Crown Cork and Seal
The changes taking place in the metal container industry at the time of the Crown, Cork and Seal case using Porter's 5 forces can be described as follows:
Current Players
There was a high concentration of market share held by five companies in the metal can industry. Collectively, the five companies held 61% of the market, with the remaining 39% shared by approximately 100 firms. With the five firms holding a large market share, the competitive environment becomes more like a monopoly and therefore less competitive. The rivalry among the five firms seems to have intensified due to the following observed industry characteristics:
1. The little growth potential for metal cans in the 1990s and the analysts' expectations of plastics as the "growth segment for containers."
2. Since they all produced mostly two-piece cans and catered to the metal beverage containers market, there appears to be a low product differentiation among the five firms.
3. The asset specificity of the industry creates a high exit barrier where the equipment is highly specialized that the firms may have a difficult time selling to buyers from other industries.
4. Major customers producing their cans in-house that accounted for approximately 25% of the total can output in 1989.
Barriers to entry
One of the barriers to entry in the metal can industry at this time is the monopoly held by the top five firms. It would difficult for a small start-up firm to have any real significant impact on obtaining market share unless they come in on a large scale or if they have proprietary know-how. Another barrier would be asset specificity as mentioned in number 3 above.
Suppliers
The suppliers in the metal can industry are considered powerful since it is dominated by basically 3 aluminum companies and are a highly concentrated industry in itself. Although steel is another raw material used, its usage had declined over the years as aluminum was lighter, were of better quality, less effect
Current Players
There was a high concentration of market share held by five companies in the metal can industry. Collectively, the five companies held 61% of the market, with the remaining 39% shared by approximately 100 firms. With the five firms holding a large market share, the competitive environment becomes more like a monopoly and therefore less competitive. The rivalry among the five firms seems to have intensified due to the following observed industry characteristics:
1. The little growth potential for metal cans in the 1990s and the analysts' expectations of plastics as the "growth segment for containers."
2. Since they all produced mostly two-piece cans and catered to the metal beverage containers market, there appears to be a low product differentiation among the five firms.
3. The asset specificity of the industry creates a high exit barrier where the equipment is highly specialized that the firms may have a difficult time selling to buyers from other industries.
4. Major customers producing their cans in-house that accounted for approximately 25% of the total can output in 1989.
Barriers to entry
One of the barriers to entry in the metal can industry at this time is the monopoly held by the top five firms. It would difficult for a small start-up firm to have any real significant impact on obtaining market share unless they come in on a large scale or if they have proprietary know-how. Another barrier would be asset specificity as mentioned in number 3 above.
Suppliers
The suppliers in the metal can industry are considered powerful since it is dominated by basically 3 aluminum companies and are a highly concentrated industry in itself. Although steel is another raw material used, its usage had declined over the years as aluminum was lighter, were of better quality, less effect