Neeraj Patki Ketan Nimsudkar Viraj Bhat Shambhavi Jha

Analysis
We would be analyzing company on following

parameters :
Companys Competitive advantage Companys Financial Strength Industry Strength Environmental Stability

Companys Competitive Advantage

Factor Market Share Score Remarks (-7 to 0)

-1 0 -2

14 % - 3rd in Industry Market Leader ACC- 17 %. Market Share is rising for last 3 years High Quality One of the Lowest Cost Cement Producer Past half of the Growth Stage

Product Quality Product Life Cycle

Product Replacement Cycle

Customer Loyalty

0
-5

Is not much significant, as it is not technology dependent product.

Not much. Brand differences are not visible enough

Companys Competitive Advantage

Companys Competitive Advantage

Factor Competitors Capacity Utilization Technological Know-How Score Remarks Almost All the Big competitors are near 100 % Utilization Ambuja is aggressively expanding capacity Technology not a trade secret

-2 -7

Vertical Integration

Captive power plants at multiple places. Power cost is 40 % of total cost. Captive port at Muldwarka, Sea Transport

Companys Competitive Advantage

Company Production Installed Capacity Capacity Utilization (%)

ACC
Gujarat Ambuja Ultratech Grasim

17,902
15,094 13,707 14,649

18,640
14,860 17,000 14,115

96
100 80 100 95

India Cements JK Group

Jaypee Group Century Madras Cements

8,434 6,174
6,316 6,636 4,550

8,810 6,680
6,531 6,300 5,470

92
96 100

84

Companys Financial Strength

Factor ROI Leverage Score (0 to 7) Remarks ROE 23% RO- net worth 19 % Debt Reduced over the years D/E ratio= 0.03 More Owners fund Fairly liquid position Liabilities covered Operating profit growing Working capital requirements easily fulfilled

4 4 7 7

Liquidity Capital Reqd./Capital Available

Companys Financial Strength

Factor Cash Flow Score (0 to 7) Remarks Net cash flow positive No borrowings required for fulfilling WC needs High exit barriers Low risk in northern market

6 2 5

Ease of exit from the market Risk Involved in the business

Industry Strength
Factor
Growth Potential

Score (0 to 7)

Remarks
10.5 % CAGR. Gov-backed construction projects have created strong demand for cement in the country. Industry players will continue to increase their output Profits will remain strong for some years but may gradually erode, due to expected oversupply. However Industry dominated by large players may give control over pricing.

Profit Potential

Industry Strength
Factor Financial stability Score Remarks Demand Supply controlled by fewer players Growth in Economy will translate into growth of sector Downturns may affect temporarily
Technology not a trade secret Industy is highly up to date High Highly Capital Intensive

Technological Know-How Resource Utilization Capital Intensity

4 6 5

Industry Strength
Factor Ease of entry into market Score Remarks Highly Capital Intensive Ease only for bigger players as technology readily available Average Gestation Period : 2-3 Yrs Holcim, La Farge,HeidelBerg Highly Productive Nearing 100 % Capacity utilization

Productivity, Capacity Utilization

Environmental Stability
Factor Technological Changes Demand Variation Score (-7 to 0) Remarks Technology up to date. Rapid changes less likely Usually, the demand for cement grows at about 3%-4% above the growth rate of GDP. Cement demand rises with the progress in economic development, reaches a peak level, and then starts declining once all the developmental projects are in place and the country has achieved a very high level of economic growth

-1 -3

Rate of Inflation

-5

High Inflation. Increase in Fuel and Energy Costs

Environmental Stability
Factor Price Range of competing products Score Remarks (-7 to 0)

-1

Not much Difference Brand differences are not very visible

Barriers to entry into market

Competitive pressure Price elasticity of Demand

-3
-4

Capital Intensive No technological or IPR barrier

High New entrants also coming in Prices nearly fix High infrastructure growth Demand less likely to deviate

-2

Average Scores
Factor Companys Competitive Advantage Companys Financial Strength Industry Strength Environmental Stability Score

-2.13 5 5.5 -2.72

SPACE Chart

Financial Strength

Competitive Advantage

5.5

-7
-2.13

0
-2.71

Industry Strength

Environmental Stability

-7

SPACE Chart

Financial Strength

Competitive Advantage

5.5

-7
-2.13

0
-2.71

Industry Strength

Environmental Stability

-7

Strategies
Aggressive Posture : It must exploit existing opportunities. It should continue its development and investment strategies to weaken the competition Should look for related acquisitions Must control its resources to have competitive advantage.

Continue sea transportation Keep control over cheaper resources Keep investing in captive plants

Should Focus on overall cost leadership