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Strategic Management

Guided By : Prof. Vikram Parekh

Submitted by-Mayank MathurMadhukar ThoratKumar KashyapLaxmi Khandayat

(ITM XMBA-24)

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�Introduction

�Strategic Management Process

• Mission Vision Values

�Overview of Cement Industries

�Key Industry statistics & Dynamics

�Market Analysis

�PESTLE analysis

�SWOT analysis

�Competitors Analysis -Porter’s 5 Forces Model

�Analysis Of Company Value Chain

�Strategies

Flow

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Movie……

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o ACC was formally established on August 1, 1936. Sadly, F E Dinshaw, the man recognized as the founder of ACC, died in January 1936; just months before his dream could be realized.

o The country's first notable merger at a time when the term mergers and acquisitions was not even coined.

oThe historic merger of ten companies to form a cement giant now merged with Holcim in year 2005

F. E. Dinshaw – the founder of ACC

INTRODUCTION

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Strategic Management Process : Vision, Mission

Values

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Mission

Mission :

Leadership – Maintain relationship of the Indian cement industry throughout the continuous

modernization and expansion of its manufacturing facilities and activities and through

establishment of a wide and efficient marketing network

Profitability-Achieve a fair and reasonable return on capital by promoting productivity

throughout the company

Growth- Ensure a steady growth of business by strengthening our position in the cement

industry.

Quality- Maintain high quality of our products and services and ensure its supply their supply

at fair prices.

Equity- Promote and maintain fair industrial relations and an environment for the effective

involvement, welfare, and development of staff at all levels.

Pioneering- Promote research and development efforts in the areas of product development

and energy , and fuel conservation and to innovate and optimize productivity.

Responsibility- Fulfill ACCs obligations to society, specifically in areas of integrated rural

development and in and in safeguarding the environment and natural ecological balance

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Values

Core values of ACC Cement:

Empathy : Empathy begins with listening ... paying close attention to the

world around us , understanding, appreciating and meeting the needs of

those ACC serves , including consumers, retail customers, shareholders

and each other as employees.

Originality : Being Authentic and Innovative and Integrity. These values

are linked. As we look at ACCs history, we see a story of how its core

values work together and are the source of its success

Core Competencies : its ability to synthesize, integrate and harmonizeits diverse world-class engineering, procurement, manufacturing and

distribution skills to meet the expectation of their customers.

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Overview of Cement Industry…contd

Key Industry statistics & Dynamics

•India is the world’s second largest cement producer after China

•Total turnover of the Indian cement industry y is estimated at USD25

billion in FY11

•Major players contributed about 97 per cent to the installed capacity

during FY11

Large Cement Plants

Cement plants: 183

Installed capacity: 234.3 mtpa

Cement production: 168.3 mtpa

Mini & White Cement Plants Cement plants: 365

Installed capacity: 11.1 mtpa

Cement production: 60mtpa

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Overview of Cement Industry…contd

Trend in GDP and growth in cement demand

• Although India is one of the largest

cement markets in the world, per capita

consumption of cement is ~ 156 kg, lower

than global average consumption ~356 kg

• Demand for cement in India is cyclical

barring short- term disruptions, it grows

largely in tandem with economic growth

•The production of cement increased

at a CAGR of 10.0 per cent over F

Y07-11

• The production of cement increased

at a CAGR of 10.0 per cent over F

Y07-11

•Production is expected to reach 247

MT in F Y12 as per the 11th Five Year

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Market analysis

ACC, with an installed capacity of 22.63 MTPA, enjoys an 11% market share in India, which with its

total installed capacity of 207 MTPA, is the second largest cement producing country in the world

Its key competitors are as follows:

Company Capacity (in MTPA)

ACC 22.63 Ambuja Cements 18.50

Binani Cements 6.50

Birla Corporation Limited 5.80

CCI 3.85

Century Textiles 6.80

Grasim 16.75

India Cements 8.94

Jaypee Group 13.50

Kesoram Industries 5.60

Lafarge 5.50

Madras Cements 10.00

Ultratech Cement 18.20

Zuari Cement 3.50

Note: Only companies with cement production capacity >3 MTPA included here. There are likely to be other competitors not

included here.

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PESTLE Analysis of Cement Industry

Political

•The price of cement is primarily controlled by following rates which are predominantly control by government:

•Coal rates

•Power tariffs

•Freight (Railway and road tariffs)

•Royalty and cess on limestone

•Taxes (Excise duty and VAT)

•Govt. of India plans to increase its investment in infrastructure to US $ 1 trillion in the Twelfth Five Year Plan (2012-17) will lead to increase in the demand of cement

•Infrastructure projects such as the dedicated freight corridors, upgraded new airports and ports are expected to enhance the scale of economic activity, leading to a substantial increase in cement demand furthermore

•Most state governments, in order to attract investments in their respective states, offer fiscal incentives in the form of sales tax exemptions/deferrals. States like Haryana offer a freeze on power tariff for 5 years, while Gujarat offers exemption from electric duty

•During election period, cement demand increases as compare to normal period. So, during 2013-2014 state assembly elections cement demand will be higher

•Govt. programs like NREGS, Indira Awaas Yojana, rising minimum support prices enhance rural income which boosts cement demand in rural areas

•NHAI plans to award road projects worth of Rs 57000 crores in FY 2012

•The total Government levies and taxes, which include Royalty on Limestone, Royalty on Coal, Electricity Duty, VAT/Sales Tax etc., on cement constitute about 60% or more of the ex-factory price of cement. The levies and taxes on cement in India are far higher compared to those in countries of the Asia Pacific Region

•Strict law & order conditions and political will of the leader of any state enhance the confidence of people living in the states as well as corporate to invest in that particular state

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PESTLE Analysis of Cement Industry

Economic

Cement demand is proportional to growth in GDP of the nation. Average cement demand to GDP ratio

was 1.2 during the last decade. The cement industry is growing at the rate of 8 to 10 % CAGR following

the growth rate of GDP

The per capita consumption of cement in India (about 155 kg) is much less compared to average per

capita consumption (about 380 kg) for the rest of the world. Hence Indian cement industry has large

potential to grow

Any instability in the world economy like political instability in Middle East countries can lead to huge

increase in the crude oil prices and thus increasing the cost of fuel, power and freight considerably

Formal approval granted to many SEZ proposals

Growth in tourism sector fuelling the increase in the construction of hotels in the country

Upcoming industrial clusters & infrastructure development in emerging tier-II and tier III cities

The growing population and increased urbanization in the country

Increasing per capita income leading to increase in housing demand to meet the current shortages and

future growth

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PESTLE Analysis

Social

The cement manufacturing units- with a slight regional imbalance - is spread all over India

Indian consumers prefer buying branded cement like ACC , ULTRATECH, JAYPEE CEMENT, LAFARGE

CEMENT etc. It has been seen in the past, as well, that mini cement plants with low brand value and image are not able to survive against the cement giants

Looking at the growth rate of Indian cement industry and capacity expansions, it is expected that cement

industry will create good number of jobs in the next 4-5 years

Technological

It can be seen that the wet process is rapidly replaced by the dry process. It reflects increasing

needs for energy conservation and suggests what the true cement plant of the future should be

Technological development in the design of cement kiln and furnace can promote use of cement kiln for utilization of wastes like tires etc. which can help in reducing the usage of costly fuels like coke,

coal etc. thereby reducing the manufacturing cost of cement

Enhanced technology will be needed to substitute coal with low cost and eco friendly alternative fuels like fuel from bio-mass wastes including fruit of Jatropha Carcus, Pongamia and Algae

Effectively finding the location of limestone reserves and efficient mining practices can lead to

reduction in per tonne cost of limestone

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PESTLE Analysis

Legal

Land acquisitions for limestone mining land,

setting up of integrated units and grinding units requires proper legal procedure

Environmental

In India, the permissible stack dust emissions from various sources for existing cement plants is

150 mg/Nm3 and 100 mg/Nm3 for plants located in critically polluted areas. However, the limit for new

plants in our country is 50 mg/Nm3 which is at par with some of the developed countries

Since the cement production is an energy intensive process with very high emission, it has to use

state of art equipment to have energy efficiency and meet environmental standards

Under PAT scheme, each particular unit (Designated Consumers (DC)) will be given Specific Energy Consumption (SEC) target to meet over a period of three years. Any additional saving will qualify for

earning Energy Saving Certificates (ESCerts), which could be traded, with DC's who could be short of

targets. This trade can be made bilaterally or through exchange.

Perform, Achieve & Trade (PAT) scheme is promoted under the National Mission on Enhanced Energy

Efficiency (NMEE) which will help energy intensive large industries units in India to enhance cost

effectiveness in terms of energy efficiency.

Perform, Achieve & Trade (PAT) scheme is promoted under the National Mission on Enhanced Energy Efficiency (NMEE) which will help energy

intensive large industries units in India to enhance cost effectiveness in terms of energy efficiency.

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SWOT Analysis

SWOT Analysis of ACC Cements

SWOT Analysis explores the relationship between the environmental influences and

the strategic capabilities of an organization compared to its competitors. The

importance of SWOT is revealed by the value of the strategies it generates.

STRENGTHS.· It is having a good image and brand loyalty among consumers.

· Service is good

· Perceived to be of very superior quality cement when compared to others

· Selling from the very first day the establishment came in to being & sells easily

· They have same price prevailing for wholesale at dealers/stockiest / retailers end.

WEAKNESS.

· Promotional activity is less , so it is facing more problems in selling of product in

the market.

· Lack of awareness program for consumers.

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SWOT Analysis…contd

OPPORTUNITY.

· Rapid growth is taking place in North East , Bihar and Madhya Pradesh (Central India ).

People are opting for more stable structures and intensive use of cement is taking

place, even government is spending heavily on infrastructure projects. Thus, this is the

right time to fully tap these markets.

· As Indian core industry is also growing at rate of nearly 8-10% per annum, it is having

a good future.

· Foreign direct investment in infrastructure sector is going to increase in coming years,

which will increase the demand of cement.

· Roads are undergoing through a transformation process through which the traditional

method of road building is being replaced by modern concrete roads.(Golden

Quadrilateral WORLD BANK assisted project connecting the nation through a network

of roads . )

THREATS:

.Large number of players in cement industry makes it more competitive for ACC to

carefully price its product and at the same time satisfy its dealers and customers.

·Players such as Ultratech , Jaypee Cement , Prism Cement, and Birla Samrat are eating

up considerable market share.

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Porter’s - 5 Forces Model

Bargaining Power of

Suppliers -

Very High

Monopolistic control of

external cost element (coal,

power, taxes transportation

results in high bargaining power

with the government

Threat of Substitutes –

Limited

Only bitumen in road, and

engineering plastics in building

offer some element of

competition, Otherwise no close

competition exists

Bargaining Power of

Buyers

Limited

The individual house owners do

not make bulk purchase. So, have

less bargaining power.

Inter Firm Rivalry

Intense

Large number of players, intermittent

overcapacity; marginal product

differentiation; high storage costs;

and, high exit barrier in form of

significant capital investment has led

to stiff competition in the industry.

Threat of New Entrants- Limited

High capital investment, broad

distribution network and

oversupplied market deter new

entrants. However, technology

and

manpower are easily available.

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Value chain analysis

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Value chain analysis…

Outbound Logistics:

Distribution Channel

Sales & Distribution

ProceduresEvaluation of Channel

DistributionWare Houses

Inbound Logistics:Effic ient Material Handling Systems

Order Processing SystemsInventory Control

Management of Inventories

Operations:Manufacturing ProcessesMining

CrushingR.M . GrindingBlending

Pyro processingGrinding andPacking

Marketing & Sales:

CustomerSatisfactionMarket Planning

Consumer Behavior

Pric ing Policy

Promotion MixAdvertisement

After-Sales

Service:Customer Support Departments

Complaintredressal forumsSeminars

ConstructionguidelinesQuality Exhibitions

Facility to drivers

M

a

r

g

i

n

Primary Activities

Support

Activities

Firm Infrastructure : Captive Power Plants, Export of Power to SEB, High Effic iency

Kilns

Procurement: Purchasing Procedures, Centralized procurement for imported items, local purchase of fast moving items, Purchase of Raw Materials

Technology Development: R & D activ ities for new products, conservation of resources, recycling of wastes, reduction in emissions & improved performance of concrete

Human Resource Management: : Freedom to achieve, enriching skills & enhancing experiments, Fair compensation, ESOS

The Value Chain of ACC Limited

Value

What buyers

are willing

to pay

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Value chain analysis…contd

Measures For Cost Reduction Used at ACC Ltd.

•For Inbound Logistics:

1. Use of imported coal

2. Continue searching for new sources of raw material availability at nearby areas.

3. Basic raw material order placing at center level to take the advantage of Bulk

ordering.

4. Mines in nearby areas to reduce the material movement cost.

•For production plant:

1. High efficiency fans for all process fans.

2. Mechanical conveying in place of pneumatic conveying

3. Six stage low pressure drop cyclone preheater

4. Captive power generation by sets SEB power cost Rs/-5 per unit while this captive

power plant gives 2.25 per unit.

5. Use of agro waste fuels like Ground nut husk (GNH),rice husk, and different

types of agro waste, baggage etc.

6. Roller press for cement grinding

7. In house energy audit for effective monitoring of energy consumption.

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Value chain analysis…contd

•For Outbound logistics:

1. Grouping orders area wise to reduce the transportation cost.

2. Established Regional and central sales office to transfer the orders of nearby area so as

to minimize the transportation cost.

3. Using technique of big vehicle to small vehicle to reach at remote area. and reduce wait

time of Big heavy vehicle to be used at other places.

Analysis Of Customer Value Chain

•As the cement industry is one of the most energy and power intensive industry so ACC is

doing many activities for energy conservation as discussed above for which it has got awards

too which no any competitor is doing. Which adds value to the final consumer .

•ACC is the pioneer in thinking about Environment protection & has done many activities for

Environment prevention it has fitted dusting control bag at every dust producing stage in

production plant and has established green plants.

•ACC has performed its corporate citizenship very well. It has built check dams and temples

and many more things for citizens.

•ACC is providing excellent after sales services to the customer for that it has establish all

together different department of civil engineer for guiding customer in construction activity.

•ACC is concerned for giant strength it assures this things to customers that their decision is

worth.

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Strategies (I/O)

Internal Strategy

•Forward Integration. ACC has created and developed an environment that

ensures continual improvement in the business processes. In the same

direction, this integration will help in proactively meeting the expectations of

customers, stakeholders and the requirements of the regulators while on

the other hand will be useful in utilizing its resources more efficiently and

effectively.” they are committed to achieve customer satisfaction by

ensuring excellence of performance in all its offerings and services

•Horizontal Integration: It involves addition of parallel new products to the

existing product line. This may happen internally or externally, internally, a

company may decide to enter a parallel product market in addition to the

existing product line. Externally, a company combines with a competing

firm. Several small cement firms combined and formed Associated Cement

Companies (ACC).

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Strategies (I/O) …contd

Intensive Strategy

1) Product Development -Product Development has always been an important activity at ACC, arising out of a focus on quality and process

improvement. It has been a constant partner, driving research, innovation and evaluation. In 1964, a centralized

research facility - the Central Research Station (CRS) was established in Thane. The research complex now

renamed as ACC Thane Complex, spread over an area of 8000 sq m has modern labs with the latest equipment

and manned by highly qualified scientists and technologists who carry out product development work in cement and

allied fields.

ACC has effectively pledged its reputation as the market leader in the quality of cement. Maintaining this lead calls

for harnessing the resources and expertise of the company - from applied research and production to marketing.

Accordingly, all ACC factories are equipped with state-of-the-art process control instrumentation and associated

quality control and testing laboratories. Trained engineers, chemists and technicians man these. The Central

Laboratory at ACC Thane Complex is used as a reference laboratory for diagnosis and resolving specific trouble-

shooting cases.

As a result of this focus on quality, ACC cement specifications exceed those set by BIS by a wide margin. Today, all

ACC cement plants have the ISO 9001 Quality Systems certification. This demonstrates ACCs tradition of

providing reliable and consistent quality through the application of modern technology, and justifies the preferences

of a nationwide customer base

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Strategies (I/O) …contd

General StrategiesCost Leadership:

ACC has strived to become a cost leader by means of setting up captive power plants, and /or up-gradation of

technology to enhance productivity,

ACC is one of the most profitable cement companies in the country. It produces cement at the lowest cost in India

due to

supply of power from captive power plants

use of petcoke (an alternate and cheaper fuel) in power plants,

proximity to key markets leading to lower outward freight costs.

ACC has a policy of supporting its cement plants with captive power plants which provide for most of its power

requirements. Expansion in cement capacity is being accompanied with expansion in power plant. ACC cement is

an efficient user of power, at only 77Kwh per ton compared to the industry average of 90-95Kwh per ton, also ACC

cement also has a location advantage compared to others.

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Recommendation

•ACC Cement is highly focused on its future objectives & expansion plans, but at the

same time it has to maintain a balance between the present plan & the future one.

On the basis of strategic analysis following recommendations will help in achieving its

future goals effectively & efficiently:-

· It must focus & remain on its Vision & Mission in order to attain its objective.

· It should focus on expanding its market in order to expand its market shares.

· It should also try to maximize the shareholders’ wealth.

· It should not choose those projects which may dilute its brand name, just for

the sake of gaining market shares.

· It should not do overpromise as it will deteriorate its goodwill.

· It must focus on its competitors’ strategy(ies) in order to gain a competitive

edge.

· It should try to go for diversification to minimize risk factor & to explore new

market as well.

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Conclusion

Keeping pace with changing times and an ever-growing need for specializedservices, ACC has begun offering its marketing expertise and distributaries facilitiesto other producers in cement and related areas. However a precondition of all suchagreement is quality control supervision to be carried out by an ACC expert locatedat the franchisee’s plant. Each of the regional Marketing offices has a customerservices cell that is manned by qualified civil engineers. These, in addition tohandling after-sales servicing, function as advisory bodies that can help customers,make the right choice of cement for a specific area of application.

ACC can provide expert advice on getting the best value from cement and offerassistance on related issues in civil construction projects.

Besides this, technical books/booklets on cement, concrete and buildingconstruction and maintenance must be made available for the benefit of thecustomers. In addition to this, ACC distribute publish free leaflets/ booklet, whichprofiles the latest information on concrete research, design, construction andmaintenance.

We feel ACC is forging ahead on its set mandate & is on its way to become one ofthe leading cement suppliers in the International markets too .

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Questions ?

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Thanks