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Summer project report on
Study of Consumer Behaviour in Cement Decision making
Industry Guide
Mr.Prasad Rao
Senior Manager-Marketing
Dalmia Cement (Bharat) Ltd.
By
Lakshmi Kannan
PGDM 09DM057
Academic Guide
Prof. A.K. Dey
Senior Professor, Marketing
Birla Institute of Management Technology
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Acknowledgement
It is my honor to get an opportunity to pursue my summer internship with Dalmia Cement
(Bharat) Ltd,, Chennai . I would like to thank Dalmia Cement (Bharat) Ltd. for giving me an
opportunity to undertake a summer internship in the company.
I express my sincere thanks to Mr.Antony Joseph, Asst. Executive Director for giving me opportunity
and permission, to undertake this project in Marketing Department in their esteemed Organization.
I extend special gratitude to Mr.Prasad Vikram Rao who is my industry mentor for helping me
throughout the project and guiding me extensively in its execution. I am obliged by the support
extended by everyone at the Dalmia Cement (Bharat) Ltd., Chennai.
I express my heartiest thanks to my academic mentor Prof. A.K. Dey for his valuable suggestions and
guidance at various stages of the project.
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Summer Project Certificate
This is to certify that Miss. LAKSHMI KANNAN Roll No. 09DM057 a student of PGDM has
worked on a summer project titled STUDY OF CONSUMER BEHAVIOUR IN CEMENT
DECISION MAKING at Dalmia Cements (Bharat) Ltd after Trimester-III in partial fulfillment of
the requirement for the Post Graduate Diploma in Management programme. This is her original work to
the best of my knowledge.
Date:___________ Signature ________________
(_________________________)
Name of Faculty
BIMTECH SEAL
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TABLE OF CONTENTS
Chapter 1Executive Summary1.1 Major Findings1.2.Conclusion1.3.Recommendations
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Chapter2Problem Definition2.1Background to the Problem 2.1.1. Company Overview 2.1.2.Industry Analysis 2.1.3.Types of Cement 2.1.4.Market Players 2.1.5.Consumption Pattern 2.1.6.Regional Pattern 2.1.7.Cement Manufacturing Technology 2.1.8.Cost 2.1.9. Government Policies 2.1.10.Consolidation Opportunity-Mergers and Acquisitions 2.1.11.Competitor Analysis-Porter’s 5 Forces Model 2.1.12.Segmentation2.2Statement of the Problem
99121517242627333437
404144
Chapter 3Approach to the Problem
3.1 Research Objective
3.2 Scope of Study
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Chapter 4Research Design
4.1 Type of Research Designs used 4.2.Information needs 4.3.Data Collection from Secondary Sources4.4.Data Collection from Primary Sources4.5.Scaling Technique4.6.Questionnaire Development and Testing4.7.Sampling Technique4.8.Fieldwork
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44454546474848
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Chapter 5Data Analysis5.1 Methodology5.2Plan of Data Analysis 5.2.1.Exploratory Research 5.2.2.Descriptive Research 5.2.3.Factor Analysis 5.2.4.Sample Input 5.2.5.Sample Output
48484849515254
Chapter 6Results
6.1 Result of Study 6.1.1 Factor Analysis
6666
Chapter 7Limitations and Caveats
7.1 Limitations 67
Chapter 8Conclusions & Recommendations
8.1 Conclusions
8.2 Recommendations
67
68
Chapter 9Exhibits
9.1 Questionnaires and Forms
9.2.Spss output
68
81
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Bibliography 92
List of Tables
Table1
Table2
Table3
Revenue Breakup
Dalmia Cement’s Market Share
Market Share in terms of Sales
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10
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Table4
Table5
Cement Volumes for the Fiscal Year 2009
Cement capacity that can be sold
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38Table6 Likert Scale 43
Table7 Differences between 2 segments 46
List of Graphs
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Chart1 Major Market Players 18Chart2 Segmentation 25Chart 3 Overall Cement Production 26
Chart4 Cement consumption pattern 27
Chart5 Cement process 28
Chart6 Result 66
Chart7 Socioeconomic Class 67
Chart 8 Dalmia Vajram Preference 68Chart 9 Decision maker 69
Chart 10 Location-wise distribution of respondents 69Chart11 Incomewise Distribution 70
List of Figures
Figure1 Cement Maufacturing Process Flow chart 30
Figure 2 Cement Manufacturing Process 31
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1. EXECUTIVE SUMMARY
The project is performed at Dalmia Cements (Bharat) Ltd, Chennai. The project focuses on studying the
consumer behavior in selecting Cement for construction. This will give Dalmia Cements an insight
into the market and try to identify the major factors expected by the consumers during cement purchase.
Cement customers are broadly classified into 3 segments-Individual housing, Industrial Construction
and Government infrastructure. Individual houses constitute nearly 50% of the total by volume (Source:
Indian Brand Equity Foundation).Government Infrastructure and Industrial Construction account for
25% each of the total by volume.
The Cement companies are interested in the individual housing segment because it is highly profitable
segment by value compared to the other two segments. This segment is most profitable because the
bargaining power of individual house owners is less whereas the government and industries make bulk
purchase and ask for low prices. Therefore, the customer segment chosen for this project was Individual
houses segment which is profitable by volume and value.
This marketing project focuses on finding out the major factors that influenced their decision making in
choosing cement. Exploratory research was first carried out with 4 masons to get an insight into the
cement industry’s current trends. Then, a questionnaire was prepared and pretested with 6 individual
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owners. The questionnaire listing various factors affecting their decision process was refined and
administered with 75 individual house owners. Then, the data was analyzed using SPSS Software.
Factor analysis was done to summarize the major factors that influenced decision making of cement
buyers.
1.1. MAJOR FINDINGS
The research was conducted in Chennai’s suburban areas in Kanchipuram district and in Kanchipuram.
1. There are 3 major factors that influence the purchase decision of individual house owners, namely
a. The properties of cement like strength, durability, quick setting, and fineness play a major role
in choosing cement.
b.Secondly, the company’s sales and marketing actions like media promotion, service, competitive
pricing comes out to be an important factor.
C.The recommendation of mason influences the customer in making the choice of cement.
2. Ultratech and Dalmia Vajram are the most preferred cements in this sample of 75.
3. People belonging to A1 and A2 socio-economic classes are the major customers in this individual housing segment. 24 % of A1 class prefers Dalmia Vajram and 17.3% of A2 prefers Dalmia Vajram among other cements in this sample of 75.
Factor Analysis for A1 Socio-economic class and A2 socio-economic class were done separately. The results are similar to the factor analysis done for the entire sample. That is, the 3 major factors , namely, the physical properties of cement, recommendation by influencers like mason and the sales and marketing efforts of the company play a major role in purchase decision holds true for both the A1 and A2 Socio-economic class who are the major customers of cement.
A1-Businessmen, middle and senior Executives
A2-Businessmen, middle and senior executives with college education, supervisors, graduate shop owners
4. Brand bought based on mason’s / contractor’s recommendations: 85%
5. Location: This chart represents the percentage of respondents in each locality covered by the survey.
6. Income wise Distribution: 42.6% of the sample belongs to 20001-30000 categories and 29.3%
belongs to 30001-50000 slabs.
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7.Agewise Distribution: 37% of the respondents surveyed are within 46-50 years and 33% belongs to 51-55 years
1.2.CONCLUSION
1.There are mainly 3 factors that contribute to the purchase decision of cement –
a.The properties of cement like strength, durability , quick setting, fineness,no cracks.
b.Recommendation by mason plays a major role.
c.The company’s sales and marketing efforts like price,brand building,media,service also influence
the customer.
2.People belonging to A1 and A2 socio-economic classes are the major builders of individual houses.
Therefore, the advertisements can focus on this segment in order to motivate them.
1.3.RECOMMENDATIONS
1. As all the cement companies follow the Bureau of Indian Standards in cement production, the
properties of the cement offered by different companies remain almost similar. There will not be much
of product differentiation. Therefore, the companies can focus on their sales and marketing efforts and
try to stand out only with the help of promotion, service, delivery,etc. The recommendations of masons
also play a major role.
As the mason’s recommendation plays a major role in selection of cement by the consumer,the company can
make special promotional effort to reach the masons by organizing a meet-giving away presentation on features
of brand, dinner, gifts,etc.to promote the brand.
2.Brand building exercise needs to be done consistently to create awareness among the consumer.
3.Reasonable prices are expected by the majority of the consumers. In contrast, Ultratech and Dalmia Vajram which are priced higher, enjoy higher market share inspite of lower priced brands. This shows that the brand quality perception in consumer’s minds is related to price. People are willing to pay a higher price for premium brands.
2.PROBLEM DEFINITION
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2.1. BACKGROUND TO THE PROBLEM
2.1.1. COMPANY OVERVIEW
The company was founded in 1935 by Jaidayal Dalmia, with the cement division being set up in 1939
in South India.It concentrates on cement, sugar and power .The company boasts of over 70 years of
strong experience.
In the pre-independence period, the Dalmia Group had set up four cement plants, out of which two got
affected by partition and Independence. The remaining two are operational as Dalmia Cement and
made strategic investments in Orissa Cements Limited (OCL). DCBL has always been the pioneer in
introducing new technologies, which the other peers in the same industry follow today. They are known
to be the leader in their industry segment in the niche category.
TABLE1
Revenue Breakup
Cement Business 72%
Sugar Business 16%
Refractories and Power 12%
Source:Bloombergutv
DCBL has business interests in two major segments namely Cement and Sugar with share of ~72% and
16% respectively for FY09 and rest coming from Power and others. DCBL has cement plants in
Southern States of Tamil Nadu (Dalmiapuram & Ariyalur) and Andhra Pradesh (Kadapa), with
combined capacity of 9 million tons per annum (MnT). With ~51% of its cement getting sold in Tamil
Nadu, 25% in Kerala, 11% in Karnataka, 9% in Andhra Pradesh and rest 4% in eastern and other
regions, DCBL enjoys double digit market share in its region. DCBL is a pioneer in super specialty
cements like Oil well, Railway sleeper and Air strip. DCBL also has three Integrated Sugar Mills in the
State of UP with installed capacity of 22,500 tons of cane crush per day, distillery capacity of 80 kilo
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litres per day (KLPD) & cogeneration facility. DCBL also has stake in OCL ~ 21.7% having cement
manufacturing capacity of 5.4 MnT .
TABLE 2
Dalmia cement’s Market share
Company Place Market share
Dalmia Cement Tamil Nadu 12%
Dalmia Cement Kerala 13%
OCL India West Bengal 8%
OCL India Orissa 29%
Source:Bloombergutv
TABLE 3
Cement Volumes for the Fiscal Year 2009
Cement Volume FY09(MT)
Dalmia Cement 3.41
OCL India 2.71
Total 6.14
Source:Bloombergutv
Dalmia Cement takes the credit of being the first to develop specialty cement for Railway Sleepers way
back in 1976.
In the year 1984,Dalmia Cement developed a special cement for petroleum oil wells,an import
substitute product,for the first time in India.
They developed the air strip Cement for the first time in India.
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Impressed by the techno-leadership of Dalmia Cement,the World Bank set up the Regional Training
Centre for cement industry at Dalmiapuram,one of its kind in South India,in association with Dalmia
Cement in the year 1991.
Dalmia Cement has the distinction of being one of the first companies in India to be awarded the ISO
9000 certification.
Cement accounts for 70% of revenues.Current Operating capacity is around 9MT.
Recently, Dalmia Cement has increased its stake in OCL India to 45.4%.Enterprise Value of cement
unit and OCL India around Rs3300 cr and Current Cement capacity of OCL India around 5.3 MT
Dalmia Cement plans 10 MT of additional Greenfield capacity by 2013 .
2.1.2.INDUSTRY ANALYSIS
The Indian cement industry with a total capacity of 200 million tonnes (including mini plants) has
emerged as the second largest market after China, surpassing developed nations like the USA and
Japan.
Low cost technology and extensive restructuring have made some of the Indian cement companies the
most efficient across global majors.
In FY09, the GDP growth slowed down to 6.7% compared to the 9% growth reported in FY08.
However, cement consumption growth in FY09 at 8.4% has been able to maintain its multiplier factor
with GDP growth at 1.25 times.
In FY09, all the regions except the Western and the Northern region have outperformed the industry in
consumption growth. The Eastern region continued its buoyant performance and registered the highest
cement consumption growth of 11.3% on yoy basis. The Southern and Central regions also reported
impressive double-digit growth of 10.4% in cement consumption. But, the Northern region has
registered the lowest growth in the cement demand on yoy basis.Comparatively, poor demand growth
registered by the Western region was on account of high base of the last year and also slightly subdued
demand.
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With focus on capacity addition, many small/medium players have been able to capture more market
share and consolidate their position in the industry in the last two years. Market share of top five
individual companies taken together show a decline to a level of 44.3% in FY09 from 46.3% in FY08.
Even though the utilisation rate dropped, average cement prices in FY09 rose by about 5% on yoy
basis. But, the growth in cement prices remained slightly subdued compared to 21% and
14%,registered in FY07 and FY08, respectively.
On the regional front, prices in the Southern region were firm and ruling consistently at the highest
level amongst all the regions in FY09. However, due to slowdown in the cement off take and relatively
low operating rate, prices in the Northern region remained at the lowest levels compared to other
regions.
In FY09, the cement industry witnessed a fall in profitability. Even though, average realisation for the
industry increased by about 4% on yoy basis, cost of production has increased by 18.5% on yoy basis.
Power and fuel cost for many cement companies increased in FY09 mainly on account of substantial
increase in coal prices. As a result, the operating profit margin of the industry dropped
by about 8- 9% in FY09. Also, higher interest rates and depreciation provided on expanded capacities
took its toll on the net profit margin of the industry which witnessed a decline by about 5% in FY09.
Going forward, cement companies would be benefited by their focus on captive power generation
which would help them to reduce power & fuel cost. With reduction in coal prices, the authors have
estimated that per tonne power & fuel cost of the industry will decline by about 12% in FY10 on yoy
basis.
Cement is a fine powder, which when mixed with water undergoes chemical change and thereafter
allowed to set and harden is capable of uniting fragments or masses of solid matter together to produce
a mechanically strong material. Cement can be used as binding material with water, for bonding solid
particles of different sizes like bricks, stones or aggregate to form a monolith. Cements used in
construction of buildings and civil engineering works contain compounds of lime, silica and alumina as
their principal constituents and can be called as complex compounds.
Cement is a very essential commodity used in the construction of buildings and other
structures.Cement is a binder, a substance which sets and hardens independently, and can bind other
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materials together. It is also the second most consumed material on the planet (WBCSD 2002-World
Business Council for Sustainable Development)
It is consented to be a core sector accounting for approximately 1.3% of GDP and employing over 0.14
million people. Also the industry is a significant contributor to the revenue collected by both the central
and state governments through excise and sales taxes. Cement is considered preferred building material
and is used worldwide for all construction works such as housing and industrial construction, as well as
for creation of infrastructures like ports, roads, power plants, etc. Indian cement industry is globally
competitive because the industry has witnessed healthy trends such as cost control and continuous
technology upgradation.
Some of the reasons for its popularity and universal acceptance are listed below:
a. Cement can be produced in large volumes in controlled condition, packed and transported
b. Cement is several times stronger binding material than lime and clay
c. It can be mixed and used at will with locally available materials at site
d. When stored properly in ordinary atmosphere does not deteriorate for reasonably longer time
e. When mixed with water, starts setting and acquires sufficient strength in a day or two, where as other
binding materials require much longer time
f. When water is added to quick lime, lot of heat is generated, but in case of cement, heat generated is
unnoticeable and comparatively much lesser
g.It can withstand compressive stresses well. Where tension and shear stresses occur it gives good bond
to steel reinforcement and transfers excess stresses to steel.
h. It is produced from the materials like limestone, hematite, bauxite, clay, etc which are abundantly
available in the upper crust of the earth.
The Indian cement industry is extremely energy intensive and is the third largest user of coal in the
country. It is modern and uses latest technology, which is among the best in the world. Also, the
industry has tremendous potential for development as limestone of excellent quality is found almost
throughout the country.India is the world's second largest producer of cement after China.Indian
cement industry is the largest with overall capacity of 217.9million tonnes. Cement contributes
significantly to the GDP of the nation directly and indirectly. Demand for cement in the country is
expected to continue its buoyant ride on the back of robust economic growth and infrastructure
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development in the country. Cement industry has contributed around 8% to the economic development
of India.
Despite some consolidation, the industry remains somewhat fragmented and merger and acquisition
possibilities are strong. Investment norms including guidelines for foreign direct investment (FDI) are
investor-friendly. All these factors present a strong case for investing in the Indian market.
2.1.3.TYPES OF CEMENT
There are some varieties in cement that always find good demand in the market.
Among the different varieties of cement, India produces Ordinary Portland Cement (OPC), Portland
Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement (PBFS), Oil Well Cement,Rapid
Hardening Portland Cement and Sulphate Resisting Portland Cement. The share of blended cement in
total cement production has increased from 29 per cent in 1997-98 to 54.5 per cent in 2003-04.
Ordinary Portland Cement (OPC): Also referred to as grey cement or OPC, it is of much use in
ordinary concrete construction. In the production of this type of cement in India, Iron (Fe2O3),
Magnesium (MgO), Silica (SiO2), Alumina (AL2O3), and Sulphur trioxide (SO3) components are
used.There are 2 grades of cement –OPC43 and OPC53.It accounts for 70% of the consumption.OPC
comes in 3 different grades-Ordinary Portland Cement 33, 43, 53 grade (OPC), 53-S (Sleeper Cement).
33, 43 and 53 grade in OPC indicates the compressive strength of cement after 28 days when tested as
per IS: 4031-1988, eg, 33 Grade means that 28 days of compressive strength is not less than 33 N/mm2
(MPa) . Similarly for 43 grade and 53 grade the 28 days compressive strength should not be less than
43 and 53 MPa respectively. 43 and 53 grade are also being introduced in PPC and PSC shortly by the
Bureau of Indian Standards (BIS)
Portland Pozolona Cement (PPC): As it prevents cracks, it is useful in the casting work of huge
volumes of concrete. The rate of hydration heat is lower in this cement type. Fly ash, coal waste or
burnt clay is used in the production of this category of cement. It can be availed at low cost in
comparison to OPC. PPC produces less heat of hydration and offers greater resistance to attack of
aggressive environment, gives long-term strength and enhances the durability of structures. PPC is
manufactured by inter grinding OPC clinker with 15-35% of pozzolanic material. Pozzolanas are
essentially siliceous or aluminous material, which in itself possesses no cementitious properties, which
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will be in finely divided form and in the presence of moisture react with calcium hydroxide, liberated in
the hydration process, at ordinary temperature, to form compounds possessing cementitious properties.
The pozzolanic materials generally used are fly ash or calcined clay. PPC is used in heavy load
infrastructure and constructions such as marine structures, hydraulic structures, mass concreting works,
plastering, masonry mortars, and all applications of ordinary Portland cement.
White cement: It is a kind of Ordinary Portland Cement. The ingredients of this cement are inclusive
of clinker, fuel oil and iron oxide. The content of iron oxide is maintained below 0.4% to secure
whiteness. White cement is largely used to increase the aesthetic value of a construction. It is preferred
for tiles and flooring works. This cement costs more than grey cement.
Portland Blast Furnace Slag Cement (PBFSC):PBFSC consists of 45 per cent clinker, 50 per cent
blast furnace slag and 5 per cent gypsum and accounts for 10 per cent of the total cement consumed. It
has a heat of hydration even lower than PPC and is generally used in the construction of dams and
similar massive constructions. PSC is obtained by mixing blast furnace slag, cement clinker and
gypsum and grinding them together to get intimately mixed cement. The quantity of slag varies from
30-70%. The gain of strength of PSC is somewhat slower than OPC. Both PPC and PSC will give more
strength than that of OPC at the end of 12 months. PPC and PSC can be used in all situations where
OPC is used, but are preferred in mass construction where lower heat of hydration is advantageous or in
marine situations and structures near seacoast or in general for any structure where extra durability is
desired.For eg, Marine structure, structures near the sea, sewage disposal treatment works, water
treatment plants, etc
Oil Well Cement: Made of iron, coke, limestone and iron scrap, Oil Well Cement is used in
constructing or fixing oil wells. This is applied on both the off-shore and on-shore of the wells.
Sulphate Resistant Cement: Sulphate Resistant Cement is used in projects such as dams that are
exposed to high amounts of sulfates. It is also used wherever there are constructions that are in direct
contact with clay soil, which contains a large amount of sulfate salt, such as foundations and pillars.
Sulphate Resistant is a pre-blended, ready-to-use cement base grout containing non-ferrous fluidities
and anti-shrinkage compounds blended with siliceous aggregate and Portland cement. A highly
sulphate resistant cement, with an extremely low C3A content, is utilized in the manufacture of
Sulphate Resistant Grout. This special cement is very resistant to attack from sodium and magnesium
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sulphates found in ground water. SRC can be used for Foundation, Piles, Basements, Underground
structures, sewage and water treatment plants and coastal works, where Sulphate attack due to water or
soil is anticipated
2.1.4. MARKET PLAYERS
The larger players in the industry control nearly 53% of the capacity and revenues for the sector in
India. The key players in the country include Associated CementCompanies (ACC), Ultratech
Cements, Grasim Industries, Gujarat Ambuja Cement and India Cements Limited. The market share of
the major cement players, in terms of revenue and production.
TABLE4
Market Share in terms of Sales
S.No Cement Market Share
1. A C C 17%
2. Grasim 15%
3. Ultratech 12%
4. Ambuja Cements. 9%
5. Other players 47%
Source:CMA
CHART1
Major Market Players
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.
Source:Cement Manufacturer’s Association
Associated Cement Companies Ltd (ACC)
Associated Cement Companies Ltd manufactures ordinary Portland cement,composite cement and
special cement.It has twelve manufacturing plants located throughout the country with exports to
SAARC nations. The company plans capital expenditure through expansion of existing units and/or
through acquisitions. Non-core assets are to be divested to release locked up capital. It is also expected
to actively pursue overseas project engineering and consultancy services.
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 tonnes and
produced 4.77 million metric tonnes 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. It manufactures Ordinary portland cement (OPC), portland pozzolana cement, fly ash-based
PPC, Low-alkali portland cement, portland slag cement, low heat cement and sulphate resistant cement.
Large quantities of its cement are exported to Nepal and Bangladesh. Going forward, the company is
setting up its captive power plant to remain cost competitive.
Century Textiles and Industries Ltd (CTIL)
The product portfolio of CTIL includes textiles, rayon, cement, pulp & paper, shipping,property & land
development, builders and floriculture. Cement is the largest division of CTIL and contributes to over
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40 per cent of the company's revenues. CTIL has four plants that manufacture cement, one in
Chhattisgarh,two in Madhya Pradesh and one in Maharashtra. Going forward, the company has scripted
a three-pronged strategy closing down its shipping business, continuing with its chemicals and adhesive
division, and focusing on cement, rayon and paper as its longterm business plan.
Grasim-UltraTech Cemco
Grasim's product profile includes viscose staple fibre (VSF), grey cement, white cement,sponge iron,
chemicals and textiles. With the acquisition of UltraTech, L&T's cement division in early 2004,
Grasim has now become the world's seventh largest cement producer with a combined capacity of 31
million tonnes. Grasim (with UltraTech) held a market share of around 21 per cent in 2003-04. It has
plants in Madhya Pradesh, Chhattisgarh, Punjab, Rajasthan, Tamil Nadu and Gujarat among others.
The company plans to invest over US$ 9 million in the next two years to augment capacity of its
cement and fibre business. It’s also plans to focus on its international ventures, ramping up the capacity
of Alexandra Carbon Black in Egypt to 1,70,000 tonne per annum (from 1, 20,000 tpa) and raising the
capacity of the carbon black plant in China from 12,000 tpa to 60,000 tpa.
Gujarat Ambuja Cements Ltd (GACL)
Gujarat Ambuja Cements Ltd 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, Chhattisgarh, Punjab and Rajasthan. The company has a
market share of around 10 per cent, with a strong foothold in the northern and western markets. Gujarat
Ambuja is India's largest cement exporter and one of the most cost efficient firms. GACL has a 14.45
per cent stake in ACC, making it the second largest cement group in the country, after Grasim-
UltraTech Cemco. The company has free cash flows that it is likely to use to grow inorganically. The
company is scouting for a capacity of around two million tonne in the northern and western markets. It
has also earmarked around US$195-220 million for acquisitions
India Cements
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India Cements is the largest cement producer in southern India with plants in Andhra Pradesh and
Tamil Nadu. Its product portfolio includes ordinary Portland cement and blended cement.The company
has limited its business activity to cement, though it has a marginal exposure to the shipping business.
The company plans to reduce its manpower significantly and exit non-core businesses to turnaround its
fortune. It also expects the export market to open up, with the Gulf emerging as a major importer.
Jaiprakash Associates Limited
Jaiprakash Industries, now known as Jaiprakash Associates Limited (JAL) is part of the
Jaypee group with businesses in civil engineering, hospitality, cement, hydropower,
design consultancy and IT. It has plants located in Rewa & Bela (Madhya Pradesh) and Sadva Khurd
(Uttar Pradesh). The company is upgrading its capacity to 6.5 million tonnes through the modernizing
of the existing units and the commissioning of a new grinding unit at Tanda (Uttar Pradesh) with an
investment of US$ 163 million. The company manufactures a wide range of world class cement of
OPC grades 33, 43, 53, IRST-40 and special blends of pozzolana cement.
Madras Cements
Madras Cements Ltd is one of the oldest cement companies in the southern region and is a part of the
Ramco group. The company is engaged in cement, clinker, dolomite, dry mortar mix, limestone,
ready mix cement (RMC) and units generated from windmills. The company has three plants in Tamil
Nadu, one in Andhra Pradesh and a mini cement plant in Karnataka. Madras Cements plans to expand
by putting up RMC plants. As Karnataka is a promising market, the company is further expanding its
capacity from the present 1.5 million tonnes to 3.4 million tonnes through an investment of US$ 9
million.
Holcim
Holcim is a key player in aggregates, concrete and construction related services. It has a strong market
presence in over 70 countries and is a market leader in South America and in a number of European and
overseas markets. Holcim entered India by means of a long-term strategic alliance with Gujarat Ambuja
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Cements Ltd (GACL). The alliance aims to strengthen their clinker and cement trading activities in
South Asia, the Middle East and the region adjoining the Indian Ocean. Holcim also intends to use
India as an additional base for its IT operations, R&D projects as well as a procurement sourcing hub to
generate additional synergies and value for the group.
Italcementi Group
The Italcementi group is one of the largest producers and distributors of cement with 60 cement plants,
547 concrete batching units and 155 quarries spread across 19 countries in Europe, Asia, Africa and
North America. Italcementi is present in the Indian markets through a 50:50 joint venture company
with Zuari Cements. All initiatives in southern India are routed through the joint venture company,
while Italcementi is free to buy deals in its individual capacity in northern India.
Lafarge India
Lafarge India Pvt Ltd, a subsidiary of the Lafarge Group, has a total cement capacity of 5 million
tonnes and a clinker capacity of 3 million tonnes 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. The
Indian cement plants are located in Chhattisgarh and Rajasthan. Lafarge Cement has become the largest
cement selling firm in the Indian markets of West Bengal, Bihar, Jharkhand and Chhattisgarh.
The recent years have witnessed a surge of foreign direct investment in the cement sector. International
players like France's Lafarge, Holcim from Switzerland, Italy's Italcementi and Germany's Heidelberg
Cements hold more than a quarter pie of the total capacity.
Holcim, one of the world's leading suppliers of cement, has 24 plants in the country and enjoys
a market share of about 23-25 per cent. It will further invest about US$ 2.49 billion in the next
five years to set up plants and raise capacity by 25 mt in the country. Holcim has a global sale
worth about US$ 20 billion, where India contributes US$ 2–2.5 billion.
Italcementi Group, the fifth largest producer of cement in the world acquired full stake in the
K.K. Birla promoted Zuari Industries' cement, to strengthen its presence in India lining up US$
300 million investment to increase the capacity of Zuari Industries from 1.7 mtpa to about 6-7
23
mtpa. Moreover, it plans to invest US$ 174 million over the next two years in various greenfield
and acquisition projects.
The French cement major, Lafarge, acquired the cement plants of Raymond and Tisco with an
installed capacity of 6 mtpa. It plans to double its capacity to 12 mt over the next five years by
adopting the greenfield expansion route.
Heidelberg cement has entered into an equal joint-venture agreement with S P Lohia Group
controlled Indo-Rama cement. It aims at a 50 per cent controlling stake in Indo-Rama's grinding
plant of 0.75 mtpa at Raigad in Maharashtra. Heidelberg is also taking over Mysore cement of S
K Birla group at a consideration of US$ 93 million.
REGIONWISE PLAYERS
NORTHERN REGION
1.Grasim Industries Ltd
2.Ambuja Cements Ltd.
3. A C C Ltd
4. Prism Cement Ltd.
5.Birla Corporation Ltd.
6.Shree Cement Ltd.
7.J K Cement Ltd.
8.Binani Cement Ltd.
EASTERN REGION
1.Ambuja Cements
2.Grasim Industries Ltd.
24
3.A C C Ltd.
4.Ultratech Cement Ltd.
5.Birla Corporation Ltd.
6.Century Textiles & Inds. Ltd.
7.O C L India Ltd.
SOUTHERN REGION
1.Grasim Industries Ltd.
2.A C C Ltd.
3.Ultratech Cement Ltd.
4.India Cements Ltd.
5.Madras Cements Ltd.
6.Dalmia Cement (Bharat) Ltd.
7.Chettinad Cement Corpn. Ltd.
WESTERN REGION
Ambuja Cements Ltd.
Grasim Industries Ltd.
A C C Ltd.
Ultratech Cement Ltd.
Century Textiles & Inds. Ltd.
Sanghi Industries Ltd.
FOREIGN PLAYERS
1.Lafarge
25
2.Holcim
3.Italcementi Group
2.1.5.CONSUMPTION PATTERN & DEMAND DRIVERS
In the current fiscal (2009-10) cement consumption has shot up, reporting, on an average, 12.5%
growth in consumption during the first eight months with the growth being aided by strong
infrastructure spending,especially from the govt sector.
The overall outlook for the industry is positive and shows significant growth on the back of robust
demand from housing construction,National Highway Development Project and other infrastructure
development projects.
Cement is mainly used in Independent houses, housing complexes, commercial complexes and
infrastructure.
The demand drivers for the cement sector continue to be housing, infrastructure and commercial
construction, etc.
Housing sector acts as the principal growth driver for cement. However, in recent times, industrial and
infrastructure sector have also emerged as demand drivers for cement.
Individual housing sector is the major consumer of cement (50% of cement demand) followed by the
government infrastructure sector.
The customers are categorized as retail customers and industrial customers
Retail customers:
People who build their own houses or contractors who opt to buy cement through distribution channel
are the retail customers. A retail customer can buy cement from a retail outlet (Hardware shop) from
his area
Industrial customers: A customer who has a registered company and buys large quantities of cement
can buy cement directly from sales points. Government is an industrial customer.
CHART2
Consumption Pattern in India
HousingInfrastructureCorporate
50%
25%
25%
26
Over the next five years, the numbers of households are expected to increase at a CAGR of 2.3 per
cent, against a population growth rate of over 1.7 per cent. The growth in urban households will be
higher than rural households, shifting the rural-urban household ratio from 70:30 to 67:33. As the
growth in households is higher than the population growth, it will accelerate the demand for new
houses. Higher demand and greater affordability due to lower interest rates and tax breaks is expected
to trigger an unprecedented housing boom. The housing finance industry has estimated a latent
demand of 33 million houses and forecasts a growth of 50 per cent per annum till 2007. With the
housing sector accounting for 50 per cent of the current cement demand, this boom is expected
to propel even higher cement demand.
2.1.6.REGIONAL PATTERN
Transporting cement, a bulk commodity, it over long distances is uneconomical. This has resulted in
cement being largely a regional play with the industry divided into five main regions. north, south,
west, east and the central region. The southern region accounts for the largest share in overall
production (29 per cent) due to the vast availability of limestone. This is followed by the northern (21
per cent) and the western regions (19 per cent).
CHART2
Consumption Pattern in India
HousingInfrastructureCorporate
50%
25%
25%
27
CHART3
Cement Production
NorthSouthEast & West
21%
29%
19%
Source:Indian Brand Equity Foundation Sectoral Report
Cement consumption varies across regions due to the differences in the demand-supply balance, per
capita income and the level of industrial development in each state. In 2008-2009, northern India
accounted for the highest proportion of cement consumption (32 per cent), followed by the southern (28
per cent), western (25 per cent) and eastern regions (15 per cent). Over the years
it has been observed that demand in the east has been driven by the housing sector, whereas
infrastructure, investments in industrial projects and the housing sector (in varying proportions) have
propelled demand in the western, northern and southern regions. The western and northern regions are
the most lucrative markets due to their higher price realisations.
CHART4
North South East West05
101520253035
Cement Consumption Pattern
Cement Consumption Pat-tern
28
Among the Indian States,Maharashtra is leading in consumption(12.18%) followed by Uttar Pradesh.In
production terms,Andhra Pradesh is leading with 14.72% of total production.Northern and Southern
regions consume around 20-30% while the central and western region consume only around 16-18%.
Therefore, the competition in the cement industry in India is increasing at a rapid rate. There are several
players in the cement industry. Many foreign players are also entering Indian Markets by acquiring
substantial stakes in Indian Companies. The Indian Cement Market is flourishing with multiple brands.
The Cement industry is currently dominated by 20 Companies which account for 70% of the market.
Although consolidation has taken place in the Indian cement industry with the top five players
controlling almost 60% of the capacity, the balance capacity still remains pretty fragmented.
2.1.7.CEMENT MANUFACTURING TECHNOLOGY
The manufacturing process of cement consists of the mixing, drying and grinding of limestone, clay
and silica into a composite mass.The mixture is then heated and burnt in a pre-heater and kiln to be
cooled in an air cooling system to form clinker, which is the semi-finished form. This clinker is cooled
by air and subsequently ground with gypsum to form cement.
Portland cements are made by grinding a mixture of limestone, clay and other corrective materials,
viz. Laterite, Bauxite,etc. Essential constituents mainly are Lime, Silica, Alumina and Iron Oxide.
The process of manufacturing consists of grinding of raw materials into fine powder, mixing them
and burning in a kiln at about 1400 deg. C. The resultant product is called Clinker. Clinker is cooled,
ground to fine powder with gypsum. The end product is cement.
There are three types of processes to form cement - the wet, semi-dry and dry processes. In the
wet/semi-dry process, raw material is produced by mixing limestone and water (called slurry)and
CHART4
North South East West05
101520253035
Cement Consumption Pattern
Cement Consumption Pat-tern
29
blending it with soft clay. In the dry process technology,crushed limestone and raw materials are
ground and mixed together without the addition of water.
The dry and semi-dry processes are more fuel-efficient. The wet process requires 0.28 tonnes of coal
and 110 kWh of power to manufacture one tonne of cement, whereas the dry process requires only 0.18
tonnes of coal and 100 kWh of power. Coal and power costs account for 35 per cent of the total cement
production costs. With 95 per cent of the total capacity based on the modern dry process technology,
the Indian cement industry has become more cost efficient. Top companies in the cement industry
match quite well with world standards in terms of energy (thermal energy Kcal/kg of clinker - India
665 against 690 of Japan) and pollution norms (SPM of 40 in India against 20 in Japan).
CHART 5
Cement process
DryWet & Semi-dry
5%
95%
Source:Indian Brand Equity Foundation Sectoral Report
The main raw materials used in the cement manufacturing process are limestone, sand, shale, clay, and
iron ore. The main material, limestone, is usually mined on site while the other minor materials may be
mined either on site or in nearby quarries. Another source of raw materials is industrial by-products.
The use of byproduct materials to replace natural raw materials is a key element in achieving
sustainable development.
30
Figure 1
Figure 2
31
Cement Manufacturing Process
Raw Material Preparation-Blasting and Crushing of Limestone
Mining of limestone requires the use of drilling and blasting techniques. The blasting techniques use
the latest technology to ensure vibration, dust, and noise emissions are kept at a minimum. Blasting
produces materials in a wide range of sizes from approximately 1.5 meters in diameter to small
particles less than a few millimeters in diameter. Material is loaded into trucks for transportation to the
crushing plant. Through a series of crushers and screens, the limestone is reduced to a size less than 100
mm and stored until required. Depending on size, the minor materials (sand, shale, clay, and iron ore)
may or may not be crushed before being stored in separate areas until required.
Grinding
32
The raw materials are next ground together in a rawmill. Passing into the rawmill, the mixture is
ground to rawmix. It is important that the rawmix contains no large particles in order to complete the
chemical reactions in the kiln, and to ensure the mix is chemically homogenous.
In the wet process, each raw material is proportioned to meet a desired chemical composition and fed to
a rotating ball mill with water. The raw materials are ground to a size where the majority of the
materials are less than 75 microns. Materials exiting the mill are called "slurry" and have flowability
characteristics.
Blending and Homogenization
This slurry is pumped to blending tanks and homogenized to ensure the chemical composition of the
slurry is correct. This slurry is conveyed to the blending system by conventional liquid pumps.
Following the homogenization process, the slurry is stored in tanks until required. In the case of wet
process, water is added to the rawmill feed, and the mill product is a slurry with moisture content
usually in the range of 25-45% by mass. In the case of a dry process, the rawmill also dries the raw
materials, usually by passing hot exhaust gases from the kiln through the mill, so that the rawmix
emerges as a fine powder. This is conveyed to the blending system by conveyor belt or by a powder
pump.
Homogenization: Calcium and silicon are present in order to form the strength-producing calcium
silicates. Aluminium and iron are used in order to produce liquid ("flux") in the kiln burning zone. The
liquid acts as a solvent for the silicate-forming reactions, and allows these to occur at an economically
low temperature. Insufficient aluminium and iron lead to difficult burning of the clinker, while
excessive amounts lead to low strength due to dilution of the silicates by aluminates and ferrites. Very
small changes in calcium content lead to large changes in the ratio of alite to belite in the clinker, and to
corresponding changes in the cement's strength-growth characteristics. The relative amounts of each
oxide are therefore kept constant in order to maintain steady conditions in the kiln, and to maintain
constant product properties.
In the dry process, each raw material is proportioned to meet a desired chemical composition and fed to
either a rotating ball mill or vertical roller mill. The raw materials are dried with waste process gases
and ground to a size where the majority of the materials are less than 75 microns. The dry materials
33
exiting either type of mill are called "kiln feed". The kiln feed is pneumatically blended to ensure the
chemical composition of the kiln feed is well homogenized and then stored in silos until required.
Pyroprocessing-Formation of climker
Whether the process is wet or dry, the same chemical reactions take place. Basic chemical reactions
are: evaporating all moisture, calcining the limestone to produce free calcium oxide, and reacting the
calcium oxide with the minor materials (sand, shale, clay, and iron). This results in a final black,
modular product known as "clinker" which has the desired hydraulic properties. In the wet process, the
slurry is fed to a rotary kiln, which can be from 3.0 m to 5.0 m in diameter and from 120.0 m to 165.0
m in length. The rotary kiln is made of steel and lined with special refractory materials to protect it
from the high process temperatures. Process temperatures can reach as high as 1450oC during the
clinker making process.
In the dry process, kiln feed is fed to a preheater tower, which can be as high as 150.0 meters. Material
from the preheater tower is discharged to a rotary kiln with can have the same diameter as a wet process
kiln but the length is much shorter at approximately 45.0 m. The preheater tower and rotary kiln are
made of steel and lined with special refractory materials to protect it from the high process
temperatures.
Regardless of the process, the rotary kiln is fired with an intense flame, produced by burning coal, coke,
oil, gas or waste fuels. Preheater towers can be equipped with firing as well. The rotary kiln discharges
Clinker
Rotating kiln
34
the red-hot clinker under the intense flame into a clinker cooler. The clinker cooler recovers heat from
the clinker and returns the heat to the pyroprocessing system thus reducing fuel consumption and
improving energy efficiency. Clinker leaving the clinker cooler is at a temperature conducive to being
handled on standard conveying equipment.
Finish Grinding and Distribution
The black, nodular clinker is stored on site in silos or clinker domes until needed for cement
production. Clinker, gypsum, and other process additions are ground together in ball mills to form the
final cement products. Fineness of the final products, amount of gypsum added, and the amount of
process additions added are all varied to develop a desired performance in each of the final cement
products. Each cement product is stored in an individual bulk silo until needed by the customer. Bulk
cement can be distributed in bulk by truck, rail, or water depending on the customer's needs. Cement
can also be packaged with or without color addition and distributed by truck or rail.
2.1.8.COST
Over the past seven years, cost of cement production has grown at a CAGR of 8.4%.Also, the
producers have been able to pass on the hike in cost to consumers on the back of increased demand.
Average realizations have increased from Rs. 1,880 per tonne in FY 03 to Rs. 3,133 per tons in FY 09,
at a CAGR of 13.6%, which has been reflected in higher profit margins of the industry.To reduce the
cost of production, the industry has focused on captive power generation. Proportion of cement
production through captive power route has increased over the years. Also, cement movement by rail
has increased over the years. Freight and energy costs are also increasing; however, in the current
market scenario, manufacturers have the flexibility to pass on the increase in costs to end consumers.
Let us have a look at the cost factors affecting the cement industry
Capacity Utilization: Since the industry operates on fixed cost, higher the capacity sold, the wider the
cost distributed on the same base. But one should also keep in mind, that there have been instances
wherein despite a healthy capacity utilization, margins have fallen due to lower realizations.
Power: The cement industry is energy intensive in nature and thus power costs form the most critical
cost component in cement manufacturing (about 30% to total expenses). Most of the companies resort
35
to captive power plants in order to reduce power costs, as this source is cheaper and results in
uninterrupted supply of power.
Therefore, higher the captive power consumption of the company, the better it is for the company.
Freight: Since cement is a bulk commodity, transporting is a costly affair (over 15%). Companies,
which have plants located closer to the markets as well as to the source of raw materials have an
advantage over their peers, as this leads to lower freight costs. Also, plants located in coastal belts find
it much cheaper to transport cement by the sea route in order to cater to the coastal markets such as
Mumbai and the states of Gujarat and Tamil Nadu. On account of sufficient reserves of raw materials
such as limestone and gypsum, the raw material costs are generally lower than freight and power costs
in the cement industry. Excise duties imposed by the government and labor wages are among the other
important cost components involved in the manufacturing of cement.
Operating margins: The company should have a consistent record of outperforming its peers on the
operational performance front i.e. it should have higher operating margins than its competitors in the
industry. Factors such as captive power plants, effective capacity utilization results in higher operating
margins and therefore these factors should be looked into. Since cement is a regional play on account of
its high freight costs, the company should not have all its plants concentrated in one region. It should
have a geographical spread so that adverse market conditions in one region can be mitigated by high
growth in the other region.
2.1.9.GOVERNMENT POLICIES
Government policies have affected the growth of cement plants in India in various stages. The control
on cement for a long time and then partial decontrol and then total decontrol has contributed to the
gradual opening up of the market for cement producers. The stages of growth of the cement industry
can be best described in the following stages:
Price and Distribution Controls (1940-1981)
During the Second World War, cement was declared as an essential commodity under the Defense of
India Rules and was brought under price and distribution controls which resulted in sluggish growth.
The installed capacity reached only 27.9 MT by the year 1980-81.
36
Partial Decontrol (1982-1988)
In February 1982, partial decontrol was announced. Under this scheme, levy cement quota was fixed
for the units and the balance could be sold in the open market. This resulted in extensive modernization
and expansion drive, which can be seen from the increase in the installed capacity to 59MT in 1988-89
in comparison with the figure of a mere 27.9MT in 1980-81, an increase of almost 111%.
Total Decontrol (1989)
In the year 1989, total decontrol of the cement industry was announced. By decontrolling the cement
industry, the government relaxed the forces of demand and supply. In the next two years, the industry
enjoyed a boom in sales and profits.
By 1992, the pace of overall economic liberalization had peaked; ironically,however, the economy
slipped into recession taking the cement industry down with it. For 1992-93, the industry remained
stagnant with no addition to existing capacity.
Government Controls
The prices that primarily control the price of cement are coal, power tariffs, railway, freight, royalty
and cess on limestone. Interestingly, all of these prices are controlled by government
Opening up the FDI channel
The impact of government policies on cement demand has been steadily decreasing with the sector
being gradually deregulated. At present, 100 per cent foreign direct investment (FDI) is permitted
in the cement industry. Lafarge was the first foreign company to enter the Indian market in 1999.
State policies and export norms to encourage investment
Both the state and export policies promote cement production. Exporters can claim duty drawbacks on
imports of coal and furnace oil up to 20 per cent of the total value of imports. Most state governments
offer fiscal incentives in the form of sales tax exemptions/deferrals in order to attract investment. In
some states, this applies only to intra-state sales, like Madhya Pradesh and Rajasthan. States like
Haryana offer a freeze on the power tariff for 5 years, while Gujarat offers exemption from duty on
electricity.
37
Urban Land Ceiling Act repeal could be a driver
The Urban Land Ceiling Regulation Act (ULCRA) enacted to control and prevent the concentration of
urban land, has been repealed in many states. This could facilitate the development of such land for
housing and other construction.
Union Budget 2010
Though cement is the most essential infrastructure input, the tax on cement is the highest among the
items required for building infrastructure. The total government levies and taxes on cement constitute
60 per cent or more of the ex-factory price, Levies and taxes on cement in India are far higher than
most of the other countries in the Asia-Pacific Region where the average tax is just 11.4 per cent, with
the highest levy of 20 per cent being in Sri Lanka. While steel attracts four per cent VAT, for cement it
is as high as 12.5 per cent.
The Union Budget of 2010 has been a mixed bag for cement industry.
In the Union Budget of 2010,although the government has refrained from loweing the taxes and duties
on cement,the government has decided to spend Rs. 1.37 lakh crore for Infrastructure Development and
The government has increased budgetary allocation for roads under NHDP. Further, with more
incentives being spelled out for the infrastructure and housing sector.The government has proposed to
allocate19,894 crore for Road Development.
The introduction of coal cess is proving to be having a multiplier effect across board in terms of cost
rise. Cement companies claim that production cost will have to rise because of this. This coupled with
the excise rollover of about 2% will surely increase price of cement per bag.
The existing excise rate of bulk cement after the proposed changes will become 10% or Rs 290 per
tonne whichever is higher from 8 % or Rs 230 per tonne now. Clinker price of Rs 300 per tonne will
now become Rs 375 per tonne.
Wherever retail cement price exceeds Rs 190 per bag, the existing excise rate of 8% of retail sale price
will become 10%. If the retail cement price does not exceed Rs 190 per bag, the existing rate of Rs 230
per tonne will stand enhanced to Rs 290 per tonne.
38
2.1.10.CONSOLIDATION OPPORTUNITY:MERGERS AND
ACQUISITIONS
The cement industry in India is still highly fragmented with over 50 players. The presence of excess
capacity in the industry has triggered large-scale consolidation, a trend expected to continue during the
next 3-4 years.
For cement companies based in India, South-East Asia and the Middle East there are potential and
lucrative export markets. Low cost technology and extensive restructuring have made some of the
Indian cement companies the most efficient across global majors. Despite some consolidation, the
industry remains somewhat fragmented and merger and acquisition possibilities are strong.
Increased activity in infrastructure and a booming real estate market have seen foreign firms vying to
acquire a share of the pie.
Holcim strengthened its position in India by increasing its holding in Ambuja Cement from 22
per cent to 56 per cent through various open market transactions with an open offer for a total
investment of US$ 1.8 billion. Moreover it also increased its stake in ACC cement with US $
486 million, being the single largest acquirer in the cement sector.
Leading foreign funds like Fidelity, ABN Amro, HSBC, Nomura Asset Management Fund and
Emerging Market Fund have together bought around 7.5 per cent in India’s third-largest
cement firm India Cements (ICL) for US$ 148.19 million.
Cimpor the Portugese cement maker paid US$ 75.76 million for Grasim Industries’ 53.63 per
cent stake in Shree Digvijay cement
Some of the other major mergers and acquisitions in the recent past include CRH acquiring My Home
Industries for US$ 462 million, Lafarge buying L&T Concrete’s ready-mix concrete (RMC) business
for US$ 349 million and Heidelberg consolidating its business with Mysore cement and Indorama, and
Italcementi acquiring 100 per cent stake in Zuari cement and 95 per cent stake in Shree Vishnu among
others.
39
TABLE5
Cement capacity that can be sold
East 1.20 mT
West 2.36 mT
North 10.37 mT
South 9.42 mT
Total 23.35 mT
Source:CRISIL
According to CRISIL estimates, given the demand-supply gap of roughly 40 million tonnes, capacity
addition is expected over the next five years. Of this, almost 30 million tonnes will be met through
greenfield/brownfield expansions and 10 million tones through blending. The capacity addition of 30
million tonnes would require an investment of around US$ 2.2 billion.
Consolidation is expected to increase further in the cement industry. Around 23 million tonnes of
additional capacity could be sold simply because on a stand-alone basis these units are unviable. As
part of a larger group, their operations could be cost effective. This opens up a number of possibilities
for acquisitions and mergers.
Cement industry in India is currently going through a consolidation phase. Some examples of
consolidation in the Indian cement industry are: Gujarat Ambuja taking a stake of 14 per cent in ACC,
and taking over DLF Cements and Modi Cement; ACC taking over IDCOL; India Cement taking over
Raasi Cement and Sri Vishnu Cement; and Grasim's acquisition of the cement business of L&T, Indian
Rayon's cement division, and Sri Digvijay Cements. Foreign cement companies are also picking up
stakes in large Indian cement companies. Swiss cement major Holcim has picked up 14.8 per cent of
the promoters' stake in Gujarat Ambuja Cements (GACL). Holcim's acquisition has led to the
emergence of two major groups in the Indian cement industry, the Holcim-ACC-Gujarat Ambuja
40
Cements combine and the Aditya Birla group through Grasim Industries and Ultratech Cement.
Lafarge, the French cement major has acquired the cement plants of Raymond and Tisco. Italy based
Italcementi has acquired a stake in the K.K. Birla promoted Zuari Industries' cement plant in Andhra
Pradesh, and German cement company Heidelberg Cement has entered into an equal joint-venture
agreement with S P Lohia Group controlled Indo- Rama Cement.
Though the industry saw consolidation by domestic players starting in the mid-1990s, it was only in the
late 1990s that foreign players entered the market. The structure of the industry can be viewed as
fragmented, although the concentration at the top has increased, as the top 5 players control around
60.28% of market share, which was 55% in 1989-90, whereas the other 39.72% of market share is
distributed among 50 minor players. The fragmented structure is a result of the low entry barriers in the
post decontrol period and the ready availability of technology.The extent of concentration in the Indian
cement industry has increased over the years. This Concentration is mainly because of the focus of the
larger and the more efficient units to consolidate their operations by restructuring their business and
taking over relatively weaker units. Also the relatively smaller and weaker units are finding it difficult
to resist the cyclical pressure of the cement industry. Some of the key benefits (ICRA 2006) accruing to
the acquiring companies from these acquisition deals include-
Economies of scale resulting from the larger size of operations
_ Savings in the time and cost required setting up a new unit
_ Access to newer markets
_ Access to special facilities / features of the acquired company
_ Benefits of tax shelter
The cement industry is witnessing a number of multinationals entering the market and mergers and
acquisitions in domestic market itself, bringing smaller players under the umbrella of larger companies,
and larger companies coming under the umbrella of global players.
The booming demand for cement, both in India and abroad, has attracted global majors to India. In
2005-06, four of the top-5 cement companies in the world entered India through mergers, acquisitions,
joint ventures or greenfield projects. These include France's Lafarge, Holcim from Switzerland, Italy's
41
Italcementi and Germany's Heidelberg Cements. The consolidation witnessed in the industry in recent
times has resulted in two crucial domestic deals. First being the de-merger of L&T’s cement (renamed
as Ultratech Cement Ltd.) division and its acquisition by Grasim. This has led to the creation of cement
giant, making the Ultratech- Grasim combine the market leader in the country in terms of market share,
particularly in the South. The other consolidation effort was seen when Gujarat Ambuja acquired
14.4% stake in ACC in 2000 (India Infoline 2003). Following this Holcim took a big stake in ACC in
the year 2005 and has recently announced an acquisition of 14.8% in Gujarat Ambuja Cement Ltd.,
now Ambuja Cements Ltd. Thus, the top two groups in the industry, Aditya Birla Group (Grasim and
Ultratech Cements Ltd. combine) and Holcim Group (Ambuja Cements Ltd. - ACC Ltd. combine) now
control more than 45 % of total capacity in the country.
Therefore,these players provide various offers to push the sales of their cement products.The consumer
makes a choice from these multiple offers in hand.
2.1.11. COMPETITOR ANALYSIS-PORTER’S 5 FORCES MODEL
Supply The demand-supply situation is tightly balanced with the latter being marginally
higher than the former.
Demand Housing sector acts as the principal growth driver for cement. However, in recent
times, industrial and infrastructure sector have also emerged as demand drivers for
cement.
Barriers to
entry
High capital costs and long gestation periods,high capacity.Access to limestone
reserves (principal raw material for the manufacture of cement) also acts as a
significant entry barrier.
Bargaining
power of
suppliers
Licensing of coal and limestone reserves, supply of power from the state grid and
availability of railways for transport are all controlled by a single entity, which is the
government. However, nowadays producers are relying more on captive power, but
the shortage of coal and volatile fuel prices remain a concern.
Bargaining
power of
Cement is a commodity business .The industries and government make bulk
purchases.So,they bargain and the value of the segment is less compared to
42
customers individual customers whose bargaining power is less.
Competition Due to large number of players in the industry and very little brand differentiation to
speak of, the competition is intense with players resorting to expanding reach and
achieving pan India presence
PORTER’S 5 FORCES MODEL
Threat of Substitutes - LimitedOnly bitumen in road, and engineering plastics in building offer some element of competition,
43
\
2.1.12.SEGMENTATION
Differences between 2 Segments
TABLE6
Differences between 2 segments
Bargaining Power ofSuppliers-Very HighMonopolistic control ofexternal cost element (coal,power, transportation and taxes) results in highbargaining power with the government
Inter Firm Rivalry-Intense
Large number of players, intermittent overcapacity; marginal product differentiation; high storage costs; and, high exit barrier in form of significant capital investment has led to stiff competition in the industry.
Bargaining Power ofBuyers-Limited The individual house owners do not make bulk purchase.So,have less bargaining power.
Threat of New Entrants- LimitedHigh capital investment, broad distribution network and oversupplied market deter new entrants. However, technology andmanpower are easily available.
44
Parameter Housing Govt
1.Share/size by vol 50% 25%
2.Consistency of steady sporadic/economy related
Demand
3.Buying system No tenders Tenders-lowest bid
4.No. Multiple clients Lesser
5.Tech expertise Low High
Since the government does bulk purchase of cement,it can bargain over the price.As a result,the cement
sales to government will reduce profits.Whereas,the retail consumer’s power is low and they contribute
to 50% of volume which is higher than the government.Therefore,the key consumer is retail consumer.
Target Customer Definition for Dalmia Cements
Private Housing Segment (Individual Houses)
1.Geographic segmentation-
Region-South India
State-Kerala,Andhra Pradesh,Karnataka,Tamil Nadu
City- Outskirts of Tier-I cities like Bangalore,Hyderabad,Cochin,
Chennai
Tier-II cities like Madurai,Ernakulam.
Rural Areas
2.Demographic segmentation-
Age: 25-55
Family cycle-Married
45
Socio-economic class-A,B,C
2.2.STATEMENT OF THE PROBLEM
To identify key factors leading to the purchase of a particular brand of cement
3.APPROACH TO THE PROBLEM
3.1.RESEARCH OBJECTIVE
To study the consumer behaviour in cement, esp. decision making w.r.t. brand choice;
and to recommend an appropriate marketing strategy to Dalmia Cement based on the above
3.2.SCOPE OF STUDY
This study focuses on consumers who bought cement in Chennai & suburbs recently.
4.RESEARCH DESIGN
4.1.TYPE OF RESEARCH DESIGNS USED
1.Exploratory Research Design-The primary objective of Exploratory Research is to provide insights
into, and an understanding of the problem from a small sample.
2.Descriptive Research Design- It is used to describe the characteristics of relevant consumer
groups.It is a structured design marked by a clear hypothesis of the problem.
4.2.INFORMATION NEEDS
The information that is needed is profile of the customer and customer’s choice of cement.
4.3.DATA COLLECTION FROM SECONDARY SOURCES
The secondary data was collected from the company and the company’s website.
The web has been a major source of collection of secondary data where from data regarding the Indian
Cement Industry was collected with regards to a brief history, government regulations. The data
46
collected gives us a view of the major players in the industry and their current competitive position in
the market.
The data was also collected from hardware stores and masons to get an insight into the cement industry
and current trends in the industy.
4.4.DATA COLLECTION FROM PRIMARY SOURCES
The basic research paradigm is followed:
1) Define the target population.
2)Select a sampling technique.
3)Determine the sample size.
4) Do the research on the sample.
5) Infer results from the sample back to the population.
Target Population
The population consists of all individual house owners in Chennai alone. The sample was chosen
based on judgemental sampling. That is, the sample elements was chosen in Kanchipuram district of
TamilNadu.
The bargaining power of individual house owners is less as far as purchase of cements is concerned.
The government and the industrial customers go for bulk purchase.So,their bargaining power is
high.Therefore,the value of that segment is less compared to the value of the individual housing
segment.
4.5.SCALING TECHNIQUE
Interval Scale is used in this project.In interval scale,numerically equal distances on the scale represent
equal values in the characteristic being measured.
The Scaling Technique used is Likert Scale.It is a non-comparative scaling technique.A non-
comparative scaling technique evaluates one object at a time.7-point Likert Scale is used.1-Not
47
important and 7 represents Important.High score represents favorable attitude and low score represents
an unfavorable response.
Likert scale is easy to construct and administer.Respondents easily understand the scale.
For example,
TABLE7
Likert Scale
Not important Very Important
a.Reasonable Price of Cement 1 2 3 4 5 6 7
b.Strength of cement 1 2 3 4 5 6 7
c.Quick setting 1 2 3 4 5 6 7
d.Durability of cement 1 2 3 4 5 6 7
e.Color of Cement 1 2 3 4 5 6 7
f.Trusted Brand Name 1 2 3 4 5 6 7
g.Unadulterated 1 2 3 4 5 6 7
h.Direct Delivery from factory 1 2 3 4 5 6 7
i.Ideal Customer Service 1 2 3 4 5 6 7
j.Reduction in Cracks 1 2 3 4 5 6 7
k.Fineness of Cement 1 2 3 4 5 6 7
l.Available in nearby shops 1 2 3 4 5 6 7
m.Recommended by 1 2 3 4 5 6 7
48
Mason / contractor
n.Recommended by shopkeeper 1 2 3 4 5 6 7
o.Recommended by engineer 1 2 3 4 5 6 7
p.Used widely 1 2 3 4 5 6 7
q.Extensive Media coverage 1 2 3 4 5 6 7
4.6.QUESTIONNAIRE DEVELOPMENT AND PRETESTING
In order to perform the survey, a questionnaire is designed keeping in mind the study of the market
Questionnaire for Study of Cement Preference
The questionnaire prepared must aid in gathering primary data from the customers, i.e. from the market.
The questionnaire was designed based on the following paradigm:
The individual question content was designed
Question structure and wording was decided
The questions were arranged in proper order.
The form and layout was designed.
The questionnaire was pretested with 6 respondents and then refined before actual research.
4.7.SAMPLING TECHNIQUE
Sample was selected based on qualitative factors like number of variables,nature of research.The
sampling method adopted is Judgement Sampling, a Non Probability sampling method .Judgement
sampling is a form of convenience sampling in which the population elements are selected based on the
49
judgement because the researcher believes that the sample is representative of the population of
interest.
4.8.FIELD WORK
A sample size of 75 was researched.The research was done in Chennai and suburban areas of Chennai.
5.DATA ANALYSIS
5.1.METHODOLOGY
1.Exploratory Research was done initially with 4 masons to get an insight into the problem.
2.Questionnaire was prepared and the research was carried out with a sample of 6.
3.The questionnaire was modified and was administered with a sample of 75.
4.Factor analysis was carried out.
5.2.PLAN OF DATA ANALYSIS
5.2.1.EXPLORATORY RESEARCH-PILOT INTERVIEWS.
Null Hypothesis H0:To find out the major factors influencing choice of cement.
Survey on cement usage in Individual houses and Flats:
Mason is found to be the decision maker in both individual houses and flats. But, in case of individual
houses, the customer has a say in selecting cements. However, in most cases, mason decides the cement
because he is believed to possess technical expertise.
Sample size=4
Location: A Construction site in Chennai
A mason and a worker at a construction site in Chennai said that they prefer Dalmia Cements
because of the following reasons:
50
It is old and hence trustworthy.
The main reason for preferring Dalmia Cements is that it is strong.
They can mix extra bags of sand with Dalmia Cement whereas that cannot be the case with
other cements.
No cracks if Dalmia Cements is used.
They feel that Dalmia cements is unadulterated whereas other cements are mixed with ash/rock
powder.
A mason said that he would like to go for Coromandel and another preferred UltraTech
Setting time with Coromandel is Fast.
Setting time with Ultratech is very fast.
They find that Ultratech/coromandel is unadulterated.
3.People give importance to unadulterated,strong cements which sets and hardens fast and price.
5.2.2.DESCRIPTIVE RESEARCH
Null Hypothesis H0: There are 3 dimensions namely, cement properties, company’s sales and
marketing actions and recommendation by masons which influence the decision making of the cement
customers.
Descriptive Research was done with a sample of 75 to find out the consumer behaviour in choosing
cement.
Factor Analysis using SPSS is done to identify the major factors responsible for the purchase decision.
The research method used in this project is factor analysis. Factor analysis is primarily used for data
reduction and summarization. As there are a large number of variables, most of which are correlated
and which must be reduced to a manageable level, so these relationships among the sets of many
interrelated variables are examined and represented in terms of a few underlying factors with the help
of SPSS.
5.2.3.FACTOR ANALYSIS
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Factor analysis is basically an interdependence technique in which an entire set of interdependent
relationships are examined. It is used to identify underlying dimensions or factors, that explain a set of
correlations among a set of variables.
Each variable is expressed as a linear combination of underlying factors.
If the variables are standardized,the factor model may be represented as :
Xi = Ai1F1+Ai2F2+Ai3F3+………………….+AimFm+ViUi
Where
Xi = ith Standardized variable
Aij = Standardized Multiple Regression coefficient of variable i on common factor j.
F = Common factor
Vi = Standardized Regression coefficient of variable i on unique factor j
Ui = The unique factor for variable i.
M = number of common factors.
There are a number of techniques that can be used to assist in the decision concerning the number of
factors to retain:
• Kaiser’s criterion;
• scree test
The communality is measured which helps in finding the amount of variance that the variable shares
with the other variables, which in turn, gives the proportion of variance explained by the common
factors. Bartlett’s test of sphericity is used to examine if the variables are uncorrelated in the
population. Also, the appropriateness of the method of factor analysis is tested by the Kaiser-Meyer-
52
Olkin (KMO) measure of sampling adequacy index. Higher values between 0.5 and 1.0 indicate that
the method is appropriate and values below that indicate the inappropriateness of the method.
The data for the purpose of the analysis will be collected with the help of surveys and questionnaire
from a pre- defined sample of respondents. The process of data collection is structured, which means
that a formal questionnaire is prepared and questions are pre-arranged in a specific order.
The Order bias was removed by changing the order of listing of attributes after every 5 interviews.
5.2.4.SAMPLE INPUT
There are 17 Questions in questionnaire and sample size was 75.Each question was given a response on
a 1-7 Likert Scale representing
1-Not important
7-Very important
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5.2.5.SAMPLE OUTPUT
Factor extraction involves determining the smallest number of factors that can be used to best represent the interrelations among the set of variables. There are a variety of approaches that can be used to identify (extract) the number of underlying factors or dimensions.
Principal Components analysis attempts to produce a smaller number of linear combinations of the original variables in a way that captures (or accounts for) most of the variability in the pattern of correlations.It provides an empirical summary of the dataset.
1.Correlation Matrix
In the Correlation Matrix table, we should look for correlation coefficients of .1 and above
If we don’t find any in our matrix then we should reconsider the use of factor analysis.
54
There are many coefficients in the correlation matrix which are above 0.1.Therefore,we can go ahead with the factor analysis.
55
2.Kaiser’s criterion
Two statistical measures are also generated by SPSS to help assess the factorability of the data:
Bartlett’s test of sphericity (Bartlett, 1954), The Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy (Kaiser, 1970, 1974).
The Bartlett’s test of sphericity should be significant (p<.05) for the factor analysis to be considered appropriate.
The KMO index ranges from 0 to 1, with .5 suggested as the minimum value for a good factor analysis (Tabachnick & Fidell, 2001).
One of the most commonly used techniques is known as Kaiser’s criterion, or the eigenvalue rule.Using this rule, only factors with an eigenvalue of 1.0 or more are retained for further investigation. The eigenvalue of a factor represents the amount of the total variance explained by that factor.
We should also check that the Kaiser-Meyer-Olkin Measure of Sampling Adequacy (KMO) value is .5 or above. The Barlett’s Test of Sphericity value should be significant (i.e. the Sig. value should be .05 or smaller). In this experiment, the KMO value is .501, and the Bartlett’s test is significant (p=.000), therefore factor analysis is appropriate.
KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
.501
Bartlett's Test of Sphericity
Approx. Chi-Square
301.744
Df 136
Sig. .000
KMO should be >0.5 to carry out factor analysis
p<0.05.Therefore,factor analysis is appropriate.
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3.Communality, h2, is the squared multiple correlation for the variable as dependent using the factors as predictors. The communality measures the percent of variance in a given variable explained by all the factors jointly and may be interpreted as the reliability of the indicator.
The factor loadings are the correlation coefficients between the variables and factors. Factor loadings are the basis for imputing a label to different factors. The squared factor loading is the percentage of variance in the variable, explained by a factor.
The sum of the squared factor loadings for all factors for a given variable is the variance in that variable accounted for by all the factors, and this is called the communality.
The factor analysis model does not extract all the variance; it extracts only that proportion of variance, which is due to the common factors and shared by several items. The proportion of variance of a particular item that is due to common factors (shared with other items) is called communality. The proportion of variance that is unique to each item is then the respective item's total variance minus the communality.
In this experiment focused on subjects' cement preferences the extracted factors explain over 80% of preferences for strength but only 37% for customer service. In general, communalities show for which measured variables the factor analysis is working best and least well.
Initial - By definition, the initial value of the communality in a principal components analysis is 1.
37% variance due to common factors.
80% variance due to common factors
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4.Eigenvalue Table
Eigenvalues: The eigenvalue for a given factor reflects the variance in all the variables, which is accounted for by that factor.A factor's eigenvalue may be computed as the sum of its squared factor loadings for all the variables.
To determine how many components to extract the Kaiser’s criterion of eigenvalue of 1 or more has to be followed.If we look in the Total Variance Explained table and scan down the values provided in the first set of columns, labelled Initial Eigenvalues. The eigenvalues for each component are listed. In this experiment only the first 5 components recorded eigenvalues above 1 (3.743,2.235, 1.724, 1.668,1.208,1.149,1.008). But,the first 2 components explain a total of 48.258% of the variance .
Component 1 now explains 31.9 % of the variance and Component 2 explains 17.237%. The total variance explained (48.258 %) does not change after rotation, just the way that it is distributed between the two components.
The percent of variance
accounted for by each
principal component
The variance explained by all the 3 components.
58
5.Scree test
Another approach that can be used is Catell’s scree test (Catell, 1966). This involves plotting each of the eigenvalues of the factors and inspecting the plot to find a point at which the shape of the curve changes direction and becomes horizontal. Catell recommends retaining all factors above the elbow, or break in the plot, as these factors contribute the most to the explanation of the variance in the data set.There are 2 breaks in this screeplot.So,2 components need to be considered.
59
6. Component Matrix
This table contains component loadings, which are the correlations between the variable and the component. Because these are correlations, possible values range from -1 to +1.This matrix contains the coefficients used to express the standardized variables in terms of the factors.These coefficients or factor loadings express the correlation between factors and variables.A coefficient with a large absolute value indicates that the variable and the factor are closely related.
Once the number of factors have been determined, the next step is to interpret them. To assist in this process the factors are ‘rotated’. This does not change the underlying solution—rather, it presents the pattern of loadings in a manner that is easier to interpret.
Component Matrixa
Component
1 2 3
Strength .884
Quick setting .884
Durability .867
Fineness .867
Reduction in cracks .419
Reco by mason .312 -.691 .507
Reco by engr .312 -.691 .507
Reco by sk -.588
Extensive media .487 .330
Direct delivery .326 -.419
Price .329 .622
Nearby availability .591
Trusted brand .477
Ideal customer service .387 .438
color .394
Unadulterated
used widely
Extraction Method: Principal Component Analysis.
a. 3 components extracted.
60
The most commonly used orthogonal approach is the Varimax method, which attempts to minimise the number of variables that have high loadings on each factor
6.Rotated Component Matrix
Rotation serves to make the output more understandable and is usually necessary to facilitate the interpretation of factors.
The sum of eigenvalues is not affected by rotation, but rotation will alter the eigenvalues (and percent of variance explained) of particular factors and will change the factor loadings.
In the Rotated Component Matrix ,we can see the loadings of each of the variables on the two factors that were selected. We should look for the highest loading variables on each of the component—these can be used to help us identify the nature of the underlying latent variable represented by each component.
In this example the main loadings on Component 1 are items like strength,durability, quick setting,fineness,no cracks.
Another important factor is recommendation by mason
The main items on Component 2 are service,media,pricing.
In the next factor analysis,we remove the factors like delivery, Reco by shopkeeper, used widely, color, unadulterated ,etc.
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Component Transformation Matrix. Provides the correlations between the factors inthe original and in the rotated solutions.
Component Transformation Matrix
Compo
nent 1 2 3
1 .945 .257 -.205
2 .326 -.812 .484
3 .042 .523 .851
Extraction Method: Principal Component
Analysis.
Rotation Method: Varimax with Kaiser
Normalization.
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Factor Analysis-2
After eliminating a few variables like color, unadulterated, used widely etc, the factor analysis is again performed.
1. Correlation Matrix
2.Communalities
The correlations between factors and variables are greater than 0.1
63
3.Eigenvalue Matrix
4.Component Matrix
More than 57% Variance explained by all 3 components.
Variance explained by each component
81% variance due to common factors
64
Component Matrixa
Component
1 2 3
Strength .888
Quick setting .888
Durability .863 .305
Fineness .863 .305
Reduction in cracks .423
Reco by mason .327 -.692 .538
Reco by engr .327 -.692 .538
Reco by sk -.601
Extensive media .475 .323
Direct delivery .334 -.394
Price .353 .637
Trusted brand .546
Nearby availability .515
Ideal customer service .399 .472
Extraction Method: Principal Component Analysis.
a. 3 components extracted.
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5.Rotated Component Matrix
Rotated Component Matrixa
Component
1 2 3
Durability .918
Fineness .918
Strength .890
Quick setting .890
Reduction in cracks .421
Reco by mason .929
Reco by engr .729
Reco by sk .568
Direct delivery .449
Price .755
Trusted brand .620
Nearby availability .589
Ideal customer service .578
Extensive media .522
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 5 iterations.
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6.Component Transformation Matrix
67
Component Transformation Matrix
Compo
nent 1 2 3
1 .946 .295 -.130
2 .321 -.816 .481
3 -.036 .497 .867
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
Factor Analysis for A1 Socio-economic class and A2 socio-economic class were done separately. The results are similar to the factor analysis done for the entire sample. That is, the 3 major factors , namely, the physical properties of cement, recommendation by influencers like mason and the sales and marketing efforts of the company play a major role in purchase decision holds true for both the A1 and A2 Socio-economic class who are the major customers of cement.For A1 Socio-economic class,
Provides the correlations between the factors inthe original and in the rotated solutions.
68
Component Transformation Matrix
Compo
nent 1 2 3
1 .946 .295 -.130
2 .321 -.816 .481
3 -.036 .497 .867
Provides the correlations between the factors inthe original and in the rotated solutions.Provides the correlations between the factors inthe original and in the rotated solutions.
69
Component Transformation Matrix
Compo
nent 1 2 3
1 .946 .295 -.130
2 .321 -.816 .481
3 -.036 .497 .867
For A2 socio-economic class,
Provides the correlations between the factors inthe original and in the rotated solutions.Provides the correlations between the factors inthe original and in the rotated solutions.
70
Component Transformation Matrix
Compo
nent 1 2 3
1 .946 .295 -.130
2 .321 -.816 .481
3 -.036 .497 .867
6. RESULT
Therefore, finally there are 3 underlying factors, mainly
1. Properties of cement like strength, durability, quick setting, no cracks, fineness etc.
2. Recommendation by mason is a major influencing factor.
3. Company’s sales and marketing actions like promotion, service, pricing etc.
Some observations made during the field work are:
1. Mostly, the owners go by the engineer and mason’s recommendations.
Provides the correlations between the factors inthe original and in the rotated solutions.Provides the correlations between the factors inthe original and in the rotated solutions.
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2. The cement is selected based on the quality, strength, durability, no cracks, fineness, etc.
3. The company’s efforts also play a major role in boosting cement sales like pricing, media, service, etc.
4. The cement that was most preferred in sample of 75 was UltraTech and Dalmia Vajram. The cements that followed were Mahasakthi.
CHART 6
Result
Retail Price Metrics in Chennai as on
Dalmia Vajram – Rs.220
Ultratech-Rs.220
Zuari-Rs.215
Priya-Rs.218
ACC-Rs.222
Coromandel-Rs.222
72
Ramco-Rs.219
Mahasakthi-Rs.215
Chettinad-Rs.218
Reasonable prices are expected by the majority of the consumers. But, Ultratech and Dalmia Vajram which are priced higher enjoys higher market share. This shows that the brand quality perception in consumer’s minds is related to price.People are willing to pay higher price for premium quality brands.
4.People belonging to A1 and A2 socio-economic class are the major individual home buyers,i.e.,the main customers of cement.
CHART 7
Socio-Economic Class
A1A2B1B2C
45.3%
37.3%
10.6%
4%
2.6%
A1-Businessmen ,middle and senior Executives
A2-Businessmen , middle and senior executives with college education , supervisors, graduate shopowners
B1-Businessmen with school-level education, graduate salesmen and supervisors, junior executive and supervisor with college education
B2-Shopowners,self-employed professional with elementary education, salesmen and supervisors without graduation and graduate petty trader
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C-Petty trader with school-level education and salesmen, supervisor with elementary education.
The chart below shows that 24 % of A1 class prefers Dalmia Vajram and 17.3% of A2 prefers Dalmia Vajram among other cements in this sample of 75.So,A1 and A2 are potential customers for Dalmia Vajram.
CHART 8
Dalmia Vajram Preference
A1A2B1B2C
24%
1.3%4%
1.3%
17.3%
5. Brand bought same as mason’s / contractor’s recommendations : 85%
CHART9
Decision Maker
MasonSelfFriend85%
8% 7%
6. Location: This chart represents the percentage of respondents in each locality covered by the survey.
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CHART 10
Location-wise distribution of respondents
Nanga
nallur
Ullaga
ram
Puzhuthiva
kkam
Madipak
kam
Keelka
ttalai
Moovaras
ampet
Kanch
ipuram0
5
10
15
20
25
30
LocationPercentage of respondents
Location
Percentage of respondents
Nanganallur 21.33333Ullagaram 17.33333Puzhuthivakkam 8Madipakkam 13.33333Keelkattalai 8Moovarasampet 5.333333 Kanchipuram 26.66667
7. Income wise distribution :42.6% of the sample belongs to 20001-30000 category and 29.3% belongs to 10001-15000 slab.
CHART11
75
Incomewise Distribution
Percentage of Respondents
10001-1500015001-2000020001-3000030001-5000050001-75000
18.6%
4%
5.3%
42.6%
29.3%
8.Age-wise Distribution of Respondents
CHART12 Age-wise distribution of respondents
<40<45<50<55
37%
17%
12%
33%
7. LIMITATIONS AND CAVEATS
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1. This sample is restricted to Kanchipuram district of TamilNadu.
2. As per the company’s source, the cement preference varies from one city to another.So; there is ample opportunity for cement companies to promote their brand.
8. CONCLUSIONS
1. There are mainly 3 factors that contribute to the purchase decision of cement –
a. The properties of cement like strength, durability, quick setting.
B.Recommendation by mason plays a major role.
C.The company’s efforts like price, brand building, media, and service also influence the customer.
2. People belonging to A1 and A2 socio-economic classes are the major builders of individual houses. Therefore, the advertisements can focus on this segment in order to motivate them.
8.1. RECOMMENDATIONS
1. As all the cement companies follow the Bureau of Indian Standards in cement production, the
properties of the cement offered by different companies remain almost similar. There will not be much
of product differentiation. Therefore, the companies can focus on their sales and marketing efforts and
try to stand out only with the help of promotion, service, delivery, etc. The recommendations of masons
also play a major role.
As the mason’s recommendation plays a major role in selection of cement by the consumer, the
company can make special promotional effort to reach the mason by organizing a meet-giving away
presentation on features of brand, dinner, gifts, etc. to promote the brand.
2. Brand building exercise needs to be done consistently to create awareness among the consumer.
3. Reasonable prices are expected by the majority of the consumers. In contrast, Ultratech and Dalmia Vajram which are priced higher, enjoy higher market share inspite of lower priced brands. This shows that the brand quality perception in consumer’s minds is related to price. People are willing to pay a higher price for premium brands.
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9. EXHIBITS
9.1. Questionnaires and forms
SUMMER PROJECT-CEMENT SURVEY
Questionnaire Serial No
Name of the Respondent:___________________________________________________________
Address:_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
1a Could you tell me up to what level you have studied?
EDUCATION: ___________________________________________________
1b Could you also tell me what is your occupation?
OCCUPATION: ___________________________________________________
Education Illi-
Terate
School
upto
School
Upto
SSC/
HSC
Some
college
Grad./
PG
Grad./
PG
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Occupation
4 yrs 5-9 yrs
but not
Grad.- Gen. - Prof.
1 2 3 4 5 6 7
1. Unskilled workers E2 E2 E1 D D D D
2. Skilled workers E2 E1 D C C B2 B2
3. Petty traders E2 D D C C B2 B2
4. Shop owners D D C B2 B1 A2 A2
Businessmen/
Industrialists with
No. of employees :
5. - None D C B2 B1 A2 A2 A1
6. - 1 – 9 C B2 B2 B1 A2 A1 A1
7. - 10+ B1 B1 A2 A2 A1 A1 A1
8. Self-employed prof. D D D B2 B1 A2 A1
9. Clerical/Salesmen D D D C B2 B1 B1
10. Supervisory level D D C C B2 B1 A2
11. Collegers/Executives
- JuniorC C C B2 B1 A2 A2
12. - Middle/Senior B1 B1 B1 B1 A2 A1 A1
1c. RECORD SEC: ______________________________
CONTINUE - ONLY IF SEC A, B OR C CODED. ELSE - TERMINATE.
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2. Could you please tell me your age in completed years?
Age: _____________ Years
3a. Could you tell me what kind of construction work is presently being done for your home? SINGLE CODING
Ensure construction pertains to independent house
New Construction 1 CONTINUE
Extension – Multiple Rooms 2 CONTINUE
Extension – Single Room 3 CONTINUE
Major alteration or renovation work 4 CONTINUE
Minor alteration or renovation work 5 TERMINATE
None of the above 7 TERMINATE
3b. Could you please tell us when the construction started and when is the scheduled date of completion?
____________________
ASK ALL
4a. Have you purchased cement in the last 6 months for this present construction? SINGLE CODING
Yes 1
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No 2
CONTINUE IF CODED 1 IN 4a ELSE TERMINATE
4b Could you tell me at what stage of construction you are presently in? SINGLE CODING
Digging for foundation not started 1 TERMINATE
Ground Floor
Foundation laid 2
CONTINUE
Pillars and beams in place 3
Walling completed 4
Roofing completed 5
Finishing work going on 6
1st/2nd/3rd floors
Pillars and beams in place 7
CONTINUEWalling completed 8
Roofing completed 9
Finishing work going on 10
House warming over 11 TERMINATE
AWARENESS & USAGE
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5a When you think of cement used for constructing houses, which brand or company name comes to your mind first? Which others can you think of? RECORD UNDER OTHERS
5b Listed here are various brands of cements used for constructing houses. Which of these brands have you heard of? Any others? MULTIPLE CODING POSSIBLE. NOTE: BRANDS CODED IN 5a, ALSO TO BE CODED HERE.
FIRST MENTION
OTHER MENTIONS
Brands 5b – Aware
ACC 1
Coromandel Cements 2
Chettinad Cements 3
Dalmia Vajram 4
India Cements 5
Ramco Cements 6
Ultratech 7
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NEEDS & PERCEPTIONS
6.Listed here are aspects that various people look for while buying cement. I would like to know your opinion on these aspects. Please rate the importance of following factors in selecting a Cement.
Not important Very Important
a.Reasonable Price of Cement 1 2 3 4 5 6 7
b.Strength of cement 1 2 3 4 5 6 7
c.Quick setting 1 2 3 4 5 6 7
d.Durability of cement 1 2 3 4 5 6 7
e.Color of Cement 1 2 3 4 5 6 7
f.Trusted Brand Name 1 2 3 4 5 6 7
g.Unadulterated 1 2 3 4 5 6 7
h.Direct Delivery from factory 1 2 3 4 5 6 7
i.Ideal Customer Service 1 2 3 4 5 6 7
83
j.Reduction in Cracks 1 2 3 4 5 6 7
k.Fineness of Cement 1 2 3 4 5 6 7
l.Available in nearby 1 2 3 4 5 6 7
shops
m.Recommended by 1 2 3 4 5 6 7
Mason / contractor
n.Recommended by shopkeeper 1 2 3 4 5 6 7
o.Recommended by engineer 1 2 3 4 5 6 7
p.Used widely 1 2 3 4 5 6 7
q.Extensive Media coverage 1 2 3 4 5 6 7
DECISION MAKING & PURCHASE BEHAVIOR
7a Can you tell me what type of contract this is? SINGLE CODING
A full (labour + material) contract construction – complete responsibility is with building contractor
1
Specified material contract – complete responsibility with the building contractor but I specify
the materials
2
Labor contract construction only – labor alone is contracted. Materials are bought by me
3
Is being done by myself completely 4
7b . Can you please tell me how the brand of cement was chosen? SINGLE CODING
Builder selected the brand and did not take my opinion 1
84
Builder gave me options and took my opinion before
finalizing the brand2
I specified the brand to the builder and asked him to use that
brand
3
7c Please recall the time when you bought the first batch of cement for the present construction that you have undertaken. Can you tell me who all were involved in deciding the brand of cement you selected? Any others? MULTIPLE CODING
Self 1
Spouse/ Other family members 2
Friends/ Relatives 3
Building contractor 4
Architect/ interior designer 5
Hard ware store/ Cement dealer 6
Mason 7
Others (specify) ______________ 8
IF RESPONDENT IS INVOLVED IN DECISION MAKING (1 CODED IN 7c) THEN CONTINUE,
7d Recollect the time when you purchased the first batch of cement, for this construction. Which all brands did you consider for purchase? You may or may not have bought all brands, but specify all the brands that you evaluated? MULTIPLE CODING POSSIBLE
7e Which of these brands did you actually buy, the first time you bought cement for your construction? If you have bought multiple brands in your very first batch of purchase, specify all? MULTIPLE CODING POSSIBLE
85
7f Which of these brands did you buy so far, for your construction? Take in to consideration all the purchases you might have made for this construction? Any others? MULTIPLE CODING POSSIBLE
7g Which of these brands did you buy, the last time you bought cement for your construction? If you have bought multiple brands in the last occasion, specify all? MULTIPLE CODING POSSIBLE
IF NOT INVOLVED IN DECISION MAKING (1 NOT CODED IN 7c) THEN GOTO 9a ELSE CONTINUE
Brands
7d –
Considered
7e –
First time
7f –
So far
7g –
Last time
ACC 1 1 1 1
Coromandel Cements 2 2 2 2
Chettinad Cements 3 3 3 3
Dalmia Vajram 4 4 4 4
India Cements 5 5 5 5
Ramco Cements 6 6 6 6
Ultratech 7 7 7 7
Don’t Know/Cant Say X 99 99 99
86
ASK 8a IF AWARE OF DALMIA BUT NOT CONSIDERED FOR PURCHASE. DALMIA CODED IN 5B BUT NOT IN 7D
7h Rate these cements in terms of price and quality on 1-7 scale,with 1- representing low price and 7-suggesting high price.Similarly 1 for quality represents low quality and 7-represents high quality.
8a You are aware of Dalmia Vajram, but did not consider this brand for purchase? What are the reasons for not considering Dalmia Vajram? Any others? MULTIPLE CODING POSSIBLE
Brands Price
Quality
ACC
Coromandel Cements
Chettinad Cements
Dalmia Vajram
India Cements
Ramco Cements
Ultratech
87
8a
It is not a good quality cement 1
The retailer does not give any discount 2
It is not easily available 3
It is priced higher than other brands of cement 4
It was not recommended by friends/ relatives 5
My mason/ building contractor/ engineer did not recommend the brand 6
Have used it before and was not satisfied with it 7
The shopkeeper recommended a different brand when I asked for Dalmia / Dalmia Vajram/ Vajram
Others(Specify)__________________________________________________________ 8
ASK 8b IF BOUGHT DALMIA (CODED IN 7F) ELSE GOTO 9
8b You have bought Dalmia cement for your construction. What are the reasons for buying Dalmia, when there are so many other brands available in the market? MULTIPLE CODING POSSIBLE
It is overall a good quality cement available in the market today 1
The retailer gave me an additional discount 2
It is easily available 3
It is reasonably priced 4
It was recommended by friends/ relatives 5
I was advised to use it by my building contractor/ mason 6
It was advised by the shop keeper 7
88
Have used it before and was satisfied with it 8
Others(Specify)__________________________________________________________
9
9a.Could you tell me how many bags of cement have you purchased so far?
9b. From which types of store have you bought cement most often, for the present construction? SINGLE CODING
Hardware store 1
A store selling only cement 2
A store selling cement & brick/sand/coir/bamboo/blue metal 3
9c. Did your mason/ building contractor recommend any brand for this present construction? SINGLE CODING
Yes 1
No 2
9d. Which brand did he recommend? MULTIPLE CODING POSSIBLE
89
10. Please tell me your family’s monthly household income, i.e the income of all earning members in your family put together after
excluding taxes. This is required purely for research purpose and confidentiality will be maintained. CODE IN GRID BELOW. SINGLE CODING ONLY.
Brands
Masons recommendation
ACC 1
Coromandel Cements 2
Chettinad Cements 3
Dalmia Vajram 4
India Cements 5
Ramco Cements 6
Ultratech 7
Less than Rs 5000 1
Rs. 5001- 6000 2
Rs. 6001-10000 3
Rs. 10001-15000 4
Rs. 15001-20000 5
Rs. 20001-30000 6
Rs. 30001-50000 7
Rs. 50001- 75000 8
75000+ 9
Don’t Know 10
90
Thank you for your help.
9.2 SPSS OUTPUT
Factor Analysis
91
92
93
94
95
Factor Analysis-2
96
97
98
99
100
BIBLIOGRAPHY
1.Cement Manufacturer’s Association
2.Marketing Research ,An Applied Orientation by Naresh Malhotra
3.www.faculty.chass.ncsu.edu/garson/PA765/factor.htm
4.www.stat-help.com/ spss .pdf
5.http://www.stat-help.com/spss.pdf
6.http://www.nursing.ucdenver.edu/pdf/FactorAnalysisHowTo.pdf
7. www.ibef.org/industry/cement.aspx
8. www.dalmia cement .com/
9. www.lafarge.com
10. www. cement .org/tech/cct_ cement _ types .asp
11.www. siadipp.nic.in/publicat/cement.htm
12. www. cement .org/market/mkt_apparent_use.asp
13. www.business-standard.com/india/news/acc... cement .../391041/
14. http://www.bloombergutv.com/industry-news/cement-building-industry-news/47430/dalmia-cements-to-demerge-.html
15. economictimes.indiatimes.com/.../Cement-prices-set-to.../5620800.cms
