The Leadership Change of Crown Cork &
Seal in 1989
Problem
John F. Connelly, highly successful CEO of Crown Cork & Seal since 1957, stepped down in 1989
and named William J. Avery the new chief executive officer of the company. Avery, taking
charge in his newly acquired position, faced an opportunity of the full or partial acquisition of
Continental Can in addition to indecision for what direction to take his company as new CEO,
with industry trends creating both opportunities and threats for future company growth in the
metal container industry.
Situation Analysis
Context
Economic Trends
 Industry wide low profit margins
 Industry wide excess production capacity
 Rising material and labor costs in the industry
 Industry diversification in types of containers for production
 Mergers and acquisitions leading to a more consolidated industry
 The consolidation of soft drink bottlers
 In-house manufacturing by brewers
 High transportation costs make international trade uneconomical
 Slowing growth of metal containers industry
Technological Trends
 Move from 3 piece can lines to 2 piece can lines in the production process
 Selling 3 piece can lines, moving 3 piece can lines to international locations
 Emergence of plastic and glass as substitutes to aluminum
 Newly designed equipment to specifically meet needs of soft-drink producers
 Aluminum recycling
 Two-piece drawn-and-ironed cans for the beverage industry
 Customer driven manufacturing
Social/Cultural
 Environmentalism, slowing growth of plastics industry and encouraging recycling
 Developing nations acceptance of cans as packaged goods takes time
Customers
There are a number of large users in the metal container industry, comprised mostly of soft drink
companies and brewers: Coca-Cola Company, Anheuser-Busch, Seagram Company, Coca-Cola
Enterprises, Phillip Morris, the Molsom Companies, John Labatt, The Stroh Brewery Company, and Adolf
Coors.
Company
Crown Cork & Seal is the 4th largest company in the metal container industry, producing metal cans,
crowns, and closures to hold and/or seal consumer and industrial goods. In 1989 they had the largest
number of 2 piece can lines in the industry for production. Some of their most notable successes came
from the former CEO who decentralized manufacturing facilities and increased the number of
manufacturing facilities to decrease transportation costs and change the company’s strategic focus to
providing quality, flexibility, and quick response to customer needs and demands.
Strengths:
Weaknesses:
-Large company with 4th market share position
-Lack of differentiation: Competing with
companies selling an identical product
- Highest number of 2 peice can lines in industry
-Quality, flexibility and quick response to
customer needs and demands
-Declining profit margin and operating margins
-In transition after CEO change
-High transportation costs
-Success in customer driven R&D strategy
-Excess production capactiy
S.W.O.T.
-High material and labor costs
Analysis
Opportunities:
Threats:
-Glass substitutes
-Partial or full aquisition of Continental Can
Plastic substitues
-Plastic closures and containers
-In-house manufacture
-Glass containers
-Consolidating indsutry
-Emergence of soft-drink indsutry and their use
of aluminum cans for packaging
-Rival purchase of Continental Can
Collaborators
Due to the need for quality supplier relationships, aluminum suppliers such as Alcan and ALCOA
represent collaborators for Crown Cork & Seal. Reynolds, for example, utilizes themselves as an
aluminum supplier, making the need for companies like Crown to work more closely with suppliers to
properly compete with the partially, vertically integrated Reynolds. Additionally, key customers may
also be considered collaborators with customer driven manufacturing for customized cans and
containers. Good relationships both upstream and downstream allow for better management of the
supply chain and better information for new products and changes to products.
Competitors
Competitors include major rivals in the metal container industry, providing identical products, as well as
regional competitors. Additionally, the substitute use of plastic and glass containers instead of metal
containers provide further competition for Crown Cork & Seal in the metal container industry.
New Entrants
Customer Bargaining Power
-High, due to multiple supplier relationships
-Low, due to barriers of entry including set-up
costs and establishing distribution networks
Industry Rivalry
High, with 4 major competitors
Amercan National Can: 25%
Market Share
Continetal Can: 18% Market Share
Reynolds Metals: 7% Market
Share
Ball Corporation: 4% Market Share
Regional Competiors: Van Dorn
and Heekin Can
Supplier Bargaining Power
-Low, due to multiple supplier relationships
Substitute Products
-High, due to emergence and increasing
popularity of plastics and glass containers
Alternatives
Status Quo
Make no changes despite changes in industry trends, ignoring threats and not taking advantage of
opportunities. This strategy option would include not bidding on the partial or full acquisition of
Continental Can, and also keep the companies focus on core competencies in production of the metal
can, instead of delving into alternative container production using plastic or glass. This option has the
strength of focusing on what the company has done well and has a minimal amount of risk, outside of
the risk of forgoing the other strategy options. For example, there is risk in forgoing bidding on
Continental Can because a rival company might take advantage of the opportunity, and there is risk in
not entering into the plastic or glass container industry because it leaves the opportunity for other
competitors with substitute products and new entrants with substitute products.
Reactive
This strategy would respond to industry trends with minimal changes, as to avoid too risky of an
expansion move. Partial acquisition of Continental Can would be a part of this alternative, as well as a
new focus on R&D and customer needs and demands as the containers industry changes and substitute
container products become more wide-spread. This strategy would look at expanding the available
products from just metal containers to also plastic or glass containers. The overall risk of this strategy
would be significantly more than the status quo strategy, but would also be significantly less risky than
the proactive strategy which would include more expansion of products and the company. It is likely
this alternative would increase market share, but not likely that this alternative would allow Crown Cork
& Seal to become the market leader.
Proactive
A proactive strategy would involve a full acquisition of Continental Can as well as a significant new focus
on R&D to include new products of both plastic and glass containers to continue to provide quality,
flexibility, and quick response to customer needs and demands. This alternative would be very risky,
especially considering the new trends of in-house manufacturing by brewers and soft drink companies.
Also, mergers in the industry had not worked well in the past, and there is a huge challenge in
combining two different companies with completely different cultures; however, this option also would
be a very aggressive approach to increase market share and potentially become the largest supplier in
the metal container industry, as well as a significant supplier of substitute containers made of glass and
plastic. Further, this alternative responds to changes in the competitive environment that are
threatening, stealing the opportunity rivals have to acquire Continental Can and not allowing new
entrants or companies providing substitute products to steal a significant market share from Crown,
ideally leaving Crown as the market leader.
Recommendation
Proactive
The proactive strategy approach would be in the best interest of the new CEO for Crown Cork & Seal
because it advantageously responds to opportunities and threats in the external environment, while
taking full advantage of the company’s strengths and responding to the company’s weaknesses. The
proactive option is risky, and the most risky of the alternatives, but the rewards of expansion moves
would be the most beneficial for long-term company growth and strength, both domestically and
internationally.
Implementation
Proactive
Phase 1
Phase 2
Phase 3
•Full acquisition of Contential Can
•7% market share for Crown Cork & Seal and 18% for Contential Can=25% market
share=leading market share in the industry
•Focus on R&D of new products in glass and plastic, fully utlizing downstream and
upsteam collaborators and continuing a customer driven R&D strategy as Connelly
exampled
•Use excess production capacity on manufuturing of new products
•Continue to concentrate on specialized uses and international markets (Connelly's
Strategy)