Strategic Analysis

on
“SHIVAM CEMENT INDUSTRIES PVT. LTD”

Submitted By:
Biraj Ghimire
Jamuna Dhungana
Khando Gurung
Nischal KC
Menuka Watankachhi
Submitted to:
Mr. Saroj Mishra
Course Instructor
Strategic Management
Apex College
April 23, 2018
 Acknowledgement
This is the matter of pleasure for us to acknowledge our deep sense of gratitude to all the
people who directly and indirectly helped us to accomplish this report. Foremost, we
would like to express our deep gratitude to our course instructor of Strategic
Management, Mr. Saroj Mishra for providing an opportunity to write this strategic plan
report and giving us the opportunity to explore on cement industry of Nepal.

We would also like to express our sincere gratitude to Mr. Satyam Goyal, Sales
Manager of Shivam Cement Industry Pvt. Ltd. for providing the information needed
to prepare this report. We also express our sincere gratitude to all the staffs of Shivam
Cement Industry who were very supportive and helpful in providing information with
regards to insurance operations in Nepal.

Thanks all for your encouragement, support and warm co-operation.

Sincerely,

Biraj Ghimire

Jamuna Dhungana

Khando Gurung

Nischal KC

Menuka Watankachhi

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 Executive Summary
Shivam Cement is a distinct brand name in the Nepalese market. This company was
established in the year 2001 and since then has been the market leader in cement
manufacturing in Nepal. This company also holds the largest market share in the
Nepalese market. According to the market requirement, Shivam Cement Industries Pvt
Ltd has committed for consistency in quality, regularity in supply and quantity in
production. It has been producing & distributing Ordinary Portland Cement (OPC),
Pozzolana Portland Cement (PPC) and Pozzolana Slag Cement (PSC) at competitive
prices to achieve the needs and satisfaction of its valued customers in Nepal, which has
been achieved through meeting the statutory & regulatory requirements of country, using
high grade of raw material & continual improvement in quality of works and services
rendered by the company, enhancing the involvement of all levels of employees, using
best available resources and by reviewing quality objectives time and again.

Cement is a solid material and consumers rarely have complaints about the product. The
cement industries have opportunities as well. One such opportunity is the cement
industry's efficiency. The cement industry has recently streamlined its production efforts
by using dry manufacturing process instead of wet. The cement industry depends on
construction jobs to create profit and it heavily relies on weather. About two-thirds of
cement production takes place between May and October. Cement producers often use
the winter months to produce and stockpile cement, to meet demand, which is considered
as a weakness of the industry. The cement industry greatly relies on constructions work.
Due to financial crises, the current economy of the world has lessened the number of
construction jobs, which in turn hurts the cement industry. There are at present more than
fifty cement industries in Nepal including both clinkers producing as well as cement
producing factories. These figures clearly show there are huge opportunity and very
tough competition in the cement industry. And in order to survive this competition detain
analysis of overall industry is vital.

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 Table of Contents

Acknowledgement i

Executive Summary ii

CHAPTER I 1

INTRODUCTION 1

1.1 Introduction of Cement Industry 1

1.2 Types of Cement 1

2.1 Background of SHIVAM CEMENT INDUSTRIES (P) LTD. 2

1.3 Products of Shivam Cement Industry 3

1.3.1 Ordinary Portland Cement (OPC) 3

1.4 Mission and Vision 3

1.5 Evaluation of Mission Statement 4

CHAPTER II 4

ANALYSIS 4

2.1 Functional Approach 4

2.1.1HR and Admin 5

2.1.2Production/ Operation 5

2.1.4Marketing 6

2.1.5Sales 6

2.1.6Finance 6

2.1.7Procurement & Logistics 6

2.2 External Environment Analysis 6

2.2.1Political Factors 7

2.2.2Economic Factors 7

2.2.3Social Cultural Factors 8

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2.2.4 Technological Factors 9

2.2.5 Ecological Factors 9

2.2.6Legal Environment 9

2.3 Key Success Metrix 9

2.4 Strategic Group 10

2.5 External Factor Evaluation Matrix 12

2.6 Internal Assessment 13

2.7 Industry Attractiveness 15

2.7.1 Bargaining power of customers- Low 16

2.7.2 Bargaining power of suppliers- High 16

2.7.3 Threats of new entrance- Moderate 17

2.7.4 Threat of new substitute products- Low 17

2.7.5 Competitive Rivalry- High 17

2.8 Strategic Option 18

2.8.1 Managing by objective (MBO) 18

2.8.2 Market penetration 19

2.8.3 Means for achieving strategy 19

2.9 BOSTON CONSULTING GROUP (BCG) Matrix Analysis 20

2.10 Generic Strategies 21

2.11 SWOT Analysis 21

2.12 Grand Strategy Cluster 23

2.13 Quantitative Strategic Planning Matrix 23

CHAPTER III 26

CONCLUSION AND RECOMMENDATIONS 26

3.2 Conclusion 26

3.4 Strategic Control and Implementation 28

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 CHAPTER I
INTRODUCTION
1.1 Introduction of Cement Industry
Cement is, literally, the building block of the construction industry. Cement is a solid
material and consumers rarely have complaints about the product. The cement industry
depends on construction jobs to create profit and it heavily relies on weather. Nepal's
cement industry has a total demand of 8 million tons of cement yearly of which 80
percent of the total demand is fulfilled by domestic production and the remaining 20
percent is imported mainly from India. Regarding clinker production, 70 percent is being
fulfilled by domestic industries and the remaining imported from India. There are at
present more than fifty cement industries in Nepal including both clinkers producing as
well as cement producing factories. These figures clearly show there is huge opportunity
and very tough competition in the cement industry. And in order to survive this
competition detain analysis of overall industry is vital.

1.2 Types of Cement

There are different varieties of cement based on different compositions namely, Ordinary
Portland cement, Portland Pozzolana cement, White cement, Portland blast, Furnace slag
cement and specialized cement. The basic difference lies in the percentage of clinker
used.

❖ Ordinary Portland Cement (OPC), popularly known as grey cement, has 95 percent
clinker and 5 percent gypsum and other materials. It accounts for 70 percent of the
total consumption in the world.

❖ Portland Pozzolana Cement (PPC) PPC has 80 percent clinkers, 15 percent

Pozzolana and 5% gypsum and accounts for 18 percent of the total cement
consumption. It is manufactured because it uses fly ash/burnt clay/coal waste as the
main ingredient.

❖ White Cement White cement is basically OPC - clinker using fuel oil (instead of
coal) with iron oxide content below 0.4 percent to ensure whiteness. A special
cooling technique is used in its production. It is used to enhance aesthetic value in
tiles and flooring. White cement is more expensive than grey cement.

❖ Portland Blast Furnace Slag Cement (PBFSC) PBFSC consists of 45% clinker, 50%
blast furnace slag and 5% gypsum and accounts for 10% of the total cement
consumed.

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❖ Specialized Cement Oil Well Cement is made from clinker with special additives to
prevent any porosity.

❖ Rapid Hardening Portland Cement Rapid Hardening Portland Cement is similar to

OPC, except that it is ground much finer, so that on casting, the compressible
strength increases rapidly.

❖ Water Proof Cement Water Proof Cement is similar to OPC, with a small portion of
calcium stearate or non- saponifibale oil to impart water proofing properties. The
Portland cement contains 60% lime 25% silica and 5% alumina. Iron oxide and
gypsum make the rest of the material. The gypsum regulates setting of the cement.

2.1 Background of SHIVAM CEMENT INDUSTRIES (P) LTD.

Shivam Cement is a distinct brand name in the Nepalese market. This company was
established in the year 2009 and since then has been the market leader in cement
manufacturing in Nepal. This company holds the largest market share in the Nepalese
market. According to the market requirement, Shivam Cement Industries Pvt Ltd has
committed for consistency in quality, regularity in supply and quantity in production.

The company was established with the major objective of producing and distributing
Ordinary Portland Cement (OPC) at competitive prices to achieve the needs and
satisfaction of its valued customers in Nepal. It aims to achieve this objective through
meeting the statutory and regulatory requirements of country, using high grade of raw
material and continual improvement in quality of works and services rendered by the
company, enhancing the involvement of all levels of employees, using best available
resources by reviewing quality objectives time to time

Shivam cements which was established in 2009 is a largest manufacturing Greenfield

project in Nepal with an aim to produce 1250 TPD from the company’s self owned
limestone. Shivam cement, a private company with a minimum of 4 billion enterprises,
is Nepal’s biggest and most modern cement manufacturing plant. It is situated at the
industrial hub Hetauda, where rapid infrastructural development has been witnessed over
the years. Shivam cement has invested hugely on capitals, human resources, production
processes, infrastructures, etc.

Company being one of the biggest manufacturing Cement Company, believe in

providing the finest quality of cement to our customers. It believes for production of high
quality standards adopting the moto “Quality over quantity”. The company is contended
to provide the finest quality of cement to the customers because as a provider the
company believe that success mean satisfied and happy customers.

1.3 Products of Shivam Cement Industry

Shivam Cement Industry has been offering

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 1.3.1 Ordinary Portland Cement (OPC)

Shivam OPC equivalent to 53 Grade is a prime brand cement with a remarkably high
C3S (Tri-Calcium Silicate) providing long-lasting durability to concrete structures. It
produces highly durable and sound concrete due to very low percentage of alkalis,
chlorides, magnesia and free lime in its composition. Almost negligible chloride content
results in restraining corrosion of concrete structure in a hostile environment.

1.4 Mission and Vision

❖ VISION

To be the leading cement company in terms of its caliber, service and sustainability.

❖ MISSION

Shivam cement as a company believes satisfaction of customers to be the

greatest achievement. We aim to remain the biggest and largest cement
manufacturing company providing the world-class cement while
keeping the environment safe and clean as well as inspiring our
employees to work even harder to keep customers delighted.

1.5 Evaluation of Mission Statement

S.N. Components Availability

1. Customers Yes

2. Product & Services Yes

3. Market Yes

4. Technology Yes

5. Concern for Survival, Growth, and Profitability Yes

6. Philosophy Yes

7. Concern for Public Image No

8. Self Concept No

9. Concern for Employees Yes

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 CHAPTER II
ANALYSIS
2.1 Functional Approach
Functional Approach

The functional approach of Shivam Cement Pvt Ltd does includes seven approach that
are discussed in detail.

2.1.1HR and Admin

Firstly the human resources and admin as Shivam Cement Pvt Ltd cement believed in
innovating and acting differently to expand continuously and keep raising their bar. They
focused in nurturing and enriching young professionals and transform them as future
managers. Acquiring new talents with new ideas and energy and blending them with
existing skills, on the job and external training has helped the company to get pool of
excellent committed staff. On the basis of job requirement, performance appraisal,
training needs assessment surveys are carried out in house along with outstation training
program in the country and abroad. As there is also lot of turnover in the company as
well which shows the weakness of the company.

2.1.2Production/ Operation

Shivam Cements has been one of the biggest Cement manufacturers in Nepal with a total
of 10% market share. This company also holds the market share in the Nepalese market.
The product of Shivam is ISI Standards which is important to have as a quality in the
product it is a Nepal Standard. The organization holds own vehicles to deliver and
receive products to transport lime stones. The Fuel efficient units is 1300 ton per day for
functioning. As the plants need continuous power supply to continue its production and
to be in the market creating its place for regular supply where as there is less capacity
utilization going on in the production.

2.1.3Engineering and Innovation

The products are high in quality which has consistency in the products. They are
focusing even on the outlook of the dust free packaging which enhance its quality and
attracts the customers. Keeping on consideration about the customer and their wants the
products are enhanced accordingly. Shivam Cement has become joint research with
partner company Hongshi and have enhanced its business. With more innovation the

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company has run its fifth year now as it is highly experienced in work force, qualified
supervisory staffs and executives to engineer and innovate.

2.1.4Marketing

With the customer as the focus of its activities so it mainly focuses on maintaining
consistency in its quality and supply. Shivam cement considers the 4 P’s (price, place,
promotion and people) in its marketing strategy; therefore, it has set the sales target for
dealers and introduced schemes for them as a reward. The main market has been created
by their brand name Shivam Cement Pvt Ltd which has occupied its place in the market.
There has been going continuous promotion in the market through media mainly. There
has be budget segregation for mainly marketing so that it can be highlighted in the
market so that it can bring its name in the market and be known by people easily.

2.1.5Sales

The increasing market for cement has made easy excess for Shivam Cement to sell the
products as the Market share is increasing by 10% with 340+ dealers. The sale is more in
institution which shows there is huge number of sales. As being a quality product there
are loyal customers who prefer Shivam Cement for construction and buildings. The sales
has to grow more in remote area as well for more sells of cement.

2.1.6Finance

The organization has large number of budget which has made the organization
financially sound organization. As being a financially strong organization there is
support and trust from other financial institutions for Shivam’s capacity and character.
As being effective in supply with its product to its dealers the income has been receiving
in time.

2.1.7Procurement & Logistics

The organization tries to provide best service and facilities to its customers. In the
advance world everyone wants to get the orders on time. The company looks forward in
satisfying and meeting their expectations. The company delivers the logistics in time
without delay which is supported by computerized inventory system. With high updating
technologies there is always regular information and updates that are needed in the
organization. Tracking systems are also kept for knowing the updates about inventory.

2.2 External Environment Analysis

PESTEL Analysis

The PESTEL analysis is a useful tool for understanding market growth or decline, and as
such the position, potential and direction for a business. PESTEL is an acronym for
Political, Economic, Social and Technological, Environmental and Legal factors which
are used to assess the market for a business. Basically, it is a scan of the macro-external
environment, in which a business wants to operate.

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2.2.1Political Factors

The price of cement is primarily controlled by the coal rates, power tariffs, railway
tariffs, freight, royalty, and cess on limestone. The cement industry has not grown or
expanded as expected despite high potential for the cement industry in Nepal due to lack
of investment friendly environment and clear government policy. Though the quality of
Nepali cement is good enough to compete with international products, it is not even used
in domestic projects due to inadequate government policies. The industry is lagging
behind despite high potential due to local political and social problems.

In Shivam Cement Industry, there is no control on prices of their products. The prices of
the product of Shivam are less in comparison to the prices of the products of the cement
industry owned by the government itself. Due to strikes, changes in government policy,
political instability, there are negative impacts that cause price hike. However the
government working for “Happy Nepali, Prosperous Nepal” has now indicated the
stability in the political sector. Further the federal governance which will be
implemented has promised a supportive environment. Moreover the end of transport
syndicate has also signified the regularity in the transportation of the end product as well
as the raw materials which ensures the cheaper and easy access to the raw material and
product.

2.2.2Economic Factors

Future of cement industry is very strong. A lot of government infrastructure and housing
projects are under construction. Currently, the industry is on the boom, with a lot of
government infrastructure and housing projects under construction. But, it is a matter of
shame for Nepali entrepreneurs to use imported raw materials in the production of
cement ignoring domestically available limestone. The Nepali cement factories,
however, have gradually started to use domestic limestone instead of imported clinker.
World Bank has projected the economic growth rate of 4.6% which indicates that the
cement industries in Nepal will also be affected by this moderate growth in the Nepalese
economy. The decline in the remittance around Rs.400 Billion further indicates that the
purchasing power of the consumer is declining which may result in decrease in the
disposable income of consumers. The cement industry is moving towards cement self-
sufficiency with 80%. The main raw material of the cement factory which is clinker has
been imported worth Rs.8.97 Billion denotes that the major cost associated with the
cement production is the import of clinker.

Nepali cement has not been competitive even in the domestic market due to the inability
of addressing the problems arising out of economic and non-economic reasons; lack of
policies for promotion of investment required for the industry, ambiguity in policies,
inability of the government to properly develop the infrastructure, domestic product
being affected by the tax levied and discount offered in imported cement and raw
materials, and existing complexities regarding the supply system of produced cement.

2.2.3Social Cultural Factors

Usually, the cement industry in Nepal consists of both the organized sector and the
unorganized sector. The organized sector comprises of the well-known cement
manufacturing companies while the main players of the unorganized sector are the
regional and local cement-producing units in various states across the state. The cement

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industry has the most potential to attract foreign investment after agriculture, service and
hydropower sectors, and the government must promote this industry accordingly as up to
80 percent of value can be added domestically in cement production considering the
availability of raw materials, labor force and, domestic and foreign market. After the
earthquake and also the prospective opportunities of federalism there has been rapid
migration trend and the consumption of cement has been significantly growing.

There are chiefly two types of problems currently seen in the cement industry; roads and
electricity; and the obstruction at the local level. The state and the private sector must
join hands to solve both types of problems. The government and private sector should
search for the solution of the identified problems on the basis of co-existence considering
the potential and necessity of the cement industry.

2.2.4 Technological Factors

From mining to production the entire process depends on technology. The Government
of Nepal plans to study and possibly acquire new technologies from the cement industry
of Japan. The government is discussing technology transfer in the field of energy
conservation and environment protection to help improve the efficiency of the Nepalese
cement industry. Cement industry has made tremendous strides in technological up-
gradation and assimilation of latest technology. Emphasis is on creating highly energy
efficient and environment friendly technology to produce cement.

Shivam has brought few highly equipped machines like Vertical Roller Mill which
capture the fine particles while producing cement and it doesn’t hamper the people.

2.2.5 Ecological Factors

Environment trends are shaping the way Nepalese live, work, produce and consume. The
cement factories are guided to limit the discharge of pollutants to carry out approved
control programs. There are 7000 sq. km reserve of limestone.

2.2.6Legal Environment

For industries and firms that depend heavily on government contracts or subsidies,
political forecasts can be the most important part of an external audit. The cement
factories should be approved by Nepal Standards Act. Further the Department of
Geology and Mines should provide the permission for the extraction of limestone.

2.3 Key Success Metrix

As per the Shivam Cement Employees the unique selling propositions are described in
terms of:

Quality: The motto of Shivam cement is (no compromise in quality) which has been
highlighted by the consistency in the weight and quality.

Brand Value: Shivam is an established brand among the individual as well as

institutional consumers.

Delivery/Supply Chain: Shivam cement has more than 348 dealers and approximately
1000 retail shops throughout the country.
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Customer Retention: The individual and institutional customers are the loyal customers
who repeat the consumption of the product and Shivam has been able to retain the
employees.

Packaging: The Shivam cement has dust free packaging which is very attractive for
consumers and is most preferred in terms of health of the workers as well.

Price: The price of the shivam cement is Rs.770 which is par to the top players in the
industry.

Demand from Real Estate: The major customer of cements industries are institutional
customers therefore the growth in the demand from real estate has been one of the key
success metrics for Shivam Cement.

2.4 Strategic Group

A strategic group is a concept used in strategic management that groups companies
within an industry that have similar business models or similar combinations of
strategies. Michael Porter developed the concept and applied it within his overall system
of strategic analysis. He explained strategic groups in terms of what he called "mobility
barriers".

Some of the major significance of strategic group analysis is:

● Helps identify the most direct competitors and basis of their competition.

● Raises the question of how likely or possible it is for another organization to move
from one strategic group to another.

● Strategic Group mapping might also be used to identify opportunities.

● Can also help identify strategic problems.

The strategic group of Cement Industry of Nepal is “Nepal Cement Manufacturers

Association” an umbrella organization of cement manufacturers of Nepal. Its major
objectives are to promote the growth of whole cement industry and protect customer
interest and even adaptability.

Strategic Group Mapping:

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In terms of perceived quality and supply chain the major player are Shivam Cement and
Jagadamba Cement. The comparison between the major player and minor players shows
that in the perceived quality Sagarmatha and Hetauda Cement the supply chain is
comparatively low. Other players like United cement, network has been confined to
certain market despite of moderately preferred quality. The Cements like Vishal and CG
are not relatively preferred in terms of quality. In terms of Customer retention and
demand from real estate the major players are Shivam and Jagadamba Cements which

14
have the high level of repeated customers and high demand from real estate, which is
followed by Sagarmatha and Hetauda Cements however the other players like United
Cement are relatively low in the performance.

2.5 External Factor Evaluation Matrix

EFE matrix can be defined as the strategic tool to evaluate external environment of the
firm include economic, social, technological, government, political, legal and
competitive information. The EFE matrix is similar to IFE matrix the only difference is
that IFE matrix evaluates the internal factors of the company and EFE matrix evaluate
the external opportunities and threats that are affecting or might affect a company.

The EFE matrix of Shivam Cement Industry consists of following attributes:

Key External Factors Weight Rating Score

Opportunities
Growing market share 0.15 4 0.48
Post earthquake reconstruction 0.09 4 0.36
Foreign direct investment 0.08 3 0.24
Industry self sufficiency 0.06 3 0.18
Increased urbanization 0.05 3 0.15
Production of own clinker 0.15 4 0.48

Key External Factors Weight Rating Score

Threats
Intense competition 0.20 3 0.06
Labor Union 0.08 4 0.28
Disruption of clinker supply 0.10 3 0.21
Increase in interest rates 0.09 3 0.21
Total 1 3.62

Total of external evaluation metrics is 3.62 which signifies a strong position. Value of
external factor evaluation is greater than that of internal factor evaluation.

2.6 Internal Assessment

Internal strength and weaknesses, coupled with external opportunities and threats and a
clear statement of mission, provide the basis for establishing objectives and strategies.

15
Objectives and strategies are established with the intention of capitalizing upon internal
strengths and weaknesses. A key strength that is difficult to imitate or match by the
competition is distinctive competencies and capabilities. The internal audit process
requires the coming together of managers and employees throughout the firm to discuss
and understand the strengths and weaknesses. It involves the gathering, assimilating and
analyzing information about a firm’s operations to determine its strength and
weaknesses.

This is an excellent means to enhance communication within the organization leading to

efficiencies in operation. A failure to recognize and understand relationships between
functional areas can be detrimental to the firm. Number and type of relationships that
need to be managed increases with a firm’s size, its diversity, its geographic dispersion
and the number of products offered.

IFE (Internal factor evaluation) matrix is one of the best strategic tools to perform an
internal audit of any firm. IFE is using for internal analysis of different functional areas
of business such as marketing, IT, operations, accounts, Human Resources and others
depend upon the nature of the business and its size.

Key Internal Factors Weight Rating Score

STRENGTHS
340 Dealers 0.15 4 0.8
Brand name 0.12 4 0.6
Self owned limestone 0.04 3 0.15
More than 10% market share 0.10 4 0.4
Skilled workforce 0.05 4 0.32
4 manufacturing plants 0.04 4 0.28
Own transportation system 0.03 3 0.24

Key Internal Factors Weight Rating Score

Weaknesses
Transportation Costs 0.12 3 0.36
Clinker Imports 0.15 3 0.45
Cost of fuel & electricity 0.11 4 0.44
Partial capacity utilization 0.04 3 0.12
Employee turnover 0.03 3 0.09

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 Labor union 0.02 3 0.06
Total 1 4.31

The average weighted score for IFE matrix is 2.72 and EFE score of 3.72 score signifies
a strong position. Plotting the values in the figure, strategic position indicates Shivam in
grow and build.

2.7 Industry Attractiveness

Porters 5 Forces Model

Industry attractiveness is magnitude and ease of making profit in comparison with the
risk involved that an industrial sector offers. It is based on the number of competitors,
their relative strengths, and rate of growth in demand for its goods or service. Overtime
different models have been developed to analyze the industry attractiveness among
which Porter’s Five Force Model is the widely accepted model. It is used to examine and
analyze the competitive structure of an industry by looking at 5forces of competition that
influence and shape profit potential. Understanding the interaction of these forces with
the existing competing organizations helps to explain the differences in profitability
amongst industries.

Industry Analysis of Shivam Cement Industry as per porters five force model is as
follows;

2.7.1 Bargaining power of customers- Low

There is not much of product differentiation for cement as cement has to be

manufactured with standard operating process of input, processing and output. Individual
customers do not have bargaining power at all. Most of the cement is selling at same
price range. At the expense of industry profits consumers are not found to influence over
price and quantity. Neither buyers have facility of backward integration, i.e self-
manufacturing. Volume that individual costumers purchase is very insignificant to exert

17
buyer power. However, institutional customers who purchase on huge quantity may have
some favor over price. Individual buyers switching cost is insignificant for the
companies. But they do want to retain the institutional buyers through relationship
management. Because of the nature of the product, that cannot be replace with closed
substitutes pull-products. It is often said that cement do not have layers of margin. There
is difference between price and incentives between competitive brands. There is no
alternative for cement but customers have now wide range of choice of brands. And
buyers do not get a huge profit. Even influences of decision makers cannot restore power
of buyer in Nepal.

2.7.2 Bargaining power of suppliers- High

Cost of input and processing such as wage, coal, fuel, electricity, clinker, automated
process is higher and thus it reduces possibility of high margin of profit. Suppliers also
don’t have a commanding bargaining power. Supplier industry that is limestone,
transportation and clinker is abundant. Cost of handling and transportation is high in
Nepal but can be switched over one another. Overall increase in cost means customer
will substitute the product for another. Those who produce their own clinker in Nepal are
around 14. In fact most of the clinker is imported from India. The manufacturers have no
option to switch between clinker suppliers. Size of clinker suppliers is high and Nepalese
manufacturers can always have alternatives Clinker supplier is not at all important to end
consumers. But there is no substitute inputs for the use of clinker. In import export of
clinker, volume matters to the Indian exporters and this may have some impact and
preference over price, quantity and delivery. many of the Indian clinker might have their
own cement industry but it does not affect Nepalese market because India is already a
larger market than Nepal. Nepalese manufactures have widespread distributors who are
there to make product accessible all year round.

2.7.3 Threats of new entrance- Moderate

Number of cement manufacturers is growing in Nepal. Still 20% of demand is fulfilled

through Indian imports. Existing companies find it difficult to cope with recent entrance
of foreign joint venture companies in terms of product line, networking, branding,
quality and distribution channel. Besides that commencement of new industries will
affect key players significantly low. But due to low economies of scale, it is unlikely that
there will be new entrants from now. New entrants also face the fact that there is almost
no chance of product differentiation. However, penetration of new product in the market
is more likely to reduce sales of struggling or companies with small market share. New
companies are supposed to lower price to penetrate into market. This is freedom to entry
and exit and no technological protection to firms. However cost of entry is high. New
entrants will hard time to manage economies of scale in the beginning. There is dearth of
literature in brand loyalty of buyers, yet buyers have no loss in switching brands. Making
of distribution channel is possible for new brands but will take time.

2.7.4 Threat of new substitute products- Low

No substitute product of cement has been discovered in the world. Cement is an integral
part of concrete and construction. With the rise in awareness in earthquake safety
infrastructures, consumers will be rather conscious on quality of cement. There is no
option for cost of changing. However, buyers have no pain in choosing between brands.

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2.7.5 Competitive Rivalry- High

There are evenly balanced competitors. Branding initiatives, product portfolio and
distribution have given key players an edge. Industry face various fixed costs at large.
Growth and market share is likely to become stagnant in the industry. Often players in
the industry are found to increase capacity. The players have diverse experience and
corporate repute and exert a sense of pride and status quo in the industry. It might as well
become scenario that, players with high stakes forgo profitability for customers
cultivation and business expansion. And there is painstaking process to exit. This is
because of huge capital investment, banking transactions, workforce, specialized
machines and fixed assets.

Manufacturers are in cut-throat competition in dominating market share among them.

Different strategies are used like dust free packaging, bulk discount, gift hampers, tours,
incentives, brand ambassadors for advertisements, corporate social responsibility, dealer
incentives in order to brand their product. Number of competitors are high. Quality is
relatively same for Nepali brands. Differences is created from brand positioning,
incentives, promotions and secondary brand association and relationship management.
The companies will bear cost from switching customers and eroded customer loyalty.

2.8 Strategic Option

Strategic options are creative alternative action-oriented responses to the external
situation that an organization faces. It takes advantage of facts and actors, trends,
opportunities and threat of the outside world. It can be identified after an institutional
assessment, keeping in mind the aspirations of an organization. The tool ‘Strategic
options’ helps to identify and make a preliminary screening of alternative strategic
options or perspectives.

The strategic options adopted by Shivam cement are:

2.8.1 Managing by objective (MBO)

Every year there is growth of 5%-10% on an average which indicates that Shivam
cement’s performance is remarkable. For this purpose, every fiscal year a target is set in
terms of sales and payment. Shivam cement is a partnership firm where the decisions are
made based on the meeting held between Managing Director of management team and
Head of Marketing Department. They decide about the target of sales and payment for
next year.

Such as in a month target is to sale 4 lakh bags and its total cost is approximate Rs. 24
crore then target payment to be received is Rs. 25 crore. In the meantime, if the target is
not achieved then meeting is conducted and Head of marketing department is responsible
to clarify the reasons and again target is set to sell more than what is expected like selling
5 lakhs bags in a month.

2.8.2 Market penetration

Shivam cements mainly focuses on maintaining consistency in its quality and supply
from Eastern Region to Western Region. For this, they have established their plants at
central Hetauda. As a result, Shivam has relatively low penetration on far western.

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Similarly, more than 348 official dealers are appointed to create a huge channel that
maintains consistency in its supply. There are more than 1,000 retail shops to facilitate
supply. Along with this, it supports in marketing the brand among customers. Shivam
cement considers the 4 P’s (price, place, promotion and people) in its marketing strategy;
therefore, it has set the sales target for dealers and introduced schemes for them as a
reward. For an instance, if dealer falls under sales category of 100000 bags of cement
then they are rewarded with a package of abroad tour. With the help of this strategy
Shivam cements are able to increase their sales, meet customers demand, and motivate
its dealers to sale more which ultimately increases profit of the company.

2.8.3 Means for achieving strategy

The raw materials required for cement are clinker, gypsum, flyers. Shivam cement at has
its own limestone. Currently they import clinker but now their strategy is being framed
to produce own cement. Shivam has largest joint venture with Hongshi of China and a
separate entity is producing Hongshi-Shivam brand.

2.9 BOSTON CONSULTING GROUP (BCG) Matrix Analysis

Shivam
Cemen
t

Figure: BCG Matrix of Shivam Cement

It appears as the industry to be growing relatively moderately but the company is

growing at higher rate than that of industry. Therefore, the company seems to be in
starts. It indicates that Shivam needs to maintain its market leader position and build
more sales platform. To be in market leader position, the company needs to repel
challenges of their nearest competitors. However, cost of maintaining market leader
position may impact on their profit and revenue.

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2.10 Generic Strategies

Shiva

As per framing of generic strategies, a large scale company has a broader segment of
market. Meanwhile, possibility of product differentiation is low. Cement has to comply
with standards maintained by Nepal Bureau of Standards. There is not much
differentiation in product itself by altering product mix. Therefore, Shivam can become a
relatively lower cost compared to it’s top player counterparts.

2.11 SWOT Analysis

STRENGTH WEAKNESS

• 340 dealers • Transportation cost

• Established brand • Clinker Imports

• Skilled workforce • Fuel costs

• 4 manufacturing units • Low rural market penetration

• Own transportation system

OPPORTUNITY THREATS

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 • Foreign direct investment • Increased competition

• Post-quake reconstruction • Labor Union

• Growing market share • Growing interest rate

• Increasing urbanization

Considering internal factors Shivam has 340 dealers and more than 1,000 retail shops to
make the product available all year round. The brand is now the most established in
Nepal. The company is employing more than 2,000 workforce from management to
operations level. The company has more than 4 manufacturing units. As a part of
backward integration, the company has it’s own transportation system. However,
transportation, fuel and electricity is the major cost associated with the company. On the
other hand, clinker imports is the major for producing cement. Also, rural market
penetration of Shivam is relatively low. As the industry is growing, it has possibility for
foreign direct investment. Because of post-earthquake reconstruction, demand of cement
has been growing ever since. Market share of Shivam is growing so rapidly and is
expected to rise after production of Hongshi Shivam. Increase in urban and smart cities is
also expected to rise need of cement in days to come. Threat to the industry is exerted by
intense competitive rivalry, the company has immense thereat to maintain market
leadership position. Soaring interest rate from the commercial banks is hitting the
corporate sector hard.

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 2.12 Grand Strategy Cluster

Looking at grand strategy cluster, Shivam has rapid market growth and strong
competitive position. The implication from this matrix is that Shivam should focus on
market penetration to build sales. Similarly, product development such as clinker
production and integration with sister concern Hongshi-Shivam will further enhance it’s
competitive position.

2.13 Quantitative Strategic Planning Matrix

Factors Weight Produce Own Market Development

Clinker
AS TAS AS TAS
Strengths
340 Dealers 0.15 4 0.8 4 0.45
Brand name 0.12 4 0.6 4 0.3
Self-owned limestone 0.04 3 0.15 3 0.3
More than 10% market share 0.05 4 0.4 4 0.4
Skilled workforce - - - -
4 manufacturing plants - - - - -

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 Factors Weight Produce own clinker Market Development
AS TAS AS TAS
Opportunities
Growing market share 0.15 4 0.48 3 0.45
Post quake reconstruction 0.09 4 0.36 3 0.27
Foreign direct investment 0.08 3 0.24 4 0.32
Industry self sufficiency 0.06 3 0.18 3 0.18
Increased urbanization 0.05 3 0.15 3 0.15
Production of own clinker 0.15 4 0.48 3 0.45

Factors Weight Produce own clinker Market Development

AS TAS AS TAS
Threats
Intense Competition 0.70 - - 4 0.23
Labor Union 0.08 0.08 4 0.28 - -
Increase in interest rates 0.10 3 0.21 3 0.3
Disruption in clinker supply 0.09 - -
Total Attractive Scores (SWOT) 4.79 4.09

Factors Weight Produce own clinker Market Development

AS TAS AS TAS
Weakness
Transportation costs 0.012 1 0.12 3 0.15
Clinker Imports - - - - -
Cost of fuel & electricity 0.11 2 0.22 4 0.2
Partial Capacity 0.04 2 0.08 3 0.12
Employee Turnover - - - - -
Labor Union 0.02 2 0.04 - -
Total 1

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There are two alternatives for Shivam, production of own clinker and development of
further market. Considering all factors, production of clinker rates 4.79 and market
development option rates 4.09 on QSPM, therefore, production of own clinker is the best
option. This alternative, is also aligned with the fact there are only 13 companies are
producing clinker and clinker imports is one of the major cost associated with producing
cement.

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 CHAPTER III
CONCLUSION AND RECOMMENDATIONS
3.1 Long Term and Short-Term Objective
The long-term strategy of Shivam Cement are:

 Produce own clinker

 Diversify on PPC segment
 Expand warehouse and dealership on Far west

The short-term strategy of Shivam Cement are:

 Utilize full capacity

 Enhance loyal customers

3.2 Conclusion
Shivam Cement has been able to justify itself as one of the distinct brand in the Nepalese
cement market as per its market share. The company has a very strong strategy that is
formed around the major objective of producing and distributing its products at
competitive prices to achieve the needs and satisfaction of its valued customers in Nepal.

Analyzing the current market performance and its situation, over the year Shivam
Cement has established itself as one of the leader in the market and is perceived as one of
the biggest threat to its competitors. It is a result of on point strategies that the company
has been able to develop and execute with perfection. The company has been very smart
and quick in developing and changing strategies throughout these years, which has been
done out of necessity to adapt with the current market trend, while considering the
challenges and threats that the company could face and the capitalizing on the
opportunities.

So, Shivam Cement is a prime example of a competitive company and has high aims and
goals for its future. With the record of successful results and strategies, it could be safe to
say that Shivam Cement will be a household name in our developing country.

3.3 Recommendation
Some of recommendations to improve the management of Shivam Cement:

⮚ Shivam should decrease possible costs of productions

⮚ Shivam should focus on gaining institutional costumers

⮚ Shivam has resources to produce 53 grade cement

⮚ Shivam should produce its own clinker

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 ⮚ Employee health and safety should be on priority

⮚ Shivam can export cement on Indian-borderline market

3.4 Strategic Control and Implementation

Strategic control involves tracking a strategy as it's being implemented. It's also
concerned with detecting problems or changes in the strategy and making necessary
adjustments.

The different types of strategic controls are discussed in brief here.

a) Premise control A company may base its strategy on important assumptions

related to environmental factors (e.g., government policies), industrial factors
(e.g. nature of competition), and organizational factors (e.g. breakthrough in
R&D). Premise control continually verifies whether such assumptions are right or
wrong. If they are not valid corrective action is initiated and strategy is made
right. The responsibility for premise control can be assigned to the corporate
planning staff who can identify for assumptions and keep a regular check on their
validity.

b) Implementation control Implementation control can be done using milestone

review. This is similar to the identification-albeit on a smaller scale-of events and
activities in PERT/CPM networks. After the identification of milestones, a
comprehensive review of implementation is made to reassess its continued
relevance to the achievement of objectives.

c) Strategic Surveillance This is aimed at a more generalized and overarching

control. Strategic surveillance can be done through a broad based, general
monitoring on the basis of selected information sources to uncover events that are
likely to affect the strategy of an organization.

d) Special Alert Control This is based on a trigger mechanism for rapid response
and immediate reassessment of strategy in the light of sudden and unexpected
events. Special alert control can be exercised through the formulation of
contingency strategies and assigning the responsibility of handling unforeseen
events to crisis management teams. Examples of such events can be the sudden
fall of a government at the central or state level, instant change in a competitor’s
posture, an unfortunate industrial disaster, or a natural catastrophe.

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