Crown Cork and Screw

Executive Summary:

In April of 1957, when Crown Cork & Seal was on the edge of bankruptcy, John Connelly took over presidency with objective to save the company. By the end of 1957, Crown had "climbed out of the coffin and was sprinting." Connelly's exceptional leadership is what contributed to the success of Crown. In May of 1989, Connelly stepped down from his position as chairman appointing his long-time disciple William Avery as chief executive officer.

We have plans to review Connelly's strategy because of the industry changes that are taking place. Since Connelly got into the business in 1957, the metal can industry had been significantly redefined as both suppliers and customers of can makers moved into can-making themselves. With the changes that were taking place, it would be a good idea for Crown to bid on all or part of Continental Can (one of our competitors), whose operations are up for sale. Crown is also faced with the choice to break Crown's tradition and increase its product line beyond the manufacture of metal cans and closures.

Modest growth potential is being seen in the metal can industry, and plastics are forecasted as the growth sector for containers. Our competitors have been expanding aggressively in a variety of directions, and Connelly had remained careful and thrived. Because Crown had done the same thing for so long, it is time for us to change. If Crown acquired Continental Can Canada, Canada would become Crown's largest single presence outside of the U.S. and would double the size of Crown's domestic operations. However, most mergers in this industry have not worked out well, and concerns are about taking two companies from completely different cultures and bringing them together.

The metal container industry has been very profitable throughout the years. In 1989 the metal container industry represented 61% of all packaged goods in the US. However, the metal container industry has been on a decline in recent years because a growing number of customers are switching to plastic or glass containers. Crown's basic business strategy is to combine the best quality metal container with the most efficient production and excellent customer service. This position has enabled the company to grow tremendously throughout the years and earn a spot in the Fortune 500.

Analysis of External Environment:

The use of Porter's 5 Forces Model gives an analysis of the industry for Crown Cork & Seal and an overview of where it is positioned within it. There is a strong competitive force among the top competitors within the metal container industry. This is because the industry makes up 61 percent of all packaged products in the United States and is also only dominated by five firms; which is very minimal compared to an industry as restaurants. The 4 rivaling competitors of Crown, making up the rest of the industry, include: American National Can, Continental Can, Reynolds Metals, and Ball Corporation. The threat of new entrants into the metal can industry is quite weak though. This is due to the fact that start-up and manufacturing costs are very high. Can production lines can cost anywhere between $16-25 million making it very difficult for the average Joe to start a company from ground up. This threat however, is quite opposite from the threat of substitute products. This threat is very strong for this industry, which results mainly from the existence of plastic and glass containers. The growth of plastic containers is the industry's major worry; mainly because it is more lightweight and convenient than metal cans or glass by consumers.

Analyzing the competitive force of suppliers and buyers are the last of Porter's analysis. The force of suppliers in the metal can industry is normal to strong. This is because, although it is very inexpensive for companies to switch suppliers from aluminum to steel, the consumer actually prefers the aluminum can. It is more lightweight and economical to recycle. A strong force of suppliers is also a result of the metal can industry only being supplied by 3 aluminum producers.

The force of buyers is normal to strong as well because the soft drink and beer companies are very large and purchase a sizable amount from the metal can industry. It is also indicated by the fact that those beverage companies purchase their packaging from a few large firms in the industry. It would be a definite strong force if they purchased from a large number of firms.

By looking at Porter's 5 Forces Model, it is noted that Crown Cork & Seal lies within the five dominant firms of the industry. This indicates that the company does have the opportunity to compete and even become the leader of the industry. To be the leader; however, will