Strategic Management Guided By : Prof.

Vikram Parekh Submitted byMayank Mathur Madhukar Thorat Kumar Kashyap Laxmi Khandayat (ITM XMBA-24)
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Flow
Introduction Strategic Management Process Mission Vision Values Overview of Cement Industries Key Industry statistics & Dynamics Market Analysis PESTLE analysis SWOT analysis Competitors Analysis -Porters 5 Forces Model Analysis Of Company Value Chain Strategies
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Movie

INTRODUCTION
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

Strategic Management Process : Vision, Mission Values

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

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 harmonize its diverse world-class engineering, procurement, manufacturing and distribution skills to meet the expectation of their customers.

Overview of Cement Industrycontd

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

Key Industry statistics & Dynamics India is the worlds 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
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Overview of Cement Industrycontd

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

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
ACC Ambuja Cements Binani Cements Birla Corporation Limited CCI Century Textiles Grasim India Cements Jaypee Group Kesoram Industries Lafarge Madras Cements Ultratech Cement Zuari Cement

Capacity (in MTPA)

22.63 18.50 6.50 5.80 3.85 6.80 16.75 8.94 13.50 5.60 5.50 10.00 18.20 3.50

Note: Only companies with cement production capacity >3 MTPA included here. There are likely to be other competitors not 10 included here.

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 11 well as corporate to invest in that particular state

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 12

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 Analysiscontd
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. 16

Porters - 5 Forces Model

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 Suppliers Very High Monopolistic control of external cost element (coal, power, taxes transportation results in high bargaining power with the government

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.

Bargaining Power of Buyers Limited The individual house owners do not make bulk purchase. So, have less bargaining power.

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

The Value Chain of ACC Limited
Firm Infras truc ture : Captiv e Power Plants , Ex port of Pow er to SEB, H igh Effic ienc y Kilns

Support Activities

Human Res ourc e Management: : Freedom to ac hiev e, enriching sk ills & enhancing ex periments , Fair compens ation, ESOS Tec hnology Dev elopment: R & D ac tiv ities for new products , c onservation of res ourc es , rec y c ling of w as tes , reduction in emis s ions & improved performance of c oncrete Proc urement: Purchas ing Proc edures , C entralized proc urement for imported items , loc al purc has e of fas t mov ing items , Purc has e of R aw Materials

M a r g i n

Inbound Logis tic s : Effic ient Material Handling Sy s tems Order Proc es s ing Sy s tems Inv entory Control Management of Inv entories

Operations : Manufac turing Proc es s es Mining Crus hing R.M . Grinding Blending Py ro proc es sing Grinding and Pac k ing

Outbound Logistic s : Dis tribution C hannel Sales & D is tribution Proc edures Ev aluation of C hannel Dis tribution Ware Hous es

Mark eting & Sales : C us tomer Satis fac tion Mark et Planning C ons umer Behav ior Pric ing Polic y Promotion Mix Adv ertis ement

After-Sales Serv ic e: Cus tomer Support Departments Complaint redres s al forums Seminars Cons truc tion guidelines Quality Ex hibitions Fac ility to driv ers

Value What buyers are willing to pay

Primary Activities

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Value chain analysiscontd

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 analysiscontd

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 21 worth.

Strategies (I/O)
Internal Strategy
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: Forward 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 troubleshooting 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 Strategies Cost 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 specialized services, ACC has begun offering its marketing expertise and distributaries facilities to other producers in cement and related areas. However a precondition of all such agreement is quality control supervision to be carried out by an ACC expert located at the franchisees plant. Each of the regional Marketing offices has a customer services cell that is manned by qualified civil engineers. These, in addition to handling 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 offer assistance on related issues in civil construction projects. Besides this, technical books/booklets on cement, concrete and building construction and maintenance must be made available for the benefit of the customers. In addition to this, ACC distribute publish free leaflets/ booklet, which profiles the latest information on concrete research, design, construction and maintenance. We feel ACC is forging ahead on its set mandate & is on its way to become one of the leading cement suppliers in the International markets too .

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Questions ?

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Thanks

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