Crown Cork and Seal Company: Summary of Case and Key Questions
Company Background Information and Historical ContextBy 1977 The Crown Cork and Seal Company was the fourth largest producer of metalcans and crowns. Under the leadership of John Connelly, the company had transformedfrom near-bankruptcy in 1957 to becoming a formidable force in the domestic andinternational metal container market. By 1976 Crown had revenues of $910 million, $343million of which came from international markets – making them the largest international producer. They derived 65% of total sales from tin-plated cans and 29% from crowns; theremainder of their business came from bottling and canning machinery. In terms of product categories, cans were categorized as follows: Food cans, beverage cans, pet foodsand general packaged cans. The biggest growth category was beverage cans whichcomprised of soft drinks and beer. At the time of the case, Crown was considered to beextremely successful – their return on sales was twice that of their three largestcompetitors, and they enjoyed the highest profit growth over the last 10 years.Industry Characteristics and Value ChainCustomers: 80% output came from food and beverage companies who maintained atleast two suppliers and had significant power of them.Competition: Crown’s current market share was 8.3%. Their three biggestcompetitors were American Can (16.6%), Continental Can (18.4%) and National Can:(8.7%). There also faced significant threats from customers backward-integrating intothe supply chain (e.g. Campbell soup started making their own cans) and fromaluminum producers like Alcoa grabbing market share.Suppliers: Big U.S steel companies and new entrants who supplied aluminum, fiber-foil and plastics.Crown’s StrategyPhilosophy: Relentless focus on core strengths: product lines were based on metalforming and fabrication competencies with a single-minded focus on tin cans andcrowns. Since R&D was not their strength, they decided to be the “second” player,learning from other firm’s mistakes and successes.