Introduction of the company ,Market structure ,Cost structure, Substitutes and complement goods , Major current and past reasons for variation in demand and supply,Regression analysis for past 10 years ,Forecast variable ‘sales’

1. DG Khan Cement Company
Dera Ghazi Khan Cement Company Limited (DGKCC) is a strategic business unit of Nishat
Group, which is the largest industrial group in Pakistan. D.G. Khan Cement Co. is market leader
with respect to market share with about 11.4% market share. Apart from its competitors; its
product is high priced yet it has highest market share because of good quality. Its plant is situated
in Dera Ghazi Khan and Khairpur and head office is situated at Lahore. Factory site Unit 1and 2
that is situated in very remote area of Punjab, yet it proved a blessing for the company. Because
it has all three basic raw materials i.e. Lime stone, Shale, and Gypsum at one place. It has three
plants working two in D.G. khan and one in Khairpur. First plant is old one and it is Japanese
plant. The other two plants are of F.L.Smiths, Denmark. Presently it has a total Installed capacity
of 14000 tpd (tons per day).
Presently the company is also exporting the cement to Afghanistan, Iraq, UAE and Russia. The
team of the D.G. Cement is story of success of D.G. Cement. The whole team is self-motivated
and had played a vital role in the success of the company
Brands (Product)
Two different products are produced at DGKCC namely Ordinary Portland Cement and Sulphate
Resistant Cement. These products are marketed through two different brands:
 DG brand & Elephant brand Ordinary Portland Cement (It is also called the OPC and its
demand is about 92% because of commonly used).
 DG brand Sulphate Resistant Cement (It is also called the SRC and its demand is about
only 8% because it is only used in standing the foundations its main work is to finish the
pours produced while standing the foundations and made the foundations much strong).
In addition to following two brands they are also offering four different packaging which
are as following:
 OPC
 SRC
 ELEPHANT BRAND
 DG PLASTIC BAG

2. Market structure
The cement industry in Pakistan is currently thriving, thanks to the country’s booming Pakistan
construction industry and high demand for residential and commercial developments within the
country. According to the All Cement Manufacturers Association (APCMA), the sale of cement
in Pakistan increased by 10 percent in the first 5 months of the 2016 fiscal year. Until recently
there were 24 cement manufacturing units in the country which were reduced to 23 with the
closure of National Cement's Karachi unit. Out of these, 2 units produce white cement, one slag
cement and the remaining produce ordinary Portland cement (OPC).
Market structure is Perfect competition because many firms offer a homogeneous product in the
market and there is freedom of entry and exit and perfect information, firms will make normal
profits and prices will be kept low by competitive pressures.
Features of perfect competition in this market
 Many firms.
 Freedom of entry and exit; this will require low sunk costs.
 All firms produce an identical or homogeneous product.
 All firms are price takers therefore the firm’s demand curve is perfectly elastic.
 There is perfect information and knowledge.
 The industry price is determined by the interaction of Supply and Demand
Cost structure
Power and fuel:
The cement industry relies on power. Power and fuel costs account for ~30% of the price
of cement when it’s sold. As a result, power and fuel have a major impact on the company’s
operating expenditure.

3. Limestone and other raw material:
The second major component in the production of cement is the cost of raw materials. The
primary raw material that’s used is limestone. Raw materials account for 30%–40% of the cost
of sales.
Coal:
Around 25 tons of coal is used to make 100 tons of cement. Coal forms about 20% of the total
operating cost. The industry uses about 5% of coal produced in the country.
Power:
Cement industry is power intensive and about 120 kWh of power is required to produce one tone
of cement. Power accounts for 16% of total operating costs.
Transportation:
Cement is highly freight intensive in nature. Every tone of cement manufactured involves the
transportation of 1.6 tons of limestone, 0.25 tons of coal, 0.05 tons of gypsum and 1 tone of the
finished product. Freight accounts for about 18% of the total cost.
Selling and other expenses:
Other expenses include employee costs, administration expenses, and repair and maintenance
charges. These account for 15%–20% of the cost of sales.
Substitutes and complement
Cement substitutes are distinguished from aggregate substitutes, such as ground scrap rubber and
ground glass, and concrete additives, such as air-entrapment agents and plasticizers. Inspectors
will not be able to visually identify concrete that has had substitutes for concrete incorporated
into the mix.
The most common cement substitutes include the following:
 Silica fume, also known as micro silica, is a byproduct of the combustion of quartz, coal
and wood chips during the production of silicon metals. silica improves compressive
strength, bond strength, and the abrasion resistance of concrete.

4.  Fly ash is a fine, light, glassy residue generated during ground- or powdered-coal
combustion. Contractors find that fly ash enables cement to flow better in pump hoses
and makes it more workable under hand-finishing.
 Slag is a byproduct of the production of iron and steel in blast furnaces. The benefits of
the partial substitution of slag for cement are improved durability, reduction of life-cycle
costs, lower maintenance costs, and greater concrete sustainability.
Cement substitutes can alleviate the following types of concrete weathering:
 Alkali-silica reaction, in which crazing and the expansion of concrete results from the
interaction between high-alkali cement and high-silica aggregates.
 Corrosion, Cement substitutes mitigate this corrosion by removing the calcium
hydroxide that makes the concrete permeable; and
 Sulfate attack, in which concrete is attacked by sulfates that are found in some arid soils,
seawater and wastewater.
In summary, cement substitutes are used to enhance certain qualities of cement and reduce the
environmental and financial costs of cement creation.
Variation in demand and supply
There are 2 main factors that affect demand for cement and are as follows:
1. Economic Growth:
Growth in the GDP of the country contributes enormously to demand for cement. This is
determined through the growths trends discussed earlier which clearly illustrate
increasing demand as the economic variables improve as well as in the table below that
shows cement demand growth relative to real GDP growth for the first half of the last
decade. This is because economic growth is directly related to the growth of the housing

5. and construction industry which consumes roughly 40% of cement demand as well as an
indicator of attracting foreign investors which fuels growth in turn.
2. Government Development Expenditures:
Another source of demand for the cement industry is government expenditures which
account for a little less than one third of cement consumption. Higher expenditure
allocated to development projects in essence fuel demand for cement. These development
projects are typically centered round dam building, reconstruction activities in terrorism
affected areas like Waziristan and the Swat Valley as well as rehabilitation activities that
focus on earthquake and flood affected areas in Pakistan.
In addition to the factors mentioned above, the cement industry is also affected by the
global economy as well as Pakistan has forayed in to exports.
Factors that affect the supply side of the cement industry are:
1. Production factor costs:
This is true for any industry. As energy costs surge, factor costs for the cement industry
goes up which consumes a considerable amount of energy resources. The cement
industry is increasingly seeking out cheaper alternatives to coal so as to reduce
production costs.
2. Financial Costs:
In the recent past, it has been observed that the cement sector’s profitability is severely
affected by financial costs. Falling interest rates help strengthen the bottom line for the
manufacturers who can then focus on cost-cutting initiatives to have a competitive edge
in the domestic and international markets.
3. Capacity Utilization:
Historically, capacity utilization has been a long-standing issue of concern amongst
suppliers. This is because excess capacity limits manufacturers’ ability to benefit from
economies of scale the benefits of which cannot be transferred to the consumer.
Consequently, suppliers become uncompetitive and consumers have to pay a high price
for inefficient production.

6. Regression Analysis
The graph is secular and non-Lenoir because secular trend is
relatively consistent movement of a variable over a long period and company growth
remains consistent regardless of the economy so our graph is also show the continuous
increasing growth and have ten year data that is long term. In x-axis show the time and y-
axis show the sale that increase continuously.
Regression line = a + bt
lnSale = 14.624 + 0.0000003160t
Where:
lna = 14.624 so 𝑒14.624
= 2244514.95
lnb= 0.0000003160 so 𝑒0.0000003160
= 1.000000316
So:
Sale= (2244514.95)* (𝟏. 𝟎𝟎𝟎𝟎𝟎𝟎𝟑𝟏𝟔) 𝒕
Sale= (2244514.95)* (1.000000316)11
= 2244522.752
Sale= (2244514.95)* (1.000000316)12
= 2244523.461
Sale= (2244514.95)* (1.000000316)13
= 2244524.170