Industry Influences

Second step of valuation process is to identify global industries that will prosper
or suffer in the long run. In Bangladesh, the listed manufacturing industries are
cement, food & allied, fuel & power, jute, paper& printing, tannery industries etc.
Among them, cement industry has an optimistic future.
The cement industry is one of the main industries necessary for sustainable
development. With the development of the country and the increasing amount of
construction, local, entrepreneurs and varies multinational companies stared
producing cement in Bangladesh during the nineties after witnessing the potential
of this industry. The magnitude of cement demand is growing with the modern
time. According to the latest industrial data of Bangladesh Bureau of statistics, the
cement manufacturing sectors has witnessed a growth of 0.26% year per year to
1.79 crore tonners till April 2022.
As many as 76 cement manufacturing companies are registered but 42 large,
medium and small companies currently operating but 10 companies comprise
more than 75% of the market share.

Company Name Share (%)

Shah 12.96%
King Basundhara 12.13%
Fresh 8.72%
Crown 7.27%
7-Circle 7.21%
Premier 6.19%
ScanRuby 5.36%
Lafarge 5.16%
 Akij 4.10%
Holcim 2.89%
Total 71.99%
Other players 28.01%

Grand Total 100.00%

In listed manufacturing cement industry, 7 companies are included. These are:

 ARAMITCEM (Aramit Cement Limited )
 CONFIDCEM (Confidence Cement Ltd.)
 CROWNCEMENT (Crown Cement Ltd.)
 HEIDELBCEM (Heidelberg Cement Bangladesh Ltd.)
 LHBL (Lafargeholcim Bangladesh Limited)
 MEGHNACEM (Meghan Cement Mills Ltd.)
 PRIMIERCEM (Premier Cement Mills PLC)

Porter’s concept of competitive strategy will help to find out competitive position
in the cement industry. After determining the competitive structure, we can
determine the relative position of “Meghna Cement Mills Ltd.” Within the
industry.
 1. Rivalry among the Existing Competitors:

Rivalry within the cement industry is moderate. The structure of the market
tends to be oligopolistic in different regions around the world. In other words,
only a few firms control the market in many different countries & cement
products are not differentiated & this means that competition between existing
firms can get intense. So, the combinations of the above results in moderate
rivalry within the global cement industry.
 Industry Competitive Structure : Cement industry is one of the highly
competitive & consolidated industry that is characterized by a few large
players & many small players & the industry is dominated by a handful of a
multinational companies each with a significant share of the global cement
market. Regional cement companies that is operate in specific regions on
countries tend to have smaller market share compared to the global
players. King Basundhara, Crown, Premier, Akij these are major players in
the cement industry & their market shares are 13%,7.27%,6.19%,4.10%
 respectively & market growth are -7.65%,7.37%,15.79% for the last 2018 to
2020( Jan- Aug).
 Industry Demand: The demand for cement industry is high. As cement is
an essential construction material used globally & it is the 2nd most
utilized product. Cement usage is increasing in developing countries like
Bangladesh & this industry in Bangladesh is the 40th largest market in the
world. The Bangladesh government has undertaken numerous
megaprojects that require massive cement to build it & the industry in
Bangladesh has played crucial role in developing infrastructure as the
economy has been growing over the years.

 Cost Conditions: Cost condition for cement industry is high but sometimes
it can vary depending on various factors such as cost of production inputs,
transportation costs. Bangladesh imports necessary raw materials for
cement production from various countries & the cost of raw materials such
as limestone, clay & gypsum can have a significant impact on the cost of
cement production. Cement producers need to transport their products
from their manufacturing plants to their customers, which can be costly.
Besides, Government regulations can impact the cost of cement
production these regulations can require cement producers to invest in
pollution control technologies which can increase the cost.

2. Threats of new entrance

For a cement industry in our country, threat of new entrance is low. It requires
huge amount of capital to open a business.
 Economies of scale: Production is heavily depended on imported raw
material (clinker) from Indonesia, Thailand and UAE. 5.12 million tonnes of
clinker, limestone, gypsum was imported at 34% higher price than previous
fiscal year.[ Mohammad Sumon, daily star, 04 September ,2022].On the
other hand market is very competitive and producers struggle hard to
achieve economies of scale. New comers are likely to face a difficult time
 entering the market unless they plan for higher budget.[light castle
analytics wing]
 Brand loyally: Brand loyalty in the cement industry is influenced by various
factors, including product quality, price, availability, and customer service.
Cement companies that invest in these areas are more likely to develop a
loyal customer base and succeed in the market. There are many existing
companies dominating the market with higher percentage of market share
like Shah Cement, Holcim, Premier cement, Mir and Seven Rings. These
firms consistently deliver high-quality products, offer competitive prices,
and provide good customer service. To gain trust of customers is always
questionable for new entrance.
 Absolute cost advantages: The absolute cost advantage is high for the
existing companies as they have the ability to produce more and sell more
of a service than new comers using the same amount of resources. Which
reflects that existing company have proper chance to increase economies
of scale. The cement industry has been investing heavily in technology to
improve efficiency and reduce costs.
 Government Regulations:
Higher tax: The Bangladesh cement industry, already fighting a price war amid
overcapacity, soaring dollar, energy disruptions, higher transportation costs and
letter of credit issues, now has a new problem to deal with – the newly added
30% supplementary duty on limestone imports and increased advance income
tax. [TBS report, the business standard]
Environmental: The utilization of recycled-fiber packaging is identified as the
most rated factor which followed by the utilization of environmental affable
manufacturing process [Raju, R., Environment sustainability practices in
Bangladeshi cement industries]
Labour regulations: Bangladesh Labour Act (BLA) 2006, which codifies all of
Bangladesh's labour regulations and establishes criteria for safe working
conditions and worker compensation in the case of injury or death. Bangladesh
National Building Code (BNBC) 2006, which specifies the minimum design and
construction requirements for all buildings in Bangladesh and includes rules for
safe construction methods and worker welfare.
And other rules to follow are quality standards and price control. So it would be
very difficult for a new company to maintain these at a very first stage.

3. Bargaining power of buyers:

This simply refers to the effect customers can exert on a particular industry. The
buyers in the cement industry in Bangladesh are mainly construction company’s
real estate developers and government agencies. The majority of buyers are bulk
buyers. One potential bargaining power with the buyers is the threat of importing
cement. However, this threat is limited to an extent as the cost of import will
increase the overall cost of the project. There are around 38 active cement
companies operating in Bangladesh. The major cement companies include
Meghna cement, LafargeHolcim Bangladesh, Heidelberg Cement Bangladesh
Limited, Premier Cement Mills Limited, and Seven Rings Cement.10 big companies
hold 77.99% market share in this industry. Lack of substitute product, small
number of cement firms and the huge demand for the product results in the
limited bargaining power of the buyers in this industry.

4. Bargaining power of suppliers:

In cement industry, bargaining power of suppliers are Moderate.

Because the main raw material of cements is limestone which is readily available
in Bangladesh. Eocene limestone occurs in Bangladesh near surface in the
sunamgonj and sylhet district and subsurface in the joypurhat, bogra and
noagaon districts. The surface to near surface deposits are at Saint Martin’s island
of cox’s bazar district and bhangerghat-lalghat-takerghat of sunamgonj.
Next important raw material is clay. There are surface to near surface deposits of
white clay in bijoypur and gopalpur area of netrokona district, nalitabari of
sherpur district, haidgaon of Chittagong district and baitul izzat of satkania Thana.
Suppliers are weak in this situation:
 Large number suppliers relative to buyers.
 Companies in the industry would not experience significant switching cost.
 Availability of raw material force down input prices and demand higher
quality inputs.
And again other raw material like clinker, slag, gypsum, fly ash etc. are imported
in recent time in a large number. The suppliers has a great influence on price as
these are imported from other countries. So overall inside and outside country,
the suppliers’ power are moderate.

5. Threat of Substitutes Product:

 Cement is a widely used construction material and does not have many direct
substitutes. In Bangladesh, there are limited substitutes available for cement, and
they are not widely used in the construction industry. Therefore, the threat of
substitutes is low. However, alternative building materials like steel and wood can
be used in some applications, giving buyers some degree of substitution options.
There exists some other substitute product for cement in construction industry
like, Fly Ash, Geopolymer, Natural fiber reinforced concrete (NFRC), Recycled
concrete aggregate (RCA).