CASE STUDY 5
FOCAL FIRM: Crown Cork & Seal
University of Arizona: Eller College of Management
Economics 571: Dynamics of Strategy
1. Perform an industry analysis for the industry.
Industry Competitors: Crown Cork & Seal (CCS) considered the following companies their main competition: American National Can, Continental Can, Reynolds Metal and Ball Corporation. Van Dorn Company and Heekin Can were regional threats. CCS and their main competitors comprised 61 % of the market in the metal can industry. There were approximately 100 other firms that served the rest of the market, but they were not plausible threats. Competition between the large firms was intense. Ball Corporation and Reynolds Metal were known for their technological advances. Ball Corp was also a low cost leader known for customizing its products to meet customer needs, qualities CCS prided itself on. Power of Suppliers and Buyers: Suppliers had significant power as they provided the main material to make the metal cans. Aluminum had surpassed steel in popularity due to its quality, weight, recycling efficiency, friendlier taste and lithographic properties. There were three major aluminum suppliers: Alcan, Alcoa and Reynolds Metal. Reynolds Metal was not only a supplier but also a direct competitor of CCS. They were also the only U.S. Company to produce metal cans. This gave them tremendous power over other firms. Steel was cheaper than aluminum, so Alcoa tried not to raise their prices to keep steel from infringing on their profits. Due to consolidation in the soft drink bottling industry there were four main buyers: Coca-Cola Company, Anheuser Busch, PepsiCo Inc., and Coca-Cola Enterprises. They established relationships with multiple can suppliers so they had significant bargaining power over them. If a supplier charged unreasonable prices or provided poor customer service, buyers would reduce their order sizes or take their business elsewhere. There was no brand loyalty. Substitutes: The threat of substitutes was high. Plastic was a viable packaging option. It was lightweight and widely accepted by consumers. However it did not retain carbonation as long as metal cans and was not environmentally friendly. Glass was not a substantial threat to soft drink sales, but it was a huge threat to beer sales. Consumers preferred “long neck” bottles instead. The threat of in-house manufacturing at the nation’s largest companies worried suppliers. Threat of Potential Entrants: The threat of new competition was low. The metal can industry was an oligopoly making it difficult for smaller firms to gain substantial market share. The constant innovation, diversification and economies of scale by companies such as Reynolds Metal and Ball Corp made it hard for others to compete on the same level. The threat of further consolidation between Ball and its subsidiary would also help them expand their power to the Canadian market. 2. Write a concise strategy statement for CCS during the period of this case.
We will become the most successful can manufacturing company in the industry by empowering all of our owner-operators and emphasizing cost efficiency, quality, and customer service; the key ingredients to Crown Cork and Seal’s future.
3. Is CCS’s strategy based on capabilities, industry attractiveness, or industry position?
Crown Cork & Seal has a strategy based on capabilities. John Connelly immediately worked to reduce debt. He improved quality by focusing on CCS’s strengths in metal forming and fabrication. Rapid design changeover to accommodate buyers was also emphasized. Connelly provided product for multiple customers in an area; he did not use one manufacturing facility for one customer as other metal producers did. 4. To the extent available in the case, identify CCS's organizational structure decisions, key company policies, and functional area strategies (e.g., finance, operations, information technology, human...
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