Crown Cork and Seal

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Crown Cork and Seal
Competitive Environment Analysis Exercise
Corporate Purpose Crown Cork and Seal had three segments Metal Containers (cans), Closures (crowns), and packaging equipment. Metal containers are cans used in things such as soft drinks or aerosol cans. These were made from steel until being switched over to aluminum in the early 80’s. Crowns which are closures for any type item such as a jar. “Metal containers generated 65% of Crown’s $1.88 billion 1988 sales, while closures generated 30% and packaging equipment 5%.” The mission of Crown Cork and Seal was to “be successful.” To do this Connelly had to take control of cost. He did this by first trimming the workforce by letting go anyone not needed which reduced payroll by 24%. “The second step was to institute the concept of accountability.” He did this by instilling pride and a sense of workmanship in the employees. He also gave plant managers “responsibility for plant profitability” as well as quality and customer service. Last but not leased he focused on the company’s debt. He paid off the banks through “inventory reduction and liquidation.”His vision and strategy for the future emphasized “cost efficiency, quality, and customer service.” Connelly did this by focusing on the company’s strengths. He was able to improve on their strengths by focusing on the beverage can and new aerosol market. Simultaneously, he improved manufacturing including adapting to customer needs. Environment Analysis: General Environment:

Demographic: 1989 over 120,795,000 metal cans were sold. Socio-Culture: The movement away from metal cans to plastic and glass has been a problem as they gain a bigger market share. Political-Legal:Political will play a big part in recycling and the push for “going green.” This will also take effect for the legal aspects as new laws will be in place for more recycling and cleaners running manufacturing plants. Technological:Shut down old out dated plants and opened up new plants across the US with new equipment. Economic: As higher gas prices hit lighter products such as plastic will be more economical to ship to customers verses a heavier metal can. Global: Connelly focused on international growth. He specifically targeted developing countries. Soon foreign plants generated 44% of sales and 54% of operating profits. Competitive environment: Buyers

The competitive environment for the buyers appears to favor the buyers over Crown Cork and Seal and its competitors for many reasons. Major buyers in this industry include Coca-Cola Company and Incorporated, Anheuser-Busch, and PepsiCo. In other words there are a low number of buyers, all of which are very large and powerful companies. The size distribution is mostly centered on these major buyers; however there are other companies such as Seagram’s, Molson, and Labatt. Because there are so few companies for CCS to sell to, a high percentage of sales are dependent on these buyers. This low number of buyers is due to consolidation within the soft drink segment, from 8,000 bottlers in 1980 to about 800 in 1989. Generally 45% of the total cost to buyers went into purchasing the cans. Due to the total cost of cans, buyers try to maintain many relationships with many can makers to increase bargaining power and reduce costs. As a result of this the buyer is not heavily dependent on one single can company. Switching costs are also lower for buyers for the same reason; they already have many resources to choose from. Buyers also are likely to profit fairly well compared to can manufacturers. Can manufacturers must maintain low prices in order to compete with each other to gain share over these very few yet powerful buyers. Some brewers are avoiding switching costs all together through backward entry into the market. By 1989, due to production of cans by “captive” plants, 25% of all...
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