CC&S update 1989: Purchases Continental Can Canada ($330M), Continental Can US ($336M), Continental RoW ($125M) 1989: Avery’s compensation exceeds $2M, putting him in the top quintile of Fortune 500 CEOs 1992: Expansion into plastics: purchases Constar ($515 M) and Van Dorn ($175M) 1996: Acquires CarnaudMetalBox (France), doubles Crown’s size, becomes #1 supplier of metal containers In total, 20 acquisitions between 1989 and 1996! International expansion: in 2002, 43% of sales is in US/Can, rest elsewhere in the world CC&S update (2) CCS outperforms the S&P 500 through 1996, but is hit by several adverse developments in industry in late 1990s 2000: Avery steps down New CEO, John Conway, evokes strategy of Connelly – but difficult to return to bare-bones corporate culture of the past 2002: Divests Constar International (plastics) Focus on repairing balance sheet & paying down debt – 2005: Crown Holdings, Inc. Further consolidation in the metal can industry – Now, more or less 3-firm oligopoly: Ball, American National, Crown CC&S takeaways: Industry analysis Industry analysis (5 forces) useful for – Understanding the economics of the industry as a whole – Assessing what market forces determine profitability (“key success factors”) – Understanding the market position of the firm we’re looking at Distinguish symptoms of five forces (margins etc.) from causes (e.g. low product differentiation, switching costs) – Understanding causes is necessary for industry analysis to be useful Distinguish barriers to entry from attractiveness of market for entrants. CC&S takeaways: Positioning Even though industry unattractive in terms of 5 forces, it’s possible to do well in niche of market Position in a market has two dimensions: – Vertical: cost or benefit advantage? For any efficiently run firm, there’s a tradeoff – Horizontal: What segment(s) of market are targeted? Broad or narrow scope? CC&S takeaways: Internal/external fit and competitive advantage For strategy to be successful, firms’ activities should be 1. aligned with one another (=internal/strategic fit) Figure out how everything fits together 2. …and tailored to market strategy & 5 forces (=external fit) Helps to attain technological efficiency and makes strategy difficult to imitate Next question: if company has competitive advantage, is it sustainable? – How big is threat of imitation by either incumbents or entrants? CC&S takeaways: steps of analysis General approach to strategic decisions: 1. Analyze industry 2. Evaluate company’s strategy 3. Assess company’s competitive advantage (or lack thereof), and its sustainability 4. Evaluate strategic options Analysis is always the biggest part of solving a strategic problem