Metal Container Industry

Metal Container Industry {draw:frame} {draw:frame} {draw:frame} {draw:frame} {draw:frame} Supplier Power Steel less expensive, but aluminum is preferred choice and mostly controlled by 3 producers. Buyer Power Composed of few very large buyers such as Coca-Cola, Anheuser-Busch, Pepsico Inc. These Companies maintains relationships with many suppliers. Barriers to Entry Startup and Manufacturing costs are high and industry controlled by few industries. Substitutes There exists the option of switching to plastic or glass which has there advantages. Rivalry Five firms dominate this industry with a total market share of 61% By using Porter's Fiver Forces, we can see how the industry operates and what type of environment it is in. Rivalry in this industry is high, as there are only five firms that dominate this $12.2 billion U.S steel metal can industry in 1989 with a market share of 61% between them. These five companies' are American National, Continental Can, Reynolds Metals, Crown Cork & Seal and Ball Corporation. The competition has been intense since there is very little product differentiation in the products, along with over capacity has shrunk the companies' margins because of their discount methods to maintain their market share. They are not just facing competition between themselves but also from their customers who are turning to in-house manufacturing for their needs and the emergence of plastic and glass producers. Supplier power is medium to high because they both had several advantages to each other. There are tradeoffs to using either aluminum or steel. The advantage of steel over aluminum was price and it represented a savings of $500 million for can manufacturers. And although the switch from aluminum to steel is inexpensive, aluminum was much lighter, of higher quality and was more economical to recycle. Those who produced aluminum had more supplier power since the three largest producers supplied the metal can industry. This gave the companies in the metal can industry less choices from which to pick. The buyer power is affected by who their customers are and the volume in which they purchase. The largest buyers in this industry were the Coca-Cola Company, Anheuser-Busch Companies, Inc., Pepsico Inc., and Coca-Cola Enterprises Inc. These few large companies controlled a significant amount of volume. The fact that the container industry had very little product differentiation made it very easy for the buyer to switch and this is what they did. They maintained relationships with more than one can supplier and if the supplier did not meet their needs then they would cut their orders or move on to another supplier. The other problem here is that some customers like