Cement Industry Analysis


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Cement Industry Analysis

  1. 1. School of Petroleum Management, Gandhinagar, Gujarat, India (www.spm.pdpu.ac.in) Cement: an Industry AnalysisSubmitted to Faculty: Dr. Subrat SahuSubmitted by Executive MBA 2010 Students: 1. Abhik Tushar Das (20104001) 2. Anil Kumar Sahu (20104004) 3. Sudeep Panicker (20104008)Course: Corporate Strategy
  2. 2. 2 Cement: an Industry AnalysisContents: S No. Topics covered Page No’s 1 Cement industry overview, its applications 3 to 6 2 Competitive forces for the industry 7 to 8 3 Economic factors 9 to 10 4 Industry drivers 10 5 Industry attractiveness 11 6 Corporate level strategy 12 to 13 7 Business level strategy 13 to 15 8 Operational level strategy 16 9 Future Competitive Strategies (KSF Analysis) 16 to 17 10 Conclusions 17ABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER
  3. 3. 3 Cement: an Industry AnalysisCement industry overview, its applications:Cement is the glue that holds the concrete together, and is therefore critical for meetingsocietys needs of housing and basic infrastructure such as bridges, roads, water treatmentfacilities, schools and hospitals. Concrete is the second most consumed material after water,with nearly three tonnes used annually for each person on the planet. Being one of the basicelements for setting up strong and healthy infrastructure, Cement plays a crucial role ineconomic development of any country. Having more than a hundred and fifty years history,it has been used extensively in construction of anything, from a small building to amammoth multipurpose project.Cement is an essential component of infrastructure development and most important inputof construction industry, particularly in the government’s infrastructure and housingprograms, which are necessary for the country’s socioeconomic growth and development. Itis also the second most consumed material on the planet. The Indian cement industry is thesecond largest producer of cement in the world just behind China, but ahead of the UnitedStates and Japan. It is consented to be a core sector accounting for approximately 1.3% ofGDP and employing over 0.14 million people. Also the industry is a significant contributor tothe revenue collected by both the central and state governments through excise and salestaxes.The manufacturing process of cement consists of mixing, drying and grinding of limestone,clay and silica into a composite mass. The mixture is then heated and burnt in a pre-heaterand kiln to be cooled in an air-cooling system to form clinker, which is the semi-finishedform. This clinker is cooled by air and subsequently ground with gypsum to form cement.There are different varieties of cement based on different compositions according tospecific end uses, namely, ORDINARY PORTLAND CEMENT, PORTLAND POZZOLANACEMENT, WHITE CEMENT, PORTLAND BLAST FURNACE SLAG CEMENT and SPECIALISEDCEMENT. The basic difference lies in the percentage of clinker used.During the period from 2006 to 2008, total cement consumption grew from 2,568 milliontonnes to 28572 million tonnes, at a Compounded Annual Growth Rate (CAGR) of close to7%. The rapid increase in global cement consumption is led by increasing demand forinfrastructure in emerging economies, with Asia accounting for 66% of the global demand.China was the world’s largest consumer of cement in 2008 and accounted for 48.73% oftotal cement consumption.Structure of the Industry:The characteristics of the Indian cement industry need to be discussed to understand itsstructure better. Firstly, it is a combination of mini (more than 300 units) and large capacitycement plants, where majority of the production of cement (94%) in the country is by largeplants. The conventional method of cement manufacturing used by large plants (Rotary Kiln)ABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER
  4. 4. 4 Cement: an Industry Analysisneeds high capacity, huge deposits of lime stone in its vicinity, high capital investment andlong gestation period. Hence mini cement plants based on Vertical Shaft Kiln technology,suiting the small deposits of limestone are becoming popular. Also they create lessenvironmental pollution. Against the requirement of `3900 per tonne of capacity of largeplants, capital costs for mini-cement plants come to about `1,600 to `1,900 per tonne .Theviability of the location plays a major role in the economics of cement manufacturing . Oneof the other defining features of the Indian cement industry is that the location of limestonereserves in select States has resulted in its evolving in the form of clusters. The proximity ofcoal deposits constitutes another important factor in cement manufacturing. Since cementis a high bulk and low value commodity, competition is also localized because the cost oftransportation of cement to distant markets often results in the product beinguncompetitive in those markets. There are at present seven clusters, where SATNA(MADHYA PRADESH) cluster is the leader in capacity as well as production. Others areCHANDRAPUR (NORTH ANDHRA PRADESH and MAHARASHTRA), GULBARGA (NORTHKARNATAKA and EAST AP), CHANDERIA (SOUTH RAJASTHAN, JAWAD and NEEMUCH IN MP),BILASPUR (CHATTISGARH), YERRAGUNTLA (SOUTH AP), and NALGONDA (CENTRAL AP).Traditionally, cement has been a heavily taxed sector with both the central and the stategovernments levying the taxes which amount to around 30% of the selling price of cementor around 70% of the ex-factory price (excluding local transport and dealer margins). Themajor taxes/ levies comprise central excise duty; sales tax levied by the respective stategovernments; royalty and cess on limestone and coal; and, duties on power tariff. The exciseduty rates on cement are on specific basis, as against ad valorem rates on most products.The cement industry is energy intensive and thus power costs form the most critical costcomponent in cement manufacturing, of about 35% to total cost of production. The issueshere is the technology used (dry versus wet process), fuel efficiency (efficient use ofcoal/lignite/any other material used for burning) and power efficiency (power availability,use of alternative fuels, unit power consumption, cost and availability of captive power).The scope for cost reduction through better energy efficiency may now be limited for betterperforming companies since they have already reached the best feasible levels. One morecharacteristic of the industry comes from it being capital intensive. Since the capitalintensity of a new cement project is high, access to capital has become a significant entrybarrier. The cost of a new cement plant can be equivalent to about 3 years of revenue.Another distinguishing characteristic comes from it being cyclical in nature as the marketand consumption is closely linked to the economic and climatic cycles.In India, cement production normally peaks in the month of March while it is at its lowest inthe month of August and September. The cyclical nature of this industry has meant that onlylarge players are able to withstand the downturn in demand due to their economies ofscale, operational efficiencies, centrally controlled distribution systems and geographicaldiversification.ABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER
  5. 5. 5 Cement: an Industry AnalysisEnvironmental Impact:Cement industry has a significant role in the climate change debate and issue of sustainabledevelopment. The cement industry produces 5% of global man-made carbon dioxide, amajor gas contributing to climate change (WBCSD 2005). In short, the main environmentalchallenges facing the cement manufacturing industry are, emissions to air of oxides ofnitrogen, sulphur dioxide, particulates and carbon dioxide, use of resources, especiallyprimary raw materials and fossil fuel and generation of waste as ash and sludge and dust.Types of cement: 1. ORDINARY PORTLAND CEMENT is the most commonly used cement for a wide range of applications. These applications cover dry-lean mixes, general-purpose ready- mixes, and even high strength pre-cast and pre-stressed concrete. 2. BULK CEMENT, an alternative to bagged cement, which is of particular advantage to large consumers of cement. Internationally, the trend is to move cement more and more in loose form rather than bagged. In fact, over 90 percent cement in the USA, and other European countries is transported and sold in bulk, unlike in India, where only one percent is transported in bulk. 3. READY MIX CONCRETE, or RMX as it is popularly called, refers to concrete that is specifically manufactured for delivery to the customer’s construction site in a freshly mix and plastic or unhardened state. 4. PORTLAND BLAST-FURNACE SLAG CEMENT contains up to 70 per cent of finely ground, granulated blast-furnace slag, a non-metallic product consisting essentially of silicates and alumina-silicates of calcium. 5. PORTLAND POZZOLANA CEMENT is ordinary Portland cement blended with POZZOLANIC materials (power-station fly ash, burnt clays, ash from burnt plant material or siliceous earths), either together or separately.History of Cement industry in India:  1947 –1969: Rapid growth stage  1969-1982: Control Period  1982-1989: Partial Decontrol  1989 onwards-till date: Total DecontrolThe trend in capacity utilization of the industry is interesting to analyze, as there are manyfluctuations all through the period. Starting with 10% in the beginning of the industry, thecapacity utilization peaked to around 99% in 1937-38. But this could not be sustained andABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER
  6. 6. 6 Cement: an Industry Analysisthe capacity utilization fell sharply to 67% in 1950, improving marginally in the following twodecades. The period of controlled market, as mentioned before was characterized byoversupply in the industry, which got reflected in negative ACGR of -0.73%. Whole of theperiod of 1970-71 to 1988-89 saw fluctuations, moving utilization levels to as low as around65% in some years. But after total decontrol, there was some sort of upturn in this trenddue to increased production levels and the ACGR went up to positive 0.93%. It may bementioned here that the capacity utilizations have been at their highest only after 1999-2000 when it reached 85% and moreover after 2004-05. In January 2007, it even went up to100%, highest ever, guiding it to the average of 94% for the financial year. This becamepossible only because the installed capacities did not increase as much as production did,finally leading to closure of gap between supply and demand. The overall period ACGR isjust above the positive mark at 0.10%.ABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER
  7. 7. 7 Cement: an Industry AnalysisCompetitive forces for the industry:The Indian cement industry can be divided into five geographical zones North, South, East,West and Central based on localised differentiation in the consumer profile and supply-demand scenario. Demand in the cement industry has seen tremendous growth on the backof infrastructure, residential and commercial projects. The industry has seen constantmodernisation and implementation of latest technologies during past few years. About 93per cent of the total capacity is based on eco-friendly dry process technology. The demandfor office space in India is being driven by the entry of multinational companies and thegrowth of the services sector, particularly the IT-BPO industry. Progressive liberalization andeasing of foreign direct investments (FDI) norms in various sectors paved the way for growthin FDI, which led to growing demand for office space from multinational companies (MNCs)and other foreign investors. Total FDI in the cement sector between April 2000 and August2010 stood at US$ 1.9 billion.Companies in the Indian Cement Industry: 1. ULTRATECH CEMENT 2. GUJARAT AMBUJA CEMENT LIMITED 3. JK CEMENTS 4. ACC CEMENT 5. CENTURY CEMENTS 6. MADRAS CEMENTS 7. HOLCIM 8. LAFARGEABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER
  8. 8. 8 Cement: an Industry AnalysisStrengths:Cement is, literally, the building block of the construction industry. Almost every buildingconstructed relies on cement for its foundation. The cement business is a US$10 billionindustry, measured by annual cement shipments. There is also a strong reputation behindthe cement industry. Cement is a solid material and consumers rarely have complaintsabout the product. Regional distribution plants have also made cement widely available toany type of buyer.Weaknesses:The cement industry relies on construction jobs to create a profit. But the cement industry iscyclical in nature and heavily relies on weather. About two-thirds of cement productiontakes place between May and October. Cement producers often use the winter months toproduce and stockpile cement, to meet demand. Another weakness is the cost of transport;the cost of transporting cement is high and this keeps cement from being profitable overlong distances. In other words, shipping cement costs more than the profit from selling it.Opportunities:The cement industries have opportunities as well. One such opportunity is the cementindustrys efficiency. The cement industry has recently streamlined its production efforts,using dry manufacturing instead of wet, which is heavier and more time-consuming. Thecement industry has also invested about US$6 billion in expansion efforts to meet unmetcement needs. Projections show that by 2012, the cement industry will have 25 percentmore production capabilities.Threats:The nature of the economy has uncovered a number of threats to the cement industry. Thecement industry greatly relies on construction. The current economy has lessened thenumber of construction jobs, which in turn hurts the cement industry. The cement industrycontrols the majority of the United States market, but not all of it. About 11.5 metric tons ofcement is imported annually to support the unmet need. If other countries can produce andship cement for a reduced price, the U.S. cement industry is in danger. The U.S. governmentis also attempting to regulate the cement industrys waste. The Environmental ProtectionAgency has introduced regulations for the cement industry to cut down emissions.ABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER
  9. 9. 9 Cement: an Industry AnalysisEconomic factors:The Economy of India is the ninth largest in the world by nominal GDP and the fourth largestby purchasing power parity (PPP). According to a report Real Estate and ConstructionProfessionals in India by 2020 by realty consultant Jones Lang LaSalle, investment ininfrastructure during 2007-12 is USD 500 billion. The expected level of infrastructureinvestment predicted in the 11th Plan is 2.36 times that of the 10th Plan and this is expectedto almost double for the 12th Five Year Plan. India is expected to grow at an average 9percent per annum in next few years. Accompanying this growth will be an increase indemand for infrastructure services. Economic and population growth prospects areexpected to place additional pressure on existing infrastructure facilities. Therefore,addressing these challenges will be essential is the infrastructure sector is to continuefostering economic growth rather than becoming a constraint.In the past ten years, cement consumption in India grew by approximately 7.5% per year.The building industry developed very dynamically, driven by the strong growth ofpopulation and the quick expansion of infrastructure.ABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER
  10. 10. 10 Cement: an Industry AnalysisMarket size:The cement industry in India has been on a robust growth trajectory for more than adecade, led by buoyancy in sectors like real estate and construction. The Indian cementindustry is very energy intensive and is the third largest user of coal in the country. It ismodern and deploys latest technology, which is among the best in the world. India is thesecond major cement producing country following China with 137 large and 365 minicement plants. Some of the major players in the cement industry include ULTRATECHCEMENT, GUJARAT AMBUJA CEMENT LIMITED , JK CEMENTS, ACC CEMENT, CENTURYCEMENTS, MADRAS CEMENTS, HOLCIM and LAFARGE to name a few.The Indian cement industry is the 2nd largest market after China. It had a total capacity ofabout 260m tonnes (MT) in FY10. Consolidation has taken place with the top five playersalone controlling over 60% of the total industry capacity. However, the balance capacity stillremains quite fragmented. Hence the cement market can be considered as a concentratedmarket with a few number of large players dominating the market share.Government Initiatives:Steps taken in the Union Budget 2011-12 include;  Allocation of ` 2, 14,000 crore (US$ 46.5 billion) for infrastructure in 2011-12. This is an increase of 23.3 per cent over 2010-11  Government to come up with a policy for developing PPP projects  IIFCL to achieve cumulative disbursement target of ` 20,000 crore (US$ 4.3 billion) by March 31, 2011 and ` 25,000 crore (US$ 5.4 billion) by March 31, 2012  Under take out financing scheme, seven projects sanctioned with debt of `1,500 crore (US$ 325.6 million). Another ` 5,000 crore (US$ 1.1 billion) will be sanctioned during 2011-12  To boost infrastructure development, tax free bonds of `30,000 crore (US$ 6.5 billion) proposed to be issued by Government undertakings during 2011-12Industry drivers:Key Drivers of Cement Industry:  Buoyant real estate market  Increase in infrastructure spending (budget spending)  Various governmental programmes like National Rural Employment Guarantee  Low-cost housing in urban and rural areas under schemes like JAWAHARLAL NEHRU NATIONAL URBAN RENEWAL MISSION (JNNURM) and INDIRA AAWAS YOJANAABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER
  11. 11. 11 Cement: an Industry AnalysisIndustry attractiveness:Product Differentiation:  India is producing different varieties of cement, based on different compositions according to specific end uses, like ORDINARY PORTLAND CEMENT (OPC), PORTLAND POZZOLANA CEMENT (PPC), PORTLAND BLAST FURNACE SLAG CEMENT (PBFS), OIL WELL CEMENT, RAPID HARDENING PORTLAND CEMENT, SULPHATE RESISTING PORTLAND, CEMENT AND WHITE CEMENT etc. The basic difference lies in the percentage of clinker used  These different varieties of cement are produced strictly under BIS specifications and the quality is comparable with the best in the world  Percentage of production of PORTLAND POZZOLANA CEMENT has steadily increased from 17.37% in 1989-90 to 60.12% in the year 2006-07  This is a favourable change in the product mix of Indian cement industry as PPC in more specialized type of cementIn an environment of growing competition witnessed in the post decontrol era, one of themajor developments has been the introduction of higher grades of cement.Industry Concentration:  Though the industry saw consolidation by domestic players starting in the mid- 1990s, it was only in the late 1990s that foreign players entered the market  The structure of the industry can be viewed as fragmented, although the concentration at the top has increased, as the top 5 players control around 60.28% of market share, which was 55% in 1989-90, whereas the other 39.72% of market share is distributed among 50 minor players  The fragmented structure is a result of the low entry barriers in the post decontrol period and the ready availability of technologyIndustry integration:  Economies of scale resulting from the larger size of operations  Savings in the time and cost required setting up a new unit  Access to newer markets  Access to special facilities / features of the acquired company  Benefits of tax shelterABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER
  12. 12. 12 Cement: an Industry AnalysisCorporate level Strategies:The Globalization of Indian Cement Industry has helped the industry to restructure itself tocope up with the alterations in the global economic and trading system. The Indian cementindustry is one of the oldest industries. It has been catering to Indias cement requirementssince its emergence during the British Raj in India. Though the majority of the players in theIndian cement industry were private sector organizations, the industry was highly regulated.Globalization of Indian Cement Industry includes several foreign companies engaging inmergers and acquisitions (M&A’s) of Indian cement companies. For example;  HEIDELBERG CEMENT - INDORAMA CEMENT LTD: Heidelberg Cement Company entered into an agreement for a 50% joint venture with the Indorama Cement Ltd., situated in Mumbai, originally possessed by the Indorama S P LOHIA GROUP. HEIDELBERG CEMENT COMPANY is the leading German cement manufacturing company. The Heidelberg Cement was set up in 1873 and has a long and prosperous history. Being one of the best in the world the Heidelberg Cement Company has its bases in different countries. The Heidelberg Cement Company has two manufacturing units in India. A grinding plant in Mumbai and a cement terminal near Mumbai harbour. A clinker plant is coming up in the state of Gujarat.  HOLCIM CEMENT - GUJARAT AMBUJA CEMENTS (GACL): HOLCIM CEMENT signed an agreement of 14.8% take over with the GUJARAT AMBUJA CEMENTS (GACL). With new products, skilled personnel, superb management, and a outstanding market strategy gives this tie up good edge over the other competitors. HOLCIM CEMENT COMPANY is among the leading cement manufacturing and supplying companies in the world. It is one of the major employers in the world; having a work force of 90,000.The HOLCIM CEMENT COMPANY has units in excess of 70 countries all over the world.  ITALCEMENTI CEMENT - ZUARI CEMENT LIMITED: ITALCEMENTI CEMENT COMPANY with the help of the CIMENTS FRANÇAIS, a subsidiary for its global activities, has acquired shares of the famous Indian cement manufacturer ZUARI CEMENT LIMITED. The acquisition was of 50% shareholding and the deal was of about 100 million Euros. ITALCEMENTI CEMENT is the 5th largest cement manufacturing company in the world. The production capacity of the ITALCEMENTI CEMENT COMPANY is about 70 million tons in a year. With the construction boom in India the company looks for a stable future. In 2001 the ITALCEMENTI CEMENT entered the Indian market scenario. It took over the plant of the ZUARI CEMENT LIMITED in ANDHRA PRADESH in southern India. The joint venture earned revenues of around 100 million Euros and an operating profit of 4 million Euros.  LAFARGE INDIA is the subsidiary of the LAFARGE CEMENT COMPANY of France. It was established in 1999 in India with the acquisition of the TISCO and the RAYMONDABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER
  13. 13. 13 Cement: an Industry Analysis CEMENT plants. Lafarge Cement presently has three cement manufacturing units in India. One of them is in Jharkhand which is used for the purpose of grinding and the other two are in Chhattisgarh used for manufacturing. The Lafarge Cement Company was set up in the year 1833 by LEON PAVIN. LAFARGE CEMENT COMPANY situated in France is the leading cement producing company in the world. It has plans for increasing the cement production through technological innovations and maximization of the capacity of the plant. It has a large network of distributors in the eastern part of India. The Lafarge Cement Company is presently producing nearly 5.5 million tons of cement for the Indian cement market.Business level strategies:  The growth of this sector can be determined by analyzing industry trends and governmental data. We will look at the business strategies specifically in terms of consolidation, globalization, targeted customer strategies, R&D, corporate governance, innovation and branding  In emerging economies, particularly in Asia, demand will increase more significantly. Therefore, expansion will be there in growing economies and this is an important aspect of global strategy.There are three major macro-level overhauls that conglomerates need to integrate whichare:  Vertical integration: Most large global players have multi-product businesses in the building materials segment and a key focus is to maintain the strategy of vertically integrating core activities of cement, ready-mixed concrete and sand and gravel. Cement continues to play the leading role.  Management focus: The reorientation of the management style is based on proximity to operating activities, clear goals, consistent implementation and speed. The focus would be on: 1. increasing efficiency 2. cost leadership and growth 3. cost efficiency  Where it is difficult to develop really unique selling points, cost efficiency is the decisive criterion for competitiveness, adequate sustainable returns and, therefore, the basis for growth. There will always be a balance between increased risks, returns and growthABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER
  14. 14. 14 Cement: an Industry AnalysisBusiness strategies for the Indian cement industry:  Consolidation and Globalization: Large cement players in India will use the acquisition route to enhance capacity and market share. It is clear that smaller plants will not survive in the long term. The top five players will hold 70-80 % of capacities and market in the next decade. There is an expectation that more global players would come into India as they would like to get a foothold in the market as the demand will propel in the emerging economies. Acquisition appears a good route primarily because a Greenfield cement plant takes 3-4 years to build and another 3-4 years to break even at an operating level of even 70-75 %. E.g.:- The acquisition of the Larsen & Toubro cement (ULTRATECH CEMENT LIMITED) business by Grasim Industries Limited in 2003-04 is a case in point. Till 2010, The ADITYA BIRLA GROUP, has increased its capacity to 31MT and is currently a market leader in India and tenth in the World.  Process Automation: The significant nature of changes to the Information technology area and the manner in which information will be processed will be drastic over the next 10-15 years. This will have some impact on the cement industry. Higher levels of technology, its seamlessness and functionalities that have wider acceptance and usage will also bring down operating costs considerably. It is envisaged that Indian companies, which operate several plants across states in India, will need to monitor plant operations on a centralized basis through the use of process automation. With growth in organization and industry, the goals of the trading operations have also been redefined. The industry no longer looks just at maximizing domestic production capacity. The trade operations enable them to build international relations, explore new markets for establishing the demand in cement in a particular demographic, and balancing out regional supply and demand. Cement can be directed to aABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER
  15. 15. 15 Cement: an Industry Analysis demographic, where its need is established, and consequently, gain flexibility to maximize worldwide production capacity.  Technology: Use of technology in marketing will assume more changes with increase in both communication and information technological changes. Concepts will emerge such as phone-a–cement, or portraying a 3-D animation of the house prior to its construction in a library, providing responses to customers through mobile technology. Increasing customer expectations of adding greater value will ensure greater attention to this aspect. Necessary enhancement in using mobile and communication technologies will also be introduced.  Cement Economics: Costs have a significant bearing on the performance of an industry and cement is no exception. The uptrend in costs is likely to continue, although the increase in input costs is expected to be neutralized by rise in prices owing to higher demand. Power and fuel costs have a strong influence on the operating expenditure of the company as they would account for about 32 % of total production costs. Overall costs are also determined by the economies of scale. The operating efficiencies of foreign players are better that that of the Indian counterparts. Companies such as LAFARGE and CEMEX fare better on energy costs and raw material costs when compared with Indian players.It will be necessary: a. Large buyers of cement would align with cement producers for a long-term supply relationship; pricing will be determined by market and expected off take during a given period b. Region-wise strategy is likely to continue, unless state governments in surplus states along with business create a different growth strategy to boost infrastructure development c. Cement delivery will be made off city limits where the growth is expected to happen. The stocking points will be larger and fewer d. Corporate Governance and Branding: Corporate governance is as a set of systems, processes and principles, which ensure that a company is governed in the best interest of all stakeholders. Branding is everything that the buyer needs to know before buying the product to suit his expected result. The product includes information about its characteristics, and what can be, it’s possible uses e. Cement Economics: Costs have a significant bearing on the performance of an industry and cement is no exception. The uptrend in costs is likely to continue, although the increase in input costs is expected to be neutralized by rise in prices owing to higher demand f. R&D and Innovation: Companies do not have much of application-oriented research and development efforts but this will become critical for future success. To a large extent, this is related to creating the application and customer of the future and understanding customer needs based on the emerging environment. Companies will need to create niche products and develop the market for such products by providing solution-based offerings to the customer.ABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER
  16. 16. 16 Cement: an Industry AnalysisOperational level strategy:The Bureau of Indian Standards came forward to grade the ordinary PORTLAND CEMENTinto GRADE 33 CEMENT, GRADE 43 CEMENT AND GRADE 53 CEMENT. This grading closelyfollowed the U.K. grading which was 32.5, 42.5 and 52.5 as well as 62.5, some of Indiancompanies are also trying to make and persuade the Bureau of Indian Standards tointroduce grade 63. While 53 GRADE CEMENT is actually best only for producing concretesof grade 53 and above, it is not to be used in ordinary structures where concrete grade 20 isnormally adequate. In India ready mixed concrete has just had the beginning. The blendingof CEMENTITIOUS MATERIALS at site is not advisable now. Hence, blended cementproduction is very essential. At present production of blended cement is around 30 percent.This has naturally to increase to at least 50 per cent since the blended cement do not gainstrength immediately and also do not generate heat like OPC. Hence, the common belief hasbeen that blended cement is inferior cement. Actually it is not so, no doubt, the rate ofgaining strength is slow in the case of blended cement. But, ultimately, in the long run itgains as much strength as any OPC. Blended cements give better workability in freshconcrete and during the hardened stage, give better durability. The consumer is to beadequately educated on the advantages of blended cement. The reluctance on the part ofbuilders to opt for blended cement is to an extent justifiable because many builders wereforced to use PPC when the production of PPC was as high as 76 per cent during the controldays.They found to their dismay, they have to retain their shuttering for much longer durationand sometimes the quality of PPC was of doubtful nature because the fly ash blended withthe PPC was of varying quality. However, of late, the selection of POZZOLANIC MATERIALShas been more stringent and the quality of blended cement is more consistent. The builderscan shed their past memories and start using blended cement. Manufacture of blendedcement results in substantial savings in energy and product cost. Hence, industry must passon to the consumers the benefits derived to the users of blended cement.Future Competitive Strategies (KSF Analysis):  Maintaining cost leadership: Better logistics management will be a key area for reducing distribution costs in future. A renewed emphasis on reducing working capital through better management of inventories and receivables as well as improvement in labour productivity at all units should contribute towards reducing costs  Improving asset utilisation: Stress on process control measures, use of alternative energy sources and increased use of high calorific imported coal to bring down energy costs by increasing the share of imported coal and use of pet-coke  Greater field penetration: Increased presence of Sales force would enable companies to push its product over its competitor offerings. This would also help in theABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER
  17. 17. 17 Cement: an Industry Analysis customer being educated about the brand with added benefits aiding in brand differentiation apart from the generic cement grades.  Enhancing margins: To enhance margins in future, Companies will concentrate on revenue boosting and cost cutting measures by reducing fuel, distribution costs and power costs by bringing down unit power consumption and increasing reliance on low cost, captive power, through fresh investments in power generation facilitiesConclusions:It can be concluded that given the sustained growth in the housing sector, the governmentsemphasis on infrastructure (both at the national and the state level) and increased globaldemand, the prospect for Indias cement industry is exceedingly promising. The dynamics ofIndian cement industry is undergoing a gradual shift. From an oversupply situation not longago, a phase has come where demand growth is outstripping supply. While tracing thegrowth of the industry in different policy regimes, it became observable that the industryhas matured with the help of all indicators of performance, such as size, production,capacity utilization, consumption and exports, after its decontrol in 1989-90. Technology ofproduction and quality of product too has advanced a lot along with decrease in regionalconcentration. Another significant trend which the industry has witnessed is of greaterconsolidation of power by larger players through mergers and acquisitions and entry offoreign majors in the ever growing market. This growth and development of the industry isall the more evident in recent years especially after 1999-2000.All the above mentioned trends in the Indian cement industry have only contributed to thegrowing competitiveness between the firms and his has resulted into improved efficienciesin procurement, manufacturing, transportation and logistics. With the infrastructure sectorpoised to be being prioritized by the Government, the demand for cement would be onlyincreasing in the times to come. Hence the outlook for the Indian cement sector looks brightfor corporate houses that can handle their brand repute and work upon tight revenuemargins by gaining from high volume sales.ABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER
  18. 18. 18 Cement: an Industry AnalysisReferences: a. http://eria.org/research/images/pdf/PDF%20No.2/No.2-part2-4.India.pdf b. http://www.cfriindia.nic.in/coalsampling/paper3.html c. http://economictimes.indiatimes.com/news/economy/infrastructure/indias- infrastructure-sector-needs-1-trillion-investment-in-12th- plan/articleshow/10771106.cms d. http://www.alacra.com/acm/2054_sample.pdf e. http://newsletters.cii.in/newsletters/mailer/trade_talk/pdf/Cement%20Industry%20 in%20India-%20Trade%20Perspectives.pdf f. http://www.ibef.org/artdispview.aspx?art_id=29715&cat_id=526&in=11 g. http://en.wikipedia.org/wiki/Cement h. http://en.wikipedia.org/wiki/Portland_cement i. Strategic Management (ISBN-13: 978-81-315-0963-0, ISBN-10:81-315-0963-X), CENGAGE Learning, R Duane, Robert E Hoskisson, Michael A Hitt.ABHIK TUSHAR DAS ANIL KUMAR SAHU SUDEEP PANICKER