ACC LTD.

STRATEGY ANALYSIS

Industry Overview

Basic raw material for the construction industry Witnessed a 9% growth for FY2010-11 India ranks 2nd in the world in cement production Cement production concentrated in certain region
Large Cement Plants Mini and White Cement Plants

Plants - 139 Installed Capacity - 234.30 mt Cement Production - 168.20 mt

Plants - 365 Installed Capacity - 11.1 mt Cement Production - 6 mt

Cement Manufacturers Association (CMA) Website

Company Background

Established in 1936 by combining 10 companies

One of the leading cement companies in India Financial Overview

ACC Annual Report FY2010-11

Competitor Overview
Ambuja Cements Ltd
Birla Cement India Cements Shree Cement
Founded in 1981. Strong presence in Western and Northern markets Capacity - 25 mtpa; Production - 20.1 mtpa Founded in 1919. Caters to Northern, Eastern and Central India markets Capacity - 6.1 mpta; Production - 5.9 mtpa Founded in 1946. Largest Cement manufacturer in South India Capacity - 14.1 mtpa; Production - 10 mtpa

Founded in 1979. Caters to the Northern India markets Capacity - 13.5 mtpa; Production - 9.4 mtpa

Madras Cements

Founded in 1957. Strong presence in Kerala and Tamil Nadu Capacity - 10.5 mtpa; Production - 7.3 mtpa

PESTLE Analysis

Political Factors

Supply of Power Shortage of Coal Lack of infrastructure Growth in GDP fuels construction activity Governments fiscal policy focusing on infrastructure Work conditions resulting in high injury rate

Economic Factors

Social Factors

PESTLE Analysis

Technological Factors

Improved Blending Ratios Improved efficiencies Governed by a number of regulations Regulations set by the Ministry of Environment Supply of hazardous waste, fly ash regulated by government

Legal Factors

Environmental Factors

Porters Five Forces Analysis

Threat of Entry 5 4.5 4 3.5 3 2.5 2 Bargaining Power of Buyers 1.5 1 0.5 0 Intensity of Rivalry

Bargaining Power of Suppliers

Threat of Substitutes

Porters Five Forces Analysis

Threat of New Entry

Capital Requirements Economies of Scale Access to distribution channels Cost disadvantages independent of scale Government Policy Oligopolistic market Dominated by the top 5 companies in the industry (47%)

Intensity of Rivalry

Porters Five Forces Analysis

Threat of Substitutes

No substitutes available Government serves as the main supplier of limestone and coal Long-term leases negotiated for limestone reserves Oligopolistic nature reduces the bargaining power of buyers

Bargaining of Suppliers

Bargaining of Buyers

Analysis of Costs

Enjoys cost advantage in freight handling and employee costs

22.36% 5.58% 18.38% 23.79% Power & Fuel 15.48% 24.47% 6.93% 6.43% 4.87% 11.16% Raw Materials 13.30% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 16.87% Shree Cement ACC UltraTech

Freight & Handling

Employees Cost

Value Chain Analysis

Raw Materials

Constitutes 15% of net sales Plants located nearer to the limestone quarries Quarries leased from the government on a long-term basis Launched newer eco-friendly varieties of cement Operates 12 captive power plants in 7 of the cement plants 71% of the power requirement generated internally

Power

Value Chain Analysis

Distribution Network

Plants located close to raw material sources and markets Has plants located across the length and breadth of India Helps in keeping freight costs low Evenly split between roadways and railways

Freight Mix

Core Competencies

Innovation

Introduced Bulk Cement as against bagged cement Established the first commercial ready mix concrete (RMX) Responsible for redefining the pace and quality of construction Research and Development Employs modern techniques to minimize disturbances to ecology and environment Has more than 6000 suppliers across India Intrinsic capacity to supply material of desired quality on time

Mining Operations

Vendor Management

Competitive Advantage

VRIN Analysis
Resource Valuable? Rare? Costly to imitate? Yes Exploited by the organization Yes Competitive implication Sustained competitive advantage Sustained competitive advantage Temporary competitive advantage Competitive parity

Brand

Yes

Yes

Distribution Yes network Product innovations Raw materials Yes

Yes

Yes

Yes

Yes

No

Yes

Yes

No

No

Yes

Recommendations

Distribution Network

Employ other means of transportation to hedge the risks Evaluate sourcing strategies for acquiring limestone Benchmark the sourcing performance against that of competitors Evaluate alternate sources of fuel Explore arrangements with governments to source coal blocks

Benchmarking of sourcing strategies

Sources of fuel

Thank You