To: Board of Director
From: XXX XXXX
Subject: Stay the course or change?
Connelly’ strategy – Maintain the focused strategy, provide superior customer satisfaction, and defend our low-cost position in the industry – has served our company well for the past 32 years as evidenced by a ~20% return, a strong culture of frugality, and with no long term debt.
Our industry is changing and we are facing a strategic decision whether we stay the course or it is time to chart a new strategy. We conducted an industry analysis using the Porter Five Forces to identify the effect of the competitive environment to our position. We have confirmed that the growth of metal containers is slowing and the industry may actually decline as plastics continue to make in-roads as credible substitutes. Consolidation is another change that has given the US beverage manufacturers increased leverage. If Reynolds introduces a new generation of can-making technology, Crown may be forced to make substantial capital investments to follow suit. Our position is also threatened with Pechiney purchasing American National (25% of the US market). However, we may have an opportunity with Continental Can (18% of the US market) being put up for sale.
I recommend that we pursue a growth strategy to acquire Continental Can. The question becomes: should we buy all or part of Continental Can?
Acquiring Continental Canada would make Crown the leading supplier of all types of cans in Canada. This would be a departure from Crown’s traditional strategy of focusing on beverage and aerosol cans but it is similar to our country-based strategies in the rest of the world. It may also prevent Pechiney from consolidating Canada to their advantage.
Acquiring Continental Can US is a more difficult decision. It is possible that Pechiney would not be able to make the acquisition for antitrust reasons, given their 25% market share. This leaves Reynolds, Ball, one of the smaller regional players, or one of the bigger European competitors. Whoever makes the acquisition becomes a strong number two in the US. The questions are: if we can take out the remainder excess costs and integrate the Continental operations and if we can change Continental’s culture to be more like ours without losing their cultural advantage.
Further, acquiring the US operations of Continental Can would be a major strategic change for Crown. No longer would we be a second- tier focused player but a full-line number two competitor in the country with a market share of 32%. We may have some challenges with maintaining customer responsiveness to such a broad customer base. Crown may also need to borrow substantial sums, taking on a level of debt far beyond what Crown has done in the past. This would be a break with past success.
Not responding to these industry changes is not an option as illustrated by Barnes & Noble and Borders not reacting early enough to the disruptive e-book, or Blackberry’s loss of leadership in the mobile market to Apple. We should turn these changes to our advantages.
Let’s discuss at our upcoming board meeting.
Commented [lp1]: There are many ways to present your case.
Below is just one way to write this memo. The key things to remember are:
Avoid writing a book summary of the facts from the case. Use just enough facts to make your points.
Leave the most room to answer the key questions and use the answers of other questions as supporting facts leading you to your recommendations.
Present both the results and implication of your observations.
Commented [lp2]: Answer case question:
What were the keys to CC&S’s success?
(and summarize the current strategy to set the context)
This sentence serves as my introduction, summarizes the current strategy, states the key elements that make CCS successful and mentions 3 components that will be referenced as part of my argument, to recommend buying all or parts of Continental Can.
Commented [lp3]: Answer case questions:
What changes are taking place in CC&S’s industry, and what should Crown Cork & Seal do to respond?
Use Porter’s five forces as a model and discuss what I learn from this analysis.
CHowmmentcantheyd best[lp4]:leverageAnswerthesecasein quthe stions:future?
Which (if any) of Continental’s regional divisions should Crown Cork consider bidding on? Why, or Why not? Hint: Use Porter’s five forces as a model.
NOTE: This section is the meat of your case analysis. Save the most room for this part of the discussion. The previous questions are to help set up and support your recommendation.
Your recommendation should explain the risks/rewards and to understand the trade-offs of each strategic choice.
Commented [lp5]: Rubric question: at least 1 company today that faces similar problems.
Commented [lp6]: 499 words in total, excluding the salutation
I stated my position – change the course to a “growth strategy” and spell out the risks and benefits of buying each or all parts of CC.