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In April 1957, when Crown Cork & Seal was on the edge of bankruptcy, John Connelly took over presidency with in order to save the company. It was rightly said that by the end of 1957, Crown had “climbed out of the coffin and was sprinting.” Due to his leadership and strategic decision the company flourished after on the verge of being bankrupt for three times. After 20 years of consistent growth, the company had emerged as a major force in both the domestic and international metal container markets.

On his entry, within three years the sale of the company increased up to 50% and also on the other hand reduced their operating and administration expenses. Also there was good return to equity shareholders from 0.55% in 1956 to 9.66% in 1961 which shows that it has increased the shareholder’s value (Exhibit 7 & 8). And there was consistent growth in sales and also the value of firm in the reign of Mr John Connelly.

During those 20 years, Crown Cork and Seal had concentrated its manufacturing efforts on tin-plated cans for holding beer, soft drinks, and aerosol products. By 1977, however, the ozone controversy and the trend toward legislative regulation of nonreturnable containers were threatening Crown’s domestic business. In May of 1989, Connelly stepped down from his position as chairman appointing his long-time disciple William Avery as chief executive officer. Avery had plans to assess Connelly’s long-followed strategy because of the industry changes that were taking place. Since Connelly got into the business in 1957, the metal can industry had been greatly redefined as both suppliers and customers of can makers moved into can-making themselves. In the case study Avery’s main concern was whether it would be a good idea for Crown to bid on all or part of Continental Can (one of their competitors), whose operations were up for sale?

Industry Analysis:
In 1989, the metal containers industry was a very robust industry, representing 61% of all packaged products in the United States. However, many factors are emerging that are beginning to contribute to an unattractive business environment. Margins are beginning to compress due to excess capacity and rising raw material/labour costs.

Key buyers in the industry are beginning to vertically integrate downward, manufacturing their own cans in “captive” plants. In addition, key suppliers are beginning to integrate upward as aluminium firms produce metal containers. The introduction and growth of glass and plastic as substitute products is becoming a real threat to the metal containers industry. Glass bottles are becoming a real source of competition with the brewery end-user, outperforming metal cans on customer preference. Plastics possess the highest growth potential, especially among soft-drink bottlers. However, their potential is currently limited due to the material’s inability to hold carbonation for a long period of time and possible environmental concerns. Producers of metal containers are beginning to recognize these trends and take action. Company Analysis:

From exhibit 8 it can be seen that the returns on sales was consistent in year 1986 to 1988 i.e. from 14.34% in 1986, 14.46% in 1946, and 14.45% in 1988. Also the return on assets is falling from 8.67% in 1987 to 8.61% in 1988 which shows that the asset utilisation is deteriorating. Company’s operating profit also falling from $223.3 million in 1987 to $212.7 million in 1988. Operating ratio has fallen from 9.6% in 1987 to 6.6 in 1988. Thus from the above data it can be seen that the company’s growth is declining. Thus William J. Avery CEO has two options: To acquire Continental Can all or part of Continental’s can-making operations Diversify in Plastics

But these options have negative side also:
-Environmental issues with recycling of plastics which may lead to regulatory issues. -Mergers in manufacturing industries did not prove successful. And also after the acquisition there might be cultural issues, emotional and attitudinal change among the management of both companies. Thus on the other hand, Crown’s competitors had been expanding aggressively in a variety of directions, and Connelly remained careful and thrived. Because Crown had done the same thing for so long, Avery wondered if it was time for them 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. In order to develop a future strategic decision plan we have assessed Crown’s business with a SWOT analysis, keeping in mind all issues Avery has to consider. That implies an evaluation of the different strengths, weaknesses, opportunities and threats of Crown Cork’s business Strengths:

-Return on equity and total return to shareholders was ranked much higher than its competitors -Creating high value to its customers
-Good R& D in industry
-Customer centric
-Tremendous skills in die forming and metal fabrication
-High Quality

-Growth slowing in metal containers.
-Rely on only metals
-Smaller than its competitors

-Expand its product line beyond the manufacture of metal cans and closures -Market presence and increase market share by diversifying

-Mergers in this industry had not worked out
-Different cultures and bringing them together
-Forward and backward strategic decision by other competitors Thus from the above SWOT analysis, Crown Cork Canada should bid for Continental Can for only part of it because CCC had sales roughly $4010 million which would make Crown largest single presence outside US and thus make it second largest in US after American National Can.

Five force model Analysis:
New Entrants Barriers:
New entry in the industry is not that big threat to the company because of government subsidies, favorable capital requirements, economies of scale, product differentiation, good distribution channel, switching cost, easy access to raw materials and favorable government policies.

Substitutes Threats:
There are many substitutes for metal containers, limiting prices & long-term demand since alternative packaging innovations like paper juice boxes can easily emerge. By acquiring plastic Crown can move into entirely new segment. Thus the threats are lessen

Entering into the business of Plastic which has huge opportunity ahead will help Crown to become the dominant player in the market, eventually rivalry threat reduces.

Buyer’s Power:
Buyers (Soft drinks Manufacturers were not likely to do in house bottling than metal canning. Bottlers were also geared to low volume, multi-label output, which was not as economically suitable for the in-house can manufacturing process. So the threat is low.

Supplier’s Power:
Suppliers are aluminum, integrated steel companies, classic oligopolies that may be vertically integrated, becoming both suppliers and competitors. There is lot of potential in plastic segment. Due to its light weight, a plastic container was convenient in handling and thus reduces the distribution cost.
There was wide acceptance from consumer. Plastic market share grew from 9% in 1980 to 18% in 1989. So the company should diversify into plastics.