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CC&S update

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)

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CC&S update

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  1. 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

  2. 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

  3. 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.

  4. 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?

  5. CC&S takeaways: Internal/external fit and competitive advantage • For strategy to be successful, firms’ activities should be • aligned with one another (=internal/strategic fit) • Figure out how everything fits together • …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?

  6. CC&S takeaways: steps of analysis • General approach to strategic decisions: • Analyze industry • Evaluate company’s strategy • Assess company’s competitive advantage (or lack thereof), and its sustainability • Evaluate strategic options • Analysis is always the biggest part of solving a strategic problem

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