Crown Cork and Seal

1. What are the most significant factors affecting competition in the metal
container industry?

• Consumer demand/Preferences
• Technological Change
• Environmental / Legislative Risk
• Number of Competitors
• Geographic location of plant and customer
• Infrastructure Investment
• Research and Development

1
Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 7/3/03
 Crown Cork and Seal
2. Have these factors changed over time?
Consumer demand/Preferences – The consumer is more aware of needs and ability
To manufacture to desired specification (Packaging)
Technological Change – Tin manufacturing lines have reduced in cost,
as manufactures lost clients which in turn lead to a reduced cost of approx 80%.
Environmental / Legislative Risk – Ozone hazards relating to fluorocarbons and the
Value of recycling tin was less than aluminum.
Number of Competitors – Decreased considerably due to increased manufacturing
and logistics, and the reduction of consumer demand.
Geographic location of plant and Infrastructure Investment – They increased the
number of plants by 300%, reduced the size and based them close to customer rather
than raw material.
Research and Development – Crowns R&D focused on enhancing their existing product line.
Their preference was to perfect their technology that they were using, and let others take the
2
risks.
Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 7/3/03
 Crown Cork and Seal
3. What strategy does Crown Cork have for competing in this industry?
• Not much Research and Development
• Focus on customers needs
• Invested in new plants
• Plants set up for multiple customers
• Located plants close to customer
• International Expansion – Crown and Cork concentrated on international
growth, especially in developing nations. (In many cases the company received
10-year tax shelters)

3
Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 7/3/03
 Crown Cork and Seal
4. What advantages, if any, does a firm the size of Crown Cork have over
American Can and Continental Can?

• They don’t have as many organisational obstacles and are able to react
quicker to product innovation
• As they would have lower overheads than the 2 majors they don’t have to
follow suit & diversify, they are able to specialise on tin products.
• Do not have a high Research and Development budget as they are not
interested. They are able to let others take the risks and make mistakes
during R&D and learn from the innovators heartaches.

4
Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 7/3/03
 Crown Cork and Seal
5. How would you explain the comparisons shown in exhibit 3 in this case?

Total Company Performance

• The 2 majors both Continental Group and American Can had the highest Sales
and Net Income for the period between 1967-76 but were overshadowed by Crown
Cork and Seal for growth in Sales and Profit for the same period.
• Both National Can and Crown Cork and Seal had the highest ROE against the 2
giants of the industry and Crown Cork and Seal the lowest Debt Ratio.
Metal Can Segments (domestic)
• Whilst Crown Cork and Seal had the lowest sales for this segment it had the
largest as a % of sales percentage.
• Also interesting was the fact that Crown Cork and Seal had the lowest amount of
can plants. The number of Crown Corks plants was approx 269% less then than
largest Continental Groups. (ie Reduced Assets therefore lower overheads)
Whereas Crown Corks Net Income was only 161% less than Continental Groups.

5
Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 7/3/03
 Crown Cork and Seal
6. Identify and discuss the major problems facing Crown, Cork and Seal.

• The Ozone Controversy – Most tests supported the basic thesis that
fluorocarbons were in some way damaging to the ozone layer.
• Regulating Nonreturnable Containers – Legislative restrictions on the use of
nonreturnable containers threatened Crown Cork. The EPA banned
throwaways from federal property.
• Economic Impact – Laws posed a threat as would increase beer and soft drink
prices.
• Deposits and Recycling – This new system favored aluminum cans because of
the higher value reclaimed for aluminum and the recycling network already
existed.

6
Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 7/3/03
 Crown Cork and Seal
7. What recommendations would you make to John Connelly as of the end of
the case?

Employ the assistance of external experts to identify and evaluate:

• Employ political lobbyists to combat possible legislation that reduces the

use for products manufactured by Crown
• Environmental concerns with products
• Industry specific advice
• Review current technology
• Market penetration

7
Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 7/3/03
 Crown Cork and Seal
7. What recommendations would you make to John Connelly as of the end of
the case? Cont…

• Marketing approach
• Additional and or synergistic markets
• Plant locations
• Efficiencies at plants (Just-in-Time manufacture?)
• Efficiencies for raw materials
• New types of raw material
• Employment efficiencies

8
Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 7/3/03
 Crown Cork and Seal
7. What recommendations would you make to John Connelly as of the end of
the case? Cont…

Continue with
• Customer service approach
• Re-evaluating fabrication processes looking for efficiencies
• Tight financial controls on spending
• Quick response times to customers

9
Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 7/3/03
 Crown Cork and Seal

© Hampson, 2000

10
Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 7/3/03
 Crown Cork and Seal

11
Adam Francis, Greg Cullen, Angus Walker, Terje Fiskvik 7/3/03