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 didnt 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