U T Dallas MBA' 2012
Crown Cork & Seal in 1989
1. What are the most significant factors affecting competition in the metal container industry?
The U.S. Metal can industry was valued at $12.2 billion 1989. There were five firms dominating this industry at that time constituting 61% of the entire market share. Some significant factors that impacted the competition among these firms were : Competitive Rivalry within the industry: The major players in the metal container industry comprised of 61% of the market share making intensive competitive rivalry among themselves. The Pricing was very competitive with little room for any significant profit margins. Focus was to enhance capacity utilization and eliminate costly changeovers wherever possible. Providing volume discounts was a common trend to attract more customers. The shrinking customer base attributed to a new low in manufacturer’s margins. Threat of new entrants : The threat of new entrants in this industry is pretty low since the major market players already dominate the existing market share. The threat for the competing companies lies in its other rivals rather than any new entrant to this specialized industry. Bargaining Power of the Customers : I feel the bargaining power in this industry for the customers was pretty high at that time. The major customers of this industry were big names like Coca-Cola, Anheuser-Busch, Pepsico Inc. etc. The mergers and consolidations among the numerous bottling industry companies resulted in a shrinkage from 8000 to 800 major players in a matter of 9 years (1980 to 1989). The customers could easily punish the metal container companies by making frequent switches whenever there occured unsatisfactory services or steep pricing. Bargaining power of suppliers : Steel had been replaced very quickly by aluminum ever since the invention of aluminum cans in 1958. By 1989, aluminum consisted of 99% of the beer and 94% of the soft drink metal...