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Crown Cork and Seal Notes

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Submitted By tompx2014
Words 428
Pages 2
Porter:
-Industry structure, market share: American National 44%, Ball Corp 5%, Crown Cork and Seal, 5%, Reynolds Metals 5%, Continental Can 13%, Other 28%.
-Industry trend—>In-house manufacture (brewers advantageous due to single-label), emergence of plastics (which was weakened in 84, 85. Still 1980 9% share to 18% share in ’89). Glass, for beer. Soft drink producers biggest customer for packaging producer. Diversification and consolidation among packing producers
-Diversification of related fields rather than unrelated ones. A response to low profit margins, excess, capacity, rising labor and RM costs. American can and insurance, failure.

Analysis Portion:
-Rivalry among existing firms (high), 5-6 big competitors. Reynolds Metals—>supplier route. New production tech—>Reynolds. New product design—> Ball Corp
-Bargaining power of buyers (high). Top 5 soft drink companies
-Bargaining power of suppliers (high)—>Alcoa, Alcan, Reynolds
-Threat of Substitutes (high): plastic and glass,
-Threat of New Entrants (low)—>the industry is already in long run MC. Smaller firms have been eliminated.

4Ps:
-Price, rising COGS due to rise of price of alum by 15%, 65% COGS is RM. TC=7.5%, Labor=12% In house manufacturing, 55%. Consolidation of soft drink bottling. Machinery=2-piece can, 20-25 M per line, 3 piece=8,5-9M/line. Most plants 12-15 lines.
-Customer. #1, Coke, #2 Anheuser-Busch, #3 Pepsi, #4 Seagram
-Distribution. Manufacturer locate plants close to customer. Crown cork and seal locate plants to multiple customers (Connelly).
-Suppliers. Alcoa, Alcan, Reynolds. Should invest in supplier to increase quality of products rather than diversify to other canning industries. Cuts down R&D costs and avoids basic research.

Connelly:
-Cut staff, reduce hq staff to 80. Reduce payroll by 24%, cut 1647 jobs
-Accountability––>managers become “owner operators”, responsible for the health of first-line plants
-Debt, Inventory control and liquidation to clear off company debt, Company debt 2%
-Strategy: R&D, Enhance existing product line, marketing: customer service, finance: debt/equity ratio 42% (56) to 18.2% (76), 5% (86)
-International presence, recycle older material
-Performance, Connelly benchmarks page 338, cut salary and increased sales, price of stocks 30 fold, income/profit grew

Avery:
-Growing plastic, light weight, petroleum (goes against the diversification plan of Connelly), no recycling, carbonation in less than 4 months,
-Acquiring Continental Can Canada, get plastic, market share, expansion world-wide, increasing bargaining power with suppliers. However, strong competition, conflict in culture

Strategy:
-Corporate: Growth, expand market share. Stability=product and market don’t change, accustom to what consumers want
-Business: R&D (no basic research), Recycle, Diversification (New material packaging)

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