NITHYA BABU – DAP0097

PRASHANT KHARE – DAP0101

RAGHURAM GUDA – DAP0208
SHIVANI SHEKHAR – DAP0163
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Contents
1 INTRODUCTION.................................................................................................................................................... 3
2 INDUSTRY ANALYSIS – Porter’s Five Forces ......................................................................................................... 3
2.1 Broader Environment ................................................................................................................................... 5
2.2 Future Outlook ............................................................................................................................................. 6
2.2.1 Industry Evolution ................................................................................................................................ 6
2.2.2 Industry Structure - Trends ................................................................................................................... 6
2.2.3 Recommendations ................................................................................................................................. 8
3 COMPETITIVE POSITIONING ................................................................................................................................ 8
3.1 Economies of Scale ............................................................................................................................... 9
3.2 Economies of Learning ......................................................................................................................... 9
3.3 Product Technologies .......................................................................................................................... 10
3.4 Product Design .................................................................................................................................... 10
3.5 Input Costs .......................................................................................................................................... 11
3.6 Capacity Utilisation ............................................................................................................................. 11
3.7 Residual / Operational Efficiencies ..................................................................................................... 13
4 COMPETITIVE ADVANTAGES (RESOURCES AND CAPABLITIES) .......................................................................... 14
4.1 External Sources......................................................................................................................................... 15
4.1.1 Ability to respond to change ............................................................................................................... 15
4.1.2 Adaptation to Unpredictability............................................................................................................ 15
4.1.3 Adaptation to Technological Changes ................................................................................................ 15
4.2 Internal Sources .......................................................................................................................................... 16
4.2.1 Business Model Innovation (Novel approaches to create values) ....................................................... 16
4.2.2 Innovations.......................................................................................................................................... 16
4.2.3 Show superior performance ................................................................................................................ 16
4.2.4 Deterrence and Pre-emption................................................................................................................ 16
4.2.5 Proliferation of product varieties ........................................................................................................ 17
4.2.6 Investment in Resources ..................................................................................................................... 17
4.2.7 Upgrade of resources .......................................................................................................................... 17
4.2.8 Cost Advantage ................................................................................................................................... 18
4.2.9 Test of Inimitability ............................................................................................................................ 18
4.2.10 Test of Durability .............................................................................................................................. 18
4.2.11 Test for Substitutability ..................................................................................................................... 18
5 FUTURE DIRECTION & EVOLUTION .................................................................................................................... 19
6 SWOT ANALYSIS ................................................................................................................................................. 20
7 CONCLUSION ..................................................................................................................................................... 22
8 REFERENCES ....................................................................................................................................................... 23

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1 INTRODUCTION
Cement is a fine mineral powder used as a binder for sand, gravel, and hard rock in concrete
for construction. The primary raw materials used in Cement production are limestone, clay,
and marl. Constructions and Infrastructure developments play an essential role in the country’s
economic growth, thereby making cement industry equally crucial as it is an essential element
in construction activities. The construction industry alone contributes 9% of India’s GDP
(Source: Investindia.gov.in), and the GDP contribution from the building materials industry
alone is 8%. Cement industry’s growth is primarily driven by extensive developments in the
construction industry segments (real estate and infrastructure developments). Globally, India
stands second in cement production and consumption after China. Currently, 98% of the
production capacity in India is run by the private sector. India’s domestic cement production
was nearly 294.4 million tonnes (MT) in FY21 (till Jan 2022). In FY 2027, cement demand is
expected to reach 419.92 MT. (Source: Cement Manufacturers Association, Ministry of
External Affairs, DPIIT , Heidelberg Cement Investors Presentation November 2018)

2 INDUSTRY ANALYSIS – Porter’s Five Forces

At first look, a surge in the private equity investment in real estate* and upcoming Government
initiatives suggest a highly lucrative market for new entrants in the cement industry. Below is
a step-by-step analysis using Porter’s Five Forces model to review the industry attractiveness.
(*24% YoY to US $477 million between July 2021 to September 2021, Source: Cement
Manufacturers Association, USGS Mineral Commodities Summary 2020, Crisil, Savills India,
News Articles, Union Budget 2021-22)

1. Entry Barriers for a new player in the Cement Industry can be categorized as High owing
to:

 Requirement of huge capital investment and large economies of scale to be profitable.

 Wide distribution and marketing channels are required, which can be difficult to
replicate by a new entrant.
 Any new entrant requires a strong brand identity to create demand.

 Such high entry barriers provide the existing companies leverage to drive Price and
Profit

2. The cement industry in India can be Top cement producers in India (Production % as of
categorized as an Oligopoly with few FY2020)
big players accounting for more than UltraTech Cement
Ambuja Cement
70% of the total market share. Some 5%
4%
4%
5% 31% ACC Limited
major companies are UltraTech Shree Cement Limited
8%
Cement, Ambuja Cement, ACC Ltd., Dalmia Bharat
10%
Shree Cement Ltd., Dalmia Bharat, Birla Corporation Limited
12% 21%
etc. This may result in High rivalry India Cement Limited
amongst the existing competitors to The Ramco Cement Limited
Others
further expand their market share.

Exhibit 1 (Source: Ibef)

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  Many of the large cement manufacturing firms have been increasing their
production capacity owing to the increase in demand through various Govt. initiated
infrastructure projects and an increase in housing demands.
 There is also immense competition amongst rivals to get Govt. projects and
contracts.
 Switching cost for the customer is low, especially between the more prominent
brands.
 Due to high capital investment, exit barriers are high.

 High competition may, in turn, bring some level of price control for the buyer.

3. The oligopolistic nature of this Industry also limits the bargaining power of Suppliers,
thereby categorizing it as Low; however, due to the large dependency on Coal, Raw materials,
and transportation network, the bargaining power of suppliers can be tagged under
Moderate.

 To control the dependency on coal supply, manage cost & carbon emissions and
improve energy savings, companies are now innovating in various ways to utilize
alternate fuel sources such as bioenergy by burning coffee husk, rice husks &
cashew nut shells, adoption of plant matter and refuse derived fuel (RDF), etc.
 Diversification of freight options is also expected to further reduce the current
bargaining power of suppliers. This may, however get impacted due to the rising
fuel costs.

 Due to the moderate impact in terms of the bargaining power of suppliers, the
cost and price of the end product is marginally driven by the suppliers.

4. The overall Bargaining Power of the Buyer can be categorized as Low. This can be
attributed to

 Substantial market concentration amongst a few large producers.

 In FY21, 55% of the cement demand in India came from housing and real estate,
which is not a concentrated buyer’s market.
 The lack of substitutes restricts buyers from exploring other alternatives.

 The low bargaining power of the buyers allows cement companies to drive
Prices and Profit up.

5. Threat of Substitutes for the Industry is Low. Although there are partial substitutes such
as asphalt, glass, steel, wood, etc., Cement currently has no direct substitutes.

 While some of the alternatives mentioned above may work in small construction
works, there is no substitute for Cement in most of its applications.
 In fact, Cement is now being considered as a substitute for Bitumen in the
construction of roads, thereby opening another market for the Industry.

 Low threat of substitutes helps companies increase their Price and Profit.

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2.1 Broader Environment

Technological Economic & Govt.

Market Factors Social Factors
Factors Factors
• "As per ICRA, in • High demand and • Extensive investment • Positive impact due to
FY22, the cement capacity expansion by major player Govt. Infrastructure
production in India is will result in increase towards capacity and housing projects
expected to increase of Jobs expansion, plant • Impact of Covid-19
by ~12% YoY. • Extensive projects optimization and • Inflation & possible
• As per Crisil Ratings, being undertaken by creating a safer recession may impact
the Indian cement Companies towards operational demand
industry is likely to reduction of carbon environment
add ~80 million footprint
tonnes (MT) capacity • Usage of alternate
by FY24 sources of Fuel to
• In FY2027, cement replace or reduce Coal
demand is expected to consumption
reach 419.92 MT.”
• Perennial Demand
• Source:
https://www.ibef.org/i
ndustry/cement-india

Barriers to Entry High (5) Low Attractiveness

Bargaining Power of Moderate (2 to 3) Moderate Attractiveness

Suppliers

Bargaining Power of Buyers Low (1 to 2) High Attractiveness

Threat of Substitute Low (1) High Attractiveness

Rivalry among Exiting High (5) Low Attractiveness

Competitors

The analysis summary suggests that the Cement industry is highly competitive, oligopolistic
and capital incentive, which may deter a new entrant to join the Industry unless backed by
heavy investment and a strong supply chain. For an existing player, it can be a lucrative market
to continue in owing to the expected future growth discussed below.

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2.2 Future Outlook
2.2.1 Industry Evolution
The cement industry has evolved a lot since the first world war. The cement industry's evolution
can be categorized into three phases, as shown in the timeline below.

Exhibit 2– Timeline of Cement Industry evolution (Source: Crisil)

During Total government control, when the Government had complete control over production
limits, prices, and distribution, they also introduced a Freight equalization system to ensure
reasonable prices for consumers and encourage producers to set up more plants. As this system
was inefficient, partial decontrol was introduced, where 66.4% of what was produced must be
sold to the Government at a ceiling price, and the rest could be sold in the open market. The
Government also helped increase the profitability of open market sales by reducing levy quota
and increasing retention prices. Post-1989, it was total decontrol, and the Government removed
its control on price and distribution. After deregulation, buyers governed the entire Industry,
which was a good move and has come a long way. While the first cement industry was set up
in 1904 in Tamilnadu, which eventually failed, India started seeing significant progress in the
cement industry from 1914 (even called the cement Era) when cement manufacturing started
in a plant set up in Porbandar, Gujarat. Before this, India was importing Cement from England.
During the initial period of cement production, the Industry had a surplus which resulted in
selling of Cement at a lower cost than the manufacturing cost and resulted in the liquidation of
many companies. Later, the war period affected the import supply, which helped in the boom
of the Indian cement industry as other factors such as availability of raw materials, increased
demand, labor cost, and support from the Government were favorable.

2.2.2 Industry Structure - Trends

The cement Industry structure is highly fragmented with over 70 players and dominated by few
major players resulting in an Oligopolistic market. Manufactures are classified into Pan-India
who are large players, regional players restricted to a few regions (North, South, East, West
and Central), and stand-alone players, who are currently only in few regions. A major change
in the industry structure first happened post-1989 decontrol resulting in Oligopoly, when there
were mergers of multiple companies with ACC, and it emerged as a dominant player getting a
majority of the market share. This trend continued and Ultra-Tech cement eventually emerged
as a leader with the highest market share, with top four dominant players accounting for over
70% of the total cement production in 2020 (Refer Exhibit 1 (Source IBEF)).

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Currently, the per capita consumption of Cement in India stands at 256 Kg, which is less when
compared globally. This provides the cement industry with growth possibilities and
opportunities for foreign players to enter the India market. Some of the large players are
investing extensively to increase their production capacity by expanding current operations and
setting up new units. On the other hand, new entrants in the Industry, such as Adani Group
have the potential to acquire smaller players and integrate the supply chain, thereby capturing
a large market share.

Infrastructure and construction sectors are the key demand drivers of the Cement industry, with
55% demand from the housing and real estate sector, 22% from public infrastructures and 10%
from industrial developments (Source: Ibef). Steady growth in the infrastructure sector resulted
in cement production reaching 350 MT as of FY 2021-22 post-pandemic slowdown in fiscal
2020. Further, it is expected to increase due to new infrastructure initiatives from Government.
Infrastructure developments are happening in steady pace all over globe would also boost
exports.
Per Capita
Year Production Imports Exports Consumption Consumption
'000 '000
'000 tonnes tonnes tonnes '000 tonnes Kg
2011-12 2,23,500.00 865.2 2,131.40 2,22,233.80 182.2
2012-13 2,40,614.00 725.3 2,135.80 2,39,203.50 193.7
2013-14 2,49,826.00 698.2 2,714.90 2,47,809.30 198.1
2014-15 2,61,338.00 1,051.50 2,313.60 2,60,075.90 205.3
2015-16 2,73,857.00 1,123.30 3,373.30 2,71,607.00 211.7
2016-17 2,70,375.00 1,708.90 2,676.90 2,69,407.00 207.4
2017-18 2,87,964.00 1,768.70 2,572.10 2,87,160.60 218.5
2018-19 3,27,722.00 1,485.20 2,253.80 3,26,953.40 246.4
2019-20 3,27,266.00 751.5 2,040.20 3,25,977.30 243.1
2020-21 2,84,913.00 780 1,712.40 2,83,980.60 209.5
2021-22 3,50,828.00 816.4 1,166.20 3,50,478.20 256
Exhibit 3 (Source: Industry outlook,CMIE)

Cement industry has one of the highest energy consumption and also contributes the highest
towards air pollution, but the major players in India have already adopted the green measures
and energy consumption measures. Hence, India is already producing World’s best class
greenest Cement. This adds additional advantage for India in cement industry growth as
majority of the countries switching to green initiatives due to global warming.
In Fiscal 2022, capacity of 30MT was added but profitability was affected due to the increased
cost of the fuel resulting in lesser cash flows. But, the Construction industry is expected to
reach $1.4 Trillion by 2025(Source: investindia.gov.in) and the Cement industry capacity is
also projected to increase by 135-145 MT by FY24(Source: Crisil) due to increasing activities
on infrastructures. And companies are now expanding their capacity to meet future demands
irrespective of the price inflations.

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Due to increasing trend in the prices of fuel and power and crude oil supply restrictions from
Russia will increase the operating cost for the cement industry as power and fuel contributes
close to 25% of operating cost. This will directly impact the profitability, but due to
decontrolled nature, prices can be pushed to consumers to retain the profitability.

2.2.3 Recommendations
Overall, while the cement industry is old and mature in certain aspects, it has a bright future
regarding demand and growth potential. Below are a few recommendations that can help
sustain industry profitability.
 To continue the leadership position with more capacity expansion, process
improvement, and modernizations.
 Backward and forward integration can help control cost and further improve
margins.
 More R&D innovations on fuel/power/raw material alternatives to be encouraged
and performed. This will allow companies to have the flexibility to switch to
alternate sources depending on their availability or economic factors.
 Continue to produce the World’s best class greenest Cement and focus on more
green initiatives as the cement industry contributes most to the pollution.
 Continued initiatives from Government on infrastructure activities and supportive
macroeconomic policies.

3 COMPETITIVE POSITIONING
In the Indian Cement Industry, most top players follow the cost-leadership model. Cement is a
basic ingredient for any construction. While different grades in the Cement are used/preferred
for different purposes, there is not a great difference between the commercial products offered
by different brands. As Cement is a commodity product, these brands and companies primarily
compete on price. Most of the focus of the innovation & research, mergers & acquisitions, and
automation initiatives are directed toward achieving cost-leadership in the market.

UltraTech is no different from the other top Cement producing companies. They proudly
proclaim their cost-leadership mission and direct their endeavours to achieve that goal, which
they believe would bestow them with the competitive positioning that they envision UltraTech
to be at.

The strategy statement of UltraTech mentions (Source: Annual Report 20-21) that they aim to
deliver superior value to all our stakeholders based on the four pillars of Sustainability,
Innovation, Customer Centricity, Team Empowerment. They plan to achieve this by
 Enhancing their Balance Sheet Strength
 Low-cost expansion
 Without Endangering the environment

Suppose we choose to set aside the third one, which is a social responsibility initiative and the
one where UltraTech had set high goals for itself in spite of being a cement producer. In that
case, the first two initiatives clearly drive home the point that the Firm is certainly a cost-leader
and these steps would further consolidate its position as a cost-leader.

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As we know, there are seven principle determinants of cost leadership that would examine how
a firm is faring in different aspects of achieving the cost-leader positioning. Let’s try and
examine how UltraTech is performing and faring with respect to these cost drivers and perhaps
identify any specific areas that it needs to improve upon.

3.1 Economies of Scale

Economies of Scale exist wherever proportionate increases in amounts of inputs employed in
a production process result in a lower unit costs. The predominance of large corporations in
most of the manufacturing, Infra and service sectors is due to this factor.

UltraTech, a company owned by the Birla Group, one of the largest conglomerate of companies
in India, has been extracting and enjoying the benefits of the huge scale it operates in. Let’s see
how they are achieving this.

 UltraTech is the largest producer of Cement in India and the third largest producer in
the World (except China). This is both in terms of the production and the Firm's
financial clout. The Company has been steadily adding more capacity to position itself
to be able4 to cater to the demand of the Cement and other related products which is
expected to take off in the coming years, not just in India but in other nearby
international markets where the Firm has its sales operations. It is well positioned to
propel the Emerging India narrative.

 With about 116.8 million Tonnes per Annum (MTPA) of overall grey cement
production capacity, 23 Integrated manufacturing and clinkerisation plants, 7
Bulk Packaging terminals, 1.5 MTPA white cement production capacity, and
over 130+ Ready Mix Concrete Plants (RMC) over 41+ cities, the scale at
which UltraTech is operating is huge, and it has further plans of increasing
these numbers, very quickly. About 20 MPTA capacity is planned to be added
by FY 23. It currently has a very healthy 21% share in the Indian Grey Cement
market. (Source: Annual Report 20-21)

 The scale economies of a product like Cement could be limited by the cost of
transporting the final product to various corners of the country. This challenge is
addressed and overcome by the fact that UltraTech has its plants in all 5 regions of the
country (viz., North, East, West, South & Central), which have well-distributed
capacities that match the demand in those regions. The expansions are also planned as
per the forecast demand increase.

 With over 33500 outlets, 74000+ retailers and close to 2500 UBS (UltraTech
Building Solutions) outlets, the Firm boasts of a distribution network that
reaches every corner of the country, strengthening its reach and impact and is
unrivalled in India. (Source: Annual Report 20-21)

3.2 Economies of Learning

Learning, repetition, and training have the power to develop and sharpen individual and
organizational skill levels and routines. Improvements in skill, understanding, and problem-
solving could be imparted to the individual workforce by properly designed training, and better
organizational routines and work cultures could be created.

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  UltraTech has spent about 3,22,594 Hrs in product training and 4,08,237 Hrs
in Safety training in FY 20-21 to enhance their human capital's skills and
capabilities.

The Company believes in empowering its workforce by allowing free, open, and inclusive
working spaces that are collaborative and performance-driven. They have targeted programs
called Springboard, UltraTechies, etc, to encourage and empower the women workforce. It has
been identified to be among the Top 30 Workplaces in India. (Source: Annual Report 20-21)

3.3 Product Technologies

Superior processes can be a source of huge cost economies. This could be achieved by Business
Processes Re-engineering or optimizing various workflows to realize hidden efficiencies.

At UltraTech, many initiatives like automation projects, Digitisation, and process integration
have been undertaken to realize the cost economies and strengthen the margins through
innovation in Process and Product design.

 Most of the operational workflows in logistics and other operational areas have been
digitally enabled through the Business Process Management tool, i-Approve, to
improve the operational efficiency and speed of decision making.
 Developing and using an integrated Digital Eco-system to manage and access
individual KPIs, delivery schedules, and even the supporting services like
transportation, verification, and delivery. An agile planning process and a unified
digital ecosystem have uniquely positioned the Firm to leverage the latest in Digital
Technologies and Analytics to realize new possibilities in operations.
 Significant changes in Information technology and higher levels of technology and ease
of communication, its seamlessness and functionalities that have wider acceptance and
usage will bring down the operating costs which deal with and implement optimization
systems with the usage of mathematical techniques and computer programming.

 Drones are utilized for the assessment of topographic maps for reserves and to
explore the captive limestone in detail, is being done. (Source: Annual Report
20-21)
 Long-term sourcing contracts for packing bags have been entered to securitize
a seamless supply of quality packaging materials. Due to the scale advantages,
these contracts are also expected to lower the cost again. (Source: Annual
Report 20-21)
 Focussed on clinker movement at optimal cost by collaborating with railways,
augmenting fleet capability at specific geographies. (Source: Annual Report
20-21)

3.4 Product Design

Research and innovation are benefiting not just the consumers but the Industry as a whole. The
Firm’s portfolio of building materials encouraging sustainability is expanding constantly,
backed by best-in-class technology and cutting-edge research. Apart from the main products
of grey & white Cement and Ready Mix Cement, the Firm also profitably operates initiates like
UltraTech Building Solutions and Products. This is trying to tap into the largely unorganised
portions of the construction sector and it was made possible by the introduction of new product
lines and the innovation behind it.

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  A total of 26.25 Crores has been spent in FY 20-21 on R&D. (Source: Annual Report
20-21)
 UltraTech is the first Company to conceptualize and implement a zero discharge Ready-
Mix Concrete (“RMC”) plant, the first of its kind RMC in the World. This year, it was
also granted a patent for the invention of ‘A Mineral-Based Composition for Use as a
Binder in the Manufacture of Cement’. (Source: Annual Report 20-21)
3.5 Input Costs
The cost advantage due to lesser Input costs is likely to be provided by

 Locational Differences in input prices: A quick look at the cost breakup would reveal
that the raw material cost of the UltraTech is much lower compared to its closest rivals,
Shree Cements of even Ambuja (& ACC). This is perhaps because the Firm has much
greater access to better-quality raw materials like limestone, mines, and quarries. All
its integrated Plants are situated closer to the mines, thereby minimizing the transport
and handling costs.

 Raw material costs rose marginally from ` 493/t to ` 504/t due to increased
additive and fly ash prices. An increase in diesel prices impacted inbound
transportation, resulting in higher raw material costs. (Source: Annual Report
20-21)

 Ownership of low-cost Sources of supply: Using Petcoke for production because of its
cost-saving and setting up a used-up Waste power plant to generate some of its energy
needs would be some of the new initiatives.
 The scale of economies is created when a firm tries to integrate its various operating
activities closer to the locations where the raw materials are available. UltraTech has
taken giant steps to ensure that most of its plants are closely integrated and are nearby
quarrying locations.

 They have captive power plants capable of 1170 MW to care for their energy
needs, out of which 273 MW (23.5 %) is Green Power. (Source: Annual Report
20-21)
 Overall energy cost declined 3.5% from ` 985/t in the previous year to ` 950/t,
mainly on account of saving in power consumption and an increase in the green
power mix. Furthermore, the Company continuously works towards efficiency
improvement. (Source: Annual Report 20-21)

 Bargaining Power: Being the largest player in the country bestows the Firm with a
unique advantage of high bargaining power with its suppliers and mining partners
giving it a cost advantage.

3.6 Capacity Utilisation

A plant's capacity for a given period of time is more or less constant (barring minor outages,
maintenance, etc). Variations in the actual output and the production (which is indirectly
controlled by demand and sales) would cause the utilization of these plants to change. It is
generally not advised to under-utilise a plant as the unit costs would likely go up due to fixed
cost components, affecting the contribution margins and the profits. Running the plant beyond

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a specific utilization limit is also not advisable as it might create inefficiencies and
irregularities.
We can see that the Utilisation of UltraTech is in a healthy range and even getting better over
the years due to process improvements and efficient operating procedures and protocols.

Exhibit 4 - UltraTech Plant Utilisation Trend (Source: Statista)

When we compare the utilization numbers of UltraTech with other major players, we see that
the Firm is among the better utilization numbers. Given the vast capacities at which UltraTech
operates and still having comparable and even better Utilisation Numbers would only present
the kind of operating efficiency and well-oiled processes that the Company has in place.

These in turn, would result in making the Company gain the cost advantage and consolidate its
position as the market leader and a Cost Leader at that too.

Installed Market Plant Utilisation %

Cement Company
Capacity Share
FY 21 Q4 FY 21
UltraTech 116.8 21.40% 74% 93%
Shree Cements 45 8.30% 66% 73%
ACC 34.5 6.30% 78.30% 90%
Ambuja 29.7 5.40% 81.20% 96%
Dalmia Cements 30.8 5.60% 67.30% 90%
Exhibit 5 – (Source: Annual Reports of the above companies)

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3.7 Residual / Operational Efficiencies
This refers to removing the residual inaccuracies and inefficiencies that may otherwise restrict
the above-mentioned actions from achieving the expected returns/results. Residual /
Operational Efficiencies make the processes water-tight and ensure that actions yield the
expected returns. They are sometimes also called the Organisational Slack or Managerial
Inefficiencies.

 UltraTech has been taking steps to ensure that such inaccuracies and
inefficiencies are kept under a check and save it from any threats that these
may cause.

By examining all the steps mentioned above and the way UltraTech is endeavouring to adhere
and implement various cost drivers in their operations clearly proves that UltraTech is a Cost
Leader and Cost leadership remains their priority across every aspect of operations, aiming at
which they have adopted best-in-class technologies to rationalize costs and strengthen margins.

Cost leader Differentiator

Cost
Broad Differentiation
Leader

Narrow Cost Focus Focus Differentiation

UltraTech and most other cement companies would fall under the shaded Green area in Q1
(Cost Leader) Quadrant. None of them could do a successful Differentiation in such a mature
market. Also, there are not any major players to do Focused production of a particular
variant/product.

The Cement industry is a very old, rigid and mature industry where it is not common to see or
even expect any Drastic change or innovation. It would soon be absorbed and normalized even
if any breakthrough change happens. The product is considered a commodity, and there is a
very little chance that we could see a Niche or Differentiator in this market. The only seeming
way for UltraTech (or any other player) to become a “Numero Uno” in this market is by being
a Cost Leader and sustaining that position by a continuous and constant endeavor to teach more
and more cost drivers that’ll help the Company consolidate being a Cost leader.

So, not just UltraTech but all other major players in this Industry would have to aim to be a
Cost-Leader.

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4 COMPETITIVE ADVANTAGES (RESOURCES AND CAPABLITIES)

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4.1 External Sources
4.1.1 Ability to respond to change
For the longer run ,UltraTech expects a shift in the market requirement and consumer
behaviour, moving from Cement towards concrete as the end-product and preferring
lightweight constructions with less effect on the environment. This will lead to improved
economic and environmental efficiencies. Also, UltraTech has seen a gap in providing end-to-
end solution in the construction industry. The Company has adapted to this change and brought
ready mix concretes under the ‘UltraTech Concrete’ name. Its product Litecon, won the
‘Innovation for Sustainability award’, is a useful lightweight construction material with both
non-structural and structural versions. Starting from 2007, the Company also started providing
all the building solution needs under the name of UltraTech Building Solutions, a retail format
that caters to the end consumer by providing a variety of primary construction materials under
one roof, and now it has expanded to 2500+ stores across India.
Demand for sustainable construction will also increase in this sector, providing enhanced
partnership opportunities across the value chain with different sectors. Government rules and
compliances will be looking for more efficient use of natural resources against which UltraTech
plays a vital role towards by following global best practices to act as a leader and focusing on
reducing carbon emissions, energy reduction, water management, waste management,
biodiversity management, resource management and community relationship management.
The Company has innovative products for consumers with a lower carbon footprint across
production, manufacturing, usage, and disposal. It has enabled communities near
manufacturing facilities, network partners, and the workforce to support in company’s
commitments to shared value creation. Selection of fuel-efficient transport options and vendors
near manufacturing locations, use of municipal solid waste and industrial waste as fuel, and
rainwater harvesting across plants are other practices adopted by the Company.
4.1.2 Adaptation to Unpredictability
The COVID-19 outbreak and the lockdown had shut down cement plants across India for a
month, from the end of March 2020. At the end of the lockdown, Company started acquiring
all relevant permissions to resume operations. It was a tough time because of the non-
availability of workers. UltraTech has sustained by making cautious decisions and responding
to the situations accordingly. Company's strong distribution channels supported the sales, and
UltraTech also started selling products directly. Plant of Solapur District of Maharashtra began
operations the same night when employees showed commitment to their work after
Government allowed the highway construction work to be resumed. Though operations on
plants were halted post-lockdown, UltraTech had continued providing emergency services to
the plants, such as water and power, so that operations could be resumed as quickly as possible
once Government clears the order.
4.1.3 Adaptation to Technological Changes
Alongside environmental sustainability, digitalization also has a bigger impact on our World.
Decarbonization and digitalization are trends forcing sectors and companies to go for structural
change to alter traditional business models. UltraTech has taken digital transformation as a
potential to use resources for economic growth and make the operations safer and more reliable.
UltraTech has successfully piloted initiatives leveraging Artificial Intelligence (AI) across the
manufacturing value chain of cement plants, thermal power plants, safety, mines, etc. Company
Partnerships with technology experts to develop holistic solutions to make manufacturing

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operations environment friendly and plants less resource-intensive. It has launched Mobile and
payment technology solutions for the sales network, dealers, and retailers. It has also integrated
RFID sensor-based systems deployed at the truck yard and inside plants for regulating vehicle
movement leading to improved safety and turnaround time.
4.2 Internal Sources
4.2.1 Business Model Innovation (Novel approaches to create values)
Recently, all products and services are available under one roof – from shopping malls to e-
commerce websites. Anything can be bought quickly and conveniently with a single click. This
is the competitive advantage opportunity figured out by UltraTech in 2007, and they have
started a one-stop solution in the construction industry by providing an UltraTech Solutions
(UBS) concept. This is the first pan-India multi-brand retail chain that considers individual
home builders' requirements at all stages of the construction. Through this platform, UltraTech
partners with end customers and provides them guidance through experts, dedicated call
centres, and informative literature. It helps them understand the nitty-gritty details of building
a dream home. UltraTech has partnered with India’s premier construction product companies
such as Berger, Pidilite, Sintex, Supreme, Astral, etc, to offer customers a comprehensive
solution of best-in-class products and services. It is now expanding to 2500+ stores across India
and is able to create value for its customers and contractors by providing them high-standard
products, assured supply, and satisfaction in terms of services and solutions from a reliable
source.
4.2.2 Innovations
UltraTech benchmarks its sustainability practices with global players through Global Cement
and Concrete Association (GCCA). It has a dedicated team of more than 50 scientists and
engineers to conduct R&D and scientific research. Company’s innovation hub offers
scientifically engineered products to cater to new-age constructions. The Company started
using alternate raw materials such as fly ash, chemical gypsum, and slag, which help in
conserving natural raw materials, and started using industrial waste as alternative fuel and
material in cement manufacturing. Incinerating waste in cement kilns, also allows cement
companies a huge opportunity to reduce the use of fossil fuels. It has also taken various
initiatives such as digitalization, alternative fuel & materials usage, and adoption of renewable
energy sources to decarbonize their operations.
4.2.3 Show superior performance
To sustain a competitive advantage, companies must preserve superior profitability against
rivals. UltraTech is superior among other players in this space and has the biggest market
capitalization, and its closest competitor, Ambuja cement, is far behind in numbers. With
competitive strategies, UltraTech has maintained a consistent performance over the years. In
terms of revenue growth, sales volume, and profit margins, the Company has excelled
compared to its competitors. Also, as of now, Company has installed a capacity of 117.95
MTPA of grey cement whereas Ambuja Cement’s installed capacity is just 25% of UltraTech’s
at 29.65 MTPA
4.2.4 Deterrence and Pre-emption
Economic deterrence occurs when a company pre-empts a competitor by making a sizable
investment. The competitor could replicate the re-source but chooses not to do large
investments because of limited market potential. UltraTech has edge here, and it did well over

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the years. It has created a massive assets infrastructure that is almost impossible for others to
replicate. UltraTech is one of the largest manufacturers of grey cement, white Cement and
ready-mix concrete (RMC) in India and the third largest cement producer in the World, and the
only Company to have 100+ million tonnes per annum (MTPA) production capacity in a single
country. Its operations spread across India, UAE, Bahrain, Bangladesh and Sri Lanka. It has
20 integrated plants, 26 grinding units, seven bulk terminals, more than 50 cement plants and
130 RMC plants. The Company also holds 900+ warehouses, 250 Railheads, 20670 Global
workforce, and 100,000+ distributors. Other companies in this segment do not stand even close
by.
4.2.5 Proliferation of product varieties
UltraTech has a sizable market share for the use of many variations of its products which gives
an advantage in creating a position in the market. The Company is enhancing and expanding
its portfolio of green products. It has a huge range of products for all the requirements of any
sector be it a home builder, real state, industrial or institutional, to cater to various aspects of
construction, from foundation to finish. They have products for Waterproofing solutions,
highly resistant to wet cracking and thermal cracking, and a slew of speciality concretes to
meet the specific needs of discerning customers. The Company also provides a bouquet of
related construction products and services.
4.2.6 Investment in Resources
Corporate strategy requires continuous investment in order to maintain and build valuable
resources. UltraTech has done a fabulous job in doing that which is evident with the given data
and its market position. In the year 2021, Ambuja Cement could achieve a capacity utilization
of 75%, while UltraTech reached a capacity utilization of 99% in March 2021. In 2020
company decided to increase the manufacturing capacity by 12.8 MTPA and announced a
capex of 5,477 crores for the expansions. Once the production from the new capacity in Q4 FY
2022-23 starts, this expansion will help make the company debt free. Another investment of
Rs 12,886 crore ($1.66 billion) in Jun 2022 is made to increase the cement maker's annual
capacity by 22.6 MTPA. Upon completion in FY 25, the Company's capacity will grow to
159.25 MTPA. The Company is consistently scaling up its contribution to the circular economy
by utilizing 20.29 million tonnes of Alternative Raw Material (“ARM”) as part of its production
operations. The Company’s plants and processes are constantly driven to become more energy
efficient. The Company also continues to increase the use of renewable energy as part of its
energy mix. It has increased renewable energy consumption by more than 50% compared to
the previous year.
4.2.7 Upgrade of resources
UltraTech is partnering with suppliers and other technology partners for solutions to make
manufacturing operations environment friendly and less resource-intensive and solutions to
make efficient logistics operations. UltraTech is well-placed to leverage the opportunities by
improving energy productivity and continuously upgrading the energy management systems.
The Company upgraded its transport to fuel-efficient options and modified the plants to use
waste as fuel. 106,000 tonnes of industrial waste were used as fuel in the year 2020-21. After
upgrading the resources, it becomes water positive and has zero water discharge at all plants.

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Its employees receive periodic training and are upskilled based on the nature of their work.
UltraTech cement skill-building program aimed at improving the quality of construction, has
trained 90,000 masons and contractors to sharpen their technical skills.
4.2.8 Cost Advantage
UltraTech has taken cost-cutting initiatives to lower expenses and drive profit margins. It has
adopted best-in-class technologies to rationalize costs, strengthen margins, and procured new
technology equipment that drives fuel and cost-efficiency. It has started entering into long-term
sourcing contracts for packing bags to securitize a seamless supply of quality packaging
materials to expect less cost of bags compared with market. The Company’s strong
geographically diverse global vendor base, strategic partnerships, and close monitoring of
market dynamics enabled them to counter the supply disruption in petcoke by switching to
other competitive fuels from multiple origins. Because of given initiatives, despite the increase
in the price of raw materials like pet coke and diesel, the total cost for the products hasn’t gone
up.
4.2.9 Test of Inimitability
UltraTech has a large production capacity, built up over the years, which helps them enjoy
large economies of scale and the highest market share in India.
This is further strengthened by the geographic distribution of their plants across all regions of
India with a strong distribution channel.
It will be difficult for any new entrant or existing small competitors to replicate.
4.2.10 Test of Durability
The main reason UltraTech enjoys the market leadership it does is its high capacity and the
high scale that it operates.
If we try to look at the “Test of Durability: How quickly does the resource depreciate” or we
can even rephrase this as “How long can the firm enjoy the advantage it is gaining out of this
resource”. When posed with this question, as the resource is physical (capacity, productivity
and network), it has a certain life span depending on what kind of apparatus it is. It should go
to End of life after that duration.
But, given that the company knows this information apriori, they can plan for a graceful
retirement and replacement for every piece of plant, machinery, or any other physical plant.
With the older and replaceable components getting replaced properly per the schedule, we can
see that the resource passes the durability test. Only a huge macroeconomic disruption like a
natural disaster, a war, sudden unavailability of Raw material, etc could cause a failure.
4.2.11 Test for Substitutability
While the cement industry as a whole does not have a direct substitute, Cement created by
various companies is not differentiated much in terms of the final product.
In addition, the switching cost for a consumer is low, thereby putting UltraTech at risk in terms
of Test of Substitutability.

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5 FUTURE DIRECTION & EVOLUTION
The World’s cement demand is likely to grow steeply especially in developing countries. India
being one of them and spearheading the Infra and Development in the World, is sure to create
a huge demand for Cement in the coming years.

 The Government has committed itself to a plethora of Infra Projects to fast-track the
economy that is getting back on its feet after the pandemic.
 The housing boom is slowly returning back, at least in the tier-I and tier-II cities, after
being apprehensive for a couple of years. The availability of housing loans and the
increased spending power of the middle class are fuelling this demand.
 The private sector is also getting back strongly and is demanding more & more
commercial and office space.
 Looking at a few other countries in Asia and India, we could be sure that they will spur
growth in the coming decade.

This kind of growth forecast would need the Indian Cement Companies to grab the potentially
growing opportunities. When we look at the UltraTech, in particular, there are some really
specific opportunities for it to consider.

 Being the largest producer of Cement in India with almost 120 MTPA Production
capacity, UltraTech is better placed than other Indian companies to scale up to the new
requirements and developments in India and abroad.
 UltraTech can plan to quickly increase its capacity by investing in CapEx expansions.
Caution should be exercised here to ensure that these new plants become operational as
soon as possible and not take years to come to the party. This could only mean that
most of these capacity expansions should be done as Brownfield investments.
 The Company could look to acquire some of the existing smaller players as most of the
larger players would look to consolidate their positions by acquiring smaller produces,
especially with the time taken to get a Greenfield plant functional being at least 5 – 7
years, compared to 6 – 9 months for a Brownfield Plant.
 This would consolidate and re-distribute the current capacities among the current top
tier players and protect these Brownfield capacities from falling into the hands of off-
shore companies, who’d also be eyeing catch the Infra storm that is brooding in India.
 The fact that UltraTech mentions this in their Strategy statement, is that a)
they’d be aiming to do low-cost largely Brownfield CapEx and b) that they
have committed to spend Rs. 12,800+ crores in the next few years on CapEx
strengthens this argument and confirms that the Company is in the right
direction. (Source: Annual Report 20-21)

 Apart from increasing the CapEx, with the growing concerns on Carbon footprints,
especially of larger companies, it’s also important that the Company tries to get into
Greener solutions and operation procedures.
 With increasing concerns within India and even internationally over the issue, there
might be some restrictions and directions from the Government to these companies to
be more responsible towards the environment. If not ready, these restrictions could send
all the plans of the Company for spin.
 UltraTech, for its part, has stated that all its goals be met “Without Endangering the
Environment.” Initiatives like the Increase of Green Energy in its Power mix, Water
Positive Index and usage of re-cycled and harvested water for its operation, usage of
Waste Heat Recovery for generating some of its power would put it firmly on that path.

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  Targets like achieving Carbon Neutrality by 2030, increased targets for
conversion rate and Water positivity would place UltraTech in a position take
up the GREEN challenge and come out successfully in a future would where
these changes look unavoidable

6 SWOT ANALYSIS
Looking at and considering the analysis of all the above factors and situations about the Cement
industry in India and specifically how these factors build-up to affect The UltraTech and its
strategy and how it’s evolving, we can now attempt to understand, in one place, the Internal
and External influencing factors that shape up the core strategy of the Company in the form of
a SWOT Analysis.
Internal Factors
Strengths: Weaknesses:

1. UltraTech is the Largest Cement 1. The brand UltraTech is very closely

producer in India, both in terms of
production (116.8 MTPA) and the
market share (21% share).
2. UltraTech is India's largest exporter
of Cement amounting to 30% of the
industries exports. This also
enhances the brand’s international
presence and value.
3. Apart from the grey cement, it also
leads in related products like white
Cement, Ready Mix Concrete,
Building Solutions & Materials, etc,.
Creating a hold in the supplementary
markets.
4. The Firm usually operates most of its
plants in an integrated manner,
creating a lot of operational
efficiencies and saving a lot of
overhead costs and time.
5. UltraTech is part of the Aditya Birla
Group, which is a huge brand and
brings in a wealth of management
experience, financial clout, customer
confidence & trust.
6. With an elaborate R&D effort,
UltraTech is at the forefront of any
innovations in the Industry.
7. In spite of being in the Cement
Industry, it has set steep standards in
achieving Carbon neutrality, Water
positivity, and other Green
Initiatives.
associated with only Grey Cement,
and the fact that it has some really
good other products is lost on the
customers sometimes.
2. On the other side, the brand is not
very well known in the international
markets compared to other brands.
3. The international presence is limited
to a small number of growing
economies but almost none in US and
Europe.
4. The workforce is mostly expected to
comprise rough labour, and training
them could be costly. The unhealthy
working conditions and locations
does not incentivize the workforce
either.
5. Cement being a commodity product,
the dealers and even the customers do
not necessarily have brand loyalty.
6. With the cost game getting nastier
between the companies, per unit
profitability is taking a downward
trend.

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 8. With an elaborate distribution
network of dealers and retailers
across the country, it has a reach that
is second to none in the Industry.
External Factors
Opportunities
1. The entry barriers into the cement
industry are higher than ever due to
extremely high CapEx, licenses and
Government regulations.
2. There is expected to be a huge growth
in the demand for Cement in coming
years due to the governments new
Infra push, growing comfort at
individual and institutional levels to
pursue property expansions and
acquisitions.
3. Expanding the footprint & presence
in larger and wealthier markets like
America, Europe, JAPAC, etc., and
promoting the brand internationally.
4. Pursuing collaborations and tie-ups
with smaller local players who have
better public relations and also
understanding of the landscape in
both domestic and international
markets.
5. Encouraging the research and
technological innovations to propel
not just the product design and
production but also the operational
aspects like processes and the
subsidiaries like raw material
handling and transportation.
6. Exploring the developments and the
opportunities in the online and digital
space and how those breaking trends
and technologies could be used to
enhance companies’ overall
performance in production,
operations, marketing, sales, and
even accounting domains.
Threats
1. With the domestic cement landscape
growing more and more greener,
there is an imminent threat of
invasion from the foreign players.
These huge, cash-rich players would
be difficult to tackle, especially in a
cost market.
2. New re-structuring in the domestic
market (Entry of Adani Cements)
could disrupt the market equilibrium
and pose a fresh threat to the market
leadership of UltraTech.
3. Changing political environments and
stabilities both domestically and
internationally is not good for any
firm this huge, especially when there
are multi-fold dependencies for raw
materials, government priorities, etc
4. The continuously changing
technological landscape needs
UltraTech to constantly upgrade their
technology game and might become
stale and would face the threat of
competitors taking over with better
tech.
5. In spite of taking a lot of Green
Initiatives, UltraTech being in an
industry that is primarily known for
creating environmentally negative
impact, might face the wrath of
regulating and enforcing authorities.
6. Cement being a commodity and
especially in a cost market, could
soon become a less profitable
industry.
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7 CONCLUSION
The cement industry is consistently growing over the years because of the country's continuous
demand for housing, commercial space, and other infrastructure activities. This Industry is
categorized as an Oligopoly market where only a few big players dominate and further expand
the capacity to fulfil the future demand. According to “Investment Information and Credit
Rating Agency of India Limited” (ICRA), the cement production in India is expected to grow
by 12% YOY majorly because of initiatives on rural housing and government focus on
infrastructure development, urban housing, and other commercial activities. Also, high
allocation under the Indian union budget FY 2022-23 for infrastructure, affordable housing
schemes, and road connectivity projects will further increase the production demand in this
Industry. Citing there is no direct substitute for Cement, this potential drives a huge investment
in this Industry by different companies. As this sector is capital intensive and requires huge
investment and a strong supply chain network, the expected surge in demand is an excellent
opportunity for the well-established players to increase their market share and capacity
utilization, but possibly this will squeeze the growth of small players. Being a market leader,
UltraTech has already started multiple capacity expansions and targeting to achieve 150+
MTPA capacity by the year 2025. As a market leader, it has better bargaining power, which
helps achieve lower production costs compared to smaller rivals. The Company also tends to
have better distribution channels, which helps improve market share and capacity utilization.
UltraTech spends a good amount of money on innovations, skill building for its employees,
and upgrading resources. Its product LiteCon is an innovative material for lightweight
constructions, Unique business solutions provides a one-stop solution for all the needs under
one roof. The economy of scale helps UltraTech to maintain its cost. To further lower or sustain
the cost, Company has also taken initiatives on packing bags and finding alternatives for
petcoke. As demand for sustainable construction is increasing, government rules and
compliances will be looking for more efficient use of natural resources to focus on reducing
carbon emissions, energy reduction, water management and waste management, Company has
innovative products for consumers with lower carbon footprint across production,
manufacturing, usage and disposal. UltraTech has also started converting its plants to run on
renewable sources of energies.
Ambuja and ACC, which are backed by Adani, are also accelerating the growth and committed
to doubling the capacity is every 5 years. This is a potential threat for UltraTech to toppled
from its position in next 10 years. UltraTech has already seen this challenge and started capacity
expansion by considerable investments in building manufacturing plants. They can further join
hands with small players to rely on their infrastructures to start the operations quickly.
However, it is hard to retain the lead position by only increasing the capacity and this is well
known truth for UltraTech. Cement comes with certain grade quality, and all the companies
more or less produce the same products, so for any company, there is no product differentiator
advantages. To retain its position along with increasing market share, UltraTech has to
continuously provide unique solutions, adapt the new demand of sustainable construction,
provide cost-effective products, and comply with government rules and regulations. Also, they
have a reliable name of Birla, which customers trust for generations, and continuous support
from its employees and distributors helps it to sustain its market leadership position.

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8 REFERENCES
https://www.ibef.org/industry/cement-india
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Textbook - Contemporary Strategy Analysis 10th Edition - By Robert M. Grant

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