Name Rajul Garg Shweta Gupta Amit Kariwala Aakriti Rai Nikita Singla Ricky Sundrani

Roll no E13 E18 E21 E43 E55 E56

One of the Worlds leading packaging manufacturers Makers of 1 out of every 5 beverage cans in the World Also produces aerosol cans, specialty packaging, can ends and crowns 223 mfg. plants situated in 49 countries 60% of revenues from outside US

 An Idea for better bottle cap gives rise to Crown, Cork And Seal Company 1891 Bought By Competitor Charles McCanus due to bankruptcy following patent expiry 1927
1930

Diversification into Can-Making

Bankruptcy again Co. taken over by John Connelly 1957

Target Markets
Domestic niche in growth segments International Pioneer rights Exits Motor Oil Can Market

Financial Control
Reduce debt No Cash dividends Stock Repurchase

Labor and Personnel

Lean and Mean Low Salaries Stock Option incentives

Manufacturing
Small plants located close to customer Process innovation\cost reduction Just in Time

Cost Efficiency and Improving Quality

R&D
Work closely with customers Not expend heavily on R&D

Marketing
Close ties with customers Provide technical assistance at customers plant

Represented 61% of packaged products in US in 1989 Included cans, crowns, screw caps, bottle lids etc for industrial and consumer goods During 1980s Aluminium can growth averaged 8% annually while steel shipment fell by average 3.1% per year Aluminum took over steel in 1980 - 89

In-house Manufacturing
Captive Plants (25% of total can output) Followed by large brewers to reduce costs, but not widespread in soft-drink sector

Plastics
Initially showed great growth due to light weight, handling convenience resulting in customer acceptance Challenges - Manufacturing difficulty, Carbonation retention, preventing oxygen penetration, recycling problem resulted in slow growth post 1987 Market comprised mostly of small players with few exceptions e.g. Owens Illionis

Glass
Lost cost advantage on plastic due to rising resin costs Metal was preferred for cans due to logistical, economic, transportation benefits etc

Dominated by 5 firms 61% Market Share Pricing

Extremely Competitive Cost reduction attempts via volume discounts, over-capacity, shrinking customer base resulted in lower operating margins

Customers
Coca-Cola, Pepsico, Anheuser Busch etc

Distribution
Cost Components Raw Material, Direct Labour, Transport Manufacturing plants located close to customers to minimize transport costs Aluminum was preferred over steel due to low shipping costs

Suppliers
Largest Aluminium Producers Alcoa, Alcan, Reynolds Metals

Reasons for Diversification

Low Profit Margins Excess Capacity Rising Material Costs

Diversification across
Spectrum of Rigid Containers to supply major end-users (Foods,

Beverages) Non-Packaging Businesses (Energy, Finance)

American Can Insurance, ultimately selling off can business to Triangle Industries Continental Energy Exploration, Research, Transportation National Can Glass Containers, Canning etc Ball Corporation HighTechnology Market

Challenges

Newly appointed CEO Growth Slow down in metal containers 1977: Ozone controversy & trends towards legislative regulation of non returnable containers was threatening Crowns business Plastic was only growing segment Problems in merger of America Can and National Can

Plastic

Convenient handling Higher acceptance with customer

Glass

Light weight

Cost advantage Faster filling speeds

Light weight
Compact for inventory Transportation efficiency Beer category had love affair with long neck bottles

Recycling was not a closed loop

To go or not to go for growing opportunities in plastic closures and containers

To bid or not to bid for Continental Can

Entering plastic business either by building internal capacity or acquiring

Expanding metal container lines to reduce focus on beverage and aerosol cans

Exit or sell the business

Diversify into other packaging materials or product categories

Crown versus Larger Competitors in 1983

Revenues COGS Gross Margin SG&A Operating Income

CC&S American National ($ mm) % of Sales ($ mm) % of Sales ($ mm) % of Sales 1298 100% 3346.4 100% 1647.5 100% 1116 86% 2721 81% 1432.2 87% 182 14% 625.4 19% 215.3 13% 43.1 3% 501.8 15% 121.8 7% 138.9 11% 123.6 4% 93.5 6%

CCS has higher operating income as compared to its competitors Low investment in R&D has resulted in higher ROE for CCS (Exhibit 5)

Supplier Power 3 major Al suppliers, so more concentration of suppliers Acquisition of Continental Cans would reduce Suppliers bargaining power in the metal can industry

Buyer Power
Buyers pose a credible threat of backward integration Products are indifferent, so buyers face no switching cost Buyers are large and buy in large quantities Continental acquisition would increase its market share thereby reducing buyer bargaining power Threat of Substitutes Threat of Substitutes would be reduced by diversification into plastic containers

Potential Entrants Low capital investment No switching cost and brand loyalty Acquisition of Continental would further increase economies of scale Access to newer distribution channels Industry Competitors Continental has a market share of 18% in the metal can industry as compared to CCSs 7%. So the acquisition would reduce competition for CCS

Strengths
Just in time delivery Located close to customer High quality Customer driven High profit margins Low costs Focus on specialized product lines International sales

Weaknesses
Rely on metal can, not diversified Smaller than its competitors Few R&D initiatives No.4 in US

Opportunities

Threats
Backward and forward integration by buyers and suppliers Little growth in metal can industry Customer base decreasing Price pressure

To be market leader can maker Expand globally High potentials of growth Few competitors High operating margins(sales 44%, profit 54%)

Post Acquisition : Double the sales to $ 3.6 billion Analysts expect demand to increase from the soft drink business CCS current debt to equity ratio is 12% which would rise to 38% post the acquisition But the repayment of debt for the acquisition should be easy Connelly frugality and Crowns strong cash flow As a result of the acquisition, stock price could rise to $70

Parenting Matrix
Ballast Business Heartland Businesses (CCS acquisition of Continental Can Company)

Fe el Alien Business

Value Trap Business

Benefi t

Buy out/ merge with opposition Diversify into plastic and glass business Recruit / develop knowledge base of the plastic industry Pursue alternative customers Research and development Migrate current principles & strategies into growing markets

William Avery CEO- 1989 1990 consolidation acquired Continental Can 1992 entered into plastic container industry acquired Constar & became leader in PET products ( plastic ) 1993 food canning acquired Van Dorn 1996 packaging acquired Carnuad Metalbox