Crown, Cork & Seal

12 Pages 3073 Words

Introduction:

In the face of a changing business landscape in the metal can industry, William J. Avery, Crown’s new CEO, had planned on revising his predecessor, John Connelly’s business strategy. Suppliers and customers of can makers were beginning to integrate into can makers themselves, which was redefining the metal industry. Under Connelly, Crown attained sustained success over three decades due to Connelly’s strict strategies, which emphasized cost efficiency, quality and customer service. Avery was trying to determine whether or not to break with tradition or expand Crown’s product line due to the changing nature of the metal can industry landscape and/or participate in the supplier and customer consolidation that had become traditional in the metal can business.

Analysis:

In order to understand how the industry is changing, we must first look at the forces involved and trends that are emerging. One fact in particular that immediately stands out is that industry operating margins began to fall in spite of persistent demand for metal cans. This can be attributed to several factors. First, Five large firms dominated the industry with close to 100 lesser firms. The distribution of market share closely represents an oligopoly, which would suggest that there might be lower profits. Second, the case states that pricing was very competitive and can manufacturers aggressively discounted to protect their market share due to overcapacity and shrinking customer bases. A third reason for drops in operating margins were due to pricing that did not consider substantial increases in costs, increased can making capacity, increases in backwards integration of breweries and can-makers, and soft drink bottling consolidation.
Another important force to consider is the customer and what impacts they have on the metal can industry. The soft drink industry is a thriving and profitable industry based on overall sales of ma...