ULMS519: GLOBAL CORPORATE STRATEGY
MAY 2022 EXAM
ANSWERS BY: 201602773
MSc Business Analytics and Big Data
University of Liverpool Management School
Answer 1.
This paper's critical reflection on Porter's Five Forces will centre on the cement industry
(Dangote Cement). The purpose of using this theory is to evaluate the competitiveness of the
African cement industry. The scope of the research is limited to Africa's major cement
industrial chains.
The five forces are a comprehensive approach to understanding the fundamental underlying
determinants of profitability and competency in any sector. Porter's 5 forces analysis is useful
when studying an industry's external environment; it is used to understand the dimensions
that control competition within the industry so that businesses may build a strategy that will
ensure competitive advantage and optimize profits over time.
The strengths of the five factors in the cement business and the extent to which Dangote
Cement is positioned against these forces have been discussed below.
1. Barriers to Entry(high)
With long gestation durations and high capital expenses, entering the industry is
expensive, given the capital cost of around US$ 17,000 to US$ 20,000 per ton
(estimated). The location of the cement factory also becomes critical. When choosing
a plant location, there is a trade-off between accessibility to raw material suppliers and
proximity to markets. The factory should be located near the mineral reserves to
reduce raw material assembly costs.
In the cement sector, there are a lot of rivalries. On a national basis, the African cement
business is oligopolistic, with the top six firms out of more than 26 (in West Africa)
grabbing 73% of the market. This nature has remained constant over time.
2. Buyer Power(low)
This refers to the impact that customers may have on a certain sector. Because most
purchasers in the cement sector are bulk consumers, negotiating strength is limited.
Facts show that in the cement business, the absence of replacements, the small
number of cement companies, and inelastic demand for the commodity limit
customers' bargaining power.
3. Supplier power(moderate)
Suppliers wield enormous power in this sector. This is because raw materials account
for a significant portion of the cement manufacturing process. For example, if the coal
suppliers cease delivering coal to the plant, it will be unable to operate, and output
would halt. The coal supply must be restored as soon as feasible. As a result, suppliers
significantly impact cement manufacturing businesses' actions. However, because all
raw materials are natural resources, the government has jurisdiction over them. To
build a cement plant, companies must purchase government rights. As a result, the
suppliers' influence is limited.
4. Inter firm rivalry(high)
In Africa, the cement sector is one of the most competitive. Many cement companies
are large-scale, with significant cash involved in establishing production facilities that
raise the business’s exit barrier. As a result, they continue in business and enter fierce
competition. Furthermore, because the differences in cement types are modest,
customers have a cheap switching cost, and enterprises compete intensely for market
share. As a result, there is a pricing war and more competition. By the end of 2020,
Africa's cement industry had a capacity of 386.1 Mt/a. The top ten enterprises have a
capacity of 202.2 Mt/a, or 52.4% (Figure 1). More than 50 more providers account for
183.9 Mt/a, or 47.6% of total capacity, indicating Africa's cement industry
fragmentation.
5. Threat of substitutes (low)
While construction companies can use less cement in exchange for other materials
with cementitious properties, the substitution effect on cement prices is minor (United
States Geological Survey, 2008). Only if another industry produces a comparable
product (e.g., aluminium cans vs plastic bottles) or if consumers of that product can
reduce the ratio of their usage of that product and substitute another product is an
industry endangered. Because both options are almost non-existent for cement buyers,
the threat of alternatives is minimal.
According to this component of the industry's Five Forces analysis technique, threats to new
entrants and rivalry among current consumers are the most crucial variables impacting the
sector.
Dangote Cement has been able to sustain its competitive edge primarily via operational
effectiveness, which includes an aggressive distribution system, modern and highly energy
efficient factories, proximity to important markets, robust backing from Dangote Group (its
parent business), backward and vertical integration, tax benefits, and economies of scale.
According to Aguilar (2006), the PEST analysis is valuable for analyzing an organization's
external macro environment. However, the ScanStep Framework recognizes cultural issue
drivers, security issue drivers, and non-legal regulatory issue drivers, which are variations of
the traditional PEST analysis that accommodate relevant issues.
RecommendationsAccording to studies, despite the Covid-19 epidemic, the cement sector in Africa generally
grew favourably in 2020. Porter's Five Forces and PEST analysis are being used to analyze
and evaluate Dangote's external environment to suggest strategies that would assure the
company's long-term competitiveness and sustainability.

It is suggested that the price of ordinary cement (32.5) sold by rivals be dropped by at
least 40% while flooding the market with the 42.5 grade, which is being promoted to
customers as the preferred and higher quality at the previous price of the regular 32.5
grade. As a result, Dangote Cement would appear to be a company that values
customer pleasure and follows the rules. It would also enable the government to meet
its aim of lowering cement costs. Certain industry operators with low capacity may be
driven out of business, pressured to be purchased, as earnings that are already small
at 10% on average compared to Dangote's 52% would be fully decimated, and market
leadership would be consolidated and perpetuated.

Dangote Cement, like its worldwide and local competitor Lafarge, should invest more
in R&D to maintain its leading position in tackling all manner of ESG challenges,
notably those connected to carbon emissions and pollution. Eccles and Serafeim
(2013) address the need for organizations to match increases in shareholder value
with improved performance in ESG issues in their study on innovation related to
sustainability. Organizations that focus on improving ESG performance are bound to
experience a reduction in shareholder value, which can be reversed when
organizations persistently innovate in products, business processes, and models.
Answer 2.
When attempting to understand how and why firms differ in resource capacity, capabilities,
and performance, the resource-based view (RBV) is a valuable place to start. In African
economies, relationship management and the capacity to create social capital to tap into
otherwise inaccessible resources may be a substantial source of economic advantage
(George et al.,2016).
According to Barney and Hesterly (2006), the VRIO framework, which is a practical application
of the resource-based view, is a good tool for analyzing a firm's internal environment. Table 2
represents the VRIOS (Value, Rarity, Imitability, Organisational, Sustainability) framework of
Dangote Cement, which explains the success of the firm.
Dangote would maintain its significant competitive advantage in the short to medium term,
based on a study of its talents and unique characteristics. It now has a 70% market dominance,
with Lafarge second with a 13% market share. However, suppose any of these talents and
capacities are replicated or substituted by rivals to attain competitive parity (Pitt & Kofoupolous,
2012). In that case, this is mitigated by the company's substantial investment in the African
market. Dangote should consolidate its export strategy to neighbouring West African nations
to prepare for a market surplus caused by government policies to drive down prices.
The tangible and intangible assets a corporation utilizes to determine and implement its
strategy are characterized as resources and capabilities (i.e. core competencies). For
Dangote Cement,
Tangible resources:

Financial- Cement manufacturing is capital intensive; Currently, the market
capitalization of the Dangote is $11.7B

Physical resources- It uses mineral resources such as limestone, silica, alumina, and
others required in large quantities to manufacture cement, making them vital resources
for Dangote Cement PLC's operations.

Technologically, it has made significant efforts in fleet management. All its factories
are equipped with cutting-edge technology to decrease pollution and environmental
deterioration.

Organizational- All departments, units, and subsidiaries that support the company's
activities are appropriately managed and well aligned to achieve the company's
objectives, i.e., low costs and market leadership.
Intangible resources:

Innovation and Human resources- The Dangote Cement manufacturing process is
automated and managed centrally. Human resources aid the business's success with
competence in management and day-to-day operations. Dangote cement employs
over fifteen thousand workers. Employees are instilled with an entrepreneurial spirit,
are well compensated, and come from various cultural backgrounds. The company
always attempts to use current and professional management approaches to establish
team synergy that results in the most satisfactory goods.
ESG Sustainability in Dangote Cement
Eccles and Serafeim (2013) examine the four key ideas that firms might undertake to increase
financial and ESG performance in their study on innovation and sustainability.

Identifying important ESG issues that have the potential to have a significant influence
on financial performance

Evaluating the impact of regulating these ESG issues on financial performance

Developing an innovation strategy to guarantee that the performance frontier is
constantly moved higher

Informing all stakeholders about the invention
Dangote Cement has pursued these four significant efforts, as evidenced by how it has
conducted business over the previous ten years, identifying and analyzing material ESG
concerns and employing innovative strategies to address them. Dangote has purposefully
guaranteed that all its cement factories are fuelled mainly by natural gas to prevent air pollution,
which they consider a big margin driver; this source of electricity is also deemed cost-effective
compared to other environmentally harmful sources. Despite all the accolades and honours
they had received over the years for their involvement in industrializing Nigeria, the Nigerian
government accused the founder of the Dangote Group of anti-competitive behaviour and
attempted to form a monopoly in the cement sector in 2015. These are essential ESG
concerns that will impact financial performance in the future.
Dangote will need to continue to innovate to maintain its leadership position in the cement
industry, given that its main competitor, Lafarge, is a global leader who, while lacking
Dangote's capacity in Africa, ranks higher in innovation, leveraging over 50 years of
experience and the world's largest building manufacturing laboratory. According to Hamel and
Prahalad (2005), organisations with strategic intent desire market leadership rather than
focusing just on shareholder wealth, which immediately correlates to higher financial
performance.
Other theoretical frameworks
In contrast to the SWOT analysis, which focuses more on the organization's strengths and
weaknesses, the SCOT Analysis evaluates an organization's skills, challenges/concerns, and
opportunities and threats, which are the trustworthy source of its competitiveness. Being the
most lucrative in an industry does not inevitably imply being the most profitable. Dangote has
gained a market share of over 70% and has also produced an unrivalled return on equity and
profit, dwarfing that of its competitors both locally and globally. The below diagram shows how
the resource-based view can be complemented by SCOT analysis.
Recommendation & Conclusion
It can be concluded that Dangote has an obvious strategy statement and has made strategic
decisions and action plans that support and get the company closer to attaining its goals. It
would maintain market leadership by using the cement industry's high entry barrier, but it may
be forced to confront diminished profitability if market forces interact to lower prices.
It is highly recommended that In its Nigerian operations alone, DCP has made 1.4 billion
additional investments in social programmes, with approximately 1,000 students benefiting
from Dangote scholarships. The organization should continue to cultivate long-term
partnerships with host communities to improve their socio-economic well-being and maintain
its social licence to operate. The cement behemoth should also continue to strengthen its
workplace and community health and safety standards and its investments in human capital
development.
Above all, Dangote Cement should continue to expand its production capacity. It intends to
reach 49 million metric tons by 2022, making it the world's sixth biggest cement manufacturer
in terms of volume and the fifth largest cement dealer.