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CROWN	
  CORK	
  AND	
  SEAL	
  COMPANY:	
  
THE	
  EVOLVING	
  CAN	
  INDUSTRY	
  
	
  
MIN-­‐GYU	
  CHOI,	
  TEDDY	
  TR...
Background	
  
Under	
  the	
  leadership	
  of	
  John	
  F.	
  Connelly,	
  Crown	
  Cork	
  &	
  Seal	
  Company	
  (CC...
William	
  J.	
  Avery	
  has	
  replaced	
  Connolly	
  as	
  CEO	
  at	
  a	
  time	
  when	
  the	
  can	
  industry	
 ...
and	
  allowed	
  the	
  company	
  to	
  react	
  quickly	
  to	
  customer	
  needs.	
  Furthermore,	
  each	
  plant	
 ...
products	
  to	
  adopt,	
  and	
  or	
  relevant	
  industries	
  to	
  pursue.	
  Also,	
  diversification	
  initiative...
container	
  future	
  growth.	
  Industry	
  observers	
  forecast	
  plastics	
  are	
  the	
  strongest	
  container	
 ...
Suppliers	
  in	
  this	
  industry	
  are	
  limited.	
  The	
  three	
  largest	
  aluminum	
  producers	
  seem	
  to	
...
The	
  intense	
  rivalry	
  among	
  mature	
  competitors	
  is	
  critical	
  to	
  consider.	
  The	
  case	
  explain...
As	
  we	
  have	
  mentioned,	
  CC&SC	
  has	
  adopted	
  the	
  philosophy	
  of	
  “late	
  mover,”	
  in	
  terms	
 ...
While	
  Connelly’s	
  strategy	
  proved	
  successful	
  for	
  many	
  years,	
  the	
  can	
  industry	
  is	
  undeni...
consequences.	
  Avery	
  should	
  consider	
  these	
  carefully,	
  and	
  determine	
  which	
  combination	
  of	
  r...
The	
  financial	
  state	
  of	
  Crown	
  lends	
  itself	
  to	
  acquiring	
  competitor	
  firms.	
  It	
  is	
  a	
 ...
Strategy	
  4—New	
  Markets:	
  We	
  believe	
  Avery	
  should	
  consider	
  expanding	
  into	
  untapped	
  
regions...
Avery	
  should	
  consider	
  the	
  following	
  questions:	
  how	
  much	
  has	
  the	
  popularity	
  of	
  plastic	...
WORKS	
  CITED	
  
"About	
  Crown."	
  Crown	
  History.	
  Crown	
  Holdings,	
  Inc.,	
  2014.	
  Web.	
  27	
  Apr.	
 ...
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Crown Cork Seal

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Crown Cork Seal

  1. 1. CROWN  CORK  AND  SEAL  COMPANY:   THE  EVOLVING  CAN  INDUSTRY     MIN-­‐GYU  CHOI,  TEDDY  TRAN,  GREGORY  VANDERZANT,     MARYORI  VENERO  UGARTE,  MAURICE  WINGO                                                    
  2. 2. Background   Under  the  leadership  of  John  F.  Connelly,  Crown  Cork  &  Seal  Company  (CC&SC)  was   transformed  from  an  ailing  organization  to  a  metal  can  industry  leader.  CC&SC  became  a  company   that  specialized  in  cost  efficiency,  quality,  and  customer  service.  The  company  leveraged  core   competencies,  capitalized  on  established  industry  trends,  and  identified  reliable  growth   opportunities.   Today,  the  metal  container  industry  in  the  United  States  is  changing  significantly  as  the   result  of  4  factors:  1)  the  emergence  of  new  materials  and  technology,  2)  aggressive  pricing   strategies,  3)  product  line  specialization,  and  4)  domestic  market  saturation.  Over  time,  the  number   of  can  manufacturers  has  decreased  as  a  result  of  several  mergers  and  acquisitions.  Aggressive   strategies  have  led  to  price  wars  amongst  competitors,  which  have  negatively  affected  profit   margins.  Thus,  competitors  have  relied  on  other  factors  to  differentiate,  such  as  distribution   channels,  levels  of  responsiveness,  and  R&D.     Long  ago,  CC&SC  implemented  a  seminal  strategy  that  involved  increasing  the  number  of   production  plants  and  thus  expanding  national  distribution.  This  led  to  transportation  cost   reduction  and  higher  levels  of  responsiveness  for  customers.  CC&SC  has  always  focused  on  targeted   research  to  improve  current  products.  Significantly,  it  has  rarely  engaged  in  innovative  related  R&D   itself.     CC&SC  has  strategically  reduced  its  product  line  to  beverage  cans  and  aerosols.  This  has   allowed  the  organization  to  leverage  core  competencies  and  invest  in  the  most  promising  new   technology.  Another  factor  that  has  differentiated  the  organization  from  competitors  has  been  its   ability  to  identify  opportunities  in  developing  countries.  CC&SC  has  secured  unique  and  exclusive   “pioneer  rights”  abroad,  which  have  provided  the  company  with  first  mover  advantage  in  several   markets.   DIRECTION  &  GOALS  
  3. 3. William  J.  Avery  has  replaced  Connolly  as  CEO  at  a  time  when  the  can  industry  outlook  has   grown  negative.  New  trends  pose  a  threat  to  the  business  strategy  implemented  by  Connelly.  The   growth  of  metal  containers  and  closures  has  slowed  and  plastic  is  forecasted  to  become  even  more   popular.  Avery  is  considering  whether  or  not  it  is  time  to  1)  diversify  CC&SC’s  product  line,  and  or   2)  purchase  a  Canadian  can  competitor.   Just  like  any  business,  CC&SC  goals  are  to  maximize  1)  short-­‐term  and  long-­‐term  profit,  as   well  as  2)  share  prices.  We  believe  achieving  this  aims,  given  the  specific  nature  of  the  can  industry   and  CC&SC’s  position,  boils  down  to  adaptation  and  diversification.   Analysis   SWOT:  STRENGTHS   Leadership:  Connelly  had  visions  as  CEO,  and  developed  a  strategy  and  specific  culture  to   reinforce  these.  He  pushed  ahead  his  strategies  through  frugality,  demanding  goals,  and  maximizing   the  organization’s  potential.  Here  are  some  specific  actions  that  he  took,  which  had  a  positive   impact:   • Focused  on  beverage  &  aerosol  high-­‐growth  segments   • Committed  to  customer  service,  just-­‐in-­‐time  delivery   • Concentrated  on  cost  reduction,  in  both  manufacturing  and  R&D   • Developed  competency  in  manufacturing  filling  equipment  solutions   • Expanded  internationally   • Decentralized  responsibility  at  the  plant  level  to  empower  plant  managers         • Paid  himself  a  low  salary   Customer  Relationships:  CC&SC  has  a  customer-­‐centric  culture.  Plants  are  strategically   placed  across  the  world,  in  order  to  be  close  to  customers.  This  has  reduced  transportation  costs  
  4. 4. and  allowed  the  company  to  react  quickly  to  customer  needs.  Furthermore,  each  plant  has  the   capacity  to  handle  multiple  customers.   Financial  Stability:  After  Connelly  took  over  at  CC&SC  he  steadily  reduced  debt  to  equity   from  42%  in  1956,  to  5%  in  1986.  Also,  the  company’s  revenues  reached  $1  billion  in  1977,  and   earnings  per  share  reached  $10.11  in  1988.   Quality  &  Differentiated  Products:  CC&SC  concentrates  on  specialized  products,  such  as   fiber-­‐foil  cans  for  motor  oil—these  are  approximately  20%  lighter  and  15%  cheaper  than  regular   metal  cans.  In  order  to  meet  the  needs  of  soft  drink  and  aerosol  producers,  CC&SC  began   manufacturing  two-­‐piece  cans.   WEAKNESSES   Limited  R&D:  By  and  large,  CC&SC  has  not  been  interested  in  high  quality  R&D,  except  for   the  development  of  specific  equipment.  Connolly  and  the  company  have  chosen  to  focus  on   enhancing  existing  products.  We  believe  this  mentality  could  cause  CC&SC  to  fall  behind  its   competitors  over  the  long-­‐term.   Lack  of  Product  Diversity:  There  has  been  intense  competition  in  the  metal  container   industry  for  decades.  Additionally,  the  demand  for  containers  made  from  plastic  and  glass,  has  also   increased.  However,  CC&SC  has  continued  to  focus  on  metal,  despite  changing  markets  realities.     Because  the  metal  can  industry  is  heavily  dependent  on  raw  materials  such  as  aluminum,   which  means  that  the  customer  price  of  finished  cans  is  consequently  affected.  If  CC&SC  expanded   their  business  into  plastics  and  or  glass,  it  would  have  a  robust  business—capable  of  weathering   changes  in  raw  material  prices.  This  could  ultimately  translate  into  increased  profits.   OPPORTUNITIES   Product  Diversification:  We  believe  CC&SC  can  leverage  core  competencies  and  consider   diversifying  its  business.  As  a  rule  of  thumb,  companies  should  primarily  consider  relevant  
  5. 5. products  to  adopt,  and  or  relevant  industries  to  pursue.  Also,  diversification  initiatives  must  create   value  for  shareholders.   International  Expansion:  CC&SC  specializes  in  international  growth.  CC&SC  has  chosen  to   pursue  various  opportunities  in  Africa  and  East  Asia  markets.  By  pursuing  international  expansion   the  company  is  able  to  recycle  obsolete  equipment.   THREATS   Substitutes,  Power  of  Suppliers/Buyers,  &  Competition:  There  are  many  substitutes  for   aluminum  containers;  as  a  result,  the  long-­‐term  demand  for  aluminum  containers  may  be  affected.   In  the  case  of  CC&SC,  the  suppliers  and  buyers  are  incredibly  powerful.  The  suppliers  include  a   limited  number  of  aluminum  sheet  companies,  and  the  buyers  include  large  breweries,  soft  drink   bottlers,  and  food  companies.  Lastly,  can  companies  find  it  hard  to  differentiate,  as  buyers  purchase   based  on  price.  The  industry  is  tightly  packed  and  competitive.   PORTER’S  FIVE  FORCES   There  was  relatively  stable  growth  for  the  metal  container  industry  in  1980’s—at  a  rate  of   3.7%.  To  illustrate  the  size  and  importance  of  the  industry,  consider  that  120  billion  cans  were   produced  in  1989  alone.  Aluminum  has  clearly  won  out  over  steel  as  the  can  industry’s  preferred   material;  demand  has  grown  200%  over  the  past  decade.  Also,  aluminum  cans  much  lighter  than   steel  versions,  which  makes  for  easier  and  cheaper  shipping.  An  impressive  99%  of  beer  businesses   and  94%  of  soda  businesses  use  aluminum  containers.     In  order  to  help  determine  a  company’s  strategic  direction  in  the  metal  container  industry,   it  is  important  to  analyze  competitive,  environmental  factors.   SUBTITUTES  THREAT   It  is  important  to  consider  the  threat  of  substitute  products  and  their  impact  on  the   industry.  This  is  especially  true  here,  considering  the  fact  that  analysts  see  little  potential  for  metal  
  6. 6. container  future  growth.  Industry  observers  forecast  plastics  are  the  strongest  container  growth   segment  for  the  1990s.     Throughout  the  1980s  plastics  have  led  growth,  with  market  share  increasing  from  9%  to   18%.  The  plastic  industry  still  has  relatively  small  players—only  seven  companies  have  sales  over   $100  million.  Because  of  declining  resin  prices,  the  cost  of  plastic  had  become  comparable  to  glass,   taking  away  glass’  advantage.  Although  plastic  poses  a  formidable  threat,  aluminum  still  prevails  in   many  areas.     Firstly,  plastic  is  more  difficult  to  recycle  than  glass  or  aluminum.  Secondly,  plastic  is  not  a   good  fit  for  beer,  as  it  is  unable  to  preserve  beer  long  enough  to  meet  a  strict  90  day  shelf  life   requirement.  Lastly,  it  is  incompatible  with  some  existing  production  processes  due  to  its  inability   to  take-­‐on  certain  shape  requirements.       Plastic  containers  have  also  shown  to  preserve  less  carbonation  than  aluminum  containers;   4  months  as  opposed  to  16  months.  Even  though  11%  of  domestic  soft  drink  sales  have  utilized   plastic  containers,  this  has  been  mostly  at  the  expense  of  glass,  not  aluminum.  Glass  continues  to  be   a  reliable  substitute  for  metal,  but  only  in  certain  cases—glass  bottles  dominate  a  particular   segment  of  the  beer  market.  Ultimately,  many  bottlers  prefer  cans  for  logistical  efficiency  and  lower   cost  of  delivery.     NEW  ENTRANTS  THREAT   In  addition  to  plastic  and  glass,  it  is  important  to  consider  the  threat  that  new  entrants  pose   to  enter  CC&SC,  and  the  can  market.    As  noted  in  the  case,  in-­‐house  manufacturing  of  cans  has   noticeably  been  on  the  rise.  In-­‐house  manufacture  represents  approximately  25%  of  total  can   output;  in  most  cases  it  is  the  nation’s  major  food  producers  and  brewers;  the  beer  industry   supplied  55%  of  its  own  can  needs  in  this  year.  Notably,  the  beer  market  is  conducive  for  in-­‐house   manufacturing,  since  many  brewers  are  single  label  bottlers.   POWER  OF  SUPPLIERS  
  7. 7. Suppliers  in  this  industry  are  limited.  The  three  largest  aluminum  producers  seem  to   dominate  market  share.  Two  notable  suppliers  were  mentioned  in  the  case—Alcoa,  the  world’s   largest  aluminum  producer,  and  Alcan.  They  supply  over  65%  of  demand  for  domestic  aluminum   sheet.     Reynolds  Metals  is  the  next  largest  supplier,  and  in  fact,  is  the  only  supplier  in  the  US  that   also  produces  its  own  cans.  The  company  poses  a  unique  threat  to  CC&SC  in  that  it  is  both  a   supplier  and  competitor.  Anytime  few  suppliers  dominate  an  industry,  there  is  a  risk  of  those   suppliers  having  excessive  bargaining  power  or  leverage  over  customers.   POWER  OF  BUYERS   The  bargaining  power  of  buyers  has  shifted  dramatically.  Many  soft  drink  companies  have   consolidated,  which  has  resulted  in  the  emergence  of  a  handful  of  large  entities;  consider  that  the   number  of  bottlers  has  fallen  from  nearly  8,000  to  only  800,  over  the  span  of  less  than  10  years.  The   large  companies  that  remain  control  a  significant  amount  of  beverage  volume.  These  companies  are   not  loyal  to  any  single  can  manufacturer.     When  the  beverage  industry  switched  to  2  piece  cans,  manufacturers  were  forced  to  react   quickly.  They  had  to  either  ship  and  reuse  obsolete  equipment  overseas,  where  technology  wasn’t   as  cutting  edge,  or  sell  off  three-­‐piece  lines  at  incredible,  unprofitable  discounts.  Considering  that   soft  drinks  make  up  42%  of  the  can  market  today  as  opposed  to  29%  10  years  earlier,  we  believe   these  companies  will  begin  to  exercise  leverage  to  get  what  they  want,  for  example,  things  like   packaging  price  discounts.       One  positive  for  can  manufacturers  in  1989  is  that  the  vending  machine  market  is  built   around  cans  specifically,  and  accounts  for  20%  of  soft  drink  sales.   INDUSTRY  COMPETITION  
  8. 8. The  intense  rivalry  among  mature  competitors  is  critical  to  consider.  The  case  explains   “competing  cans  are  made  of  identical  materials  using  identical  specifications  on  practically   identical  machinery”.     CC&SC  is  hardly  the  biggest  player  in  the  industry.  American  National,  which  was  recently   acquired  by  France’s  Pechiney  International,  is  the  world’s  largest  beverage  can  producer,   accounting  for  25%  of  the  market.  Peter  Kiewit  Sons—the  next  biggest  competitor—recently   purchased  Continental  Can,  with  18%  market  share.  Continental  Can  has  also  been  involved  in  the   production  of  plastic  bottles,  and  has  heavily  diversified  into  other  areas.       Reynolds  Metals,  as  mentioned  earlier  as  a  supplier,  represents  7%  of  the  market,  the  same   as  CC&SC.  Reynolds  is  a  world  leader  in  can  making  technology.  Ball  Corporation  at  4%  market   share  is  another  substantial  competitor.  Like  Reynolds,  Ball  is  known  for  technology,  as  well  as   specialized,  high-­‐margin  products.  With  its  planned  purchase  of  a  Canadian  joint  venture,  it  will   become  the  number  2  producer  in  Canada.   There  are  approximately  100  remaining  smaller  firms,  including  Van  Dorn  and  Heekin.  Van   Dorn  is  known  for  plastic  injection  molding  equipment,  and  the  company  is  currently  building  2   plastic  production  plants.   Interpretation   SWOT  and  Porter’s  Five  Forces  have  allowed  us  to  consider  CC&SC’s  strengths  and   weaknesses,  as  well  the  dynamics  of  the  external  environment.  Let’s  summarize  the  key  themes  of   our  analysis,  which  we  will  use  to  build  our  action  alternative  recommendations.   Firstly,  the  company’s  strengths  seem  to  include  a  history  of  superior  CEO  leadership,  a   commitment  to  exceptional  customer  relationships,  a  strong  emphasis  on  financial  accountability,   and  aggressive  expansion  in  international  markets.  Conversely,  the  company’s  weaknesses  include   a  lack  of  product  diversity  and  limited  budget  for  R&D.  
  9. 9. As  we  have  mentioned,  CC&SC  has  adopted  the  philosophy  of  “late  mover,”  in  terms  of  R&D.   The  company  is  averse  to  spending  money  on  basic  research,  and  instead  allows  competitors  to   take  on  the  risks  of  bringing  new  technologies  to  market.  CC&SC  has  focused  on  improving  niche   skills  and  partnering  with  customers  to  address  specific  requests.  Not  surprisingly,  it  has   maintained  a  relatively  small  share  of  the  aluminum  can  market.     Secondly,  we  see  that  the  company  may  wish  to  consider  pursuing  alternative  materials   (e.g.,  glass,  plastics),  acquire  other  container  businesses,  and  further  expand  into  the  international   marketplace.  As  we’ve  mentioned,  growth  in  the  domestic  metal  container  industry  appears  to  be   stagnant.     As  a  substitute  for  metal  cans,  plastics  have  accounted  for  the  greatest  area  of  growth  this   decade.  Also,  glass  maintains  its  status  as  a  reliable  substitute  for  aluminum  in  the  beer  industry.   The  domestic  metal  container  industry  is  transitioning  from  the  maturity  stage  to  the  decline  stage;   the  international  industry  has  remained  in  the  growth  stage.  The  international  marketplace  has   been  a  particularly  strong  arena  for  Crown,  representing  44%  of  its  sales  in  1988.     Action  Planning   As  Avery  takes  charge  of  CC&SC,  he  senses  that  the  tide  is  shifting.  What  actions,  if  any,  need   to  be  taken  in  order  for  him  continue  the  success  of  his  predecessor?  As  we  have  discussed,  there   are  several  issues  to  consider.  The  following  are  a  selection  of  some  of  the  most  important.     The  container  industry  is  experiencing  a  period  of  consolidation.  Would  acquisition  of   Continental  Can  strengthen  CC&SC’s  operation,  or  would  it  be  problematic,  because  of  the   incongruous  cultural  match?  Also,  analysts  have  forecasted  that  plastics  will  experience  significant   growth.  Should  CC&SC  commit  financial  resources  to  “new-­‐age”  material  R&D?  Lastly,  drink   company  vertical  integration  will  continue  to  intensify  competition  within  the  industry.  Should   CC&SC  now  break  from  its  traditional  product  lines  and  diversify  outside  the  industry?   CRITERIA  
  10. 10. While  Connelly’s  strategy  proved  successful  for  many  years,  the  can  industry  is  undeniably   changing.  CC&SC’s  position  may  be  in  jeopardy  if  appropriate  action  is  not  taken.    Avery  must   attempt  to  strike  the  right  balance  of  preserving  core  competencies  and  implementing  necessary   change.  The  company’s  long-­‐term  profitability  rests  on  Avery’s  ability  to  navigate  the  current   economic  climate.   We  believe  Avery  should  make  decisions  based  on  certain  criteria,  which  we  have   prioritized.  Firstly,  we  feel  Avery’s  actions  should  not  affect  CC&SC’s  short-­‐term  profitability.  As   discussed,  aluminum  suppliers  and  drink  bottlers  both  possess  significantly  greater  leverage  than   can  companies.  It  would  be  detrimental  to  CC&SC’s  supply  chain  activities  and  overall  business  if  it   were  unable  to  match  competitor  prices—both  in  terms  of  those  it  pays  for  raw  materials,  and   those  it  extends  to  drink  companies.   We  believe  the  second  priority  should  be  long-­‐term  profitability.  The  third  priority  is   preserving  key  tenets  of  Connelly’s  reign,  specifically  product  quality,  customer  service,  and   workplace  culture.  If  changes  are  not  implemented  with  thought  and  diligence,  then  standards  may   suffer.  This  would  negatively  affect  CC&SC’s  brand  equity.     ALTERNATIVES   We  believe  additional  options  exist  to  Avery,  beyond  material  diversification  and   acquisition  of  Continental  Can.  Chief  among  these  are  1)  pursuing  a  general,  industry  wide   consolidation  strategy,  2)  pursuing  a  gradual  divestment  of  aluminum  industry  assets,  and  in  turn,   investing  in  new  ventures,  and  3)  pursuing  domestic  and  or  international  market  expansion.   For  brevity  and  clarity  purposes,  we  have  chosen  to  summarize  our  interpretation  of   Avery’s  options  into  4  general  categories:  1)  exploring  new  container  materials,  2)  acquiring  or   merging  with  other  firms,  3)  divesting  assets  and  exiting  the  industry,  4)  increasing  business,  perhaps   in  specific  markets.  Naturally,  each  course  of  action  will  result  in  positive  as  well  as  negative  
  11. 11. consequences.  Avery  should  consider  these  carefully,  and  determine  which  combination  of  routes   minimizes  negative  impact.   Strategy  1—New  Materials:  There  is  no  doubt  that  plastic  has  gained  significant   momentum.    In  our  Porter’s  Five  Forces  analysis,  we  examined  the  competitive  nature  of  the   aluminum  can  market  and  the  lack  of  leverage  over  suppliers  and  buyers.  Delving  into  plastic  could   address  the  pressure  resulting  from  these  situations.  It  could  differentiate  CC&SC  from  its   competitors,  which  may  result  in  an  uptick  in  business.  Also,  CC&SC  would  be  diversifying  its   operations  and  lessening  its  dependence  on  aluminum  suppliers.  This  would  result  in  lower,  raw   material  costs.   It  is  important  to  reiterate  that  the  case  identified  issues  with  plastic  containers.  They  do   not  retain  carbonation  and  prevent  oxygen  infiltration  effectively.  Also,  some  drink  companies   demand  flat  bottoms  containers,  which  apparently  is  difficult  to  achieve  with  plastic.  Another   important  drawback  is  the  required  changes  in  production.  Plastic  containers  could  not  be   produced  using  the  exact  same  machinery  and  processes  used  for  aluminum  cans.  If  CC&SC  were  to   diversify  its  container  line  by  including  plastic,  it  would  need  to  make  capital  investments.     Strategy  2—Consolidation:  In  chapter  5  of  our  textbook,  we  discussed  the  different  stages  of   the  industry  life  cycle.  In  the  declining  stage,  a  firm  may  choose  to  pursue  consolidation,  whereby   that  company  acquires  or  merges  with  other  firms  in  the  industry.  The  benefits  include  gaining   power  and  influence,  as  well  as  valuable  assets.  The  idea  is  to  purchase  firms  at  reasonable  and   agreeable  prices.     Lockheed  Martin  pursued  such  a  strategy  after  the  Cold  War  and  defense  spending   plummeted.  Many  companies  that  had  previously  relied  on  government  contracts  could  not  survive.   Lockheed  Martin  took  advantage  of  this  buyer’s  market  and  purchased  17  independent  entities.  The   company  emerged  strengthened  and  diversified.    
  12. 12. The  financial  state  of  Crown  lends  itself  to  acquiring  competitor  firms.  It  is  a  top  four,   aluminum  can  producer;  margins,  income,  and  return  on  equity  are  all  strong;  CC&SC  has  a  low  and   healthy  debt  to  equity  ratio;  and  the  company’s  stock  price  has  consistently  risen  since  1981.  We   believe  not  only  Continental  Can,  but  Van  Dorn  and  Heekin  could  be  quality  prospects.       Avery  is  concerned  by  the  fact  that  can  industry  mergers  and  acquisitions  tend  to  end   poorly,  and  that  there  are  differences  in  culture  between  CC&SC  and  Continental  that  could  be   insurmountable.  We  believe  there  could  be  issues  that  arise  from  changes  in  high  level   management,  asset  consolidation,  and  customer  response  as  well.   Strategy  3—Divesting  and  Exiting:  Again,  we  believe  the  can  industry  may  be  in  decline.  If   this  is  the  case,  Avery  may  wish  to  pursue  either  a  consolidation  strategy  or  a  divestment  strategy.   Divesting  could  be  advantageous  in  that  the  company  would  be  exiting  before  operations  became   unprofitable.  With  CC&SC’s  sound  financials,  Avery  could  gradually  wind  down  aluminum  can   operations  and  safely  transition  into  a  new  industry,  or  industries.   We  believe  it  would  be  prudent  to  consider  two  cases.  The  first  is  that  of  Ball  Corporation.   Management  at  Ball  successfully  expanded  beyond  glass  and  cans,  and  into  high  technology.  By   1987,  Ball  procured  $180  million  in  defense  contracts.  The  case  describes  the  company’s  successful   ventures  in  petroleum  engineering  equipment  and  computer  components  as  well.  The  second  case   is  less  encouraging.  National  Can  attempted  to  diversify  its  business,  mainly  through  other  types  of   containers—glass  and  plastic  versions,  food  cans,  pet  food  cans,  and  bottle  closures.  This   diversification  proved  to  be  a  financial  drag  on  the  company.     ‘Divesting  and  re-­‐investing’  is  perhaps  the  riskiest  of  the  alternatives  we  chose  to  analyze.   The  biggest  question  is  would  Crown’s  aluminum  can  success  translate  into  a  new  enterprise?  A   final  drawback  would  be  that  Crown  loses  intangibles  that  Connelly  and  the  company  worked   decades  to  achieve.  These  include  brand  equity,  supplier  and  customer  relationships,  and  human   capital.    
  13. 13. Strategy  4—New  Markets:  We  believe  Avery  should  consider  expanding  into  untapped   regions,  either  domestically  or  internationally.   Exhibit  6  in  the  case  provides  a  map  of  Crown’s  facilities.  The  Midwestern  and  Western   regions  of  the  US  are  noticeably  bare,  where  Crown  does  not  seem  to  have  a  significant  presence.   We  believe  the  Northern  California  bay  area,  Las  Vegas,  and  Seattle  could  be  high  value  locations.  As   mentioned,  Connolly’s  overseas  investments  were  consistently  successful,  as  Crown  generated  a   large  portion  of  its  income  from  international  business.  Avery  could  always  consider  a  greater  push   for  international  expansion  as  well.   SELECTION   We  would  recommend  the  following  strategy  to  Avery:  over  the  short  term  he  should   continue  pursuing  new  international  opportunities,  which  we  believe  includes  acquiring   Continental  Can.  We  also  believe  he  should  look  to  consolidate  domestically,  via  acquiring  smaller   and  or  less  profitable  competitors.  Long-­‐term,  we  believe  Avery  should  consider  diversifying,  either   by  incorporating  plastics,  expanding  to  new,  relevant  industries,  or  both.  CC&SC  could  follow  the   examples  of  Ball  and  American  Can.   We  believe  this  combination  of  objectives  best  satisfies  our  action  planning  goals,  suites  the   strengths  of  the  company,  and  considers  external  factors  such  as  competition,  customers,  and   industry  dynamics.     IMPLEMENTATION  AND  ASSESSMENT   We  would  recommend  that  3-­‐5  years  from  now  Avery  employ  SWOT  and  Porter’s  Five   Forces  to  determine  the  company’s  current  status  position.     We  would  hope  that  by  consolidating  and  expanding  internationally,  the  company’s  power   would  improve.  The  company’s  assets  should  grow,  and  so  too  should  its  leverage  over  suppliers   and  buyers.  New  opportunities  and  threats  should  have  arisen  as  well.    
  14. 14. Avery  should  consider  the  following  questions:  how  much  has  the  popularity  of  plastic   grown?  How  many  drink  companies  are  manufacturing  containers  in  house?  What  other   international  markets  could  be  pursued?  What  other  can  companies  are  acquirable?  Avery  will  also   need  to  consider  whether  or  not  the  change  the  company’s  long-­‐term  plans  and  objectives.  After  3-­‐ 5  years,  do  CC&SC’s  diversification  options  still  appear  attractive?  Are  there  other  new,   diversification  opportunities?     ACTUAL  DEVELOPMENTS   According  to  CC&SC’s  website,  the  company  did  in  fact  pursue  a  consolidation  and   diversification  strategy.  The  company,  which  today  is  known  as  Crown  Holdings,  boosted  annual   revenue  from  approximately  $2  billion  to  $8  billion,  in  less  than  10  years.  It  began  its  consolidation   plan  with  the  purchase  of  Continental  Can  in  1990;  that  acquisition  made  CC&SC  North  America’s   can  leader.  Later  in  the  1990’s,  CC&SC  acquired  companies  such  as  Constar  and  CarnaudMetalbox,   and  thus  expanded  its  presence.  It  also  began  a  serious  foray  into  plastics  (“About  Crown”).     Notably,  CC&SC  became  more  interested  in  revolutionary  R&D.  In  2000,  the  company   developed  its  SuperEnd  beverage  ends;  the  company  claims  that  this  was  one  of  the  most  pivotal,   technological  improvements  in  the  beverage  ends  for  decades.  It  is  in  2003  that  the  company   completes  a  $3  billion  refinancing  plan  and  becomes  Crown  Holdings  (“About  Crown”).      
  15. 15. WORKS  CITED   "About  Crown."  Crown  History.  Crown  Holdings,  Inc.,  2014.  Web.  27  Apr.  2014.         **Please  note  that  all  facts  and  figures  not  accompanied  by  citations  are  taken  directly  from  the   course  textbook,  Strategic  Management  by  Dess,  Lumpkin,  and  Eisner.    

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