CCS Take Away

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
 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
 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