Administration

Topics: Tin can, Soft drink, Beverage can Pages: 38 (11752 words) Published: June 20, 2013
9-793-035
REV: JULY 26, 2005

STEPHEN P. BRADLEY

Crown Cork & Seal in 1989
John F. Connelly, Crown Cork & Seal’s ailing octogenarian chairman, stepped down and appointed his long-time disciple, William J. Avery, chief executive officer of the Philadelphia can manufacturer in May 1989. Avery had been president of Crown Cork & Seal since 1981, but had spent the duration of his career in Connelly’s shadow. As Crown’s new CEO, Avery planned to review Connelly’s long-followed strategy in light of the changing industry outlook. The metal container industry had changed considerably since Connelly took over Crown’s reins in 1957. American National had just been acquired by France’s state-owned Pechiney International, making it the world’s largest beverage can producer. Continental Can, another long-standing rival, was now owned by Peter Kiewit Sons, a privately held construction firm. In 1989, all, or part of Continental’s can-making operations, appeared to be for sale. Reynolds Metals, a traditional supplier of aluminum to can makers, was now also a formidable competitor in cans. The moves by both suppliers and customers of can makers to integrate into can manufacturing themselves had profoundly redefined the metal can industry since John Connelly’s arrival. Reflecting on these dramatic changes, Avery wondered whether Crown, with $1.8 billion in sales, should consider bidding for all or part of Continental Can. Avery also wondered whether Crown should break with tradition and expand its product line beyond the manufacture of metal cans and closures. For 30 years Crown had stuck to its core business, metal can making, but analysts saw little growth potential for metal cans in the 1990s. Industry observers forecast plastics as the growth segment for containers. As Avery mulled over his options, he asked: Was it finally time for a change?

The Metal Container Industry
The metal container industry, representing 61% of all packaged products in the United States in 1989, produced metal cans, crowns (bottle caps), and closures (screw caps, bottle lids) to hold or seal an almost endless variety of consumer and industrial goods. Glass and plastic containers split the balance of the container market with shares of 21% and 18%, respectively. Metal cans served the beverage, food, and general packaging industries. Metal cans were made of aluminum, steel, or a combination of both. Three-piece cans were formed by rolling a sheet of metal, soldering it, cutting it to size, and attaching two ends, thereby creating a three-piece, seamed can. Steel was the primary raw material of three-piece cans, which ________________________________________________________________________________________________________________ Professor Stephen P. Bradley and Research Associate Sheila M. Cavanaugh prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 1993 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

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Crown Cork & Seal in 1989

were most popular in the food and general packaging industries. Two-piece cans, developed in the 1960s, were formed by pushing a flat blank of metal into a deep cup, eliminating a separate bottom, a molding process termed “drawn and ironed.” While aluminum companies developed the original technology for the two-piece can, steel companies ultimately followed suit with a thin-walled steel version. By 1983, two-piece...
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