Crown Cork & Seal – Business Analysis Essay
At the beginning of the eighties, major companies that necessitated packaging for their products saw the advantage of using aluminum instead of steel as cans, because aluminum was much lighter, reducing the transportation and the production costs (Bradley, 2011). The can industry shaped around this trend, with many companies activating in this field reorganizing and diversifying their businesses. For Crown Cork & Seal (CC&S), the advent of aluminum in the metal packaging industry represented an opportunity to produce major changes, which allowed the company to continue existing.
As CC&S was confronting the bankruptcy, John F. Connelly stepped in and changed the management of the company by reducing the unnecessary workforce, erasing the nepotism organization and making accountable each plant managers for the successes of their unities. Without jumping in to adopt the market’s trends, the company’s strategy was to wait and see if certain moves was or not successful, learning from others’ mistakes; however, Connelly was an innovator in customer service, working closely to his customers for generating improvements (Bradley, 2011).
With this business philosophy, CC&S avoided bankruptcy and achieved high performances, pursuing and implementing three key success indicators: cost efficiency, customer service and quality (Bradley, 2011). Customer needs are constantly evolving, and as long as the company will focus on anticipating and meeting them, CC&S will leverage on its strength in the future. Unlike its competitors, the company chose to serve more clients from a common location, instead of moving in the close proximity of each client for supporting their businesses, which was a strategy that generated cost effectiveness. Adopting a vertical integration for the transportation suppliers would be a supportive strategy for continuing to maximize the cost efficiency advantage in the future. For continuing to leverage on the quality aspect, the company needs to improve its processes, aligning them to the new technology and quality standards.
Because the metal canning market is experiencing a decline, leaving market space to bottle packaging, CC&S should consider taking a new approach. Bidding into Continental Can’s bottle packaging division in Unites States, Europe and Canada would reposition the company, which would diversify its offer, improving and increasing its line-up of services for its clients.
In 1989, when Avery took over CC&S, the company faced the bargaining power of the clients, which generated the drop in the metal can market and the increase in the plastic one. With decreased demand, the production costs become higher for the metal packaging and companies still using metal as their raw material have to face the bargaining power of suppliers. Still, the bargaining power of the customers is higher than that of the suppliers, because CC&S has the advantage of reducing its metal canning production for the plastic packaging, if it decides to bid for Continental’s bottle packaging division. The bargaining power of the existent players is relatively high. With American National Can, Reynolds Metals, Ball Corporation, Van Dorn Company and Heekin Can, there is sufficient market for CC&S to cover and even to attract from its competitors. The bargaining power of new entrants is relatively low, considering that the industry has entry barriers due to the fact that established companies have already consolidated strategic partnerships and the capital requirements into this industry are high (Porter, 2008). Finally, the threat of substitute products, which implies replacing an item with another which performs similar functions, such as plastic replaces aluminum (Porter, 2008) is significant. In fact, for this threat in particular CC&S needs to reshape its business, bidding for Continental’s plastic division. Moreover, nowadays, an important substitute for aluminum and plastics is the “bag in box” concept (Flemming, Humphries, Thompson & McFeeters, 2002), which shapes a new packaging concept that can impose a real substitute threat for CC&S.
Bradley, S.P. (2011) Crown Cork & Seal in 1989. Boston: Harvard Business School.
Flemming, H.P., Humphries, E.G., Thompson, R.L. & McFeeters, R.F. (2002) Bag-in-box technology. North Carolina: NC State University.
Porter, M.E. (2008) The five competitive forces that shape strategy. Available at https://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1.
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