1. CHAPTER 1
RESEARCH METHODOLOGY
1

2. INTRODUCTION AND HISTORY
Introduction:-
The cement industry is experiencing a boom on account of the overall growth
of the Indian economy. The demand for cement, being a derived demand, depends
primarily on the industrial activity, real estate business, construction activity, and
investment in the infrastructure sector. India is experiencing growth on all these fronts
and hence the cement market is flourishing like never before. Indian cement industry
is globally competitive because the industry has witnessed healthy trends such as cost
control and continuous technology up gradation. Global rating agency, Fitch Ratings,
has commented that cement demand in India is expected to grow at 10% annually in
the medium term buoyed by housing, infrastructure and corporate capital
expenditures.
History:-
The attempt to produce cement in India dates back to 1889 when a Calcutta
firm attempted to produce cement from Argillaceous (kankar). But the first organized
effort on mass scale to manufacture Portland cement commenced in Madras
(Washermanpet), in 1904, by South India Industries Limited (Cement Manufacturers
Association 1964; Gadhok 2000). The factory could not succeed hence it failed.
In 1914 the first commissioned cement-manufacturing unit in India was set up by
India Cement Company Limited at Porbandar, Gujarat, with an installed capacity of
10,000 tonnes and production of 1000 tonnes. Subsequently two plants; one at Katni
(M.P.) and another at Lakheri (Rajasthan) were set up. The First World War gave
positive stimulus to the infant industry.
The following decades saw increase in number of plants, installed capacity and
production. This period can thus be called the Nascent Stage of Indian cement
industry. The problem of supply outstripping demand was significant in early period
of the industry. Problem of disposal of cement was aggravated by the prejudice with
which indigenous cement was regarded. This was followed by a price war between
the producers where they resorted to cutting down of prices and selling at below
production cost. This situation forced many companies into liquidation. It was then
when the government of India intervened into the market and referred the cement
industry to the Tariff Board. The board recommended protection by government and
cooperation among existing cement units.
All these events resulted in formation of Indian Cement Manufacturers‘
Association in 1925 whose main function was to regulate prices in the industry. In
1927, Concrete Association of India was formed whose two main objectives were to
educate public about the use of cement and to play an active role in popularizing
Indian cement. The next step in the direction of rescuing cement industry was the
formation of Cement Marketing Company of India Limited in 1930 to promote and
2

3. control the sale and distribution of cement at regulated prices. After all these
initiatives, the sales increased along with more plants.
In 1936, eleven companies, except Sone Valley Portland Cement Company
Limited, merged to form Associated Cement Company Limited (ACC). In 1937,
Dalmiya Jain Group set up five factories with installed capacity of 575000 tonnes and
ACC added four more plants. With all these expansions, price war again started off
which resulted into a significant decrease in prices. But in the post world war period,
setting up of Department of Planning and independence of the country provided fresh
impetus to the industry.
The price and distribution control system on cement, implemented in 1956, aimed
at ensuring fair prices to producers and consumers all over the country, thus reducing
regional imbalances, and at reaching self-sufficiency within a short time period.
Although due to slow growth in capacity expansion and rising cost in the industry, the
government had to increase the fixed price several times. However, these price
increases as well as financial incentives to enhance investment, showed little effect on
the industry. In spite of the fact that government exercised no control over the Indian
cement industry all through the Third Five Year Plan (1961-1967), growth was low
due to inadequate retention price and lack of adequate financial resources to the
existing companies.
3

4. Problem Statement:
A Macro analysis of Cement Industry in India.
Objectives:
I. To study the major players and their Market Share
II. To find the problems and prospect of Cement Industry
III. To know the political, economical, social, and technological factors
affecting Indian cement industry
IV. To know the likely future scenario of cement industry
Scope of the study:
The study has been done for the cement so more or less it helps in understanding the
dealer‘s opinion towards the cement market.
Factors affecting cement industry in india.
4

5. LITERATURE RIVEW
Article 1
India is the 2nd largest cement producer in world after china .Right from laying
concrete bricks of economy to waving fly over‘s cement industry has shown and
shows a great future. The overall outlook for the industry shows significant growth on
the back of robust demand from housing construction, Phase-II of NHDP (National
Highway Development Project) and other infrastructure development projects.
Domestic demand for cement has been increasing at a fast pace in India. Cement
consumption in India is forecasted to grow by over 22% by 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 production grew at
the rate of 9.1 per cent during 2006-07 over the previous fiscals total production of
147.8 mt(million tons). Due to rising demand of cement the sales volume of cement
companies are also increasing & companies reporting higher production, higher sales
and higher profits. The net profit growth rate of cement firms was 85%. Cement
industry has contributed around 8% to the economic development of India. Outsiders
(foreign players) eyeing India as a major market to invest in the
form of either merger or FDI (Foreign Direct Investment). Cement industry has a long
way to go as Indian economy is poised to grow because of being on verge of
development. Despite the growth of Indian cement industry India lags behind the per
capita production. Supply for cement is expected to remain tight which, in turn, will
push up prices of cement by more than 50%. The most important factor for better
prices is consolidation of the industry. It has just begun and we will see more
consolidation in the coming years. Other budget measures such as cut in import duty
from 12.5 per cent to nil etc. are all intended to cut costs and boost availability of
cement.
Sadly the adverse effects of global slowdown have not speared this
industry too. Demand is sluggish, the government is keeping an eagle eye on prizes,
domestic coal and pet coke, prizes have increased sharply and utilizations rates are
down. The numbers coming out are a reflection of grim times. ACC the country‘s
largest cement company that‘s controlled by Swiss giant HOLCIM, registered 2% fall
in august sales. The biggest fall since Feb. 2007. Production fell by 5%. To stand
against the problematic situation, government as well as cement industry has taken
some steps. Companies are focusing on cost of transportation. One of the strategy is to
decrease dependence on road & opt for sea logistics as that can cut transportation cost
by 30- 50 %. Some plants are adopting futuristic plan such as setting up captive power
plant, moving closer to the customers by creating clicker, crushing, and capacity in
key markets, to be more customer centric to generate better revenue. India should
push for stricter regulations of market place as to control the prices of big companies
and prevent them from forming cartels and exchanging information. To fight with the
high inflation, government wants to import more cement from Pakistan .However
cement prizes are not very much high as other items but still they are increasing. And
the reason of high prize is surging cost of raw material and transportation cost. Apart
5

6. from this government also discussed with cement industry not to have increase in
prizes and keep consumer interest in mind.
Conclusion:
The question arise in front of the government is whether the demand by the
government is possible to increase through expenditure on infrastructure or not
according to the current state of economy when so many crises are going on or how
the government allocation of US$ 3.23 billion for the National Highway development,
Project will keep the demand for cement alive? And to what extent the prizes of
cement should be increase so that consumer can‘t affect.
Source:
www.researchandmarkets.com/cementindustry/2010
Infrastructure article on cement industry.
Article 2
Key Parameters of Indian Cement Industry
There are 127 firms present in the cement sector across the country, distributed into
fivegeographic zones. The southern Zone has the maximum share in the All-India
production of cement, followed by the Northern Zone for the years chosen for
analysis (2004, 2005 and 2006). Firms are spread across various states in the
country.
Concentration Index: C3
The Indian cement industry has three major players having a combined market
share/size of 34.5 as on March 2006. Concentration Index, C5 is 43.31 as on March,
2006. The concentration index has remained more or less constant across the years
such a high concentration index is a factor that strongly encourages collusion, as
discussed in earlier sections. However, it is important to note that there are a
significantnumber of small players in each zone.
Production
the zone wise cement production figures. In Northern andCentral zones, production
was sufficient to cater to the entire demand. As such therewas no shortfall. Even in
the southern zone, the production was in excess to thedemand and there was a
surplus for all months in two years. In eastern and westernzones, the production lags
the demand slightly
Capacity Utilisation
Data over the past two years, as illustrated through Figure 5.2.5 reveals that the
cementproducing companies have utilized their capacity to the maximum to cater to
the surging demand.
6

7. Capacity Enhancement
Due to the strong demand as a result of increased real estate and construction
activity inthe country, all the major cement producing firms are ramping up their
productioncapacity. The table reveals the expansion plan of a few ofthe cement
producing firms. The increased production capacity would translate into
increased sales volume.
Expense to Sales Ratio
Expense (or cost to sales) ratio per annum of the cement
companies has decreased over the years. Though the total sales have picked up, the
cost of producing cement has not increased at the same pace. The sharp increase in
sales without a corresponding increase in cost does indicate possibility of cartel
behavior. A counter argument could be that the declining ratio is attributed to the
economies of scale because of increased capacity utilization.
Source:
www.researchandmarkets.com/parametercementindustry/2010
article of parameters of cement industry of india.
7

8. Research Design:
Research design selected for this project is Descriptive in nature
Data sources:
Primary sources:
 Structured Questionnaire
Secondary sources:
 Companies literature
 Industry publications
 Business Articles
 Business Magazines
 Library Research
 Internet Surfing
Population: Ahmedabad
Sampling unit: a cement dealer in Ahmedabad
Sample size: 70
Sampling method: Convenience and judgmental Sampling
The aim of taking sample size 70 is
o I have taken sampling of those individuals who are cement dealers.
o I have taken different brands of cement and dealers of each brand are
selcected.
o There was also problem of time, cost constraints as well as lack of positive
response.
8

9. o There are chances of biased responses due to some lack of information.
Statistical test procedures used for analysis:
Descriptive statistics were used for analysis and interpretation, one sample Z test for
means was used for hypothesis testing.
Expected contribution of the study and beneficiaries:
 We as a student of management would be the most benefited. As this study
will help us to gain in depth and live knowledge and insight in to the subject
matter.
 The organization which will show interest to help us carry out this project
would also be benefited with the same.
 The college would also benefit from the project report, as this would help the
college to build the reputation within the corporate world.
Limitations:
1. Lack of co-operation from the retailers for interviews.
2. It was found in some cases dealers showed inclination towards certain brands
which gave them more margins when compared to others.
3. The time constraint faced in the project might have affected the
comprehensiveness of its findings.
9

10. CHAPTER 2
INDUSTRY PROFILE
10

11. INDUSTRY PROFILE
Indian Cement Industry
An Overview
1. Indian cement industry dates back to 1914 - first unit was set-up at Porbandar, with
a capacity of 1000 tonnes.
2. Currently India is ranked second in the world with an installed capacity of 114.2
Million tonnes. Industry estimated at around Rs. 18,000 crores (US $ 4185 mn).
3. Current per capita consumption - 85 kgs, as against world standard of 256 kgs.
4. Cement grade limestone in the country reported to be 89 bt. A large proportion
however is unexploitable.
5. 55 - 60% of the cost of production are government controlled
6. Cement sales primarily through a distribution channel. Bulk sales account for < 1%
of the total cement produced.
7. Ready mix concrete a relatively nascent market in India
Installed Capacity
The Indian cement industry is the second largest producer of quality cement, which
meets global standards. The cement industry comprises 130 large cement plants with
an installed capacity of 160.24 million tonnes and more than 365 mini cement plants
with an estimated capacity of 11.10 million tonnes making a total installed capacity of
171.34 million tonnes.
Cement is one of the core industries which plays a vital role in the growth and
expansion of a nation. It is basically a mixture of compounds, consisting mainly of
silicates and aluminates of calcium, formed out of calcium oxide, silica, aluminium
oxide and iron oxide. The demand for cement, depends primarily on the pace of
activities in the business, financial, real estate and infrastructure sectors of the
economy. Cement is considered preferred building material and is used worldwide
11

12. for all construction works such as housing and industrial construction, as well as for
creation of infrastructures like ports, roads, power plants, etc. Indian cement
industry is globally competitive because the industry has witnessed healthy trends
such as cost control and continuous technology upgradation.
The Indian cement industry is extremely energy intensive and is the third largest
user of coal in the country. It is modern and uses latest technology, which is among
the best in the world. Also, the industry has tremendous potential for development
as limestone of excellent quality is found almost throughout the country.
Current Scenario
The Indian cement industry is the second largest producer of quality cement. Indian
Cement Industry is engaged in the production of several varieties of cement such as
Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland
Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid Hardening Portland
Cement, Sulphate Resisting Portland Cement, White Cement, etc. They are
produced strictly as per the Bureau of Indian Standards (BIS) specifications and
their quality is comparable with the best in the world.
The Indian cement industry is the second largest in the world.The industry occupies
an important place in the national economy because of its strong linkages to other
sectors such as construction, transportation, coal and power. The cement industry is
also one of the major contributors to the exchequer by way of indirect taxes.
Indian Cement industry is comprised of 148 large cement plants with around 46
member companies.The installed capacity of these large cement plants is estimated
to be 219.17 million tonne during 2009-10 (as on March 2009).There are 95 large
cement plants with capacity of of million tonnes and above and around 1,40,000
manpower is employed uder these plants (one Mn.T cement generates downstream
employment to 50,000 persons). Also,there are 365 mini and white cement plants
with an installed capacity of 11.10 million tonne (P).
12

13. Statistics
Table 1 - Cement Production & Despatches (P)
2010-11 2009-10
Description Jan-11 Dec-10 Jan-10
(Apr-Jan)
Cement
14.52 13.59 14.65 136.51 130.85
Production
Cement
14.47 13.60 14.59 135.56 130.09
Despatches
Source: Cement Manufacturers' Association
Cement production during April to January 2010-11 was 136.51 million tonnes as
compared to 130.85 million tonnes during the same period for the year 2009-10.
Despatches were estimated at 135.56 million tonnes during April to January 2010-
11 whereas during the same period for the year 2009-10, it stood at 130.09 million
tonnes.
Key Drivers of Cement Industry
Buoyant real estate market
Increase in infrastructure spending
Various governmental programmes like National Rural Employment
Guarantee
Low-cost housing in urban and rural areas under schemes like Jawaharlal
Nehru National Urban Renewal Mission (JNNURM) and Indira Aawas
Yojana
13

14. Technological Advancements
Modernization and technology up-gradation is a continous process for any growing
industry and is equally true for the cement industry. At present, the quality of
cement and building materials produced in India meets international standards and
benchmarks and can compete in international markets. The productivity parameters
are now nearing the theoretical bests and alternate means. Substantial technological
improvements have been brought about and today, the industry can legitimately be
proud of its state-of-the-art technology and processes incorporated in most of its
cement plants. This technology up gradation is resulting in increased capacity,
reduction in cost of production of cement.
14

15. INTRODUCTION
What is cement?
Cement is a mixture of limestone, Clay, Silica and Gypsum. It is a fine powder which
when mixed with water sets to a hard mass as a result of hydration of the constituent
compounds. It is the most commonly used construction material. Cement is
manufactured by burning a mixture of limestone and Clay at high temperatures in a
kiln, and then finely grinding the resulting clinker along with Gypsum. The end
product thus obtained is called Ordinary Portland Cement (OPC).
Different Types of Cement
There are different varieties of cement based on different compositions according to
specific end uses, namely Ordinary Portland Cement, Portland Pozolona Cement,
Portland Blast Furnace Slag Cement, White Cement and Specialized Cement. The
basic difference lies in the percentage of clinker used.
1. Ordinary Portland cement (OPC):
OPC, popularly known as grey cement, has 95% clinker and 5% of Gypsum and
other materials. It accounts for 70% of the total consumption. White cement is a
variation of OPC and is used for decorative purposes like rendering of walls, flooring
etc. It contains a very low proportion of iron oxide. Ordinary Portland cement is the
most commonly used cement for a wide range of applications. These applications
cover dry-lean mixes, general-purpose ready-mixes, and even high strength pre-cast
and pre-stressed concrete.
2. Portland Pozolona Cement (PPC):
Portland pozzolana cement is Ordinary Portland Cement blended with pozzolanic
materials (power-station fly ash, burnt clays, ash from burnt plant material or
Siliceous earths), either together or separately. Portland clinker is ground with
15

16. Gypsum and Pozzolanic materials which, though they do not have cementing
properties in themselves, combine chemically with Portland
cement in the presence of water to form extra strong cementing material which resists
wet cracking, thermal cracking and has a high degree of cohesion and workability in
concrete. PPC has 80% clinker, 15% pozolona and 5% gypsum and accounts for 18%
of the total cement consumption. It is cheaply manufactured because it uses fly
ash/burnt clay/coal waste as the main ingredient. It has a lower heat of hydration,
which helps in preventing cracks where large volumes are being cast.
3. 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. It has a heat of hydration even lower than PPC
and is generally used in construction of dams and similar massive constructions.
Portland blast-furnace slag cement contains up to 70 per cent of finely ground,
granulated blast-furnace slag, a nonmetallic product consisting essentially of Silicates
and Aluminum-silicates of Calcium. Slag brings with it the advantage of the energy
invested in the slag making. Grinding slag for cement replacement takes only 25 per
cent of the energy needed to manufacture Portland cement. Using slag cement to
replace a portion of Portland cement in a concrete mixture is a useful method to make
concrete better and more consistent. Portland blast-furnace slag cement has a lighter
colour, better concrete workability, easier finish ability, higher compressive and
flexural strength, lower permeability, improved resistance to aggressive chemicals
and more consistent plastic and hardened consistency.
4. White Cement:
White Portland cement has essentially the same properties as gray cement, except for
color, which is a very important quality control issue in the industry. It is
manufactured using fuel oil (instead of coal) and with iron oxide content below 0.4%
to ensure whiteness. Special cooling technique is used. It is used to enhance aesthetic
16

17. value, in tiles and for flooring. White cement is much more expensive than grey
cement.
5. Specialized Cement:
Oil Well Cement: is made from clinker with special additives to prevent any
porosity.
Rapid Hardening Portland cement: It is similar to OPC, except that it is ground
much finer, so that on casting, the compressible strength increases rapidly.
Water Proof Cement: OPC, with small portion of calcium stearate or non-
saponifibale oil to impart waterproofing properties.
Capacity and Production
The cement industry comprises of 125 large cement plants with an installed capacity
of 148.28 million tonnes and more than 300 mini cement plants with an estimated
capacity of 11.10 million tonnes per annum. The Cement Corporation of India, which
is a Central Public Sector Undertaking, has 10 units. There are 10 large cement plants
owned by various State Governments. The total installed capacity in the country as a
whole is 159.38 million tonnes. Actual cement production in 2008-09 was 116.35
million tonnes as against a production of 106.90 million tonnes in 2007-08,
registering a growth rate of 8.84%.
Keeping in view the trend of growth of the industry in previous years, a production
target of 126 million tonnes has been fixed for the year 2009-10. During the period
April-June 2009, a production (provisional) was 31.30 million tonnes. The industry
has achieved a growth rate of 4.86 per cent during this period. The graph above shows
the consumption of cement in different areas of housing, infrastructure and industries.
17

18. Exports
Apart from meeting the entire domestic demand, the industry is also exporting cement
and clinker. The export of cement during 2007-08 and 2008-09 was 5.14 million
tonnes and 6.92 million tonnes respectively. Export during April-May, 2009 was 1.35
million tonnes. Major exporters were Gujarat Ambuja Cements Ltd. and L&T Ltd
Recommendations on Cement Industry
For the development of the cement industry ‗Working Group on Cement Industry‘
was constituted by the Planning Commission for the formulation of X Five Year Plan.
The Working Group has projected a growth rate of 10% for the cement industry
during the plan period and has projected creation of additional capacity of 40-62
million tonnes mainly through expansion of existing plants. The Working Group has
identified following thrust areas for improving demand for cement;
(i) Further push to housing development programs;
(ii) Promotion of concrete Highways and roads; and
(iii) Use of ready-mix concrete in large infrastructure projects.
Further, in order to improve global competitiveness of the Indian Cement Industry,
the Department of Industrial Policy & Promotion commissioned a study on the global
competitiveness of the Indian Industry through an organization of international repute,
viz. KPMG Consultancy Pvt. Ltd. The report submitted by the organization has made
several recommendations for making the Indian Cement Industry more competitive in
the international market. The recommendations are under consideration.
Technology Up-gradation
Cement industry in India is currently going through a technological change as a lot of
upgradation and assimilation is taking place. Currently, almost 93% of the total
capacity is based entirely on the modern dry process, which is considered as more
environment-friendly. Only the rest 7% uses old wet and semi-dry process
technology.
18

19. Cement Dispatches
Cement industry in India has successfully maintained almost total capacity utilization
levels, which resulted in maintaining a 10% growth rate. In 2006-07, the total dispatch
was 155 MT, which rose up to 170 MT in 2007-08. The month of October 2009 saw a
cement dispatch of 12.22 MT, which was almost 9% higher than the total cement
dispatch of 11.21 MT in the same month in the previous year.
Major Players in Indian Cement Industry
There are a number of players prevailing in the cement industry in India. However,
there are around 20 big names that account for more than 70% of the total cement
production in India. The total installed capacity is distributed over around 129 plants,
owned by 54 major companies across the nation.
Table 2 Following are some of the major names in the Indian cement industry:
Company Production Installed Capacity
ACC 17,902 18,640
Gujarat Ambuja 15,094 14,860
Ultratech 13,707 17,000
Grasim 14,649 14,115
India Cements 8,434 8,810
JK Group 6,174 6,680
Jaypee Group 6,316 6,531
Birla Corp. 5,150 5,113
Source: Cement Manufacturers' Association
19

20. Mergers and Acquisitions in Cement Industry in India
UltraTech Cement is going to absorb its sister concern Samruddhi Cement to
become biggest cement company in India.
World's leading foreign funds like HSBC, ABN Amro, Fidelity, Emerging
Market Fund and Asset Management Fund have together bought 7.5% of India
Cements (ICL) at a cost of US$ 124.91 million.
Cimpor, a Cement company of Portugal, has bought 53.63% stake that Grasim
Industries had in Shree Digvijay Cement.
French cement company Vicat SA bought 6.67% share of Sagar Cement at a
cost of US$ 14.35 million.
Holcim now holds 56% stake of Ambuja Cement. Previously it held 22% of
stake. The company utilized various open market transactions to increase its
stakes. It invested US$ 1.8 billion for that.
Recent Investments in the Indian Cement Industry
In a recent announcement, the second largest cement company in South India,
Dalmia Cement declared that it's going to invest more than US$ 652.6 million
in the next 2-3 years to add 10 MT capacity.
Anil Ambani-led Reliance Infrastructure is going to build up cement plants
with a total capacity of yearly 20 MT in the next 5 years. For this, the
company will invest US$ 2.1 billion.
India Cements is going to set up 2 thermal power plants in Andhra Pradesh
and Tamil Nadu at a cost of US$ 104 billion.
Anil Ambani-led Reliance Cementation is also going to set up a 5 MT
integrated cement plant in Maharashtra. It will invest US$ 463.2 million for
that.
Jaiprakash Associates Ltd has signed a MoU with Assam Mineral
Development Corporation Limited to set up a 2 MT cement plant. The
estimated project cost is US$ 221.36 million.
20

21. State wise Capacity
As cement is a low value commodity, freight costs assume a significant proportion of
the final cost. Transporting costs render the prices of cement in distant destinations
uncompetitive. For instance, it is financially infeasible to transport cement by road
over 250 kms. Railways are mostly used to transport cement over longer distances.
However, its bulky nature and infrastructure bottlenecks render even rail transport
unviable over very long distances (that is why Madras Cements or India Cements,
located in the south, can hardly make a difference to the fortunes of west-based
companies like Gujarat Ambuja). Therefore, manufacturers tend to sell cement at the
nearest market first and sell in distant markets only if additional realization is greater
than freight costs incurred. This is the reason for showing regional demand rather than
state demand in case of cement.
Region wise Capacity
The Indian cement industry has to be viewed in terms of five regions:-
North (Punjab, Delhi, Haryana, Himachal Pradesh, Rajasthan, Chandigarh,
J&K and Uttranchal);
West (Maharashtra and Gujarat);
South (Tamil Nadu, Andhra Pradesh, Karnataka, Kerala, Pondicherry,
Andaman & Nicobar and Goa);
East (Bihar, Orissa, West Bengal, Assam, Meghalaya, Jharkhand and
Chhattisgarh); and
Central (Uttar Pradesh and Madhya Pradesh).
21

22. Table 3 Region wise capacity
Northern Region
Punjab 2173.34
Delhi 500.00
Haryana 172.00
Himachal Pradesh 4060.00
Rajasthan 16299.34
J&K 200.00
TOTAL 23404.68
West
Maharashtra 8950.00
Gujarat 12937.00
TOTAL 21887.00
South
Tamil Nadu 12913.18
Andra Pradesh 19831.02
Karnataka 9744.00
Kerala 420.00
TOTAL 42908.20
East
Bihar 1000.00
Orissa 2761.00
West Bengal 2291.66
Assam Meghalaya 400.00
Jharkhand 3475.01
Chattisgarh 11287.33
TOTAL 21215.00
22

23. Central
U.P. 6297.00
M.P. 16185.00
TOTAL 20482.00
South accounts for 33.03% of cement production capacity of the country, with Andra
Pradesh accounting for 15.27% of the total production capacity of India. It has an
installed capacity of around 20mn tons of cement and ranks first in the country,
followed by Tamil Nadu with 9.94% of the total production capacity. North accounts
for 18.02% of the total production capacity, with Rajasthan at 12.55% of the total
production capacity of the country. West accounts for 16.85% of the total production
capacity. Maharashtra and Gujarat have production capacity of 6.89% and 9.96%
respectively. East and Central Regions account for 16.33% and 15.77% of the total
production capacity of the country respectively.
Trade between these regions is on a very low scale mainly because of the
transportation bottlenecks and uncompetitive cost of transportation. The Southern
region dominated the cement consumption at 44.5 million tonnes in FY 08-09,
accounting for about 30% of total domestic cement consumption. During FY 08-09,
Southern region has witnessed highest CAGR of cement demand growth at 10.4%
followed by Northern and Eastern regions at 8.9% and 9%, respectively
Mechanics of Distribution Channels of Sector
Companies invariably hire agents or transport cements to own or government
warehouses either via roadway or railways. Incase of exports, cement reaches the
nearest port via roadways or railways and is then transferred to the importing country.
Domestically, from agents or warehouses the cement is transported to the
dealers/distributors and in turn to sub dealers who finally sell it to the end users. There
may or may not be physical ownership of goods. In the second case, dealers and sub
23

24. dealers take order from buyers and place it to the companies, co ordinate and monitor
the timely dispatch of said orders.
Energy and Transport Requirements
The cement industry is dependent on three major infrastructural sectors of the
economy: coal, power and transport. The inputs from these three sectors account for
roughly 50% of the cost of cement. Both the availability and the cost of these inputs
have a vital bearing on the fortunes of the cement players. All these sectors are largely
in the State sector, and, historically cement companies have had virtually no control
on the cost or availability of these inputs. Hence, the industry response has largely
been in the form of achieving efficiency gains and finding alternatives (captive power,
use of waterways). One additional external influencer of the cement industry
performance is the taxes and levies imposed by the Central and State Governments.
This together account for around 30% of the selling price of cement in the Indian
context.
The shortage in domestic coal production coupled with the poor quality has resulted
in cement companies resorting to importing coal, or going in for open market
purchase of coal, or using alternative fuel such as lignite or pet coke.
Use of imported coal has become an essential feature of the Indian cement industry
and has shown a rising trend during the last few years.
Power and Fuel cost form the largest proportion of the cost structure. This reflects the
effects of the trend in rising global oil and fuel prices. On the other hand Employee
costs form the smallest proportion of over all cost. This is essentially because cement
industry is a very capital intensive industry. This also accounts for the huge
depreciation and interest costs which accrue on the plant and machinery. Moreover,
the labour employed is essentially semi-skilled excluding the top management which
brings down labour costs.
24

25. Government Policies
Government policies have affected the growth of cement plants in India in various
stages. The control on cement for a long time and then partial decontrol and then total
decontrol has contributed to the gradual opening up of the market for cement
producers. The stages of growth of the cement industry can be best described in the
following stages:
Price and Distribution Controls (1940-1981):
During the Second World War, cement was declared as an essential commodity under
the Defense of India Rules and was brought under price and distribution controls
which resulted in sluggish growth. The installed capacity reached only 27.9 MT by
the year 1980-81.
Prices
The regional variation in the Indian market has resulted in the cement prices across
regions witnessing movement within a band, with no appreciable increase in any
region. Differences in regional demand supply situation have translated into price
differences across regions. Prices are lower in Southern regions where there is
normally a supply surplus. However, prices are higher in Eastern and Western regions
where shortages exist. The surplus position had resulted in significant pressure on
price realizations in recent years.
The cyclical trough in the late-1990s had a severe impact on the industry financials.
However, cement prices have firmed up during the last few years due to improvement
in demand-supply position and increasing consolidation in the industry. The
Wholesale Price Index (WPI) for cement increased 3.9% during FY2007-08, as
compared with a growth of 1.2% during FY2006-0 T
25

26. Chart 4 Wholesale price index of cement
WPI for March 2008-09 was 11% higher than the WPI for March 2007-08.
Margins
Cement prices have firmed up during the last few years due to improvement in
demand-supply position and increasing consolidation in the industry. The trend in
gross sales realization is similar for the cement companies in our sample (comprising
pure cement companies accounting for around two-thirds of industry production and
sales).
The operating profits and margins for cement companies are most sensitive to cement
sales realizations. During FY2008-09, riding on high average sales realizations, the
cement companies posted increased operating profits and margins. This reversed the
decline in operating profits and margins during FY2007-08. This was mainly because
of excess capacity and the consequent low price realizations. While sales volume of
the sample companies improved 7%, operating income (OI) increased 24.2% to Rs.
183.45 billion
26

27. Chart 5 Growth in sales volume and value
Returns
The key driver of profitability is cement prices, which fluctuate depending on outlook
on demand-supply gaps. The fluctuating fortunes of the Indian cement industry are
very typical of a commodity industry. The companies make bumper returns during the
boom years (FY1994-96, and FY2005-08) while the performance goes down
drastically during the lean years (FY1997-2001 and FY 2009-na). The returns have
improved significantly since FY2003 because of higher capacity utilizations,
operational efficiency and cost control measures supplemented with higher sales
realizations. But at the present scenario have reduced during the first quarter of FY
2009 and is still going to continue for few more years.
The Indian cement industry has undergone vital changes through technological
changes in the pursuit of cost efficiency and drive for consolidations. Most of the
companies are making profits.
27

28. Table 4 - Peer Comparison
P/E P/BV
Market Cap EV/EBIDTA ROE ROCE D/E
Company (TTM) (TTM)
(Rs. in Cr.) (x) (%) (%) (x)
(x) (x)
Ambuja Cem. 16,446.59 12.35 2.54 7.11 20.0 23.9 0.04
ACC 15,243.55 9.49 2.53 5.90 29.4 40.0 0.10
Samruddhi Cem. 12,111.86 19.82 2.64 0.00 23.3 24.7 0.55
UltraTech Cem. 10,447.20 9.68 2.27 7.60 26.6 28.5 0.46
Shree Cement 6,549.75 9.03 3.57 3.44 61.4 34.0 1.50
Birla Corpn. 2,773.13 5.28 1.56 4.07 36.4 38.9 0.32
Prism Cement 2,675.36 10.94 2.29 7.16 27.4 31.2 0.44
Binani Cement 1,642.06 6.00 2.43 3.87 49.0 32.8 1.58
J K Cements 1,241.96 5.67 1.14 4.70 22.6 21.0 0.82
Heidelberg
1,091.18 8.16 1.55 2.57 19.0 24.2 0.01
Cem.
JK Lakshmi
847.34 3.66 0.86 3.40 27.2 22.7 0.92
Cem.
OCL India 706.98 4.32 0.89 3.13 19.1 17.8 1.00
Sanghi Inds. 522.45 19.47 0.77 6.52 8.4 8.2 1.39
Mangalam
469.22 4.07 1.23 2.00 35.4 53.4 0.04
Cement
Sh. Digvijay
225.49 4.33 2.61 5.36 29.6 16.9 0.33
Cem
Source: www.financialexpress.com
28

29. Export of cement from India
The Indian cement industry exported around 6 mt of cement during FY2008-09,
accounting for around 4% of the total production. There has been a significant year on
year variation in the export trend, implying that Companies rely on cement exports to
balance out the domestic demand supply situation. As seen from above there is excess
production, so the difference in supply and demand is met by exporting. The export of
Indian cement has increased over the years, giving a boost to the Indian cement
industry.
The demand for cement in the foreign countries is a derived demand, for it depends on
industrial activity, real estate, and construction activity. Since growth is taking place
all over the world in these sectors, Indian export of cement is also increasing.
The cement industry in India has around 300 mini cement plants and 130 large cement
plants. The total production capacity of these plants is around 167.36 million tons.
The India cement industry is technologically very advanced, as a result of which the
quality of Indian cement is now considered the second best in the world. This has
given a major boost to the Indian export of cement. The production of cement in India
is not only able to meet the domestic demand, but large amounts are also exported. A
fair amount of clinker and cement by-products are also exported by India. As the
quality of Indian cement is very good, its demand in the international market is
always high.
29

30. Table 5 World cement production
The graph shows that the production of cement in India is at 2nd place after China, this
higher production is a good reason for exporting cement.
In 2008-2009, 3.38 million tons of cement was exported from India. That figure stood
at 3.47 million tons in 2006-07, and 3.36 million tons in 2007-08. In 2006-2007, 1.76
million tons of clinker was exported from India. In 2007- 2008 clinker exports
amounted to 3.45 million tons, and in 2008- 2009 the figure stood at 5.64 million
tons. This shows that the export of Indian cement has been increasing at a steady pace
over the years.
30

31. Indian Technology Advantage
The manufacturing process of cement consists of the mixing, drying and grinding of
limestone, clay and silica into a composite mass. The mixture is then heated and burnt
in a pre-heater and kiln to be cooled in an air cooling system to form clinker, which is
the Semi-finished form. This clinker is cooled by air and subsequently ground with
gypsum to
form
cement.
The dry
and semi-
dry
processes
are more
fuel-
efficient.
Table 6 Distribution of dry and wet Cement.
The wet process requires 0.28 tonne of coal and 110 kWh of power to manufacture
one tonne of cement, whereas the dry process requires only 0.18 tonnes of coal and
100 kWh of power. Coal and power costs account for 35 per cent of the total cem The
dry and semi-dry processes are more fuel-efficient. The wet process requires 0.28
tonne of coal and 110 kWh of power to manufacture one tonne of cement, whereas the
dry process requires only 0.18 tonnes of coal and 100 kWh of power. Coal and power
costs account for 35 per cent of the total cement production costs. With 95 per cent of
the total capacity based on the modern dry process technology, the Indian cement
industry has become more cost efficient.
31

32. Top companies in the cement industry match quite well with world standards in terms
of energy (thermal energy Kcal/kg of clinker - India 665 against 690 of Japan) and
pollution norms (SPM of 40 in India against 20 in Japan).
32

33. Chapter 3
Introduction to company
33

34. “ OUR SOUNDNESS IS IN YOUR LIFE ”
34

35. GROUP PROFILE
MISSION
To produce, market and develop high construction materials whilst complying with
principles of sustainability and maximizing / preserving shareholder value.
STRATEGIC VISION
CIMPOR plans to remain one of the main players worldwide in the trend toward
consolidating the cement sector whilst maintaining its growth and internationalization
policy. It plans to maintain excellent technical, economic and financial performance
compatible with its adopted voluntary principles of sustainable development
GROUP VALUES
Shareholders: To defend shareholders‘ legitimate interests through intrinsic
appreciation of their investments in the company and adequate remuneration.
Clients: Focus on the full satisfaction of client expectations in accordance with the
ethical principles of integrity and applicable standards.
Personnel: Fair remuneration for work performed, career advancement opportunities
and fairness of treatment.
Organization: Constant search for excellence by establishing ambitious goals and by
selecting leaders at all levels capable of taking responsibility and the meeting targets.
35

36. Quality: Compliance with national and international standards, particularly regarding
Product Certification and to the proper application of the Quality Management
System
GROUP STRATEGY
• To consolidation current positions through internal growth – whilst increasing
efficiency and capacity at industrial units - and greater penetration in markets
where the Group already operates – expansion to activities relating with the
cement line (e.g., ready-mix concrete and operation of quarries).
• To make new acquisitions, with priority given to geographic areas of emerging
on the emerging markets where the Group already operates, while maintaining
the necessary balance through operations in consolidated and mature markets
where the growth potential is offset by lower risk.
• To optimize operations by taking advantage of synergies, cost cutting
(particularly energy costs), higher personnel productivity and investment in
R&D.
• To develop trade between the Group companies so as to balance peaks in
certain markets with supply in other areas.
36

37. WORLDWIDE PRESENCE
Figure 1
CIMPOR - Cimentos de Portugal is the largest Portuguese cement group, operating in
Portugal, Spain, Mozambique, Morocco, Brazil, Tunisia, Egypt, Cape Verde, South
Africa, Turkey, China, Peru and India involved in manufacturing and marketing
cement, hydraulic lime, concrete and aggregates, precast concrete and dry mortars.
Cement production capacity with own clinker to 29.5 million tonnes per year.
1976
CIMPOR - CIMENTOS DE PORTUGAL, E.P. was created.
37

38. 1982
The Maia distribution terminal is built. The 3rd line at the Souselas plant initiates
activity, with a capacity for 1 million tonnes/year.
1983
The adaptation process, replacing fuel oil with coal, is initiated in all plants.
1985
The last wet production line is transformed from wet to dry process.
1988
Ready-mix concrete business is restructured. CIMPOR BETÃO, S.G.P.S., S.A. is
created.
1991
The precast business area starts operating. PRECIMPOR, S.G.P.S., S.A. is created.
1991
The company becomes a public company, with the new name CIMPOR -
CIMENTOS DE PORTUGAL, S.A.
1992
The process of internationalization begins. The Spanish holding company
CORPORACIÓN NOROESTE S.A., in Galicia, is acquired. C.M.P. - Cimentos
Maceira e Pataias is created and the Maceira and Pataias plants are sold.
Strategic plan for total quality, the "Jump Project" was set up. 1992
38

39. WORLDWIDE JOURNEY
• PORTUGAL – SINCE 1976
• SPAIN – SINCE 1992
• MOZAMBIQUE – SINCE 1994
• MOROCCO – SINCE 1996
• BRAZIL – SINCE 1997
• TUNISIA – SINCE 1998
• EGYPS – SINCE 2000
• SOUTH AFRICA – SINCE 2002
• CAPE VERDE – SINCE 2005
• TURKEY – SINCE 2007
• CHINA – SINCE 2007
• INDIA – SINCE 2008
39

40. INDIA - SINCE 2008
(Plant)
1.2 Million MT / year
Shree Digvijay cement Co. Ltd.- Sikka, Jamnagar (Gujarat)
40

41. Shree Digvijay Cement Company
COMPANY PROFILE
Shree Digvijay Cement Co Ltd., established on November 6, 1949 at Sikka –
Jamnagar and one of the pioneers in the Cement business, is a flagship company of
the Cimpor Group. Cimpor acquired management control of the company in the year
2008.
Its basket of products includes special cements like Oil Well Cement, Sulphate
Resisting Portland Cement and Railway Sleeper Manufacturing Cement in addition to
other varieties of Ordinary Portland Cement etc. It has a fully computer controlled
plant and has a production capacity of 1.30 million tones per annum.
Well connected by Road, Rail, Air, and Sea, Digvijay has its own port. Digvijay‘s
prolific experience in the domestic and international markets is now further honed
with the Cimpor Group‘s management skills and technology.
The company‘s brand ‗Kamal Cement‘ is a well-known name in the cement industry.
They have a significant market share in Gujarat and internationally in SAARC
countries, Middle East and East Africa.
The company backed by its prolific experience, management skills and commitment
along with state of the art technology makes its products presence in the international
business and quest to meet the requirement of discerning customers and a concrete
ambition to build a stronger globe.
The company had successfully established its presence by exporting varieties of
cement & cement clinker to the following countries: UAE, Somalia ,Yemen,
Bangladesh , Qatar, Srilanka, Iraq, Kuwait, Behrin, Philippines and other SAARC
and African countries
41

42. Product range of the company includes:
Ordinary Portland Cement 53 grade (OPC) as per BIS / BS / ASTM / SLS
standards
Oridinary Portland Cement 43 grade (OPC)
Sulphate Resisting Portland Cement (SRPC)
Railway Sleeper Manufacturing Cement (53-S Grade OPC)
Oil Well Cement Class 'G' Grade HSR (as per API specifications 10A)
Portland Pozzolana Cement
Milestones:
1944 Digvijay traces its origin on 6th November by Bangurs.
1947 Started commercial production with 1 lakh M.T capacity per annum.
1953 First expansion making total capacity to 2 lac M.T per annuam.
1954 Construction of Aerial Ropeway, a unique system in the country for
transportation of sea-sand from jetty to plant.
1956 Second expansion to increase the production capacity to 4 lac M.T per
annum.
1957 Ropeway put into operation.
1958 West Cost Paper Mills Ltd commissioned with financial help of
Digvijay.
1959 Clinker grinding plant commissioned at Mumbai known as ―Bombay
Cement Mill‖ with annual capacity of 1 lac M.T.
1960 Asbestos Plant installed at Ahmedabad known as 'Asbestos Product
Division.'
1964 Ropeway system installed for transportation of clinker and cement
directly to Ship from factory.
1966 Commissioned Cement grinding unit at Ahmedabad known as
Ahmedabad Cement Mill.
42

43. 1967 Enhancement of cement production capacity to 6 lac M.T per annum.
1979 Beawar cement project initiated with financial help of Digvijay.
1982 Amalgamation of Hastings Jute Mill, Shreeram Silk Mill and Relaxon.
1984 Conversion of metre gauge line into broad gauge line.
1985 Dry process plant commissioned Lockout at Bombay Cement
Mill.
1989 Digvijay become Sick and registered with BIFR first time.
1992 Digvijay came out of BIFR through profit and Equity infusion.
1994 Demerger of Fibre Product Division, Ahmedabd Cement Mill, Shreeram
Silk Mill and Relaxon from Digvijay.
1998 Hastings Jute Mills sold. Grasim acquired management control of
Digvijay Digvijay became Sick second time.
2000 Installation of captive power plant (DG Sets) and upgradation of
Cement Mill to reduce cost.
2001 Digvijay was badly affected in earthquake.
2002 Downsizing of manpower through VRS.
2007 Digvijay came out from BIFR.
2008 Cimpor acquired management control of Digvijay.
Awards & Achievements
National Awards won by Digvijay:
1982- National Productivity Award
1996- National productivity Award
2003- National Energy Conservation Award
2004- National Energy Conservation Award
2005- National Energy Conservation Award - Certificate of Merit
2006-National Energy Conservation Award
Other Awards / Certifications
1989- American Petroleum Institute Certification
43

44. 1996- ISO - 9002 Accreditation
2002- Bharat Shell's Lubricant Excellency Award
2003- Century International Quality Era Award in Gold Category
2005- ISO 14001 (Environment Management System) Certification
2005 OHSAS 18001 Certification
Awards / Certificates on Export Front
1994- Recognition as 'Export House' 1995 Golden Jubilee Year
1995- Recognition of Merit for Meritorious Export Performance
1997- Certificate of Merit for Export Achievement
2005- Recognition as Two-star Export House by Ministry of Commerce, Govt.
of India
2005- CAPEXIL Special Export Award
2006 CAPEXIL Special Export Award
Management
O Name Designation
1 Leonard D' Casta Chairman
2 Alvaro Joao Serra Nazare Director
3 Robert Pavrey Director
4 Napoleon De La Colina Director
5 Luls Filipe Sequeira Martins Director
6 Chief Executive Officer & Whole
P A Nair
Time Director
44

45. COMPETITORS
Ultratech Cement
UltraTech Cement Limited has an annual capacity of 52 million tonnes. It
manufactures and markets Ordinary Portland Cement, Portland Blast Furnace Slag
Cement and Portland Pozzalana Cement. It also manufactures ready mix concrete
(RMC).
The company has 11 integrated plants, one white cement plant, one clinkerisation
plant in UAE, 15 grinding units – 11 in India, 2 in UAE, one in Bahrain and
Bangladesh each and and five terminals — four in India and one in Sri Lanka.
UltraTech Cement is the country‘s largest exporter of
cement clinker. The export markets span countries
around the Indian Ocean, Africa, Europe and the Middle
East.
UltraTech's subsidiaries are Dakshin Cements Limited, Harish Cements Limited,
UltraTech Ceylinco (P) Limited and UltraTech Cement Middle East Investments
Limited
45

46. Ambuja Cement
Ambuja Cements Ltd. (ACL) is one of the leading cement manufacturing companies
in India. The Company, initially called Gujarat Ambuja Cements Ltd., was founded
by Narotam Sekhsaria in 1983 with a partner, Suresh Neotia. Sekhsaria‘s business
acumen and leadership skills put the company on a fast track to growth. The
Company commenced cement production in 1986. The global cement major Holcim
acquired management control of ACL in 2006. Holcim today holds little over 46%
equity in ACL. The Company is currently known as Ambuja Cements Ltd.
ACL has grown dynamically over the past decade. Its current cement capacity is
about 25 million tonnes. The Company has five integrated cement manufacturing
plants and eight cement grinding units across the country. ACL enjoys a reputation of
being one of the most efficient cement manufacturers in the world. Its environment
protection measures are on par with the finest in the country. It is one of the most
profitable and innovative cement companies in India. ACL is the first Indian cement
manufacturers to build a captive port with three terminals along the country‘s western
coastline to facilitate timely, cost effective and environmentally cleaner shipments of
bulk cement to its customers. The Company has its own fleet of ships. ACL has also
pioneered the development of the multiple bio-mass co-fired technology for
generating greener power in its captive plants.
ACL has always met tough challenges and seized the opportunities that have come its
way. It has nurtured the same spirit of enterprise and search for cutting-edge
technology with which it started. It thus continues to be the driving force and in many
ways a benchmark for the cement industry in India.
46

47. Jaypee Cement
The Jaypee group is the 3rd largest cement
producer in the country. The group's cement
facilities are located in the Satna Cluster (U.P),
which has one of the highest cement production
growth rates in India.
The group produces special blend of Portland
Pozzolana Cement under the brand name ‗Jaypee Cement‘ (PPC). Its Cement
Division currently operates modern, computerized process control cement plants with
an aggregate capacity of 21.3 MTPA. The company is in the midst of capacity
expansion of its cement business in Northern, Southern, Central, Eastern and Western
parts of the country and is slated to be 37.55 MTPA cement producer by 2012 with
Captive Thermal Power Plants totaling 702MW.
All the 156 cement dumps are networked using State-of-the-art TDM/TDMA VSATs
along with a dedicated hub to provide 24x7 connectivity between the plants and all
the 156 points of cement distribution in order to ensure ―track – the – truck‖ initiative
and provide seamless integration. This initiative is the first of its kind in the cement
industry in India.
In the near future, the group plans to expand its cement capacities via acquisition and
greenfield additions to maximize economies of scale and build on vision to focus on
large size plants from inception.
The Group is committed towards the safety and health of employees and the public.
Our motto is ' Work For Safe, Healthy, Clean & Green Environment.
47

48. THEORETICAL BACKGROUND
Promotion is persuasive communication. It is a highly visible element in the
marketing mix. It tells the target customer product, price, and place. It tells also
known as marketing communication. Promotion consist of activities that facility
exchanges with target customers through persuasive communication to stimulate
demand. According to Professor Philip kotler:- ―Promotion includes all the
activities the company undertakes to communicate and promote its products to the
target market.‖ In modern marketing the question is not whether to promote but rather
what to say, to whom and how often. A good product, an attractive price and an
accessible distribution must be supported by an effective promotion to satisfy
customer needs. Promotion activity include advertising, sales promotion, public
relation, and direct marketing. Promotion can also be viewed as the management of
the customer buying process of pre-purchase, purchase and post purchase.
FUNCTION OF PROMOTION
Promotion is a tool to influence target customer and to face competition. It performs
four functions:-
Information
Persuasion
Reminding
Reinforcing
PROMOTION MIX The promotion mix is the combination of advertising, public
relations, sales promotion, personal selling and direct marketing tools that help
achieve marketing objective
1) ADVERTISING
Advertising in any paid form of nonpersonal communication by an identified sponsor
to promote product.
48

49. 2) PUBLIC RELATION
It refers to programmes designed to promote or protect a company image and
products. Publicity is any unpaid form of communication through media about an
organization, its policies and products.
3) PERSONAL SELLING
Personal selling is personal communication with customers to persuade them to buy
products. It permits interaction and relationship building. Sales persons provide
feedback about the market, competitors and customers.
4) DIRECT MARKETING: - It is persuasion by manufacturer to specific customers.
The tools of direct marketing are:
1.Face to face selling
2.Mail
3.Catalogue marketing
4.Telephone 5.
E-mail
5) SALES PROMOTIONS: - Sales promotion has been increasing in popularity as a
tool. Marketers are using it aggressively. Sales promotion refers to short term
incentives to stimulate demand. It is used to create a stronger and quicker purchase
response. It can be directed at consumers, middleman and sales personnel. It
supplements advertising and facilitates personal selling.
According to Professor William J. Stanton:- ―Sales promotion refers to demand –
stimulating devices designed to supplement advertising and facilitate personal selling.
According to professor Philip kotler:- ―Sales promotion consists of diverse
collection of incentives tools, mostly short term, designed to stimulate quicker and or
greater purchase of particular product /services by consumer or trade.
NATURE OF SALES PROMOTION:
1. It is short term
2. It provides incentives
3. It aims at quicker response
4. It is directed at target audience
49

50. OBJECTIVE OF SALES PROMOTION
1. Objective for consumer promotion:
(a) Encourage greater purchase volume
(b) Attract new customer
(c) Introduce new products
2. Objective for trade promotion:
(a) Carry and push new item
(b) Increase reseller‘s inventories
(c) Attract new channel members
(d) Offset competitive promotion
(e) Better store display
3. Objective for sales force promotion
(a) Motivate sales force
(b) Support new product
METHOD OF SALES PROMOTION Sales promotion methods differ according to
the target audience. They can be directed at consumer promotion, trade promotion,
and sales force promotion
Consumer promotion method
Free sample Coupons
Rebates
Premium Price off Contests
Display/Demonstration
Trade promotion methods
Free goods
Allowance
50

51. Prices-off Sales
Contest
Gift items
Credit facilities
Trade show
Sales contests
Trade shows conventions
Gift items
Promotional kits
Marketing mix
Figure 2
4 P‘s of marketing mix comprises of:
Product
Price
Place
Promotion
51

52. How to Establish a Promotional Mix
You drive sales by promoting the benefits of your company's goods or services to
pools of potential buyers. The ways you promote your organization will largely
determine whether you successfully plant the right messages in the minds of your
target audience. This module explains how you can establish a promotional mix best
suited to your company's needs and resources.
Determine Your Target Market
Determine Your Objectives
Design Your Message
Select Your Promotional Channels
Determine Your Budget
Determine Your Promotional Mix
Measure the Results and Adjust
Elements of promotion mix
A promotional mix is an allocation of resources among five primary elements:
1. Advertising
2. Public relations or publicity
3. Sales promotion
4. Direct marketing
5. Personal selling
52

53. Strategies of promotion mix
Push & Pull Strategies -
Figure 4
Communication by manufacturer is not only directed towards consumers to create
demand. A push strategy is where the manufacturer concentrates some of their
marketing effort on promoting their product to retailers to convince them to stock the
product. A combination of promotional mix strategies are used at this stage aimed at
the retailer including personal selling, and direct mail. The product is pushed onto the
retailer, hence the name. A pull strategy is based around the manufacturer promoting
their product amongst the target market to create demand. Consumers pull the product
through the distribution channel forcing the wholesaler and retailer to stock it, hence
the name pull strategy. Organizations tend to use both push and pull strategies to
create demand from retailers and consumers.
53

54. Chapter 4
Pest analysis, Swot analysis and
Five force analysis
54

55. PEST ANALYSIS OF INDIAN CEMENT INDUSTRY
Figure 5
The PEST Analysis is a framework that you can use to scan the external macro-environment
in which a firm operates. PEST is an acronym for the following factors:
Political factors
Economic factors
Social factors, and
Technological factors
55

56. In 2002 the world production of hydraulic cement was 1,800 million metric tons. The
top three producers were China with 704, India with 100, and the United States with
91 million metric tons for a co mbined total of about half the world total by the
world's three most populated states.
POLITICAL
The price of cement is primarily controlled by the coal rates, power tariffs, railway
tariffs, freight, royalty and cess on limestone. Interestingly, government controls all of
these prices. Government is also one of the biggest consumers of the cement in the
country. 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 for5 years, while Gujarat offers exemption
from electric duty. (India Infoline Ltd n.d.)
ECONOMIC
Currently, the industry is on the boom, with a lot of government infrastructure and
housing projects under construction. In spite of seeing a fall during 2008-09, the
export segment of the industry is expected to grow again on account of various
infrastructure projects that are being taken up all over the world and numerous
utstanding cement plants coming up in near future in the country
SOCIAL
Usually, the cement industry in India consists of both the organized sector and the
unorganized sector. 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. Indian
consumers prefer buying branded cement like ULTRATECH, JAYPEE CEMENT,
56

57. AMBUJA 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.
With a population of more than 100 billion people, it is expected that cement industry
will create another 25 lakhs jobs in the next 4-5 years.
TECHNOLOGY
From mining to production the entire process depends on technology. The
Government of Indiaplans 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 efficiency of
the Indian cement industry.Cement industry has made tremendous strides in
technological up-gradation and assimilation of latest technology. At present 93% of
the total capacity in the industry is based on modern and environment-friendly dry
process technology.
57

58. SWOT ANALYSIS
Figure 6
To plan marketing and management strategies for businesses, it is important to
perform a situations analysis. One such analysis, a SWOT analysis, examines
"strengths, weaknesses, opportunities and threats" within a particular business or
field. The cement industry is an example of a field for which a SWOT analysis would
enhance marketing and management strategies.
1. Strengths
o The cement industry has much strength to be considered. Cement is, literally, the
building block of the construction industry. Almost every building constructed relies
on cement for its foundation. The cement business is a $10 billion industry, measured
by annual cement shipments. There is also a strong reputation behind the cement
industry. Cement is a solid material and consumers rarely have complaints about the
product. Regional distribution plants have also made cement widely available to any
type of buyer.
Strengths of shree Digvijay cement
58

59. o Shree Digvijay Cement has good loyal stockiest
o Management of MNC that is Cimpor group is an add advantage to the company.
o Quality and other services like free sample testing for the buyers could be
considered as strengths of the company.
Weaknesses
o The cement industry is not without its drawbacks. The cement industry relies on
construction jobs to create a profit. But the cement industry 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. Another weakness is the cost of transport; the cost of transporting
cement is high and this keeps cement from being profitable over long distances. In
other words, shipping cement costs more than the profit from selling it.
For shree digvijay cement drawbacks would be
o Limestone is available little far from the plant which ultimately results into higher
input cost.
o No brand awareness in the Ahmedabad region.
o Comparetively less dealers in Ahmedabad region.
Opportunities
o 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, using dry manufacturing instead of wet, which is heavier and more time-
consuming. The cement industry has also invested about $6 billion in expansion
efforts to meet unmet cement needs. Projections show that by 2012, the cement
industry will have 25 percent more production capabilities.
59

60. Threats
o The nature of the economy has uncovered a number of threats to the cement industry.
The cement industry greatly relies on construction. The current economy has lessened
the number of construction jobs, which in turn hurts the cement industry. The cement
industry controls the majority of the United States market, but not all of it. About 11.5
metric tons of cement are imported annually to support the unmet need. If other
countries can produce and ship cement for a reduced price, the U.S. cement industry
is in danger. The U.S. government is also attempting to regulate the cement industry's
waste. The Environmental Protection Agency has introduced regulations for the
cement industry to cut down emissions
Threats for Shree Digvijay cement.
o New capacity expansion like JP, ABC cement may hurt the market share.
o Other brands like Ambuja and Ultratech have an extremely high percentage of
brand loyalty, something that was evident from the survey that was conducted.
o A huge amount of small players are grabbing a large chunk of lower income
cement base.
60

61. PORTER’S 5-FORCE MODEL FOR CEMENT
INDUSTRY
THREAT FOR ENTRANTS:
The high capital costs acts as a major entry barrier for the entry of new players. The
high freight costs make it difficult to import cement. Cement being a high volume low
value commodity results in high freight costs, which makes cement imports
economically unfeasible. Domestic Cement industry is highly insulated from global
cement markets. With GoI intervention, making cement duty free, cement is being
imported from neighboring countries. However, due to logistics issues and lack of
port handling capabilities, imports of cement will remain negligible and do not pose a
threat to domestic industry.
61

62. BARGAINING POWER OF SUPPLIERS:
The major inputs are coal and power. The Prices of both coal and power are
determined by the government. To mitigate the high costs of power the cement
players have set up captive power plants.
COMPETITIVE RIVALRY BETWEEN EXISTING PLAYERS:
Previously the rivalry was strong among the players, as the industry was not
consolidated. During the last few years the industry has become more consolidated
with the Top 3 players having a combined market share of 49 percent in 2008-09 as
compared to 32 percent in 2007-2008.
BARGAINING POWER OF BUYERS:
Retail sales constitute about 80 percent of the total sales and the rest is institutional
sales. The retail buyers don‘t have any bargaining power while the institutional buyers
get a discount of 5 to 10 percent as they buy cement in bulk.
THREAT OF SUBSTITUTES:
There are no good substitutes for cement.
62

63. Chapter 5
Data Analysis and interpretation
63

64. Data Analysis and interpretation
1) No. of years in Business
Less than 5 years
6-10 years
11-15 years
More than 15 years
Responses
Less than 5 years 6-10 years 11-15 years More than 15 years
13 28 36 27
No. of years in business
Less than 5 years 6-10 years 11-15 years More than 15 years
13%
26%
27%
35%
The above chart shows that most of the dealers who all are suryed have dealership of
various brands since long time because 35% and 26% dealers are in the business since
11-15 years and more than 15 years respectively.
64

65. 2) What are the grades you dealing with ?
53 Grade Cement
PPC Grade Cement
Others
All Grade Cement
Responses
53 grade
cement 60%
PPC grade
cement 25%
OPC grade
cement 11%
All grades
cement 4%
What are the grades you dealing with ?
53 grade cement PPC grade cement OPC grade cement All grade cements
4%
11%
25%
60%
As it can be seen that 60% of total dealers that is 60 dealers sell 53 grade cement and
25% ofdealers also sell PPC grade cement where as other grades such as oil well
cement stands at only 11%.
65

66. 3) Rank the following brands according to your preference ?
Ultratech
Ambuja
Jaypee
Hathi
Sidhee
Kamal
Sanghi
Ultratech
Ranks 1 2 3 4 5 6 7
Responses 37 19 32 6 5 0 1
Ultratech
Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Rank 6 Rank7
1%
0%
5%
6%
37%
32%
19%
The above chart shows 37% dealers ranked Ultratech as a number one brand. This
clearly shows that the company has good brand image in the market.Only 1% dealers
have given it the lowest rank.
66

67. Ambuja
Ranks 1 2 3 4 5 6 7
Responses 20 53 17 9 0 1 0
Ambuja
Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Rank 6 Rank 7
0% 1% 0%
9%
20%
17%
53%
After Ultratech, Dealers preferred Ambuja as 53% dealers ranked it at second
position, whereas 20 % ranked it number one brand which clearly shows that both
Ultratech and Ambuja have cut throat competition in terms of brand image.
67

68. Jaypee
Ranks 1 2 3 4 5 6 7
Responses 16 6 42 21 11 3 1
Jaypee
Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Rank 6 Rank 7
3% 1%
11% 16%
6%
21%
42%
Out of total dealers 42% ranked Jaypee at 3rd position and 16 % dealers ranked it
number one brand which clearly shows that Jaypee though being only 2 years old in
the market, has a considerably good brand image.
68

69. Hathi
Ranks 1 2 3 4 5 6 7
Responses 7 5 6 43 25 5 9
Hathi
Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Rank 6 Arank 7
9% 7%
5% 5%
6%
25%
43%
Most of the dealers that is 43% of total 100 dealers ranked Hathi at 4th position and
25% ranked it at 5th positon, therefore I can say that Hathi has not that good brand
image but people more or less are aware about the brand.
69

70. Kamal
Ranks 1 2 3 4 5 6 7
Responses 7 4 2 6 8 50 23
Kamal
Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Rank 6 Rank7
4%
7% 2%
23%
6%
8%
50%
The above chart clearly shows that comparatively kamal is not that much popular in
the ahemdabad region. Kamal as a brand stands at 6th position as highest that is 50%
dealers have ranked it at 6th postion. This shows that not much dealers are aware
about the brand. Only 7 % dealers ranked it at number one position and that may be
because they were dealers of kamal cement.
70

71. Sanghi
Ranks 1 2 3 4 5 6 7
Responses 8 6 2 2 6 16 60
Sanghi
Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Rank 6 Rank 7
8% 2%
6% 2%
6%
60% 16%
Sanghi is the least preffered brand of all brands as it stands at 7th rank with highest
number of dealers that is 60% of all ranked it at the last position.
71

72. 4) How much quantity of cement you sell per month?
10-50 tones
50-100 tones
100-150 tones
More than 150 tones
Responses
Ultratech 80 tones
Ambuja 100 tones
Jaypee 50 tones
Hathi 60 tones
Sidhee 60 tones
Kamal 40 tones
Sanghi 30 tones
100
90
80
70
60
50
40
30
sales
20
10
0
From all the market players Ambuja is having the largest share in the sales followed
by ultratech which is sells 80 tones on average per month, Hathi and Sidhee almost
sells same per month where as kamal and Sanghi have low sales.
72

73. 73

74. 5) Reason for selling particular brand of cement ?
Customer Acceptance/Brand Image
Pricing
Quality
Responses
Brand Image Quality Pricing
Ultratech 8 3 1
Ambuja 7 5 1
Jaypee 5 4 2
Hathi 4 5 3
sidhee 4 5 3
Sanghi 3 4 5
Binani 4 3 5
Kamal 1 5 6
9
8 Brand
Image
7
Quality
6
5 Pricing
4
3
2
1
0
Ambuja as a brand is very famous in the market almost 90% of the dealers sell
ambuja because of its brand image,
Quality being the next important reason. Ultratech is just behind ambuja in terms of
both brand image and quality. More over according to dealers customer is more
74

75. interested in price rather than quality so dealers of Jaypee, Kamal, Hathi and Sidhee
considers price as a reason for customer availability.
6) If Credit, how many days ?
Days
Responses
Days
Ultratech 0
Ambuja 5
Jaypee 2
Hathi 3
Sidhee 3
Sanghi 15
Kamal 7
Binani 3
Binani
Kamal
Sanghi
Sidhee
Hathi Days
Jaypee
Ambuja
Ultratech
0 2 4 6 8 10 12 14 16
Ultratech do no give credit at all. They need payments in advance. Whereas other
brands such as Sanghi, Kamal, Ambuja give credit of 15,7,5 respectively
75

76. 7) Reason for selling particular brand of cement ?
Customer Acceptance/Brand Image
Quality
Pricing
Ultratech
7
6
5
4
Quality
3 Pricing
Transport
2
1
0
Extremly Satisfied Moderately Dissatisfied Extremely
satisfied satisfied satisfied
The maximum numbers of dealers are satisfied with the quality and transport facility
of ultratech cement, where as dealers who are dissatisfied with the price is also more
in numbers.
76

77. Ambuja
Quality Pricing Transport
Extremely
satisfied 3 2 2
Satisfied 4 3 2
Moderately 4 4 3
Dissatisfied 1 2 3
Extremely
dissatisfied 0 1 2
4.5
4
3.5
3
2.5
Quality
2
Pricing
1.5 Transport
1
0.5
0
Extremely Satisfied Moderately Dissatisfied Extremely
satisfied dissatisfied
Out of total 14 dealers of Ambuja 3 said that they are extremely satisfied with the
quality of cement and 4 said that they are satisfied which shows that almost 50%
dealers are satisfied with the quality of cement. Ambuja could be considered number
one brand in terms of quality as not even a single dealer is extremely dissatisfied with
the quality of cement. Overall if we see Ambuja‘s dealers are satisfied with all the
factors quality,pricing and transport.
77

78. Jaypee
Quality Pricing Transport
Extremely satisfied 2 3 2
Satisfied 3 4 3
Moderately
satisfied 4 2 3
Dissatisfied 2 2 2
Extremely
dissatisfied 1 1 2
4.5
4
3.5
3
2.5
Quality
2
Pricing
1.5 Transport
1
0.5
0
Extremely Satisfied Moderately Dissatisfied Extremely
satisfied satisfied dissatisfied
Here, the chart shows that dealers are more satisfied with the pricing than other
factors. Overall Jaypee provides good transport facility and good quality of cement.
78

79. Hathi
Quality Pricing Transport
Extremely
satisfied 3 2 2
Satisfied 4 3 4
Moderately
satisfied 2 4 4
Dissatisfied 2 3 1
Extremely
dissatisfied 1 2 1
4.5
4
3.5
3
2.5
Quality
2
Pricing
1.5 Transport
1
0.5
0
Extremely Satisfied Moderately Dissatisfied Extremely
satisfied satisfied dissatisfied
In case of hathi dealers are satisfied with the quality and transport as out f 12 dealers 4
said that they are satisfied both with the quality of cement and transport or availability
of the cement.
79

80. Sanghi
Column1 Quality Pricing Transport
Extremelysatisfied 1 1 2
satisfied 3 3 2
Moderately
satisfied 4 5 3
dissatisfied 3 2 3
Extremely
dissatisfied 1 1 2
6
5
4
3
2 Quality
Pricing
1
Transport
0
Dealers are more satisfied with the price at which the company offers the cement than
other factors. There are dealers who are extremely dissatisfied with the transport and
availability of the cement at Sanghi
80

81. Kamal
Quality Pricing Transport
Extremely
satisfied 2 3 2
Satisfied 3 4 4
Moderately
satisfied 4 3 3
Dissatisfied 2 2 1
Extremely
satisfied 1 1 2
4.5
4
3.5
3
2.5
Quality
2
Pricing
1.5 Transport
1
0.5
0
Extremely Satisfied Moderately Dissatisfied Extremely
satisfied satisfied satisfied
Kamal ‗s dealers are overall satisfied with the pricing and transport out of total of 12,
4 dealers are satisfied with transport and 4 satisfied with the pricing policy. As far as
quality is considered only 2 out of 12 are extremely satisfied. The graph clearly shows
where does the brand stands in terms of quality, transport and pricing policy.
81

82. 8) What is general prices gap between following companies
Hathi ______________
Sidhee ______________
Laxmi ______________
Jp ______________
Kamal ______________
Ambuja ______________
Ultratech ______________
Sanghi ______________
Binani ______________
Responses
For this question all the dealers had different perception about the price gaps, most of
them assumed that Ultratech and Ambuja both the brands have premium price that is
of atleast Rs. 5 and both the brands do not have that much price gaps. Some dealers
gave preference to their brands by stating more price gaps between their brands and
other small brands and assumed less gaps between their brands and top players like
Ambuja.
Further, there were some dealers who tried to give the correct scenario of the market
by saying that there are not much price gaps between all the companies, on an average
there is price gap of only Rs.5 to 7 not more than that.
82

83. 10) Rate sales promotion activities according to their effectiveness ( for dealers)
Activities Rate
Gifts
Incentives
Foreign tours
Golds schemes
Responses
Least effective Less effective Moderately More Most
effective effective effective
15 22 26 10 27
Gifts
Least effective less effective Moderately effective
More effective Most effective
15%
27%
22%
10%
26%
The pie chart shows that gift is an effective sales promotion activity but not that much
as there 22% dealers saying it is less effective and 27% says it is somewhat effective.
So overall it couldn‘t be considered extremely effective.
83