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crown case
- 1. CASE PRESENTATION CROWN CORK & SEAL CASE- 1989 GROUP 2
- 3. INTRODUCTION Crown Cork & Seal - leading packaging manufacturers Product line - Beverage cans and Beverage ends William Avery is appointed CEO after John Connelly steps down as Chairman As Crown's new CEO, Avery's plan is to review Connelly's long followed strategy The metal container industry has changed considerably since 1957 after Connelly took over Avery's concerns: With $1.8 Bn in sales, should Crow bid for all or 1. part of Continental Can? 2. Should Crown break with tradition and expand its product line beyond manufacturing metal cans? 3. There is little growth potential for metal cans in the 1990s
- 4. COMPANY HISTORY Mission TO EXCEED THE EXPECTATIONS OF THE CUSTOMERS AND PROVIDE THEM WITH THE BEST INTERNET SERVICES AND THE MOST RELIABLE SUPPORT SYSTEM. 1891 : Crown Cork & Seal Company 1920 : Patent ran out, competitive became serve and nearly bankrupted the company 1927 : Crown was brought by Charles McManus 1930 : Crown prospered, selling more than half of the United States and world supply of the bottle cap - McManus anticipated the success of the beer can and diversified into can making 1946 : McManus died, the company ran on momentum Try to expand into plastic and ludicrous diversification into metal bird 1955 : Partnership with Connelly Container, Inc. 1956 : Connelly began buying stock and was asked to be an outside director 1957 : Crown teetered on the Verge of bankruptcy John Connelly took over the president. His recue plan was simply - just common sense
- 7. PRICE
- 8. CUSTOMERS
- 9. DISTRIBUTION
- 10. MANUFACTURING
- 11. SUPPLIERS
- 13. In- house manufacture In 1989, manufacturing cans for their own business usage made up around 25% of the overall can output. The majority of the increase in domestic can production took place in facilities controlled by the country's largest brewers and food manufacturers.
- 14. Plastics Plastics was the growth leader in the container industry.
- 15. Glass Glass bottles accounted for only 14% of domestic soft drink sales. Soft drink bottlers preferred the metal can to glass can.
- 16. Soft drinks and Aluminum cans The soft drink industry of metal cans shipped accounted for Aluminium's growth was 1. 29% in 1980 2. 42% in 1989 also supported by the vending machine market.
- 17. Diversification & consolidation Low-profit margins, excess capacity, and rising material and labour costs prompted several corporate diversifications and subsequent consolidation throughout the 1970s and 1980s. For instance, American Can lessen its reliance on domestic can production by entering completely unrelated industries like insurance.
- 18. CONNELLY'S STRATEGY Crown concentrated on tin- plated cans and crowns. Connelly singled out two specific applications in the domestic market: beverage cans and the growing aerosol market. PRODUCTS & MARKETS Crown emphasized quality, flexibility, and quick response to customer needs. From 1976 to 1989, Crown had 26 domestic plants vs 9 in 1955. MANUFACTURING In 1970, Crown formed Nationwide Recyclers, Inc., as a wholly owned subsidiary. It had invested approx. $10 million in its recycling arm. RECYCLING
- 19. Connelly's strategy met with substantial success throughout his tenure. $100 invested in Crown stock in 1957 would be worth approximately $30,000 in 1989. PERFORMANCE Connelly's philosophy stated that quality and efficiency need to be increased together to succeed. He was the best salesman in the company. According to Michael J. McKenna, president of Crown's North America division insisted that Crown has always been customer driven. MARKETING & CUSTOMER SERVICE CONNELLY'S STRATEGY
- 20. They focused on enhancing the existing product line. Crown also started working closely with large breweries in the development of the two- piece drawn-and-ironed cans for the beverage industry RESEARCH & DEVELOPMENT They reduced the debt/equity ratio from 42% in 1956 to 5% in 1986. By the end of 1988, Crown’s debt represented less than 2% of total capital. Connelly discontinued cash dividends in 1956. Earnings per share reached $10.11 in 1988 adjusted for a 3-for-1 stock split in September 1988 FINANCING Their strategy focused on international growth, they received “pioneer rights” from many foreign governments aiming to build up the industrial sectors in their countries. By 1988, Crown’s 62 foreign plants generated 44% of sales and 54% of operating profit INTERNATIONAL CONNELLY'S STRATEGY
- 21. Financially sound( D/E less than 2%) Good customer Support Cost Efficient Lack of product Diversity No R&D Globalisation STRENGTH 1 2 3 WEAKNESS OPPORTUNITIES SWOT ANALYSIS 4 THREAT Emerging Plastic Market Slow growth rate Substitutable
- 22. AVERY'S CHALLENGES: Acquisition of Continental Can Canada (CCC) 2 1 Growing opportunities in plastic closures and glass containers.
- 23. ENTRANCE INTO THE PLASTIC CONTAINER INDUSTRY PROS • MARKET GAP IN THE CONTAINER INDUSTRY • DECREASING SHIPPING COST BECAUSE OF LIGHTWEIGHT • DEVELOPED IN VARIOUS PATTERN CONS • PORTION OF METAL CAN MORE THAN PLASTIC CONTAINER • LOOP OF RECYCLE- INCOMPLETE • NOT CORE COMPETENCY
- 24. ACQUIRE THE CONTINENTAL CAN COMPANY PROS • GETTING MORE MARKET SHARE • GETTING PLASTIC CONTAINER LINE MANUFACTURING FROM CONTINENTAL CAN • INCREASING BARGAINING POWER AGAINST FROM SUPPLIER AND CUSTOMER • EXPANSION IN WORLD WIDE CONS • ACQUIRING CONFLICT IN CULTURE • STRONG COMPETITION • INCREASING TREND OF IN-HOUSE CAN MANUFACTURING
- 25. CONTACT US OPEN FOR DISCUSSION THANK YOU