Crown Cork and Seal

Company, Inc
 Metal Can Industry Structure
Market Share ($12.2bn) Pricing
Low profit margins in US ranging from 4-7%
Huge investment
Competitive pricing
25% Primary Price component:
39% Raw Material 65%
Direct Labor 12%
4% Transportation 7.5%
7%
7%
18%
Distribution
Plans located closer to the customers

American National Ball Corporation Crown Cork & Seal Manufacturing

2-pieces can line: $20-25mn per line
Reynolds Metal Continental Can Other 3-pieces can line: $7mn per line
 Industry Overview
Customers Competitors Suppliers

Being lighter, more consistent

Large and powerful quality and more economical
customer base to recycle, by 1989 aluminum
accounted for 99% of the beer
and 94% of the soft drink
metal can
 Industry Highlights
In-house manufacture

Plastics

Glass

Soft drinks &

aluminum cans

Diversification &
consolidation
 Roadmap of CC&S Inc.
Crown CS company 1927
founded
Crown bought by competitor:
1891 Charles McManus
1920
Patent run out, post which Crown on the verge of
the company was on the bankruptcy again.
verge of bankruptcy Connelly took over as
president
1957
1955 Partnership with
1930 Connelly Container
Prosperous growth
Sold over 50% of US and world
supply of bottle cap
Diversified into beer can market

1956

Connelly became outside

director
 John Connellys Strategy
Focus on core competency of the firm: Single product line

Lean Organization: Fired employees, reduced payroll

Institute accountability : Managers responsible for plant profitability

Pay off debts: Reduced debt/equity ratio from 42% in 1956 to 5% in 1986

Stock repurchase and no dividends

Investment in R&D: Quality control & max efficiency

Differentiating through service: Flexibility & quick response to customer needs

Manufacturing : Regional plants closer to customers

Globalization: Developing International markets

 SWOT ANALYSIS
STRENGTHS
Specialised Product Line
Strong International
Presence
Good Financial Performance
Effective Customer Service
Cost efficient
Crown Cork
OPPORTUNITIES
Expanding Globally
Chance to consolidate
Product Diversification
STRATEGIC CHOICES
WEAKNESS Corporate Strategy
Less diversity of product What business should we be in?
Less emphasis on Research
and Development Growth: High Market share
Ranked No. 4 in USA on Stability: Stable product and market dynamics
Market Share
Retrenchment: Cutting down due to changes in
consumer behaviour
Business Strategy
How shall we compete in this business?
THREATS Cost Leadership: Through innovation, use of green
Slow Growth in Metal Can technology, and effective supply chain process
segment Diversification: Introducing new materials packaging
Emerging Plastic Industry Products & Services: High R&D, Green technology
Declining manufacturers Management: Innovation, Supply chain
margin Marketing: new international markets
Backward and Forward
Integration
 CC&S Inc. Value Chain
Focused on enhancing the
existing product line

1.Strong Leadership
2. Lean Organization

Sale Forecasting

Regional Plants flexibility

Low Debt/Equity Emphasis on
Quality and quick response to
customers needs
 PORTERS FIVE FORCES
Threat of New Entrants
High Competition Low
Asset Specificity
HIGH HIGH
Bargaining Power of Suppliers
Big 3 aluminum packaging HIGH Bargaining Power of Customers
producer => Alcoa, Alcan Rivalry among Existing Firms Easy switching to other
and Reynolds Metals 5-6 Big Players suppliers
Only one aluminum can Commoditized products Consolidated Buyers
producer => Reynolds Price competitive Captive plants
Metals

Threat of Substitutes HIGH

Aluminium Expensive, Widely accepted alternative
Glass Lost Competitiveness, Attractive due to long-neck beer
bottles
Plastics Emerging industry, carbonation and recycling issues
 ALTERNATIVES
Acquiring Continental Entrance into Plastic Container Industry

+ Pros + Pros

Decreasing Shipping cost due to light weight

Gaining Market Share
Strengthening Global Outreach
Reducing Bargaining Power of Buyers
and suppliers
- Cons
Cultural Difference between the firms
Competitive Market
Growth of In-house manufacturing
Increasing Market Share of Plastic Industry as
a whole
Widespread consumer acceptance
- Cons
Carbonation escape in 4 months
Incompatibility with Standard production
lines
Recycling was not a closed loop system
Growth slowing down due to environmental
concerns
Sales and income effects in 1993
Due to acquisition of Continental Can

SALES INCOME
Acquiring European part Acquiring European part
Acquiring USA part Acquiring USA part
Acquiring domestic part Acquiring domestic part
Doing nothing Doing nothing

0.0 1000.0 2000.0 3000.0 4000.0 5000.0 0.0 50.0 100.0 150.0 200.0 250.0

Due to diversification by acquiring Constar

Net sales by doing nothing Added sales by acquiring

3000 Constar
2500
5000.0
2000
4000.0
1500 3000.0
1000 2000.0
500 1000.0
0 0.0
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1989 1990 1991 1992 1993
Recommendations and Implementations
Acquire European division of continental cans
Diversifying into the plastic industry by acquiring Constar.

Phase 1 Phase 2 Phase 3

Consolidate Board of Focus on new R&D products Use excess manufacturing

Directors with cross-over in Plastic (recycling as well) capacity to manufacture
training or the employees and continue with the new products
Swap and interlace customer driven R&D Continue to concentrate
managers from both strategy as Connelly on specialised uses and
companies in order to illustrated international markets as
create balance between per Connellys strategy
manager levels at each
company.
 How attractive has the metal container
industry been over the years?
The metal container industry represented 61% of all packaged products
in the U.S. and had been very lucrative for the five firms that dominated
the $12.2 billion industry during 1989 with Crown Cork and Seal making
up 7% of the market.
How well did Crown Cork do under John Connelly?
What were the keys to their success?
Crown Cork was revived under John Connelly. At the time that he
stepped up as president of Crown Cork the company was at the verge
of bankruptcy.
Once Connelly took the reins of the company the vision changed, to
emphasize cost efficiency, quality and customer service.
This was done by recognizing Crowns position as a small producer
and developed a product line built around the companys traditional
strengths in metal forming and fabrication. Also, Connelly closed
inefficient fabrication plants
Thank You