International Strategy_La_Cimenterie_Nationale

1. INTERNATIONAL STRATEGY
CASE: La Cimenterie Nationale
Group 3: Tutor:
Le Vinh Huy (mr) Prof. Dr. Jean-Paul Lemaire
Nguyen Gia Bao (mr)
Nguyen Cong Thien (mr)
Bui Thi Bich Ngan (miss)
Hoang Hong Binh (miss)

2. Agenda
• Company Introduction
• External Analysis: P.R.E.S.T model
• Internal Analysis
• Strategy Formulation
• Recommendation

3. Company Introduction
Lebanon
map

4. Company Introduction
Lebanon history
• 26/11/1941: independent from France-administered
League of Nations mandate.
• 1948: joined the Arab League during Arab-Israeli war
• 1975 – 1990: Lebanese Civil War between Christian &
Muslim inhabitants.
At the end of the war, there were extensive efforts to
revive the economy and rebuild national infrastructure.
• 12/07 – 14/08/2006: 33-day war (July war) with
Israel.

5. Company Introduction
“La Cimenterie Nationale” history
• Cimenterie Nationale (hereinafter CN) is a joint stock
company with a capital of approx. 100 million USD.
Founded in 1953 with the Doumet and Asseily families as
shareholders.
• Top 3 of cement producers in Lebanon:
▫ CN (2006 domestic sales = 1.15 million tons of cement
with market share exeeding 34%; 2007 annual
production capacity = 2.1 million tons of clinker)
▫ Holcim (Swiss base, 2nd largest global cement producer)
▫ Sibline

6. Company Introduction
Product Structure
Product PA-S 42.5 P 42.5 P 42.5 BTNa, RMS P 52.5 BTNa, RMS PA-L 42.5
Blast furnace Ordinary Moderate sulfate Moderate sulfate Blast furnace
slag modified Portland resistant cement, resistant cement, limestone modified
cement Cement normal strength high strength cement

7. Area of reference
Southern
Europe Algeria
Syria
Libya
Yemen
Lebanon
Jordan
Iraq
Egypt
Saudi Arabia
Greece and
Turkey

8. External Analysis
Unstable environment but temporarily favorable at the moment
• Political - Regulatory pressure:
* Lebanon is often impacted by extreme internal and external disturbance
* North & East embraced by Syria, a much larger country which has once
controlled the northern part of Lebanon with 15,000-strong army troops
in several months in early 2005. Lebanon was part of the Greater Syria
(modern-day Syria, Lebanon, Jordan, Iraq, Kuwait, Israel, the
Palestinian territory, Cyprus, part of modern-day Turkey) in the past.
* South adjacent to Israel, which has long been enemy to the Arab
community in Middle-East. During the Civil War (1975 –
1990), Lebanon had been several times invaded by Israel army troops as
Lebanon supported PLO (Palestine Liberation Organization)
* Has Hezbollah (a paramilitary force) in their cabinet. Hezbollah, being
considered terrorists by Western countries, is enemy of Israel

9. External Analysis (con’t)
• Social - Economical pressure
* Has several ethnics (Christians, Shi’a Islam, Sunni Islam) that
never live peacefully with each other for decades
* Lebanon often has up and down economic cycles. During the
wars, only producers of vital items like food, drink and
clothing can survive. Commodities, particularly cement, is a
luxury item, hence there is very little demand for it. After the
wars, rehabilitation works, including infrastructure
reconstruction, are a strong stimulus for cement producers
* Apart from destroying the country as a whole, wars also bring
deadly devastation to Lebanese people and assets.
* Hence, local cement producers always have to cope with
cycles of fat cows and lean cows

10. External Analysis (con’t)
• Technological pressure
* MNC cement producers like Lafarge, Holcim, Heidelberg
Cement, and Italcementi have long been present in the
industry. With pool of expertise built up through hundred of
years, they always lead the cement industry by applying state-
of-the-art technology to their production, thus providing their
clients with top quality products.

11. Characteristics of Lebanon’s cement sector
• Supply and demand
▫ Ciment de Sibline S.a.L., Cimenterie Nationale S.L., Holcim
(Liban) S.L., and Seament S.L. produced cement at a rate of 5
million metric tons per year (Mt/yr) in 2006; the combined
capacity of their plants was about 6 Mt/yr. Holcim (Liban)
produced about 2 Mt/yr of cement, and Cimenterie
Nationale, about 1.7 Mt/yr.
▫ Cement demand declined in the fourth quarter of 2006 because
of fighting in Lebanon between Israel and the Hezbollah
organization; demand for the entire year, however, still
increased. Post-combat reconstruction was expected to consume
700,000 metric tons to Mt during the next 2 to 3 years.

12. Characteristics of Lebanon’s cement sector
• Factors which have most impact on the cement sector:
▫ To have new lines of modern technology, higher energy
efficiency and meet environmental concerns
▫ Increase in domestic consumption rates in the Arab countries
▫ Increase in favorability of the investment climate and financial
incentives
▫ Financial surpluses
▫ Lack of cement production in some countries
▫ Significant increase in the size of the construction industry
▫ Housing starts

13. Characteristics of Lebanon’s cement sector
• Future evolution of cement sector in Lebanon: The success of the
Lebanese cement industry depends upon the long-term restoration
of peace and stability to the country. The short-term outlook is for
slow economic growth; the domestic consumption of cement and
steel is not likely to change substantially. Rising cement demand in
Syria may provide opportunities for exports.

14. COMPETITION OF CEMENT INDUSTRY
Porter’s 5 Forces
SUPPLIERS
Bargaining power of supplier
MEDIUM
THREATH
RIVALRY
THREATH OF
OF
AMONG
NEW
SUBSTITUTES
EXISTING FIRMS
ENTRANTS
LOW
MEDIUM TO HIGH
HIGH
Bargaining power of buyers
LOW
BUYERS
14

15. Cement supplier: Medium
Cement production depends on the following suppliers:
-Energy suppliers will have a significant negative impact on the production
cost due to the increasing in petroleum price.
-Supply of limestone, the main ingredient of cement, is effectively
inexhaustible. Industrial waste can be used as recycled material.
-

16. THREAT OF SUBSTITUTES: Low
- There are no adequate substitutes for cement for the making of
concrete.
- There are several substitutes for concrete:
Steel, Wood, asphalt, brick, metals, glass, and plastic.

17. BUYERS: LOW
the current demand is huge
2557
• Global cement demand has
2600
enjoyed robust growth in recent
2500 2342
years.
2400
2185
(mt)
2300 • China is leading this growth with
2200 the population of of 1.3bn and rising
2100
as well as increasing wealth and vast
2000
infrastructure requirements.
1900
• Middle East region presented the
2004 2005 2006
large growth of building and
construction industry due to the
economic booms, re-construction
after war and revenue from oil
industry– which is the enormous
motivation for cement industry.

18. RIVALRY AMONG EXISTING FIRMS:
medium to high
• Existing firms are trying to expand their
capacity.
• Compliance of Standard barrier from
governments enforce the improvement of
quality and the application for higher
technology

19. THREAT OF NEW ENTRANTS:
Medium to High
• Rise of emerging market producers, especially
China
• Egypt with very low production cost

20. Segmentation of competitive
groups
• Competitive groups can be divided by
Demand: public (such as roads) and private
(such as building and housing construction)
Location: domestic (Lebanon), Middle East
(Syria, Israel, Iraq with the same
frontiers), Southern Europe, Greece &
Turkey, Western Africa
La CN will compete local cement makers and
international competitors
(Holcim, Lafarge,…)

21. La CN is an local Lebanese producers and has
exportation activities to Iraq & Syrie
Local makers Global Joint venture
competitors (local +
international)
Serve for Private Public & Private Public & Private
demand
Location Local Local and
regional
Size Modest Big Medium and
rising
Financial Limited familial Strong financial Strong financial
resources capital supply supply

22. Prior managerial “levers” to stick to the
dynamics of the sector
• Moving towards a qualitative and quantitative leap in terms of design
capacities
• Effort to contribute to the reconstruction process, to build new high -
capacity production lines to reduced the price, stop or dispense with old
lines of low productivity and high cost.
• Lafarge planned to reduce production costs by substituting petroleum coke
for diesel. Egypt access to natural gas.
• In addition to other building materials, manufacture various types of gray
and white cement.
• The entrance of partners from international companies, which currently
own more than 22 % the Arab cement industry
• Demonstrate remarkable presence in inter Arab trade & in international
markets, particularly Egypt, Jordan, Lebanon & Saudi Arabia.

23. KSFs of cement sector in Middle East
• Power: electricity & a variety of fuels.
• Natural resources: Cement production is one of the few
natural resource-based industries where Lebanon has a given
advantage. The country has an abundant supply of high-
quality limestone, convenient deep-water ports and a wealth
of know-how
• Capital Intensity: Profits were very high during the last two
years. Large facilitates granted to investors by Arab and
international financial institutions. The availability of huge
financial surplus at the existing cement companies and
investors.
• Production Technology and Plant Modernisation The
aspiration of new projects or planned factories to replace old
production lines with high-capacity production lines (1Mta at
least), which increases and doubles current capacities

24. Internal Analysis
Competitive Advantages of “La Cimenterie Nationale”
• Strong, talented team of top management led by Pierre Doumet
(CEO, owner) who possesses high level of technical knowledge &
management skills.
• Excellent logistic facilities.
• Certified Quality (ISO 9001) and Environmental Management
Systems (ISO 14001).
• Certified products according to Local & International Standards
(EN & ASTM).
• Low production cost products with leading brand name and top
quality in Lebanon.
• Cement consumption rates increased in most Arab countries,
particularly in the GCC countries.

25. Internal Analysis (con’t)
• Strengths
- Talented top management executives led by Pierre Doumet
(CEO, owner), Danny (CFO & chief administrative), Adib (bulk
export sales manager), Ghassam (product quality &
environmental respect & personnel security manager)
- Despite its family business status, CN embraces an open
structure: personnel are given strong dose of responsibility,
thus, they treat the company like their own  strong cohesion
team, able to resolve any problems arisen
- State-of-the-art technology with rotary kilns fired by pet coke,
which helps reducing 30-40% cost of energy compared to other
competitors using traditional fuel oil
- Products of top quality with more 90% clinker as the main
constituent, conforming to Lebanese as well as European and
American industrial norms (EN & ASTM)

26. Internal analysis (cont.)
• Strengths
- Large range of products (normal portland cement, moderate
sulfate resistant cement, blast-furnace slag modified
cement, blast-furnace limestone modified cement)
- Have its own electrical generators, thus helps it avoiding the
frequent power outage prevailing in Lebanon, due to current
distribution monopoly from “Electricite du Liban”.
- High productivity leads to lower production cost per ton ratio.
- Proximity to major transportation axes (shipments to
Turkey, Italy, and Southern France via ships, to Syria and Iraq via
trucks)
- Servicing maritime docking & loading station

27. Internal Analysis (cont.)
• Weaknesses
- Modest size in comparison with top 5 global MNC cement
maker
* Lafarge group, French base: 155 Mtons of cement in 2007.
By December 2007, Lafarge took over the Cement division of
ORASCOM group, Egyptian base, at the cost of 10 billion Euros
* Holcim group, Swiss base: 145 Mtons of cement in 2007
* Cemex group, Mexican base (non-existence in the Middle-
East & North Africa & Mediterranean): 95 Mtons of cement in
2007
* Heidelberg group, German base: 85 Mtons of cement in
2007
* Italcementi group, Italian base: 50 Mtons of cement in 2007.
Largest cement producer in the Mediterranean

28. Internal analysis (cont.)
• Weaknesses
- Its largely familial capital prevents LN
from benefiting much more substantial
financial resources. This also limits LN to
expand into a global network of
commercialization

29. Strategy Formulation
• Major activity in local market and Gulf region
• Cement export to Arab countries especially to Syria and
Iraq.

30. Strategy Formulation
• Competitors progressively enlarging geographic frame
when setting up new factories in Saudi Arabia, UAE, as
well as in Jordan, Syria and Egypt.
• Takes into consideration the accession of new markets
as Cyprus, Spain, Southern France, Italy and Africa due
to its efficient logistics.
• Maintain exportation towards Syria and Iraq by road
with high speed routes.
• Upgrade capacity to meet a rapid growth in regional
demand and projected market trends due to competitive
advantages.

31. Recommendation
• Financial solution:
Strengthen capital
- Joint-stock model.
- Joint-venture with local companies at regional
level.
- M&A
Better cost management
- Set up plant in Egypt to benefit lower labor cost.
- Energy cost control: using alternative fuels to
reduce cost and environment impact

32. Strategic solution
Product diversification
• Upgrade production and storage capacities
• Product diversification at geographical level:
concrete, aggregates