Crown Cork and Seal Company: Summary of Case and Key Questions
Company Background Information and Historical ContextBy 1977 The Crown Cork and Seal Company was the fourth largest producer of metalcans and crowns. Under the leadership of John Connelly, the company had transformedfrom near-bankruptcy in 1957 to becoming a formidable force in the domestic andinternational metal container market. By 1976 Crown had revenues of $910 million, $343million of which came from international markets – making them the largest international producer. They derived 65% of total sales from tin-plated cans and 29% from crowns; theremainder of their business came from bottling and canning machinery. In terms of product categories, cans were categorized as follows: Food cans, beverage cans, pet foodsand general packaged cans. The biggest growth category was beverage cans whichcomprised of soft drinks and beer. At the time of the case, Crown was considered to beextremely successful – their return on sales was twice that of their three largestcompetitors, and they enjoyed the highest profit growth over the last 10 years.Industry Characteristics and Value ChainCustomers: 80% output came from food and beverage companies who maintained atleast two suppliers and had significant power of them.Competition: Crown’s current market share was 8.3%. Their three biggestcompetitors were American Can (16.6%), Continental Can (18.4%) and National Can:(8.7%). There also faced significant threats from customers backward-integrating intothe supply chain (e.g. Campbell soup started making their own cans) and fromaluminum producers like Alcoa grabbing market share.Suppliers: Big U.S steel companies and new entrants who supplied aluminum, fiber-foil and plastics.Crown’s StrategyPhilosophy: Relentless focus on core strengths: product lines were based on metalforming and fabrication competencies with a single-minded focus on tin cans andcrowns. Since R&D was not their strength, they decided to be the “second” player,learning from other firm’s mistakes and successes.
Crown Cork& Seal Five Forces Analysis Essay
669 WordsFeb 15th, 20113 Pages
Five forces Analysis of Crown Cork& Seal in 1989
Part1. Competition analysis of metal container industry
Bargaining power of suppliers
1. There are only three major aluminum suppliers, Alcan Aluminum, Alcoa, Reynolds Metal. They have obtained strong power by dominating and controlling the primary aluminum and aluminum production market. They are more concentrated than metal container industry.
2. These aluminum producers control huge aluminum resource so that the can manufacturer cannot put threat of backward integration. In contract, the aluminum producers are able to put threats of forward integration, just as Reynolds Metal integrated into aluminum cans.
Conclusion: aluminum producers can exert a good deal of…show more content…
Plastics are light and convenient handling, achieving widespread customer acceptance. In general, plastic packing growths fast and posts significant threats of substitution to cans
2. Glass is competing steadily with cans in beer market.
Conclusion: the metal cans face significant threats from substitutes.
The intensity of competitive rivalry:
1. Products are not much differentiated, so there is intensive price competition.
2. The low-entry barrier and the threats of substitutes put a cap on prices
3. The great deal of bargaining power of supplier and customers cut down the margin of metal can manufactures.
4. The capacity is excess, the demand for cans is below the potential supplies.
5. The rising material and labor costs further shrink the profit margin
6. The metal container industry approach maturity, indicating the growth is slowing.
Conclusion: the competition in metal container industry is very intense.
Part2: Competitive advantages of Crown Cork & Seal
The competitive advantages of Crown Cork& Seal come from customer-orientation strategy and international expansion strategy.
First of all, Crown is customer-oriented in almost all aspects of business. For example, Crown’s technology strategy focuses on enhancing the equipment and product line specifically to meet customer’s need, rather than on basic research. Their