Crown Cork And Seal

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Business Strategy Crown Cork and Seal Company, Inc. Matt Burnet 6 Oct 2009 Business Strategy Matthew Burnet Page 1/4 Student # 306657 Business Strategy Case Study Crown Cork and Seal Company, Inc 1. In 1977 there were 100 firms operating in the metal container industry, worth $7.1 billion, with the top four manufactures holding 52% market share. Industry growth was relatively modest, managing only 3.3% CAGR between 1967 and 1976. However, soft-drink and beer cans segment grew at a CAGR of 8.8% during this period, with ongoing high growth expected. The industry is moderately capitally intensive - up-front investment of $10-$15 million per line (two-piece cans), with instillations ranging from 1 to 5 lines. The products are undifferentiated, commodity items, where pricing is set by the market. Manufacturers are price takers, and buyers have significant power with limited switching costs between suppliers. Due to the high capital investments, manufacturers require high capacity utilisation and large volumes in order to bring down their average costs, which they achieve through volume discounts, further increasing the power of the purchasers. The suppliers were traditionally large US steel companies and more recently Aluminium suppliers. Despite the fact that can companies were significant customers of steel products (fourth largest customers in aggregate) they did not have a strong bargaining position with their suppliers due to their limited individual share of sales amongst the few, large suppliers. The customers of the can companies were predominately major food and beer companies (80% of sales). These buyers had considerable power over the can companies (ability to switch suppliers; threat of self manufacture) and were able to bid down prices and dictate terms (e.g. set service levels). 2. There were four main trends that were evident

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