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

2.2.4 Technological Factors 9

2.2.5 Ecological Factors 9

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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.

Companybeing 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

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 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

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

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 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

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

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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 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

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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.

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.

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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.

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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 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 .

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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 a 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.
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.
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● 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 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:

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 Key External Factors Weight Rating Score

Opportunities

0.15 4 0.48
Growing market share

0.09 4 0.36
Post earthquake reconstruction

0.08 3 0.24
Foreign direct investment

0.06 3 0.18
Industry self sufficiency

0.05 3 0.15
Increased urbanization

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. Objectives and
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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

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Key Internal Factors Weight Rating Score

Weaknesses

0.12 3 0.36
Transportation Costs

0.15 3 0.45
Clinker Imports

0.11 4 0.44
Cost of fuel & electricity

0.04 3 0.12
Partial capacity utilization

0.03 3 0.09
Employee turnover

Labor union 0.02 3 0.06

Total 1 4.31

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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 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

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relationship management. Because of the nature of the product, that can not 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 can not 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

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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.

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.

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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 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 it’s 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.

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2.9 BOSTON CONSULTING GROUP (BCG) Matrix Analysis

Shivam
Cement

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

Shivam

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
• Foreign direct investment
• Post-quake reconstruction
• Growing market share
• Increasing urbanization
THREATS
• Increased competition
• Labor Union
• Growing interest rate

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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 Weigh Produce Market Development

t Own 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

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Self-owned 0.04 3 0.15 3 0.3
limestone

More than 0.05 4 0.4 4 0.4

10% market
share

Skilled - - - -
workforce

4 - - - - -
manufacturin
g plants

Factors Weigh Produce Market

t own Developme
clinker nt

A TAS AS TAS
S

Weakness

1 0.12 3 0.15
Transportation costs 0.012

- - - -
Clinker Imports -

2 0.22 4 0.2
Cost of fuel & electricity 0.11

Partial Capacity 0.04 2 0.08 3 0.12

- - - -
Employee Turnover -

2 0.04 - -
Labour Union 0.02

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 1
Total

Factors Weight Produce own Market

clinker Developmen
t

AS TAS A TAS
S

Opportunities

Growing market share 4 0.48 3 0.45

0.15

Post quake reconstruction 4 0.36 3 0.27

0.09

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 Market

clinker Development

AS TAS AS TAS

Threats

Intense Competition 0.70 - - 4 0.23

Labor Union 0.08 0.08 4 0.28 - -

3 0.21 3 0.3
Increase in interest rates 0.10

Disruption in clinker - -
supply 0.09

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 Total Attractive Scores 4.09
(SWOT) 4.79

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.

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

30
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.

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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
⮚ 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.

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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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