INTERNATIONAL MARKETING

Cement Industry

Introduction
India is the second largest producer of cement in the world. India's cement industry is a vital
part of its economy, providing employment to more than a million people, directly or indirectly.
India has a lot of potential for development in the infrastructure and construction sector and
the cement sector is expected to largely benefit from it. India has a lot of potential for
development in the infrastructure and construction sector and the cement sector is expected to
largely benefit from it. Some of the recent major initiatives such as development of 98 smart
cities are expected to provide a major boost to the sector.

Market Size
Cement production capacity in India stood at 502 million tonnes per year (mtpy) in 2018.
Capacity addition of 20 million tonnes per annum (MTPA) is expected in FY19- FY 21.
Cement demand is expected to reach 550-600 Million Tonnes Per Annum (MTPA) by 2025
supported by pick-up in the housing segment and higher infrastructure spending. The industry
is currently producing 280 MT for meetings its domestic demand and 5 MT for exports
requirement.

Cement Companies
The Indian cement industry is dominated by few companies. The top 20 cement companies
account for 70% of the total cement production of country.

Top 10 global cement companies

Rank Company Country Capacity (Mt/yr) Plants

1 LafargeHolcim Switzerland 286.66 164

2 Anhui Conch China 217.20 32

3 CNBM (Sinoma) China 176.22 94

4 HeidelbergCement Germany 121.11 79

5 Cemex Mexico 87.09 56

6 Italcementi Italy 76.62 60

7 China Resources China 71.02 19

8 Taiwan Cement Taiwan 63.72 6

9 Eurocement Russia 45.18 17

10 Votorantim Brazil 45.02 41

TOP INDIAN CEMENT COMPANIES

NAME OF Market Sales Net Profit Total Assets

THE Capitalisation.
COMPANY
UltraTech Rs. 85,363.84 Rs. 20,279.80 Rs. 2,144.47 Cr. Rs. 21,955.03
Cr Cr Cr.
Cement

Shree Cement Rs. 38,460.30 Rs. 5,887.31 Cr. Rs. 787.24 Cr. Rs. 5,754.81 Cr.
Cr.

Ambuja Rs. 37,105.87 Rs. 9,978.12 Cr. Rs. 1,496.36 Cr. Rs. 9,787.71 Cr.
Cr.
Cements

ACC Rs. 27,639.93 Rs. 11,738.21 Rs. 1,168.29 Cr. Rs. 7,860.36 Cr.
Cr. Cr.

Ramco Cements Rs. 8,047.00 Cr. Rs. 3,644.89 Cr. Rs. 242.35 Cr. Rs. 4,903.50 Cr.

Prism Cement Rs. 5,637.59 Cr. Rs. 4,964.86 Cr. Rs. 81.65 Cr. Rs. 2,356.87 Cr.

Dalmia Cement Rs. 4,753.63 Cr. Rs. 229.73 Cr. Rs. 49.74 Cr. 578.90 Cr.

JK Laxmi Rs. 3,880.17 Cr. Rs. 2,056.60 Cr. Rs. 93 Cr. Rs. 2,638.12 Cr.
Cement

Orient Cement Rs. 3,644.62 Cr. Rs. 1,547 Cr. Rs. 194.78 Cr. Rs. 2,048.01 Cr.

Birla Corp Rs. 3,272.73 Cr. Rs. 3,209 Cr. Rs. 175.44 Cr. Rs. 3,673.55 Cr.
 Code and conduct of doing business in Cement Industry

A foreign company planning to set up business operations in India has the following options:

AS AN INDIAN COMPANY
A foreign company can commence operations in India by incorporating a company under the
Companies Act,1956 through
• Joint Ventures; or

• Wholly Owned Subsidiaries

Foreign equity in such Indian companies can be up to 100% depending on the requirements
of the investor, subject to equity caps in respect of the area of activities under the Foreign
Direct Investment (FDI) policy.

Joint Venture With An Indian Partner

Foreign Companies can set up their operations in India by forging strategic alliances
with Indian partners.
Joint Venture may entail the following advantages for a foreign investor:
• Established distribution/ marketing set up of the Indian partner

• Available financial resource of the Indian partners

 • Established contacts of the Indian partners which help smoothen the
process of setting up of operations

Wholly Owned Subsidiary Company

Foreign companies can also to set up wholly-owned subsidiary in sectors where 100%
foreign direct investment is permitted under the FDI policy.

AS A FOREIGN COMPANY
Foreign Companies can set up their operations in India through
• Liaison Office/Representative Office

• Project Office
• Branch Office
Such offices can undertake any permitted activities. Companies have to register themselves
with Registrar of Companies (ROC) within 30 days of setting up a place of business in India.

Liaison Office/Representative Office

Liaison office acts as a channel of communication between the principal place of
business or head office and entities in India. Liaison office can not undertake any
commercial activity directly or indirectly and can not, therefore, earn any income in
India. Its role is limited to collecting information about possible market opportunities
and providing information about the company and its products to prospective Indian
customers. It can promote export/import from/to India and also facilitate
technical/financial collaboration between parent company and companies in India.
Approval for establishing a liaison office in India is granted by Reserve Bank of India
(RBI).

Project Office
Foreign Companies planning to execute specific projects in India can set up
temporary project/site offices in India. RBI has now granted general permission to
foreign entities to establish Project Offices subject to specified conditions. Such
offices cannot undertake or carry on any activity other than the activity relating and
incidental to execution of the project. Project Offices may remit outside India the
surplus of the project on its completion, general permission for which has been
granted by the RBI.

Branch Office
Foreign companies engaged in manufacturing and trading activities abroad are
allowed to set up Branch Offices in India for the following purposes:
• Export/Import of goods

• Rendering professional or consultancy services

• Carrying out research work, in which the parent company is engaged.
 • Promoting technical or financial collaborations between Indian companies
and parent or overseas group company.
• Representing the parent company in India and acting as buying/selling
agents in India.
• Rendering services in Information Technology and development of
software in India.
• Rendering technical support to the products supplied by the parent/ group
companies.
• Foreign airline/shipping company.

A branch office is not allowed to carry out manufacturing activities on its own but is
permitted to subcontract these to an Indian manufacturer. Branch Offices established
with the approval of RBI, may remit outside India profit of the branch, net of
applicable Indian taxes and subject to RBI guidelines Permission for setting up branch
offices is granted by the Reserve Bank of India (RBI).
Branch Office on “Stand Alone Basis”
Such Branch Offices would be isolated and restricted to the Special Economic zone
(SEZ) alone and no business activity/transaction will be allowed outside the SEZs in
India, which include branches/subsidiaries of its parent office in India.
No approval shall be necessary from RBI for a company to establish a branch/unit in
SEZs to undertake manufacturing and service activities subject to specified
conditions.

IF an Indian cement company wants to do business in abroad it has to make a series of

strategic decisions:-

1) The first decision a company has to make is whether to expand its business abroad or not.
This decision is based on consideration of number of important factors like:-

• Present and future opportunities

• Present and future market opportunities

• The resources of the company like skill,experience, financial support, production and
marketing capabilities,etc.

• Company's objectives.

2) Once the company has decided to invest abroad, the next important decision is the
selection of the most appropriate market. For this, a thorough analysis of the potentials of
the various overseas markets and their respective marketing environment is essential.
3) The next important decision relates to determining the appropriate modes of entering
those foreign markets. The important foreign market entry strategies are:-
• Exporting
• Licensing and Franchising
• Management Contracting
• Turnkey Contracts
• Fully Owned Manufacturing Facilities
• Assembly Operations
• Joint ventures
• Mergers and Acquisitions
• Strategic Alliance
• Countertrade

4) Decision regarding the nature of the organisational structure of the company

internationally. This will depend on number of factors like:- Company's international
orientation; nature of business; size of business; its future plans, etc.
5) Designing a suitable marketing mix- production, promotion, price and physical
distribution, so as to adopt to the characteristics of overseas markets.

Hence, a firm typically passes through different stages in its transition from local firm to a
transnational firm. That is, a firm which is entirely domestic in its activities normally passes
through different stages of internationalisation before it becomes a truly global one.

The best cement company which is doing exceptionally well is LafargeHolcim which is
located in Switzerland. It has a capacity of 345.2 Mt/yr with 220 number of plants.

In April 2014, Holcim and Lafarge, two independent companies, announced a merger. With a
combined market value exceeding $50 billion, their merger was the second largest announced
in 2014 worldwide. Holcim decided to divest part of its business. The divestments accounted
for 10 to 15% of the company’s EBITDA. Their merger is one of the reasons behind being so
successful with Lafarge presence in India, China and South Korea and Holcim presence in
Philippines, Vietnam and Thailand they can join their hands to deliver an absolute best
experience to the customer.