Crown Cork And Seal Case Analysis

1. Case: Crown, Cork and Seal in 1989
(a) Perform an industry analysis of the U.S metal can industry in 1989.Define the industry. Analyze the effect of buyer and supplier power, competition, barriers to entry, complements and substitute for the industry. Summarize your assessment of industry’s attractiveness.
Is this an industry in which the average metal company can expect an attractive return over the long run?
The metal container industry that represented 61% of all packaged products in US in 1989, consisted of metal cans, crowns and closures to hold or seal a vast variety of consumer and industrial goods. Metal cans were used in food, beverage and packaging industries. These cans were made of aluminum, steel or combination of both. Mainly three-pieced and two-pieced cans were produced in 1989, with 80% of $120 billion cans produced being two-pieced.
In 1989 more than

The major metals in can industry were steel and aluminum. By 1989, aluminum had gained quite popularity in the metal can industry. This popularity was attributed to aluminum’s lighter weight, higher and more consistent quality, recycle economies, friendliness to taste and superior lithography qualities. The popularity is evident from that fact that by 1989, aluminum accounted for 99% of beer and 94% of soft drink metal container businesses respectively. However, aluminum was supplied to the metal can industry by few suppliers with the three largest suppliers being Alcoa, Alcan and Reynolds Metals. Alcoa and Alcan supplied over 65% of domestic can sheet requirements. Reynolds Metals not only supplied aluminum sheets to the industry but was also the only aluminum company in the US that was involved in the production of cans. These three suppliers had price leadership in the industry which meant that they would set the prices of aluminum. Similarly, steel suppliers’ power was having price advantages over