Page 3: Strategy
All businesses need a vision - a clear direction which drives their activities. Today, the Chief Executive of Rexam has defined the company’s vision as being to 'transform Rexam into the world’s leading consumer packaging group in its chosen sectors'.
An organisation’s strategy is the means by which it achieves its vision. It is a long term plan for the organisation which involves an outline of the products and markets it will compete in. The takeover of the American National Can Group Inc (ANC) is just one example of the way in which Rexam is putting its strategy into practice. At the time of the takeover ANC was the world’s second largest beverage can maker.
Demand for consumer packaging is relatively stable. People need to eat and drink in both good times and bad. As a result demand does not experience the cyclical growth of many other products. Consumer packaging has experienced steady increases in demand over the long term. It provides a good example of a successful old economy product.
It has been logical for Rexam to develop a global presence. Rexam’s customers have grown in size, for example spreading from being European to global businesses. It has therefore made sense to grow with them. A global purchaser of packaging will find it easier to deal with the same supplier worldwide. Standards, specifications and commercial contracts can be coherent but supply can still take place in the local markets.
Rexam is particularly well placed in the global packaging market because of its unique product range. Rexam operates in four market segments in the packaging industry. These are:
- Beauty packaging e.g. pump mechanisms and lipstick cases for cosmetic companies
- Healthcare packaging e.g. sterile wrapping for medical goods
- Beverage packaging e.g. metal, glass and plastic containers for the beer and soft drinks industry
- Food packaging e.g. ice-cream cartons.
There are clear synergy benefits from operating in these major market segments. Marketing to a number of key customers who will want to purchase all of these types of packaging is a typical example of this synergy.
In order to build up a strong global presence in these key packaging areas, Rexam has been following a policy of divesting its non-core packaging businesses. The cash received from these sales has been re-invested in new core businesses. Importantly, Rexam has also placed emphasis on buying into value added packaging businesses rather than focusing on bulk products.