nationwide, two-thirds of the aluminum cans produced are recycled. The industry has done its part in reducing the weight of aluminum cans by about one-third and continuing to raise awareness of the value of recycling to increase the practice of recycling even more. Today, aluminum is the most commonly recycled post-consumer metal in the world. Thirty parents company own the 202 metal can manufacturing facilities ( which 138 in the Middle East of the USA) in the beverage can market in USA. It is a very competitive oligopoly market with five beverage container manufacturers accounted for 88 percent of the market. There are high entry barriers whereas the minimum efficient scale for a container plant is 5 lines with 20 millions dollars a line in equipment. It is a very competitive market. Vershire Company: place & critical success factors: Vershire Company, a diversified packaging company, has several major divisions including the Aluminum Can division which is one of the largest manufacturers of aluminum beverage cans in the United States. The division has plants scattered throughout the country producing several different sizes of cans for a range of customers. Even on the top manufacturers, competition on this market is really hard. In fact, most of customers have between 2 and 4 suppliers and spread purchases among them. Moreover one large beverage company produced one-third of its own container requirements and ranked as one of the top five beverage container producers in the industry. Aluminum Can division has a great place in this market whereas it is on the top five too. All aluminum can producers employee essentially the same technology, and the division’s product quality is equal to that of its competitors. That’s why the Aluminum Can division critical success factors are the same than competitors objectives: The division has to meet the customer’s cost and quality specifications or its standards for delivery and customer service in order to avoid the customer return to another supplier. Four global companies, two of which also manufacture aluminum containers, supply aluminum to can producers. Moreover raw materials typically account for 64 percent of the production cost. In a such competitive industry, individual producers are not able to influence the price of the output they sell or the output they purchase. Aluminum Can division can influence prices with lots of difficulties but has to respect very competitive price in order to stay on the market. Which a such important rate of raw materials in the production cost, Aluminum Can division has to find competitive advantage with it stature, it low cost, it standards of delivery and it customer service.

Vershire Company Case Overview Vershire Company was a diversified packaging company with several major divisions including the -Aluminum Can division –one of the largest manufacturers of aluminum beverage cans in the United States. The division had plants scattered throughout the United States. Each plant served customers in its own geographic region. Its customers were primarily small independent franchisees of Coca-cola and Pepsi Cola. Budget was the primary tool to direct each division’s effort towards common corporate objectives. Budget were made on the basis of review and approval process, started in May, when each divisional general manager submitted a preliminary report to corporate management summarizing the outlook for sales, income, and capital requirements for the next budget year, and evaluating the trends anticipated in each category over the subsequent two years. The performance measurement and evaluation was conducted each month using a performance evaluation report for a plant and its supplemental report. The plant manager had to explain only the areas where budgeted targets (Net sales, price and mix changes, gross margin, standard manufacturing costs) had not been met. Management incentives were granted for plant managers to motivate them. The result was some plants ran internal competitions between production line and departments to reduce cost items.
Strategy Vershire’s strategy is that of differentiation in the packaging industry. ... Vershire’s critical success factors are the same as what their competitors’ objectives would be – to meet the customers’ cost and quality specifications or its standards for delivery and customer service. If these standards are not met, it is very easy to leave one company and get the exact same product from another company for the same price. ... Two days after sheets received, each plant submits reports to the division, who compiles it and distributes to the company. ... This is a centralized company. ... Also creating in house competition can be damaging to the company as a whole as groups try to undercut other groups. ... Vershire is doing very well to maximize its competitive advantage. ... Dropping price a few pennies could mean that a company leaves you and goes to another company for their lower prices.