Professional Documents
Culture Documents
in)
Submitted to Faculty: Dr. Subrat Sahu Submitted by Executive MBA 2010 Students: 1. Abhik Tushar Das (20104001) 2. Anil Kumar Sahu (20104004) 3. Sudeep Panicker (20104008)
3 to 6
7 to 8
Economic factors
9 to 10
Industry drivers
10
Industry attractiveness
11
12 to 13
13 to 15
16
16 to 17
10
Conclusions
17
SUDEEP PANICKER
SUDEEP PANICKER
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 readymixes, 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 customers 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 Decontrol
The trend in capacity utilization of the industry is interesting to analyze, as there are many fluctuations all through the period. Starting with 10% in the beginning of the industry, the capacity utilization peaked to around 99% in 1937-38. But this could not be sustained and
SUDEEP PANICKER
SUDEEP PANICKER
SUDEEP PANICKER
SUDEEP PANICKER
SUDEEP PANICKER
10
Industry 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 YOJANA
SUDEEP PANICKER
11
In an environment of growing competition witnessed in the post decontrol era, one of the major developments has been the introduction of higher grades of cement. Industry Concentration: Though the industry saw consolidation by domestic players starting in the mid1990s, 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 technology
Industry 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 shelter
SUDEEP PANICKER
12
13
There are three major macro-level overhauls that conglomerates need to integrate which are: 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 growth
SUDEEP PANICKER
14
Business 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 a
SUDEEP PANICKER
15
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, its 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.
SUDEEP PANICKER
16
SUDEEP PANICKER
17
Conclusions:
It can be concluded that given the sustained growth in the housing sector, the government's emphasis on infrastructure (both at the national and the state level) and increased global demand, the prospect for India's cement industry is exceedingly promising. The dynamics of Indian cement industry is undergoing a gradual shift. From an oversupply situation not long ago, a phase has come where demand growth is outstripping supply. While tracing the growth of the industry in different policy regimes, it became observable that the industry has 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 of production and quality of product too has advanced a lot along with decrease in regional concentration. Another significant trend which the industry has witnessed is of greater consolidation of power by larger players through mergers and acquisitions and entry of foreign majors in the ever growing market. This growth and development of the industry is all the more evident in recent years especially after 1999-2000. All the above mentioned trends in the Indian cement industry have only contributed to the growing competitiveness between the firms and his has resulted into improved efficiencies in procurement, manufacturing, transportation and logistics. With the infrastructure sector poised to be being prioritized by the Government, the demand for cement would be only increasing in the times to come. Hence the outlook for the Indian cement sector looks bright for corporate houses that can handle their brand repute and work upon tight revenue margins by gaining from high volume sales.
SUDEEP PANICKER
18
SUDEEP PANICKER