Crown, Cork & Seal

12 Pages 3073 Words

jor competitors. Consolidation within the soft drink segment of the bottling industry reduced the bottler supply to 10% of it’s original size, which left a few large companies responsible for a large amount of beverage volume. Because these companies were few, they had power to maintain several can supplier relationships. This left the can supplier at their mercy, which could result in reduction in order size if their performance wasn’t satisfactory. The customer has a lot of power in this case, and it would be in the best interest of the can supplier to keep the customer happy, which would prove later to be one of the key elements in Connelly’s strategy.
Distributors as a force should also be considered. Raw material constituted the majority of the cost for metal cans. Aluminum was preferred over steel because of lower weight and shipping costs. Shipping costs were also minimized by close proximity of can makers to their customers. In general, the overseas market was seen as uneconomical due to costs. Connelly had a different view and valued the international market. He capitalized off of developing areas and was able to recycle equipment and implement his strategy of owner-operation with the locals who understood their own market.
How were economies of scale determined in manufacturing? The beverage industry was switching from a less costly and less efficient form of production (3 piece can line) to a more costly yet more efficient form of production (2 piece can line). This switch required more capital and less manpower. Eventhough every segment of the container industry was not making the switch immediately, the biggest customer for metal cans was the soft drink business, which was switching to the 2 piece can production line.
Suppliers also affected the industry. Aluminum accounted for 99% of the beer and 94% of the soft drink metal container business by 1989. This was achieved for several reasons. Alumi...