SWOT Analysis of Ultra Tech Cement Industry

The SWOT analysis about Ultra Tech cement and its position in the market. The company is one of the best in the cement industry, analysing it through the different framework of analysis in order to judge the actual situational and industrial position of the company in order to find out how actually is the company doing.

The company is facing a lot of problem regarding its promotion and marketing techniques due to which it faces a short of awareness in the market due to which people are not aware of the product but instead of all the problems it is quite stable and maintain its position in the market. After performing Swot analysis of the company by reviewing porter’s 5 forces and pestel analysis company’s strategic standing and positioning have been analysed.

Currently the company is having a better standing as threat of entry is very low due to high initial funds required to establish the factory setup.

Contents

INTRODUCTION:

Ultra Tech is India’s biggest exporter of cement clinker. The company’s production plants have increase across eleven integrated area, one white cement plant, twelve grinding units and five terminals four in India and one in Sri Lanka. Most of the plants have ISO 9001, ISO 14001 and OHSAS 18001 certification. In addition, two plants have outcome ISO 27001 certification and four have received SA 8000 certification. The process of certification is at present started for the left over plants. The company exports over 2.5 million tons per annum, which is about 30 per cent of the country’s total exports. The export market comprises of countries around the Indian Ocean, Africa, Europe and the Middle East. Export is a pressure area in the company’s strategy for growth. World’s top 10 cement companies comprises of Ultra Tech Cement Limited. The company has an annual capacity of 48.8 million tones, and manufactures and markets ordinary There is blast furnace slag cement and There is Pozzolana cement. The company’s subsidiaries are Dakshin Cements Limited, Harish Cements Limited; there is Ceylinco (P) Limited and Ultra Tech Cement Middle East Investments Limited. (Kalesh, 2009)

SWOT ANALYSIS:

STRENGTHS:

Cement demand has grown in tandem with strong economic growth derived from:

Growth in housing sector (over 30%) key demand driver.

Infrastructure projects like ports, airports, power projects, dam & irrigation Projects.

National Highway Development Programme.

Bharat Nirman Yojana for rural infrastructure and rise in industrial projects.

Production

The company’s production facilities are spread across 11 integrated plants, one white cement plant, 12 grinding units and 5 terminals, 4 in India and one in Sri Lanka. High quality cement production is increasing annually. Annual production capacity is 23.10 million tones.

Use of high-end equipment such as the Gamma Metrics Machine and the X-ray Analyser ensures that each product passing out of company. There is manufacturing facility adheres to global standards of quality and performance.

Logistics:

Ultra Tech Can directly deal with the limestone tenders and thus the middle man do not affect its cost. Company use the local transporters which provide the efficient transportation cost. Thereby reducing the extra expense and making cement more economical for the local man to afford.

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Plantation:

Ultra tech’s manufacturing plant uses ultra-modern technology and imported machinery. Company’s Unit at Koala is the only Unit in this sector in India to have a desalination plant. It is used for meeting the water needs of the plant and the colony. The waste gases from the cooler are used in the desalination plant. that makes the product recyclable and environmental friendly thereby contributing to the environment.

The Ultra Tech cement manufacturing the greenbelt at company’s Units is simply awesome and is surrounded by trees all around. At some points, company is advancing to achieve the skyline. Only the leaves and the flowers and hear the cacophony of the birds. 

Company’s CSR (corporate social responsibility) activities extend to 127 villages, in proximity to its plants, across the country. (William B. Werther, David B. Chandler, 2010)

Brand Positioning:

In the world, Aditya Birla Group is the eighth largest cement player. Ultra Tech’s products include Ordinary Portland cement, Portland Pozzolana cement and Portland blast furnace slag cement. The company exports over 2.5 million tons per annum, which is about 30 per cent to the country’s total exports. Ordinary There is cement is the most commonly used cement for a wide range of process. Applications cover dry-lean mixes, general-purpose ready-mixes, and even high strength pre-cast and pre-stressed concrete.

OPC(ordinary Portland cement) is used for applications, such as commercial buildings, industrial constructions, Multi storied complexes, cement concrete roads and heavy duty floors. PPC ( Portland Pozzolana cement )cement is used for big construction like dam and thermal power plant.

Distribution Channels:

Ultra Tech’s distribution network is very widely spread out in the country with over 5,500 dealers and 30,000 retailers with its strong distribution channels currently Ultratech is starting to acquire a strong positioning in the market giving head on competition to its rivals.

Quality:

All the plants of Ultra tech are ISO 14001 Environment Management System’s certified sustain to OHSAS 18001 standards.

Clean technologies and processes that combine economic progress and sustainable environment are adopted by the company for better performance. There is plants at Awarpur and Ratnagiri in Maharashtra; There is Jafrabad and Magdalla in Gujarat; Hirmi in Chhattisgarh; Arakkonam in Tamil Nadu; Tadipatri in Andhra Pradesh; Jharsuguda in Orissa and Durgapur in West Bengal. They have won the Capexil Certificate of Export Recognition – Top Exporter -Cement, Clinker, Asbestos and Cement Products for the years 2000, 2002 and2003. Bhartiya Udyog Ratan Award presented to Sh. KYP Kulkarni By Indian Economic Development & Research Association (IEDRA) for good quality of cement to customer, New Delhi in 2004. (Narayanan, 2007)

WEAKNESSESS:

Cement Industry is highly fragmented and it is also highly regionalized and Low value commodity makes transportation over long distances uneconomical.

Not available in all the places: Ultra tech is not available at all the places as it is not manufactured at all places and all plants are not available everywhere due to which people cannot find it everywhere hence the profit margins are affected to a greater extend.

Human Resource:

Due to openness in the Ultra tech’s work culture which is very informal that does not suit for better management in corporate . The environment being very informal affects the management a lot as being the management they have to maintain a distance and discipline but due to the openness there is no such thing and they face a lot difficulty to control. And Ultra tech has insufficient man power due to its easy recruiting and selection method.

Marketing:

Lack of awareness program for consumers due to low promotion mix: the company faces the problem of proper promotion due to which the customers doesn’t know much about the product resulting into less sales of the product instead of being a good product.

Lack of marketing mix:  the company suffers with the problem of proper marketing mix which in return results into the whole confusion state and the product does not reach to the customers properly and in fact a lot of them don’t know about it also.

Delay in supply: the company being situated in the outer parts of the city and its plant not being located in every city causes delay in the supply of the product. (Porter, 1988)

Health:

Highly dusty environment at the time of dumping the cement is hazardous for health.

It affects human’s respiratory system adversely. Ultra tech is therefore not contributing to society as its corporate social responsibility remains unfulfilled due to many hazards.

Others:

Cement industry is highly fragmented and regionalized as Low value commodity makes. As transportation over long distances is uneconomical for value sector, so cost of transporting cement is high and this keeps cement from being profitable over long distances. In other talks, shipping cement costs more than the profit from selling it.

PESTEL ANALYSIS:

Analysing the above through pestel framework Ultratech was highly affected by the environmental factors. As cement plants are very harmful for the environment causing a lot of pollution and is harmful for the health of human being hence proving that the environmentally it is not good and hence its plants all are made to be situated outside the city where the population rate is low or no population. So Ultratech is bearing great difficulty in managing the environment along with the health issues.

OPPORTUNITIES:

With the low per capita consumption of cement in India 102 kg compared to the global average of 260 kg and the emphasis on infrastructure development, Ultra tech has ample opportunity to ride the growth curve. Ultratech can develop new marketing area. It can sign MOU’s (memorandum of understanding) with government regarding supply of cement for government work. Ultratech can also maintain the position of competition in the market. Institutional market like corporate and offices, school society complexes are growing in large scale, which will increase the requirement. People are opting for more stable structures and good future, so large use of cement is taking place, so government is spending heavily on infrastructure project as Indian industry base is growing rapidly Thus, this is the right time to fully invest in these market. There is regular demand of cement which in turn will increase foreign investment in this sector. As roads transformation process is going on through which the traditional method of road building will be convert by modern concrete roads. Substantially lower per capita cement consumption as compared to developing countries (1/3 rd of world average) Per capita cement consumption in India is 82 kgs against a global average of 255 kgs and Asian average of 200 kgs. For green field capacity 20 million tons per annum will be required to match the demand in pipeline for other two years leading to favourable demand – supply scenario. (verma, 2008)

THREATS: 

As huge cement industry emerge there is more competition for ACC (Associated Cement Companies) to carefully enhanced its price , product and at the same time satisfy its dealers and customers. Cheap priced brand are capturing like a mushroom to lower income customer base. Players such as Jaypee Cement, Prism Cement, and Birla cement. ACC cement are eating up considerable market share. Due to India’ satisfy growth many new international cement companies are expected in coming years which will bring enormous change and can start price war. Government intervention to adjust cement prices Transportation cost is upgrading. Due to loading restriction there is overloading industrialist shows increase in costs due to the shortage in coal industry.

Many retailers are influence by better profit margin, and other Benefits because of small industries increase competition among them, which in turn give heavy discount to customer and start malpractices.

Timber is also being considered as one of the substitutes of cement, which is cheap and long lasting. Due to continuous attack of earthquake, many countries like Japan, Indonesia, Singapore etc are now using timber in construction since those areas are high earthquake affected. (Kalesh, 2009)

PORTER’S 5-FORCE MODEL(THREAT) ANALYSIS:

Analysing the above through the five forces framework:

Threat of New Entrants: The high costs are major entry barrier for the entry of new players. The high shipment costs make it difficult to import cement. Cement being a high volume low value commodity results in high goods costs, which makes cement imports economically unlikely. Domestic Cement industry is highly integrated from global cement markets. Making cement duty free, as cement is being imported from neighbouring countries. However, due to logistics issues and lack of port, handling capabilities, imports of cement will remain negligible and do not pose a threat to domestic industry of Ultratech.

Competitive rivalry between existing players: Previously the rivalry was strong among the players, as the industry was not consolidated. During the last few years the industry has become more consolidated with the Top 3 players Ultratech is having a combined market share of 49 percent in 2005-06 as compared to 32 Percent in 1999-2000. (Porter, 1988)

Its competitive analysis is as follows:

Domestic players competing Ultratech are:

Associated Cement Companies Ltd (ACCL)

Associated Cement Companies Ltd manufactures ordinary Portland cement, composite cement and special cement and has begun offering its marketing expertise and distribution facilities to other producers in cement and related areas. The company plans capital expenditure through expansion of existing units and/or through acquisitions.

Birla Corp

Birla Corp’s product portfolio includes acetylene gas, auto trim parts, casting, cement, jute goods, yarn, calcium carbide etc. The cement division has an installed capacity of 4.78 million metric tones and produced 4.77 million metric tones of cement in 2003-04. The company has two plants in Madhya Pradesh and Rajasthan and one each in West Bengal and Uttar Pradesh and holds a market share of 4.1 per cent. Going forward, the company is setting up its captive Power plant to remain cost competitive.

Madras Cements

Madras Cements Ltd is one of the oldest cement companies in the southern region and is a part of the Armco group. The company is engaged in cement, clinker, dolomite, dry mortar mix, limestone; ready mix cements (RMC) and units generated from windmills.

Lafarge India

Lafarge India Pvt Ltd, a subsidiary of the Lafarge Group, has a total cement capacity of 5 million tonne and a clinker capacity of 3 million tonne in the country. Lafarge commenced operations in 1999 and currently has a market share of 3.4 per cent. It exports clinker and cement to Bangladesh and Nepal. It produces Portland slag cement, ordinary Portland cement and Portland Pozzolana cement.

Grasim-Ultra Tech Cemco

Grasim’s product profile includes viscose staple fiber (VSF), grey cement, white cement, sponge iron, chemicals and textiles. With the acquisition of Ultra Tech, L &T’s cement division in early 2004, Grasim has now become the world’s seventh largest cement producer with a combined capacity of 31million tones. Grasim (with Ultra Tech) held a market share of around 21 per cent in 2005-06.

Gujarat Ambuja Cements Ltd (GACL)

Gujarat Ambuja was set up in 1986 with the commencement of commercial production at its 2 million tonne plant in Chandrapur, Maharashtra. The group has clinker manufacturing facilities at Himachal Pradesh, Gujarat, Maharashtra, Chattisgarh, Punjab and Rajasthan. The company has a market share of around 10 per cent, with a strong foothold in the northern and western markets. Its total sales aggregated US$ 526 millionwith a capacity of 12.6 million tonne in 2003-04. Gujarat Ambuja is one of India’s largest cement exporter and one of the most cost efficient firms. It has also earmarked around US$ 195-220 million for acquisitions Cements Ltd.

CONCLUSION:

As India is the second largest producer of cement in the worlds many big player presents in the market after that Ultratech cement increases his market share due to the high growth rate of real estate. Because of continuously growth of ultra tech cement after little year company may occur top cement manufacturer in India. After swot analysis of Ultra Tech I found that company has many strength, but few weakness also present, there are various opportunities for company in India and other Asian countries because the infrastructure is continuously developing. Company has won the best Employer award in 2007, so young generation have various career opportunities in it. Overall performance of company is increasing continuously in each sector like as Production, HR, Marketing it is good for company it is soon about to establish a strong brand name in the industry due to its good quality and reputed image that is making it exclusive from its competitors.