Problems affecting the industry as a whole – 

(1) Increasing self-manufacture - growing trend toward self-manufacture by large can customers,

particularly of the low- technology standard items. The proportion of "captive" production increased

from 18.2% to 25.8% between 1970 and 1976. Backward integration.

(2) New material Introductions - The greatest threat to the traditional, tin-plated can was the growing

popularity of the new, lighter-weight aluminum can. Most of the inroads were made in the beer and soft

drink markets, where aluminum held 65% and 31% shares respectively in 1976. Additional gains were

expected, as aluminum was known to reduce the problems of flavoring, a major concern of both the

brewing and soft drink Industries.

(3) The effect of the "packaging revolution" on the competitive atmosphere – packaging became a new

means of advertising. This had serious Implications for the metal can industry. Although the tin can was

functional, aluminum was easier to lithograph and plastic enabled more versatile shapes and designs.

Strategy of Crown Cork

Crown Cork end Seal continued to manufacture primarily metal cans and closures. Develop a product

line built around Crown's traditional strengths in metal forming and fabrication. Domestic market:

beverage cans, and the growing aerosol market. These applications were called "hard to hold," because

the cans required special characteristics either to contain the product under pressure or to avoid

affecting taste.

In addition to the specialized product line, Connelly's strategy was based on two geographic thrusts:

expand to national distribution In the U.S. and invest heavily abroad.

Crown was unusual In that it set up no plants to service a single customer. Instead Crown concentrated

on providing products for a number of customers near their plants. Also, Crown developed its lines

totally for the production of tin- plated cans, not for aluminum.

In International markets Crown invested heavily in undeveloped nations, first with crowns and then with

cans as packaged foods became more widely accepted

Investing heavily in new and geographically dispersed plants.

The plants were small (usually under 10 lines versus 50 in the old Philadelphia complex) and were

located close to the customer rather than the raw material source.

Crown executives viewed their greatest competitive strength and challenge as providing a very high

level of customer service.

According to company executives, however, the most important aspect of Crown's emphasis on service

was not its ability to deliver quickly, but rather the ability of the Crown sales force and its technical

department to solve customer problems.

 

Crown's R&D focused on enhancing the existing product line.

After Connelly took over, he used the first receipts from the Inventory liquidation to get out from under

the short-term bank obligations. He then steadily reduced the debt-equity ratio.

What advantages, if any, does a firm the size of crown cork have over American can and continental

can? How do you explain the comparisons shown in exhibit 3 in the case?

If you look at exhibit 3 you can see that the sales growth of the small companies are way more than the

big companies. Due to the changing environment in the industry many of these big players started

diversification and started investing abroad. Continental and American Can performed diversification

and suffered huge losses. Many of these expansions was in unrelated areas. National Can conducted

diversification in related areas.

Also these big players were unwilling to invest in new technology to keep up with industry trends. They

cut margins to attract customers, thus hampering their profitability.

The small companies also didn’t build plants servicing a single customer. This reduced risks to quite an

extent.

What recommendations would you make to management?

Explore other products (related) – plastics and glass

Have a more active R&D department

Focus on buy outs/merge with opposition