Crown, Cork and Seal Case 1989

Crown, Cork and Seal Case 1989

Crown, Cork and Seal Case 1989

Five Forces Analysis



Using Porter's 5 Forces Analysis argue that given likely evolution and status of the metal industry in 1989, it is profitable to acquire all or part of Continental Can:



Internal Rivalry

Strong force

5 major competitors holding 61% (American National Can, Continental can, Reynolds Metal, Crown Cork and Seal, Ball Corporation)

Heavily compete on basis of price

Companies offering volume discounts

Industry operating margins falling – fell by 7% in 3 years to 4% in 1989. Industry profitability is therefore decreasing which increases competitor rivalry

Over capacity and shrinking customer base (i.e. customers choosing glass or plastic)

Price wars – "can manufacturers aggressively ... Show more content on Helpwriting.net ...By 1989, due to production of cans by "captive" plants, 25% of all can output was produced by captive plants. By 1980 brewers had capability to supply 55% of their can needs. It is easier for brewers to do this because they make high–volume single–label products. While at the same time soft drink industry could not easily do this because they focused on low–volume multiple–label products.



Supplier Power

Strong force

3 largest aluminium producers supplied metal can industry (Alcoa, Alcan, Reynolds Metal)Since aluminum was invented in 58, steel has continuously declined due to economical reasons and consumer preference. Due to the threat of steel, firms like Alcoa limited aluminum prices which kept suppliers from holding much bargaining power.

So few big suppliers

Threat to forward integrate– Reynolds Metal – supplier of aluminium entering the mkt to can makers and is also a threat.

These aluminum producers control huge aluminum resource so that the can manufacturer cannot put threat of backward integration. In contract, the aluminum producers are able to put threats of forward integration, just as Reynolds Metal integrated into aluminum cans.

"Moves by both suppliers and customers of can makes to integrate into can manufacturing themselves"

While it is inexpensive for companies to switch from aluminum to steel (because steel is actually cheaper option by $500 mil per year

... Get more on HelpWriting.net ...