How does Porter’s “Five Forces” article relate to the CC&S case essay
CCC&S was the company that faced a serious challenge, when the company had to change its marketing strategy and manufacturing in the late 1980s – early 1990s. In fact, the company faced the problem of the decline of metal containers market and emergence of plastic containers market. In such a situation, the company had to shift to new marketing strategy and new manufacturing to maintain its competitive position. In this respect, Porter’ five forces help to reveal benefits of the step undertaken by the company.
The bargain power of buyers is very important because the more buyers the company can attract the stronger is its position in the market because it takes the larger market share. The bargain power of buyers of CC&S was growing steadily. The net sales of the company grew steadily in the course of the 1970s – 1980s. For instance, net sales of the company were $448,4 m in 1971, $825 m in 1975, $1,402 m in 1979, $1,487.1 m in 1985, $1,834.1 m in 1988 (Bradley, 2011). In such a way, the growth of sales of the company had started to slow down in the 1980s for sales of the company tripled in 1970-1975, while in 1979-1988 sales of the company grew $432.1 m only that is about 23% only, while taking into consideration the inflation rate in the course of the decade, the growth of sales of the company is even lower than 23%.
At the same time the major customers of the company were large companies using containers, especially in beverage industry, including the Coca-Cola Co. with $8,965.8 m sales and all the products sold by the company were packed in containers. The same trend may be traced in packaging of other large companies, which were the target customer group of CC&S, including Anheuser-Busch Companies Inc. with $7,550 m sales, Pepsi Co Inc. with $5,777 m sales, the Seagram Company Ltd. with $5,581.779 m sales, Coca-Cola Enterprises Inc. with $3,881.947 m sales, Phillip Morris Companies Inc. with $3,435 m sales and others (Bradley, 2011).
The bargain power of suppliers is also very important because the company relies heavily on stable supply, while problem is supply affects manufacturing process and undermine the position of the company in the market. The bargain power of suppliers of CC&S was also quite high. The major suppliers for metal cans manufactured by CC&S were Alcan Aluminium with $8,529 m sales in 1988, ALCOA with $9,795.3 m sales in 1988, and Reynolds Metals with $5,567.1 m sales in 1988 (Bradley, 2011).
However, substitutes of metal containers manufactured by CC&S started to emerge in the late 1980s. Substitutes were plastic containers. Major manufacturers of plastic containers in 1989 were Owens-Illinois with $3,280 m sales, American National with $4,336 m sales, Cnstar with $544 m sales, Johnson Controls with $3,100 m sales, Continental Can with $3,332 m sales, Silgan Plastics with $415 m sales, and Sonoco Productive Co. with $1,600 m sales (Bradley, 2011).
In such a situation, CC&S had to compete with its major competitors, while the strong competitive position would allow the company to take the lead in the industry and accelerate its business development. The major competitors were major metal can manufacturers. The major metal can manufacturers in 1988 were Ball Corporation with $1,073 m sales, Heekin Can Inc. with $275.8 m sales, Van Dorn Company with $333.5 m sales, American Can Company with $2,854.9 m sales, National Can Company with $1,647.5 m sales, the Continental Group Inc. with $4,942 m sales. CC&S had $1,834.1 m sales in 1988 (Bradley, 2011).
In such a situation, the shift to manufacturing plastic contains was beneficial for CC&S because the company entered the new segment of the market with a different product, where the competition was lower, while prospects of business development were better.
