Unattractive Industry

Can: Unattractive industry

What strategy could work? What is surprising?

• Downsizing

• Smaller plants, closing down the big one in Philadelphia

• Focus on tin-plated (rather than Aluminium)

• Reducing stocks to zero

• No basic R&D ? fast follower ? no first mover ? less risk

• Plants near customers and not close to resources (support and assist customers)

• International expansion

• Investing more ? reducing dividends + buy back (paid back the banks), deleveraging, reducing debt to equity ratio

Smaller plants are counterintuitive because they cannot enjoy economies of scale. If you are big, you might have high fixed costs (in the short term).

Link between small plants and close to customers. Less transportation costs.

Ford mondeo ? do the same for the whole world ? economies of scale ? but then they had to adapt anyways to the local markets

Ford Model T ? worked because mass market. They needed specialisation and standardisation. The more we repeat, the more we get better: learning cost (courbe du coût unitaire en function de l'output cumulé) ? do faster and better ? less down time, less mistakes ? higher productivity. Extreme cost-based strategy. First mover advantage if you go down the learning curve first.

Cours du 15 février 2010

If you have to make up your mind would you choose cost or differentiation strategy?

• Diff: more flexible thanks to smaller plants. Does the customer care about small or big plants? Yes if it adds value to the customer.

• Cost: everything they do is oriented towards having lower costs.

The main strategy is cost. You cannot differentiate a lot on cans. Then there is a little bit of differentiation that makes the difference.

Strategic cost analysis: cost analysis on a comparative basis (compared to the competition and potential competition) ? how sustainable is it? To sustain your advantage, you have to know where it comes from.

Sometimes, the most important aspects are not what they compete on: Airlines compete on price, but you consider safety.

A. Product/market scope

• Overall approach: specialisation

• Focus on particular products

• Supply of particular customer segments (beverages & aerosols)

B. Manufacturing