Article: Crown Cork & Seal in 1989

In: Business and Management

Submitted By kanghyuna
Words 523
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Article: Crown Cork & Seal in 1989
1. What key strategic issues face Avery in 1989? What strategic options are open to him? Avery faced strategic issues about whether Crown should break with tradition and expand its product line beyond the manufacture of metal cans and closers. And he had to decide whether or not to get involved in the bidding for Continental Can. The acquisition of Continental Can Canada would make Canada Crown's largest single presence outside of the United States. Also it would double the size of Crowns domestic operations.
2. How attractive is the metal container industry? (Try to use Porter's 5-forces model.) l Bargaining power of buyers
The products are indifferent so it means there is low switching cost. Also buyers are very large and become more concentrated through consolidation. And they buy in large amount and maintain relationships with more than one can supplier. In addition, there can be the threat of backward integration. But metal producers are unlikely to put the threats of forward integration => High l Bargaining power of suppliers
There are three largest aluminum suppliers; Alcoa, Alcan and Reynolds Metal.
Aluminum is classic oligopoly dominated by Alcan and Alcoa. Reynolds may benefit from R&D synergies. Also there is a threat of forward integration. =>High l Threat of new entrants
It seems that barriers to entry are low. Product differentiation and switching cost is not that high. Capital costs for three-piece can product lines are relatively low but capital costs for a two-piece can line is $20-25 million. =>moderate l Substitute
There are many substitutes for metal containers- glass, plastic paper, and paper-andplastic combinations. Switching cost is low. => High l Rivalry
Industry is dominated by 5 major firms. The largest is American national can (25%),
Continental can (18%), Reynolds metal (7%),…...

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