Strategic management of AMBUJA CEMENT LTD

INTRODUCTION TO CEMENT INDUSTRY The cement industry is one of the main beneficiaries of the infrastructure boom. With robust demand and adequate supply, the industry has bright future. The Indian Cement Industry with total capacity of 165 million tones is the second largest after China. Cement consumption in India has increased by over 22% in 2009-10 from 2007- 08.Among the states, Maharashtra has the highest share in consumption at 12.18%,followed by Uttar Pradesh, In production terms, Andhra Pradesh is leading with 14.72% of total production followed by Rajasthan. Cement industry has contributed around 8% to the economic development of India. Cement industry has a long way to go as Indian economy is poised to grow because of being on verge of development. The company continues to emphasize on reduction of costs through enhanced productivity, reduction in energy costs and logistics expenses. As per the Working Group report on Cement Industry for the formulation of the 11th Plan, the cement demand is likely to grow at 11.5 per cent per annum during the 11th Plan and cement production and capacity by the end of the 11th Plan are estimated to be 269 million tones and 298 million tones, respectively, with capacity utilization of 90 per cent. Foreign cement companies are also picking up stakes in large Indian cement companies. Swiss cement major Holcim has picked up 14.8 per cent of the promoters' stake in Gujarat Ambuja Cements (GACL). Holcim's acquisition has led to the emergence of two major groups in the Indian cement industry, the Holcim-ACC-Gujarat Ambuja Cements combine and the Aditya Birla group through Grasim Industries and Ultratech Cement.

INTRODUCTION TO CEMENT INDUSTRY

The cement industry is one of the main beneficiaries of the infrastructure boom. With robust

demand and adequate supply, the industry has bright future. The Indian Cement Industry with

total capacity of 165 million tones is the second largest after China.

Cement consumption in India has increased by over 22% in 2009-10 from 2007- 08.Among the


states, Maharashtra has the highest share in consumption at 12.18%,followed by Uttar Pradesh,

In production terms, Andhra Pradesh is leading with 14.72% of total production followed by

Rajasthan.

Cement industry has contributed around 8% to the economic development of India. Cement

industry has a long way to go as Indian economy is poised to grow because of being on verge of

development.

The company continues to emphasize on reduction of costs through enhanced productivity,


reduction in energy costs and logistics expenses. As per the Working Group report on Cement

Industry for the formulation of the 11th Plan, the cement demand is likely to grow at 11.5 per

cent per annum during the 11th Plan and cement production and capacity by the end of the 11th

Plan are estimated to be 269 million tones and 298 million tones, respectively, with capacity

utilization of 90 per cent.

Foreign cement companies are also picking up stakes in large Indian cement companies. Swiss

cement major Holcim has picked up 14.8 per cent of the promoters' stake in Gujarat Ambuja


Cements (GACL). Holcim's acquisition has led to the emergence of two major groups in the

Indian cement industry, the Holcim-ACC-Gujarat Ambuja Cements combine and the Aditya

Birla group through Grasim Industries and Ultratech Cement.


INTRODUCTION TO AMBUJA CEMENT

Ambuja Cements was set up in 1986. In the last decade the company has grown tenfold. The

total cement capacity of the company is 18.5 million tones. Its plants are some of the most

efficient in the world. With environment protection measures that are on par with the finest in the


developed world. Ambuja Cements Limited, formerly known as Gujarat Ambuja Limited is a

major Cement producing company in India. The Group's principal activity is to manufacture and

market cement and clinker for both domestic and export markets.

The Company also operates a hotel through its subsidiary GGL Hotel and Resort Company. It

has shown innovation in utilizing measures like sea transport, captive power plants, and imported

coal and availing of govt. sops and subsidies to constantly check the costs.


The company's most distinctive attribute, however, is its approach to the business. Ambuja

follows a unique homegrown philosophy of giving people the authority to set their own targets,

and the freedom to achieve their goals. This simple vision has created an environment where

there are no limits to excellence, no limits to efficiency. And has proved to be a powerful engine

of growth for the company.

As a result, Ambuja is the most profitable cement company in India, and one of the lowest cost

producers of cement in the world.


Its focus:-

Best quality cement

Good packaging

Logistic management - strong distribution network

Customer service

Capacity built up from 0.7 mn tones in 1986 to 18.0 mn tones as of today at CAGR of 18%

Organic growth and growth through acquisitions.


HISTORY OF AMBUJA CEMENT


Ambuja Cements Limited was earlier known as Gujarat Ambuja Cements Limited (GACL). The

company was set up in 1986. In this short span Ambuja Cements has achieved massive growth

and presently, the total cement capacity of the company is 16 million tonnes. The company has

three subsidiaries, viz, Ambuja Cement Rajasthan Limited (ACRL), Ambuja Cement Eastern

Limited (ACEL) and Ambuja Cement India Limited (ACIL). Ambuja also has a strategic

investment in ACC through its subsidiary (ACIL).

Ambuja Cements is the most profitable cement company in India, and the lowest cost producer


of cement in the world. One of the major reasons that Ambuja Cements is the lowest cost

producer of cement in the world is its emphasis on efficiency. Power consists over 40% of the

production cost of cement. The company improved efficiency of its kilns to get more output for

less power. Thereafter Ambuja Cements set up a captive power plant at a substantially lower cost

than the national grid. The company sourced a cheaper and higher quality coal from South

Africa, and better furnace oil from the Middle East. As a result, today, the company is in a

position to sell its excess power to the local state government.


Ambuja cement is the first company to introduce the concept of bulk cement movement by sea in

India. This resulted in speedier transportation and brought many coastal markets within easy

reach. Ambuja Cements has a port terminal at Muldwarka, Gujarat. It is an all weather port that

handles ships with 40,000 DWT. The port has a fleet of seven ships with a capacity of 20500

DWT to ferry bulk cement to the packaging units. The company has bulk cement terminals at

Surat, Panvel, and Galle. The Surat terminal has a storage capacity of 15,000 tonnes and Panvel

terminal has a storage capacity of 17,500 tonnes. Both the terminals have bulk cement unloading


facility.

BACKGROUND


1982

The Company was incorporated on 17th June, and the Certificate of

Commencement of Business was obtained on 11th February, 1983. It was

promoted by Modi Industrial House and Madhya Pradesh Audyogik Vikas

Nigam Ltd (MPAVN). The Company manufactures cement.


The Company had under taken to set up a project to manufacture Portland

cement in Madhya Pradesh. The main plant and machinery was obtained from

Polybius Ltd U K and their Indian associates Buckau Wolf India Ltd.

The Company entered into a foreign collaboration agreement with Blue Circle

Industries PC., U.K. (BCI) for technical consultancy services.

1986


7 shares subscribed for by the signatories to the Memorandum of Association.

334, 99, 993 shares then issued at par out of which

208, 99,993 shares to promoters, directors, etc. (including 10, 00,000 shares

to NRIs on repatriation basis) and 15, 00,000 shares to MPAVN were reserved

and allotted.

Out of the remaining 111, 00,000 shares, the following shares were reserved

for preferential allotment:


25, 00,000 shares to NRIs on repatriation basis (all were taken up);

16, 75,000 shares to employees of the company (including Indian working

directors and employees of Modi Group Companies) and

2, 22,000 shares to business associates of the company.

Out of (ii) and (iii) above, only 1, 93,450 shares were taken up.

The balance 67, 03,000 shares, along with 17, 03,550 shares not taken up by

employees and business associates, were offered for public subscription


during January-February. 83, 75,000 additional shares were allotted to retain

oversubscription (4, 86,950 shares to NRIs and 78, 88,050 shares to the

public).

1987


25, 00,000 shares issued at par as rights to Indian resident shareholders in

prop. 1:15. Only 22, 74,291 shares taken up.

1988

The balance 2, 25,709 shares out of the rights issue of 1987-88 allotted

privately.

1989


The Company came under the provisions of the Sick Industrial Companies

(Sp. Provisions) Act, 1985 and a reference was made to the Board for

Industrial and Financial Reconstruction (BIFR).

1990

Forfeiture on 56,600 shares annulled.


1991

The Company's plan to expand the capacity from 11.5 lakh tones to 18 lakh

tones.

Subject to necessary approvals being obtained, the company Proposed to issue

458, 00,920 rights equity shares of Rs. 10 each at a premium not exceeding of

Rs. 2 per share in the proportion 1:1.

In addition to the above rights issue, 5% of the rights issue at a premium not


exceeding Rs. 2 per share was to be offered to the employees, etc., of the

Company and promoter companies on an equitable basis.

Issued 31, 10,000 shares at par as rights in prop. 7:100 (all were taken up) and

1, 55,500 shares at par to employees (only 1,900 shares taken up) in January.

1993

1,000 right shares kept in abeyance were issued.


1994

Production declined to 10, 31,219 tones due to excessive rains and floods

which inundated the factory and limes tome mines.

1997

The Scheme for rehabilitation was sanctioned by BIFR. Gujarat Ambuja


Cements Ltd. was inducted as Co-promoter for revival of the company, the

Board has reconstituted and the new management assumed charge in

December.

The name of the Company has been change from Modi Cements Ltd. to

Ambuja Cement Eastern Ltd.

45,801,930 No. of equity shares of Rs.10 each has been reduced by75% to

11,450,483 No. of equity shares of Rs. 10 each pursuant to the rehabilitation


scheme sanctioned by BIFR on 5th November; 116,000,000

No. of equity shares of Rs. 10 each fully paid up and 50, 00,000 No. Of equity

shares of Rs. 10 each Rs. 750 called and paid up allotted to Gujarat Ambuja

Cements Ltd. pursuant to rehabilitation scheme sanctioned by BIFR on 5th

November.

1998


Modi Cements Ltd. is being merged with Gujarat Ambuja Cements (GACL),

which holds a 93 per cent stake in the ailing company.

1999

AMBUJA Cement Eastern Ltd. (ACEL), in its transition from the erstwhile

Modi Cement Ltd during its first full financial year, had to contend with more

than establishing the `Ambuja Cement' brand in a market that was familiar


with the Ambuja name but not the product.

2000

The Company holds 166057827 equity shares of Rs. 10/- each in the company

representing 93.58% of its share capital.

Ambuja Cement Eastern Ltd. will make a preferential issue of equity

shares/any other security convertible into equity shares not exceeding


1,70,00,000 No. of equity shares of Rs 10 each to holding company, Ambuja

Cement India Ltd.

2002

Gujarat Ambuja loses its image as the lowest cost producer in the Market due

to acquisition. 2003

Members approve for the delisting of the equity shares of the company from

Delhi and MP stock Exchanges.


Ambuja Cement awards equipment order for BHEL

2004

Ambuja Cement Eastern shares delisted from Bhubaneswar Stock Exchange

& Delhi Stock Exchange

Ambuja Cements (Eastern) Ltd has succeeded in coming out of the Board for

Industrial and Financial Reconstruction (BIFR) fold.

Ambuja Cement Eastern Ltd has informed that at the review meeting of the


BIFR held on March 3, 2004, the BIFR have passed an order, discharging the

company from purview of the Sick Industrial Companies (Special Provisions)

Act, 1985.

2009

Capacity to increase from 16 mn. Tones’ to 22 mn. Tones’.




COMPANY PROFILE


The G.A.C.L is a Public Limited Company. In Which ………

Share capital is ………………………………..304.48 Crores Rs.

Investment in plant & machinery is…………..1288.94 crores Rs.

Net current asset is ……………………………418.24 crores Rs.

CORPORATE OFFICE: SOLICITORS & ADVOCATES:


122, Maker Chambers III, Kanga & Co

Nariman Point,

Mumbai – 400 021.

WORKS:

Ambuja Nagar P.O.

Taluka Kodinar, Dist Junagadh,


REGISTERED OFFICE:

Gujarat – 362 715.

Ambujanagar P.O.

Taluka Kodinar, Dist. Junagadh,

BHAVNAGAR OFFICE:


Gujarat – 362 715. 317/318 3RD floor

Madhav darshan, waghavadi road

Bhavnagar 364001.


PRODUCT DETAILS



Ambuja Cement is the flagship brand of Ambuja. A unique outcome of international expertise,

this super performing cement has been developed taking into consideration the weather

conditions in India and practices of home building.

Ambuja Cement is available in Portland Slag Cement (PSC) and Portland Pozzalona Cement

(PPC) variants.

PRODUCT AND MANUFACTURING PROCESS:


Cement is manufactured by using the mixture of limestone, clay, sand, literate, bauxite and iron

and the mixture is burning at a high temperature of 1,400 to 1,500 degree Celsius and the

resultant clinker (a final product) is made then it mixed and grinding with gypsum to form

cement for final use.

The process of manufacture is divided broadly into 3 stages…

Stages of process:-


1. Preparation of the raw materials

2. Burning process of the raw materials in kiln and

3. Grinding the clinker to the finished products

Type of Processes

There are mainly 3 types of processes to get the final product. These

Processes are as follows.

A. Wet process.


B. Semi dry process.

C. Dry process.

A. Wet Process:-

This is the old process of manufacturing of cement. In this process the raw material grinding

with sufficient water, so that the mixture contains 30% to 40% of water. But it is not useable

because it use higher coal consumption 30% to 35% as compared to dry process.


B. Semi dry Process

In this process the raw material are processed in dry state and the grinding raw meal is

neutralized by addition of 10% to 20 % water, and it is final by heat consumption process.

C. Dry process

This is the modern method of production. In the dry process limestone and clay are fed into a


grinding mill with passing hot air. The materials are heats dried thoroughly and then reduced to

fine powder know as raw meal. The raw meal is mixed with a little water and formed into

nodules in nodulising fan. Their nodules are then fed into a moving grate through which the hot

gases from the rotary klin are passed. They are dried in pertically claimed. The calcined nodules

then fall into a short rotary klin of conventional design where they are burnt to form clinker.


KEYS STEPS TOWARDS STRATEGIES PLANNING



1. VISION :- To be India’s most admired company

2. MISSION :- Delighted customers, inspired employees, Empowered partners, energized

society.

3. OBJECTIVES :-The management of Gujarat Ambuja decided some objectives to


become topper in the market. And the objectives are:

Better quality then other company.

Fair returns to share holders.

A higher productivity to cover maximum market.

Maximum customer satisfaction.

Clean & healthy Environment for employee’s growth.

Try to lower pollution to fulfillment of social responsibilities.


4. GOALS :-Become number one cement company in India

5. STRATEGIES-

COMPANY’S STRATEGY:

Captive Infrastructure: Ports & Power Plants

Presence in the growing markets of North & West


Retail Focus – Premium pricing

Largest Exporter of cement

35% Cement transport by sea - Cheapest Mode

One of the Lowest Cost Cement Producer

MARKETING STRATEGY:

Emphasis was on Quality


High Advertisement for BRANDING-3 times than ACC at one time.

Improvement in Packaging by information provided by suppliers

Extensive & primarily exclusive distribution network-Over 6,000

Dealers and 20,000 retailers.

Promotion through seminar, workshops for masons, architects,

Contractors etc by providing info on use of AMBUJA CEMENT

advertising and Publicity campaign.


EXPANSION STRATEGY:

Starting with a plant with a capacity of 0.7 MT in Gujarat, GACL is now having plants at

different place with total 16.5 MT. It has adopted organic growth. To participate in the growth of

the cement industry, the company has planned capital expenditure programmers aggregating to

about Rs.3500 crore. This would help the company maintain its market share going forward.

6) VALUES-


Code of Business Conduct and Ethics

1. Applicability

The Code of Conduct will apply to all the members of the Board of

Directors and all the employees of the Company in M grade. clause 25 of this Code requiring

annual confirmation is applicable to Directors and employees in grades MOA and above.

2. Honest and Ethical Conduct


The Company expects all the Directors and the Employees to act in accordance with highest

professional standards, integrity and high morals and ethics.

3. Conflict of Interest

The Company expects that the Directors or Employees of the Company shall not engage in any

business relationship or activity which might conflict with the interest of the Company. The

following are examples of situations, which may constitute a conflict of interest:


When a Director or an Employee engages in a

Business relationship or activity which is or is perceived to be in conflict with the interest

of the Company with anyone who is party to a transaction with the Company.

When a Director and Employee or a member of his or her immediate family receives

personal benefits by making or influencing decisions relating to any transaction.


In case it is likely that a conflict of interest might exist, the concerned

Director or Employee must at the earliest opportunity make full disclosure of all facts and

circumstances that reasonably could be expected to give rise to any violations of this Code of

Conduct and the Board shall ensure that Company’s interests are protected. An Employee other

than a Director shall make such disclosure to the Head of the Department and/or to the Unit

Head. The Head of the Department and/or the Unit Head shall look into the merits of the

transaction and ensure that the Company’s interests are protected.


4. Accounting & Financial Reporting-

The Management shall ensure that all business transactions shall be recorded in true, fair and

timely fashion in accordance with the accounting and financial reporting standards, as applicable

to the Company. They will ensure the reliability and accuracy of its accounts, records and

reports.

5. Confidentiality


The Directors and Employees shall strive to protect confidential information acquired,

generated, gathered or which otherwise comes into their possession during the course of

business. All such information should be maintained in strict confidence, except when

disclosure is expressly authorized by the Company or required by the law.

Confidential information includes all non-public information, intellectual property rights

such as trade secrets, business research, new products, new projects and plans, business

strategies, customer, employee and suppliers’ lists and any unpublished financial or price


sensitive information.

The obligation to protect the Company’s proprietary and confidential information

continues even after Directors and Employees leave the Company. The Directors and

Employees must return all proprietary information in her/his possession upon leaving the

Company.


6. Compliance with Laws, Rules and Regulations

The Directors and Employees shall keep themselves updated in relation to laws/statutory

compliances applicable to their scope of work. The Directors and employees of the Company

shall comply with all laws, rules and regulations and shall not commit any illegal or unethical

act.

7. Fair Competition


The Company is committed to respect the principles and rules of fair competition prohibiting

anticompetitive behavior and abuse of a dominant market position.

8. Bribery and Corruption

The Directors and Employees shall not be involved in bribery and corruption while conducting

the Company’s business. They are prohibited from offering or providing any undue pecuniary or

other advantage for the purpose of obtaining, retaining, directing or securing any improper


business advantage or for personal gain.

9. Customers, Suppliers and Stakeholders

The Company is committed to create value for each of its stakeholders. The Directors and

Employees shall treat the Company’s customers, suppliers and stakeholders with respect and

dignity. There should not be any coercive measures used while dealing with any of the

stakeholders.


10. Corporate Opportunities

The Directors and Employees are prohibited from taking for themselves business opportunities

that arise through the use of corporate property, information or position. They shall not use

corporate property, information or position for personal gain, or to compete with the Company.

11. Gifts, Hospitality and Donations


The Company will not utilize bribery and corruption in conducting business. The Directors and

Employees are prohibited from receiving, soliciting or offering any illegal or undue pecuniary or

other advantage,

12. Corporate Social Responsibility, Health and Safety

The Company recognizes its social responsibility and aim to improve the quality of life of its

workforce, their families and the communities around its operations. The Company pursues a


clear policy dealing with employment practices, occupational health and safety, community

involvement as well as customer and supplier relations.

13. Sustainable Environmental Performance

The Company strives to preserve the environment for future generations by striking a balance

between economic growth and continuously improving environmental performance and social

responsibility. The Directors and employees must adhere to the policy.


7) PROGRAMS-this all strategies is implemented by company in function areas:

Captive Infrastructure: Ports & Power Plants

Presence in the growing markets of North & West

Retail Focus – Premium pricing

Largest Exporter of cement

35% Cement transport by sea - Cheapest Mode


One of the Lowest Cost Cement Producer

MARKETING STRATEGY:

Emphasis was on Quality

High Advertisement for BRANDING-3 times than ACC at one time

Improvement in Packaging by information provided by suppliers

Extensive & primarily exclusive distribution network-Over 6,000

Dealers and 20,000 retailers.


Promotion through seminar, workshops for masons, architects,

Contractors etc by providing info on use of AMBUJA CEMENT

Advertising and Publicity campaign

CONCLUSION-Thus to sum up for success of ambuja cement industry all this 7keys which is

part of strategies planning is very important.




LEVELS OF STRATEGIC MANAGEMENT



(a) Corporate level :-


Name Position

Mrs. Pearl Tiwari CEO(Chief executive Officer)

Shri Amrit Lal Kapur MD(Managing director)

(b) Business strategy


Suresh Neotia Shri Suresh Neotia, the Chairman of Ambuja Cements Ltd., is from a

well-known Kolkata based family. The Director of a number of

eminent companies, Shri Neotia also has associations with important

public bodies. He is a passionate and

well-known collector of Indian art, and has set up a cultural institute at

Varanasi for dissemination of Indian heritage.


Shri Narotam

Satyanarayan

Sekhsaria

Shri Sekhsaria is the Vice Chairman of Ambuja Cement Ltd. and the

Chairman of ACC. He promoted Ambuja Cements Ltd. (as Gujarat

Ambuja Cements) at the age of 33, and as Managing Director he

augmented the organisation to become the fastest growing cement

company in India.

Shri Amrit Lal Kapur Ambuja Cements Ltd. He has held several more senior positions such


as Whole time Director of the Ambuja Cement Company.

Mrs. Pearl Tiwari Mrs. Tiwari currently heads the Corporate Social Responsibility

department as Vice President at Ambuja Cements Ltd. and Chief

Executive Officer (CEO) of Ambuja Cements Foundation

David Atkinson BOD (Board of director)


M L Bhakta BOD(board of director)

Markus Akermann BOD (Board of director)

John N. Johnson Vice President & Chief Information Officer

Thomas M. Kilroy Chief Sales Officer


(c) Functional level: -

50,500 employees are working in AMBUJA CEMENT LTD.



KEYS TO BUSINESS STRATEGIES


SWOT ANALYSIS



STRENGTH

a. Growth at approx CAGR of 9% in last 5 years.

b. Growing Domestic cement consumption at approx CAGR of 8% in last 3Years.

c. Highly Capital Incentive so difficult for small entrant

d. Not much restriction by govt.

e. Market consolidation taking place.


WEAKNESS

a. High Oil Prices, Cost of Power increase production cost.

Supply exceeds Production lead to competition in price.

b. Low Quality as compared to international standard but improving.


OPPORTUNITY

a. High Mortgage Penetration - Low Interest Rates.

b. Easy loan availability for housing finance.

c. Increased investments in Infrastructure.

d. Increased govt. outlay on BHARAT NIRMAN, GOLDEN QUADRILATERAL, and

BRTS etc.


THREAT

a. Further Hike in Oil Prices.

b. Use of plastic engineering in construction.

c. Sub prime market loss may affect.

Conclusion-thus to conclude, use to hell identify possible strength i.e. follows

1) build on strengths


2) results weakness

3) exploit opportunities

4) avoid strength


PEST ANAYSIS



1) POLITICAL AND LEGAL FACTOR:

Cement plant is deemed to be manufacturing activity for the purpose of incentives for the

industry in line with the approved policy of Government of India.

All cement plants are entitled to "Industry" status. Such units are eligible for all

Concessions and incentives applicable to Industries.

The State Government encourages flow of investments including FDI and provides full


support wherever required. The State Government can offer customized package of

incentives for prestigious investment proposals i.e. projects where total investments are

more than Rs. 10 Crore or a Fortune 500 company is implementing the project.

All cement Units with a connected load exceeding 100 KW shall be charged a

Concessional rate of Electricity Duty.

State Financial Institutions and the Banks, in line with the approved policy of

Government of India treats cement plants as priority sector.


2) ECONOMICAL FACTOR:

AMBUJA CEMENT INDUSTRY uses low cost highly skilled human resources in which

India enjoys internationally competitive advantage.

It should be emphasized that the internal strengths of Indian cement industry principally

comes from domestic entrepreneurship and domestic capabilities.

The impact of WTO and need for free trade areas can be observed by the fact that


Indian firms have established operations in countries like Mauritius and Brazil while

avoiding Eastern Europe.

Global expansion of Indian cement firms is in part funded by international capital. Indian

companies raise a part of their capital requirement abroad via bank debts. This exposes

companies to vagaries of interest rate fluctuations and inflation rate changes.

INTRODUCTION TO CEMENT INDUSTRY The cement industry is one of the main beneficiaries of the infrastructure boom. With robust demand and adequate supply, the industry has bright future. The Indian Cement Industry with total capacity of 165 million tones is the second largest after China. Cement consumption in India has increased by over 22% in 2009-10 from 2007- 08.Among the states, Maharashtra has the highest share in consumption at 12.18%,followed by Uttar Pradesh, In production terms, Andhra Pradesh is leading with 14.72% of total production followed by Rajasthan. Cement industry has contributed around 8% to the economic development of India. Cement industry has a long way to go as Indian economy is poised to grow because of being on verge of development. The company continues to emphasize on reduction of costs through enhanced productivity, reduction in energy costs and logistics expenses. As per the Working Group report on Cement Industry for the formulation of the 11th Plan, the cement demand is likely to grow at 11.5 per cent per annum during the 11th Plan and cement production and capacity by the end of the 11th Plan are estimated to be 269 million tones and 298 million tones, respectively, with capacity utilization of 90 per cent. Foreign cement companies are also picking up stakes in large Indian cement companies. Swiss cement major Holcim has picked up 14.8 per cent of the promoters' stake in Gujarat Ambuja Cements (GACL). Holcim's acquisition has led to the emergence of two major groups in the Indian cement industry, the Holcim-ACC-Gujarat Ambuja Cements combine and the Aditya Birla group through Grasim Industries and Ultratech Cement. 3) SOCIO CULTURAL FACTOR:

Expansion of cement development centers abroad by Indian cement firms is very limited


and is mostly driven by labor costs.

Indian cement firms are used to intense competition in global markets. Most companies

compete only on price and have gained reputation as price warriors.

Indian managers do not consider the need to customize software solutions for a foreign

country to be a major impediment for global expansion.

4) TECHNOLOGICAL ASPECTS:


Export of cement and related services is heavily dependent on transport infrastructure.

Modern advances in technology and transport media have a revolutionary change in the

scenario. Latest chemical analysis and their properties forced the industry to keep them

updated.

The universal nature of Internet and satellite communication capability provided by

Indian government has mitigated the importance of telecommunication infrastructure.

Also to organize global fests like Olympics there is demand of a very good infrastructure, thus


technology matters.

INTRODUCTION TO CEMENT INDUSTRY The cement industry is one of the main beneficiaries of the infrastructure boom. With robust demand and adequate supply, the industry has bright future. The Indian Cement Industry with total capacity of 165 million tones is the second largest after China. Cement consumption in India has increased by over 22% in 2009-10 from 2007- 08.Among the states, Maharashtra has the highest share in consumption at 12.18%,followed by Uttar Pradesh, In production terms, Andhra Pradesh is leading with 14.72% of total production followed by Rajasthan. Cement industry has contributed around 8% to the economic development of India. Cement industry has a long way to go as Indian economy is poised to grow because of being on verge of development. The company continues to emphasize on reduction of costs through enhanced productivity, reduction in energy costs and logistics expenses. As per the Working Group report on Cement Industry for the formulation of the 11th Plan, the cement demand is likely to grow at 11.5 per cent per annum during the 11th Plan and cement production and capacity by the end of the 11th Plan are estimated to be 269 million tones and 298 million tones, respectively, with capacity utilization of 90 per cent. Foreign cement companies are also picking up stakes in large Indian cement companies. Swiss cement major Holcim has picked up 14.8 per cent of the promoters' stake in Gujarat Ambuja Cements (GACL). Holcim's acquisition has led to the emergence of two major groups in the Indian cement industry, the Holcim-ACC-Gujarat Ambuja Cements combine and the Aditya Birla group through Grasim Industries and Ultratech Cement. PROCESS OF STRATEGIC PLANNING-


1) PHASE1:- STRATEGIC FORMULATION-It is also called as strategic planning the

strategic formulation can be done as the top management level or at the corporate level strategic

in the level of strategic in the level of strategic management. Strategy formulation involves

following stages.

Step1:-FRAMING MISSION AND OBJECTIVE


The first stage in formulation of strategic is to frame mission and objective followings are the

mission and objective of ambuja cement.

MISSION - Delighted customers, inspired employees, Empowered partners, energized

society.

OBJECTIVES- The management of Gujarat Ambuja decided some objectives to become

topper in the market. And the objectives are:

i) Better quality then other company.


ii) Fair returns to share holders.

Iii) A higher productivity to cover maximum market.

IV) Maximum customer satisfaction.

V) Clean & healthy Environment for employee’s growth.

vi) Try to lower pollution to fulfillment of social responsibilities.

Step:-2-ANAYSIS OF INTERNAL ENVIRONMENT


After setting objective or goal the management needs to make analysis of internal

environment .The internal environment of Ambuja cement are as follows.


Strength

Growth at approx CAGR of 9% in last 5 years

Growing Domestic cement consumption at approx CAGR of 8% in last 3 Years

Highly Capital Incentive so difficult for small entrant

Not much restriction by govt.

Market consolidation taking place


Weakness

High Oil Prices, Cost of Power increase production cost

Supply exceeds Production lead to competition in price

Low Quality as compared to international standard but improving


Step3:- ANALYSIS OF EXTERNAL ENVIRONMENT -

The management must conduct an analysis of external environment. The external environments

of ambuja cement are as follows.

Opportunity

High Mortgage Penetration - Low Interest Rates

Easy loan availability for housing finance

Increased investments in Infrastructure


Increased govt. outlay on BHARAT NIRMAN, GOLDEN QUADRILATERAL BRTS

etc.

Threat

Further Hike in Oil Prices

Use of plastic engineering in construction

Subprime market loss may affect.


Step4:-GAP ANALYSIS-

The management of ambuja cement industry had conducted the GAP analysis. The results are as

follows.custemes is not satisfied with quality of cement. So the company wants to bridge the gap

and provide the better quality of cement to the customer.


Step: - 5FRAMING THE ALTERNATIVE STRATEGIES-

After making the SWOT analysis and gap analysis the management need to frame the alternative

strategies on the basis of porter generic strategies i.e. cost, Focus, differentiate.



Cost

The low cost leader in any market gains competitive advantage from being able to many to

produce at the lowest cost. Factories are built and maintained; labor is recruited and trained to

deliver the lowest possible costs of production. 'Cost advantage' is the focus. Costs are shaved off

every element of the value chain. Products tend to be 'no frills.' However, low cost does not


always lead to low price. Producers could price at competitive parity, exploiting the benefits of a

bigger margin than competitors. Some organizations, such as Toyota, are very good not only at

producing high quality autos at low price but have brand marketing skill to use the policy.

Differentiate .

Differentiated goods and services satisfy the needs of customers through a sustainable


competitive advantage. This allows companies to desensitize prices and focus on value that

generates a comparatively higher price and a better margin. The benefits of differentiation

require producers to segment markets in order to target goods and services at specific segments,

generating a higher than average price.

Focus

The focus strategy is also known as a 'niche' strategy. Where an organization can afford neither a


wide scope cost leadership or a wide scope differentiation strategy, a niche strategy could be

more suitable. Here an organization focuses effort and resources on a narrow, defined segment of

a market. Competitive advantage is generated specifically for the niche. A niche a niche strategy

could be more suitable.

Step:-6 CHOICE OF STRATEGIES:

The origination cannot implement the alternative strategies. The ambuja cement company had


selected the focus strategies.

2) PHASE2:-STRATEGIES implementation :

The strategies are formulated for each and every function department such as marketing,

finance, HR, operation. Once the strategies re formulated than next step is implemented for such

strategies. This strategies implementation stage is carried out by middle level management or

function level stage of strategies management.


The strategies implementation stage involves following element.

Step:- 1FORMALATING OF PLANS PROGRAMMS AND PROJECT:

There is need to frame plans ,programs and project strategies by itself does not leads to action

plans result in different kinds of programs.


The company is implementing a project - Connect India Plus”, which aims at connecting all the

plants, business places across India online, under a standardized business template to run on SAP

software.

Step:-PROJECT IMPLEMENTATION

Project passes to various stages before the actual implementation .the various phases are as

follows.


a) Conception phase- idea generation.

b) Definition phase-preliminary analysis.

c) Planning and organizing phase-required resources.

d) Implementation phase-implementing the project.

e) Clean up phase-discontinuation of project.

step3:-PROCEDURIAL IMPLEMENTATION


Company uses the FEMA regulation for implementation of this project.

Step4:-RESOUCESS ALLOCATION

Ambuja Cement Company uses the physical financial human resources for implementation of

this project.

Step:-5STRCTURAL IMPLEMENTATION


There is need for organization structural implementation strategies. The organization structure is

the framework through which organization operates there can be various organizations structural

for implementation of the strategy.


Step6:-FUNCTIONAL IMPLEMENTATION

The implementation of “Project CONNECT” India Plus started in June, 2007& is expected to go

live in August, 2008. After the Go Live, all operations, locations and transactions will become

fully integrated in a manner that is in line with the updated data and information. The new

system will greatly enhance the company’s capability to capture and process a comprehensive

range of data to be used for decision making and day-to-day operations, while automating some


processes which were not part of the IT legacy system. The functional manger belonging to areas

of the HR and operation.

Step7:- BEHAVIOURAL IMPLEMENTATION:

It deals with those aspects of strategic implementation that have to impact on the behavior s on

the strategies in implementation that have to impact on the behaviors of strategies in

implementing the strategies. The behavioral implementation deals with the issue of leadership,


corporate culture, corporate politics and use of power personal values, business ethics and

corporate social responsibility.

PHASE 3: STRATEGIC EVALUATION

Step 1: - SETTING OF STANDARDS:


As per the standards set by the company the employees has to function. Along with the standards

the company should not forget it ultimate objective or goals.

Step 2:- MEASUREMENT OF PERFORMANCES:-

The set standards are then measured with the actual performance.

Step 3:- COMPARISON OF ACTUAL STANDARD WITH STANDARDS


The comparison after measuring is evaluated on the bases of performance which can positive or

negative. It means the deviating in achieving the targets.

Step 4:- ANALYSING THE DEVIATION

For eg: - the standards were to produce 1000 units but actual production is 900 the it is called

negative deviation. So it should keep in mind while evaluating a performance.


Step 5:- TAKING CORRECTIVE MEASURES

After doing all evaluation the proper measures are required to be taken.




BCG Matrix

The Boston Consulting Group (BCG) Matrix is a simple tool to assess a company’s position in

terms of its product range. It helps a company think


About its products and services and make decisions about which it should keep which it should

let go and which it should invest in further.

In 1970’s, BCG experience curve work led to inside that has a significant impact on

business thinking i.e. of rapid growth in market share was the important as the curve suggested

then the usual approach resource allocation in which each business unit funded in on growth

seems to be recipe for it failure.


Business with low market share but high potential would never generate enough cash to

win the race down the experience curve. Those with the high market share but few changes of

growth would generate far more cash than those would use productivity.

The BCG matrix can be diagrammatically represented as follow





Question Marks

Question marks are products that grow rapidly and as a result consume large amounts of cash,

but because they have low market shares they don’t generate much cash. The result is a large net

cash consumption. A question mark has the potential to gain market share and become a star, and


eventually a cash cow when the market growth slows. If it doesn’t become a market leader it will

become a dog when market growth declines. Question marks need to be analysed carefully to

determine if they are worth the investment required to grow market share.


Dogs

Dogs have a low market share and a low growth rate and neither generates nor consumes a large

amount of cash. However, dogs are cash traps because of the money tied up in a business that has

little potential. Such businesses are candidates for divestiture.

Stars


Stars generate large sums of cash because of their strong relative market share, but also consume

large amounts of cash because of their high growth rate. So the cash being spent and brought in

approximately nets out. If a star can maintain its large market share it will become a cash cow

when the market growth rate declines.

Cash Cows


As leaders in a mature market, cash cows exhibit a return on assets that is greater than the market

growth rate – so they generate more cash than they consume. These units should be ‘milked’

extracting the profits and investing as little as possible. They provide the cash required to turn

question marks into market leaders.



BCG MATRIX OF AMBUJA CEMENT:


MARKET SHARE

STAR QUESTION MARK AMBUJA CEMENT

CASH COW DOG


RATE


Ambuja Cement enjoys the position of STAR in the BCG Matrix i.e. high market share & high

market growth. Compared to others, Ambuja has highest Net Profit having market share of

18.12% in the cement industry. Overall it has 3rd largest sales turnover.


Secondly, if we look at the overall cement industry it is having high market growth as cement

industry depends on infrastructure, housing, roads, irrigation, etc which are currently in the

booming stage. So the strategy to be followed is to HOLD the position of STAR by reinvesting

their profits and using this profit to increase their turnover and gain the highest market share.


MCKINSEY 7S FRAMEWORK


Introduction

This paper discusses McKinsey's 7S Model that was created by the consulting company

McKinsey and Company in the early 1980s. Since then it has been widely used by practitioners

and academics alike in analyzing hundreds of organisations. The paper explains each of the

seven components of the model and the links between them. It also includes practical guidance

and advice for the students to analyse organisations using this model. At the end, some sources

for further information on the model and case studies available on this website are mentioned.

http://www.coursework4you.co.uk/essays-and-dissertations/general-business/strategic-models/mckinsey-7s-model/mckinsey7smodel.php


The McKinsey 7S model was named after a consulting company, McKinsey and Company,

which has conducted applied research in business and industry (Pascale & Athos, 1981; Peters

& Waterman, 1982). All of the authors worked as consultants at McKinsey and Company; in

the 1980s, they used the model to analyse over 70 large organizations. The McKinsey 7S

Framework was created as a recognizable and easily remembered model in business. The seven

variables, which the authors term "levers", all begin with the letter "S":

http://www.coursework4you.co.uk/essays-and-dissertations/analysis-of-companies/analysisofcompanies.php

http://www.coursework4you.co.uk/essays-and-dissertations/general-business/strategic-models/mckinsey-7s-model/mckinsey7smodel.php



Figure: McKinsey's 7S Model

These seven variables include structure, strategy, systems, skills, style, staff and shared values.

Structure is defined as the skeleton of the organisation or the organisational chart. The authors

describe strategy as the plan or course of action in allocating resources to achieve identified

goals over time. The systems are the routine processes and procedures followed within the

organisation. Staff are described in terms of personnel categories within the organisation (e.g.


engineers), whereas the skills variable refers to the capabilities of the staff within the

organisation as a whole. The way in which key managers behave in achieving organisational

goals is considered to be the style variable; this variable is thought to encompass the cultural

style of the organisation. The shared values variable, originally termed superordinate goals,

refers to the significant meanings or guiding concepts that organisational members share

(Peters and Waterman, 1982).


The shape of the model (as shown in figure) was also designed to illustrate the interdependency

of the variables. This is illustrated by the model also being termed as the "Managerial

Molecule". While the authors thought that other variables existed within complex

organisations, the variables represented in the model were considered to be of crucial

importance to managers and practitioners (Peters and Waterman, 1982).


The analysis of several organisations using the model revealed that American companies tend

to focus on those variables which they feel they can change (e.g. structure, strategy and

systems) while neglecting the other variables. These other variables (e.g. skills, style, staff and

shared values) are considered to be "soft" variables. Japanese and a few excellent American

companies are reportedly successful at linking their structure, strategy and systems with the

soft variables. The authors have concluded that a company cannot merely change one or two

variables to change the whole organisation.

http://www.coursework4you.co.uk/essays-and-dissertations/analysis-of-companies/analysisofcompanies.php


For long-term benefit, they feel that the variables should be changed to become more congruent

as a system. The external environment is not mentioned in the McKinsey 7S Framework,

although the authors do acknowledge that other variables exist and that they depict only the

most crucial variables in the model. While alluded to in their discussion of the model, the

notion of performance or effectiveness is not made explicit in the model.



7S MCKINSEY MODEL OF AMBUJA CEMENT LTD

The 7S model can be used in a wide variety of situations where an alignment perspective is

useful, for example to help you:


Improve the performance of a company.

Examine the likely effects of future changes within a company.

Align departments and processes during a merger or acquisition.

Determine how best to implement a proposed strategy.


The Seven Elements

The McKinsey 7S model involves seven interdependent factors which are categorized as either

"hard" or "soft" elements:

Hard Elements Soft Elements


Strategy

Structure

Systems

Shared Values

Skills

Style

Staff


"Hard" elements are easier to define or identify and management can directly influence them:

These are strategy statements; organization charts and reporting lines; and formal processes and

IT systems.

"Soft" elements, on the other hand, can be more difficult to describe, and are less tangible and

more influenced by culture. However, these soft elements are as important as the hard elements

if the organization is going to be successful.


The way the model is presented in Figure 1 below depicts the interdependency of the elements

and indicates how a change in one affects all the others.


GE GROWTH MARTIX / GE PLANNING GRID / MCKINSEY

MATRIX


The GE matrix/ McKinsey matrix is a model to perform business portfolio analysis on the

strategic business unit of a corporation. General Electric of USA with the support of consulting

firm McKinsey and company developed a more complicated matrix as a technique of portfolio

analysis. The aim of portfolio analysis was:

To analysis it current business portfolio and decide which SBU should received more or

less investment.

To develop growth strategy for adding new product and business to the portfolio.


Decide which business or product should no longer be retained

The GE business screen includes 9 cells based on 2 parameter i.e. long term industries

attractiveness/ market attractiveness and business strength/ competitive position. GE matrix

includes;


INDUSTRIES ACTRACTIVNESS BUSINESS STRENGTH

Market growth rate Market share

Profitability Technological position

Size Profitability

Pricing Size

Practices Strength


Opportunities Weakness

Threats


1

High1 2



Medium2

31


2

3

3

Low


Strong Average Weak


GE Matrix is divided into 9 cells:


CELLS INDICATE

1

Company should investment or Growth

such as market development, expansion of

business


2

Company should hold and maintain of

current strategy

3 Company should stop and select

retrenchment strategies


Note: Since the AMBUJA CEMENT LTD has only cement business. Company does not

have any strategic business unit, so company does not have GE GROWHT

MATRIX/GEPLANNING GRID/MCKINSEY MANTRIX.



STERGICE MANGEMENT AND ORGANSATION STRUCTURE


1. Once the mission, vision, objective, goals, values, programs, strategy etc are define for

the organization the manager has to implement and executive the chosen strategy by

developing organization capabilities reach the target objective on the schedule time.

2. Strategy execution on strategy implementation is an execution is an action oriented

process which is aim to achieve complementary and capability for effective organization.


3. As firm grows their structure generally changes from simple to complex structure for

example small firm are functionally structure but as they grow in size and are medium to

size and they tend to divisionally structure, where large organization are matrix structure .

4. There are many internal external factor that affect the organization structure, thus the

manager must their after closely examine the way of their company structure in order to

decide what if any changes should be made in the work is accomplished.


5. There are four types of organization structure and they are as follows.



STERGICE MANGEMENT AND ORGANSATION STRUCTURE

OF AMBUJA CEMENT:

They follow the divisional structure:


Ambuja cement having only cement business. Company follows the divisional structure. This

requirement of business growing to medium is fulfilled by structure called as divisional structure.

Divisions of Ambuja Cemnt Company are as follows.

a) GEOGRAPHICAL AREA-ambuja cement company have their business in different

geographical areas they are as follows:


NORTH ZONE- Rajasthan (Pail), Punjab (bhatinda), Himachal Pradesh

(darladhat, rqpar)

EAST ZONE-west bangal (Sanskrait)

WEST ZONE- Gujarat (kodinar)

b) Product and services-Ambuja cement only having cement business.


c) Customer-retail customer



GEOGRAPHICAL LOCATION OF AMBUJA CEMENT COMPANY



TYPES OF STRATEGIES

1. Grand Strategies


When a firm bases its plans for expansion on acquiring existing businesses, the grand strategy

is one of acquisition growth.

2. External Acquisition Strategies

Horizontal Integration

Vertical Integration


Diversifications

Concentric

Conglomerate

3. Horizontal Integration

The long-term strategy of a firm is based on growth through the acquisition of one

or more similar businesses operating at the same stage of the production-

marketing chain.


Domination of a market at one stage of the production process by monopolizing

resources at that stage.

Such acquisitions provide access to new markets for the acquiring firm and

eliminate competitors.

4. Vertical Integration

Vertical integration is the degree to which a firm owns its upstream suppliers and

its downstream buyers.


Contrary to horizontal integration, which is a consolidation of many firms that

handle the same part of the production process, vertical integration is typified by

one firm engaged in different aspects of production (e.g. growing raw materials,

manufacturing, transporting, marketing, and/or

retailing).

5. backward Integration


The main reason for backward integration is the desire to increase the

dependability of supply or quality of raw materials or production inputs.

The concern is really great when the number of suppliers is small and the number

of competitors is large.

Vertically integrating firm can better control its costs and thereby improve profit

margin of the expanded production/marketing system.

6. Forward Integration


Forward integration is the preferred strategy if the advantages of stable production

are particularly high.

A business can increase the predictability of demand for its output through

ownership of the next stage of its production/marketing chain.

7. Risk of Vertical Integration


For vertically integrated, the risks result from expansion of the company into

areas requiring strategic managers to broaden the base of their competencies &

assume additional responsibilities.

Raymond has become vertically integrated by constructing state-of-the art

facilities for its garment manufacturing companies as well as design studios

established through joint ventures and retail operations.


AMBUJA CEMENT sees retail expansion as an important way to penetrate the

market and increase sales even further.

Recently, AMBUJA CEMENTambuja cement expanded their operation in east

zone. Company increase production Capacity from 16 mn Tones’ to 22 mn.

Tones’.


8. MARKET DEVELOPMENTS

Despite the significant capacity additions in the industry, the Company kept pace with the

double digit demand growth, and maintained its strong position of approximately

18%market share in its main markets, and around 10% on an all India basis. Sales

volumes increased by 6.5%, to 18.8 million tonnes in 2009 as against 17.6 million tonnes

in 2008.


The Company has built a large network of over 6,000 dealers and 20,000 retailer’s

across18 states in India. Its reach and penetration helps the Company to manage the last

mile delivery across our relevant markets, and gives us a strong positioning in the

booming rural markets.

Along with strong brand equity, Ambuja has evolved a unique model of channel

management, based on values of trust and relationships. The strong bond between the


dealer network and the Company has helped Ambuja to withstand severe competition for

more than two decades. With the added support of Holcim's rich experience of operating

in 70countries, Ambuja has now added sophisticated IT tools and global channel

management tools to its traditional Indian model, thus adding to our capabilities to face

stiff competition endemic to large capacity additions.


Holcim's global experience has also helped Ambuja in fine tuning its product quality

management, by introducing best practices from other countries. It has helped in

enhancing the overall marketing mix, clearly targeted at the retail market in semi urban

and rural sectors, and the large buyers in the metros and mega cities.


Our network of port, bulk terminals, and bulk cement ships, on the west coast has

supported a sustainable strong market position in Mumbai and Surat. In 2009, another

bulk terminal in Kochi has been added to the network to establish a footprint in Kerala

Conclusions


Solid market position built up within short period of time through organic growth and

acquisitions.

Pin-pointed positioning tied to substantial captive infrastructure to serve markets

including sea transportation, capability to export

High use of alternative raw materials in production of composite cements

Substantial greenfield and brownfield expansion plans to grow within the attractive


markets and an internal financing capability to fund expansion projects


INTRODUCTION TO CEMENT INDUSTRY The cement industry is one of the main beneficiaries of the infrastructure boom. With robust demand and adequate supply, the industry has bright future. The Indian Cement Industry with total capacity of 165 million tones is the second largest after China. Cement consumption in India has increased by over 22% in 2009-10 from 2007- 08.Among the states, Maharashtra has the highest share in consumption at 12.18%,followed by Uttar Pradesh, In production terms, Andhra Pradesh is leading with 14.72% of total production followed by Rajasthan. Cement industry has contributed around 8% to the economic development of India. Cement industry has a long way to go as Indian economy is poised to grow because of being on verge of development. The company continues to emphasize on reduction of costs through enhanced productivity, reduction in energy costs and logistics expenses. As per the Working Group report on Cement Industry for the formulation of the 11th Plan, the cement demand is likely to grow at 11.5 per cent per annum during the 11th Plan and cement production and capacity by the end of the 11th Plan are estimated to be 269 million tones and 298 million tones, respectively, with capacity utilization of 90 per cent. Foreign cement companies are also picking up stakes in large Indian cement companies. Swiss cement major Holcim has picked up 14.8 per cent of the promoters' stake in Gujarat Ambuja Cements (GACL). Holcim's acquisition has led to the emergence of two major groups in the Indian cement industry, the Holcim-ACC-Gujarat Ambuja Cements combine and the Aditya Birla group through Grasim Industries and Ultratech Cement. Bibliography


www.google.com

www.ambujacement.com

www.yahoo.com

http://www.yahoo.com/

http://www.ambujacement.com/

http://www.google.com/



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Strategic management of AMBUJA CEMENT LTD

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