IJIRCM
Volume 10,
(May, 2014)
(ISSN 2250-3404)
Market survey of retail market & sales promotion strategy of cement
industry
*Dr. Amit Kumar Srivastava
**Nitesh Kumar
INTRODUCTION
Cement is the preferred building material in India. It is used extensively in household and
industrial construction. Earlier, government sector used to consume over 50% of the total
cement sold in India, but in the last decade, its share has come down to 35%. Rural areas
consume less than 23%of the total cement. Availability of cheaper building materials for
non-permanent structures affects the rural demand.
Demand for the cement is linked to the economic activity in any country. Broadly, it can be
categorized into demand for housing construction (homes, offices etc.) And infrastructure
creation (port, roads, power Plants etc). The real driver of cement demand is creation
of Infrastructure, hence cement demand in emerging economies is much higher than
developed countries where the demand has reached a plateau. In India too, the demand
for cement will be affected by spending on infrastructure (including housing).With the boost
given by the government to various infrastructure projects, road network and housing
facilities, growth in the cement.
Consumption is anticipated in the coming year. The favorable housing Finance environment
is expected to fulfill the vast housing requirement, both in the rural and urban areas.
The increase in infrastructure projects by the government coupled with the construction of
the golden Quadrilateral and the North-South and East-West corridor project have led to
an increase in consumption of cement. This increase is expected to continue in the future.
The reduction in import duties is not likely to affect the industry as the cement produced is
at par with international standards and lower than those prevailing in international
markets.
Today it is fashionable to talk about the new economy. We hear that the business are
operation in globalize economy; things are moving at a nanosecond pace our market are
characterized by hyper competition and disruptive technologies are challenging every
business and so business must adopt to employ were consumer. To become successful in
such a competitive environment the business organizations have to be customer oriented.
Customer need the business must be taken care of.” Built customer and not only product’’.
Customer must be delighted. This information about the market could be collected by the
way of proper market survey. Rom the market survey we get the feed about the good or
services of the organization . for this purpose the said research work is undertaken .
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Volume 10,
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(ISSN 2250-3404)
The research shall be carried out for knowing prevailing market Condition of cement
companies in Delhi Region. The second objective Of the research is to study the sales
promotion strategy undertaken by various cement companies in India. The research
shall be carried out in the market of the eastern Delhi. There are six major market players
in cement industry. They are Maihar, Century, Ultratech, ACC, Ambuja, apart from these
there are few local brands selling in the market. The information about the market will be
gathered by visiting retailers in the market. Interview of retailers shall be taken depending
upon their accessibility.
Large cement player in India will use the acquisition route to enhance capacity and market
share. It is clear that smaller plant will not survive in the long term. The top five players will
hold 70-80% of capacities and market in the next decade. These is an expectation that more
global players would come into India as they would like to get a foothold in the market as
the demand will propel in the emerging economics. As long as we have the emergence of
serious, mature, long term players it would be good for the industry. In the Indian scenario,
domestic players believe that acquisition is the quickest and the best route to cut
competition and increase market share. In an industry, which is fragmented, consolidation
appears to be an imperative strategy for the larger player.
Liberalization in the cement market was meant to remove the major obstacles arising from
state interventions in term of price and import controls that were preventing private
operators to compete for extra volume or independently set their price, it was also meant
to remove entry barriers for new firms while allowing existing ones to innovate , invest and
expend . End users were expected to benefit from competitive price wider choice in term of
different grade s of cement and improved quality resulting from product and process
innovation. The decision of liberalization the cement market fallowed in cabinet of ministers
decision. The timing of this decision coincided with the completion of the first study of
market for cement in Mauritius by the competition commission (CCM) while the CCM
welcomed the decision of the first government, it expressed concerned with regard to the
pace of the liberalization process. The CCM rather recommended a more gradual approach
by removing the restriction on import in the first stance and liberalization price following
new entry.
This new study of the market for cement in Mauritius has been motivated in view of the
significant increase (around 21%) in the price of cement over a period of less than a year
following the liberalization of the market and the lack of market development in term of
entry expansion and innovation . for instance , the various grades of cement other than the
ordinary Portland cement are yet to be commercialized in the market by the existing
cement operators and the effective operations of new entrants in the market is still
awaited.
*Professor & Director, KIPM, GIDA, Gorakhpur
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Volume 10,
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(ISSN 2250-3404)
**Research Scholar, Mewar University, Chottorgarh, Rajsthan
LITRATURE SURVEY
Referring to cement business, Francois (2007) observed that the name of the game was not
differentiation and value proposition but protecting market share without triggering a price
war that no one could afford. This reflects the degree of rivalry that is evident in global
cement industry. Francois (2007) stresses that we no longer need to think of cement as a
commodity we can protect price without compromising sales volumes. Yankelovich & Meer
(2006) points that effective segmentation concentrates on consumer needs, attitudes and
behavior which can change quickly rather than on personality traits which usually endures
throughout a person’s life. This explains one of the reasons as to why in particular cement
market over a period of time there is a change in market leader. Christensen et all (2005)
recommends that to build brand that mean something to customers you need to attached
them to products that mean something to customers and he suggests that segmenting
markets should reflects how customers actually live their lives therefore evaluate ranking of
parameters of cements it is essentials to involve all those involved in construction activities
ranging from mason , engineers.
Kevin et al. (2002) has categorized and explained brand differences into the following three
types(a) brand performance associations depicts ways in which product or services attempts
to meet customer functional needs(b) brand imagery association indicates reliability ,
durability and serviceability of the brands depicting who uses the brand and under what
circumstances (c) consumer insight associations which signifies that if a brand can show
consumers it has insights into their problems can then make the case that it is the solution.
Moon (2005) has found that by positioning or repositioning products in unexpected ways
companies can change how customers mentally categorized them. Reinartz and Kumar
(2002)on way to make customer loyalty profitable is of the view that different approaches
will be more suitable to different businesses depending on customer profile and the
complexity of their distribution channels.
Contractor and Lorange (2002) regard franchising as a kind of strategic alliance that covers
several types of inter firm cooperation within the two extremes of discrete , short term
contracts and the complete merger of two more organizations. This include(a) relational
contracts such as turnkey or training,(b) medium term contractual relationship such as
licensing or franchising,(c) medium to long term supply chain relationship, and (d) equity
joint venture. Elmuti and Kathawala (2001) point out that the reasons for creating strategic
alliances growth strategies and entering new markets obtaining new technology and or best
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quality or cheapest cost, reducing financial risk and sharing costs of research and
development, and achieving or ensuring competitive advantage.
Todeva and Knoke (2005) group the motives to engage in strategic alliance into four
categories, namely (a) organizational learning and competence building building, (b)
economic –market , cost and risk related, (c) strategic – competition shaping , pre – emption
and product and technology related , and (d) political market development.
Several factor for the success and failure of a franchising business have been studied . they
include outlet location decision maker (fork, 2001) selection process (Vaishnav and
Altinay,2009) , quality management (Monroy and Alzola, 2004)and the franchisor
/franchisee relationship (Clarkin and Swavely,2003) Justeetal.(2008) suggest that the entry
time can influence the long term survive the earlier theentry the higher the probability of
continuing franchising so the new entrants at the later stages would suffer a higher risk .
Therefore the creators of the new industry achieve some advantage s. virtually all the past
researches have focused on franchising inertial industry for example, retail out let location
decision makers.
OBJECTIVE
Cement is the single most important and profitable product in the building material sector
and with the consumption of cement in India to touch 600 million tones by the year
2020.this is truly the California gold rich of the new century . With an 8% GDP growth rate.
Governmental infrastructure augmentation and population expansion, the Indian cement
industry is a market of opportunities waiting to be tapped a direct implication of this scrotal
growth is the influx of multinationals like holmic and Lafarge , which will drive Indian
cement companies in building industry to adapt new business strategies to compliment the
higher demand and competition a cogent analytical research on the governmental reports,
industry data and cement MNC annual reports has been performed .
on the analysis and scrutiny of the distinct variables involved in this market, this paper
investigate the current and future trends in the Indian cement industry and enumerates key
business strategies that cement conglomerates will have to adapt to complete in the Indian
building materials markets.
To carry out market survey to know the prevailing market Condition of various cements
companies in Delhi state. To study the sales and promotion activities undertaken by
Cement companies in the market of Delhi .To attain these two objectives various other sub
objective needed to Be achieved. These are listed below.(a)To analyze the market share
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of cement companies in Delhi (b)To know the customers preference for the various brands
of cement. ©To know the customer of retailer for sorting difficult brands of cement. (d)To
understand the effectiveness of various sales promotion activities of cement companies.
(e)To know preference of retailers for different gift and Incentives schemes as a sales
promotion strategy. (f)To analyze the sales promotion activities for various brands Of
cement companies. (g)To analyze the frequency of visits of marketing Representatives of
various companies. Thus is attempt to find ways to increase market share, to increase
Customer satisfaction and thus increase the business prospects.
RESEARCH METHODLOGY
The market expansion strategies describes above are consistent with the study of Sorenson
and Sorenson (2001) that explain that the combination of vertical and virtual integration
lead to best performance and optimal mixes of units depending on the extent of
environmental heterogeneity faced by the chain. in the human resource management
viewpoints incentivized managers of corporate units tends to exploit existing routines in
relatively homogeneous environments while franchising, by contrast, engage in exploratory
behavior and offers the greatest retype in heterogonous environment. Further support is
provided by the work of Carney and Gedajlovic (1991), which explains with the resource
scarcity (RS) theory that franchisors will operate the strategic market with such
characteristics as high traffic, profitable outlet and populous areas through the operation to
repurchase the outlet back while leaving the less attractive markets such as rural areas , less
market expertise areas and new market territories when the franchisors has achieved a
particular size, positive cash flows and operation experience which delimits the resource
constrains, it tends to be able to own a greater number of outlets . The ownership tends to
be (a) firm will grow via franchising, but will buy back or open corporate owned units once a
particular size or critical mass has been achieved , and (b) the owned units will have higher
than average sales , and will be located in cities.
Further the franchising expansion strategy can also solve the problem for lock-out risk in
some areas where the land regulation is very strict because some of the franchises already
run the business in the area before the new regulation was announced so acquiring them to
be part of the franchising network is a good solution. A another advantage from the
franchising business model to the ready –mixed concrete market is market consolidation .
as mentioned , the ready mixed market is supply and fragmented so the franchising business
model can reduce number of competitors by converting them into partners and also
strengthening the networking . lessons learned from the Thai experiences suggest that
ready mixed concrete franchise can be used as a market expansion strategy in Thailand with
the proven total number of ready- mixed concrete franchises at closed to 200 franchises all
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over Thailand since the franchising business model was developed 10 years ago the first
ready mixed concrete franchising was established in the year 2000, following the 1997 Asian
economic crisis. With the number of ready mixed concrete machines in the inventory and
the coming shipment, the new business model was conceived out of necessary to save the
company from the crisis. A decade later, the ready mixed concrete franchising business
model as the market expansion strategy has proven to be a success with the growing
number of franchisees and the growing ready –mixed concrete sales volume. The
emergence of the second franchisors in Thailand in 2007 further confirms the viability and
the sustainability of the franchising business model for this non-retail business.
Companies do not have much of application oriented research and development efforts but
this will become critical for further success. To a large extent this is related to creating the
application and customer of the future and understanding customer needs based on the
emerging environment. Companies will need to create niche products and develop the
market for such products by providing solution based offering to the customer. Innovation
will be very important , to create high grade and cheaper quality of cement Indian
companies have been moving from lower grade cement to higher over the years, and would
have to continues to roll out even better quality to compete with global players and local
competitions. New cement products like RCM (ready mix concrete) will help create a
company carve out a niche in the market. With the surge in world population and
continuously increasing pressure on natural resources, there is a need for using new
technologies that make cement production environment friendly. it is imperative for
innovation in the concrete and cement industry to considers a heterogeneous approaches
to materials and to integrate knowledge of other fields under a triple bottom line of
economic social and environmental criteria . Stockholders concerns have increased over are
the years and there are questions raised as regards suitable development. while the world is
conscious of the problem, there is a need to act now owing to better eco- efficiency
,industrial ecology , designed for the better environment.
Segmentation is categorization of buyer into suitable classes so that the marketing
programmed are customized and made appropriate to each specific class of buyers.
Segmentation could be based on any of the following criteria:
NATURE OF APPLICATION OF CEMENT
cement is use for large infrastructure projects, commercial housing projects, residential
projects, precast or block making works, ready mix concrete units or for minor repair works.
Categories of construction professional: a construction professional could be either a
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mason, civil engineer semi urban and urban markets: cement could be sold in village,
suburban areas of cities and within the city limits.
Depending on the segmentation strategy customers who are relatively price insensitive.
costly to serve or poorly served by competitors can be changed more than those who are
really price sensitive , less price to served or well served by competitors. In terms of supply
logistics the market has not changed. The total cement storage capacity at the port area is
around 95,500 tones, Lafarge Mauritius has 9 concrete soils with a total stores capacity of
35,500 tones of cement and holmic Mauritius has 2 flat soils with a storage capacity of
40,000 tones and 20,000 tones of cement each. Bulk cement is imported by the two
companies and stocked in their respective storages facilities. Around 40%of the cement
imported is sold in bulk while the rest is packed by Lafarge and holmic and commercialized
under their respective brands names, baobab and kolas bulk cement is mainly demanded by
construction and concrete manufacturing companies bagged cement is demanded for small
and medium scale construction work such as residential projects. Lafarge and holmic act as
wholesalers and supply bagged cement to hardware storage which are responsible for retail
distribution.
Existing operation in the Mauritian cement industry have plans to produce other type of
cement domestically following the construction of their cement blending factories this
would mainly involve the blending of cement with an additive . possible additive may
include materials such as limestone’s fly-ash or slag among other these types of cement are
categorized as being Portland composite cement. The most cement in Mauritius is ordinary
Portland cement grade 42.5Ncategorised as CEM I as per the Mauritius and European
standards. Cement operation in Mauritius may decide to import or manufacturing any of the
27 types of cement specified under the Mauritius standard, MS36-1;2006. Ordinary Portland
cement grade 42,5N has a wide range of application but the commercialization of different
varieties may be very beneficial for cement users. Some specialized types of cement have
different properties that ordinary Portland cement and are more suited for some specified
applications. During the course of this study, an attempt was made to find out about any
new products that existing operators were planning to commercialize in the domestic
market.
CONCLUSION
As cement is a commodity product, manufacturers compete chiefly based on price.
Production economics of scale an important, but are limited by the cost of transporting the
finished product. The efficiency that can be achieved with new energy –efficient dry
production technology is a major source of competition. Small manufacturers may not have
the financial resource or production volume to justify investing in the most efficient
technology, putting them at a competitive cost disadvantage. The world wide consolidation
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of the cement industry is intensifying. Besides the established global competitor who are
driving this process forwards, there are a large number of new, large regional companies
based in countries experiencing strong growth. Global players will play an active yet
cautions role in this process o of consolidation, on the basis of a solid balance sheet
significantly improved key financial ratios.
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