Analyse the Structure of the Industry in Which Cc&s Competes. How Attractive Was the Industry in 1989?

Analyse the structure of the industry in which CC&S competes. How attractive was the industry in 1989?

Industry Definition

The metal container industry represents 61% of all packaged products in the United States in 1989. It produces metal cans, bottle caps and closures to hold/seal variety of consumer and industrial goods. The geographic scope of competition was not only US but also Latin America , Europe and developing countries in Africa and Asia.

Industry Participants

? The Buyers

• Soft drink bottlers and brewers including Coca-Cola, Anheuser-Busch, Pepsico, etc. (In 1989, 72% from the total market)

• Food manufacturers (25% from the total market)

• General packaging; products such as Aerosol, paint, etc. (3% from the total market)

? The Suppliers

• Steel producers (in 1989 29% from the total supply)

• Aluminum producers (balance 71%)

Three largest suppliers in this category were Alcan (covers 65% of the domestic can sheet requirements) Alcoa and Reynolds Metals (supply aluminum as well as produce cans).

? The Competitors

In 1989 five top competitors dominated the metal can industry namely, American National Can, continental Can, Reynolds Metals, Crown Cork & Seal and Ball Corporation.

? The Substitutes

There are 2 main substitutes to metal containers namely Plastics and Glass. In 1989 Plastics holds 18% of the container industry while Glass was responsible for 21%. In addition to them, in-house manufacturing was another substitute too.

? The Potential Entrants

The case hasn't mentioned about any specific potential new entrant/s, there is a greater possibility of a consolidation as the second largest player in the industry; Continental Can is for sale.

Industry Attractiveness in 1989

? The Power of Buyers

Buyers have a powerful command as

• The industry's product in undifferentiated

• They face few switching costs in changing vendors

• Credibly threatened to integrate backward and do in-house production of metal cans for themselves which is 25% of the total can output in 1989.

? The Threat of Substitutes

Is quite high as plastic containers is capturing considerable market share from one of the major metal can buyers, beverages industry. In 1989 plastic and glass collectively control 39% of the total container market with the prediction of plastics as the growth segment for containers.

? Rivalry among Existing Competitors

Intensity of rivalry is greatest as top 5 players are roughly equal in size and power and the industry growth is slow. They compete basis on price as products of rivals are identical and few switching costs for buyers and fixed costs are high and marginal costs are low and pressure for competitors to cut prices below the average costs.

This high rivalry drives down the industry's profit potential and negative impact on other 2 forces made the metal can industry unattractive in 1989.

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QUESTION 2

How has the attractiveness of the industry changed during John Connelly's period of leadership? What has caused