Describe the situation facing Missouri Can Company (MCC)? This should include th

Question

Describe the situation facing Missouri Can Company (MCC)? This should include the major issues facing the company and the decisions that need to be made. You must consider the past, but your analysis and recommendations should be forward looking.

Missouri Can Company

The Missouri Can Company (MCC) was a firm with a long and uneven history. At one time or another it had been a competitor in more than two dozen industries with varied success. Each of the several CEOs had developed a different strategy and over the decades the firm had had many manifestations. The only real constant in MCC’s strategy had been a commitment to the packaging business in its several forms. But, even in this business there had been any number of changes in direction which diluted the impact of capital spending and had the effect of MCC never achieving a strong position in any of the packaging segments although, briefly, in the early years MCC’s total packaging revenues made it the largest packaging company in the world. The lack of a competitive advantage in any of the large packaging segments resulted in MCC being pushed into producing commodity products, which had them penned between powerful steel and tinplate suppliers and powerful food and beverage producers as customers. Also, as its large customers grew there was pressure for them, especially in the low margin food business, to build their own packaging facilities, especially can plants. The long term effect of this was to cause MCC’s packaging profitability to lag its better positioned competitors.

At one time or another, the company produced auto parts, electrical equipment, power equipment, electric motors, metal alloys, airplane wings, furniture, appliances, communications equipment, specialty chemicals, and consumer products, to name only the most important of its many businesses. MCC also bought several regional retail chains. None of these businesses worked out well and all were either sold or liquidated at a loss. The financial and human capital devoted to these businesses was largely lost. Further, the problems they caused diverted capital and management attention from better opportunities.

NEW STRATEGIES FOR THE COMPANY

Under still another new CEO, a management consensus had developed. The consensus was to (1) reduce holdings in operations that fall short of performance goals or do not fit the long-term strategy of the company, and a target of realizing $600-$700 million from the sale of such assets was established, (2) reinvest these funds in areas promising profitable growth, (3) improve return on equity over the long term as a consequence of this reinvestment strategy, and (4) strengthen MCC’s balance sheet and credit standing. The new benchmarks for the firm included having a well-balanced BCG matrix that considered fast growing industries to be those that were growing at more than 10% per year. The end result would be a firm with four main businesses: financial services, energy, packaging and forest products. The latter was primarily a paper, fiber drum, and cardboard business that also generated about 25% of revenues from selling lumber and wood chips.

This strategy was followed and many businesses were sold, although the amount of money received for the businesses fell short of the $700 million target by almost $250 million. The businesses sold were all either small competitors in their industry or were in industries that suffered from overcapacity and low returns.


The New Missouri Can Company

Once the sales were complete, most of the realized funds were redeployed into MCC’s four main business groups, resulting in a firm that management thought met their goals. The Chairman stated in the Annual Report that MCC was ready to move on to a new phase:

“Our primary task is now the efficient production of quality goods and services within our restructured business segments: packaging, forest products, insurance, and energy. Further details on MCC’s posture are contained in the attached operating and financial statements. Our overall strategy is to achieve the competitive advantages that can result from increased productivity, market focus, and innovation.”

By the beginning of year five, following the new strategy, management believed that it was well positioned strategically for future growth and profitability. They had pared their operations to four main businesses: Financial Services, Energy, Packaging, and Forest products. The review for each segment was done by top management with the assistance of outside consultants who were all experienced top-level executives in each industry. Some of the consultants were retired and some of them were still active, but they all had long and successful experience in the industry they were consulting on. There is also an outlook section for each industry segment that includes estimates of profitability, cash flow, and needed investment in the next 10 years. The outlooks were done entirely by the consultants.

Explanation / Answer

The primary issue faced by MCC is the lack of a clear vision and strategy in business operations and the absence of definite leadership and guiding principle in the company. The absence of strategy and vision led to the company entering into various sectors, even if the sectors are not in inclination with the firm’s primary business. Also the strategy of the company to enter various sectors, completely ignored the fact that entering a market sector is not important. The importance lies in the sustenance of business. The absence of competitive edge in any sector, weakened the grip of the company in the overall market. There were several CEOs in the company. Each came to the management with his own set of strategy. The business strategy changed with the change of CEOs and this was quite absurd as usually it’s the other way round. CEOs come and go, but the strategy of the company remains aligned with the business objectives and vision and mission.

To come out of such a situation, the first step that the company must take is to have a strong leadership. This leader will help in giving a direction to the business of the company. The leader will scrutinize the various subsidiary businesses and based on their future prospects and past performances, he can take a call of continuing the business in that sector or pulling off the plug. The avenues where the business is struggling must be shut at once. The strategy of the company must be aligned with the vision, mission and business objectives of the company. This way, the company will gain overall effectiveness in market and will strengthen its market value as well as market position.

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