I NTRODUCTION

CRH plc is an Irish-owned global business which was founded

in 1970 following the merger of two Irish companies,

Cement Limited (established in 1936) and Roadstone Limited

(established in 1949). The group was originally called ‘Cement

Roadstone Holdings’ and later abbreviated to CRH.

In 1970, CRH had sales of approximately €26m, 95% in

Ireland. It is now one of the largest businesses in its sector in

the world and employs approximately 76,000 people at over

3,600 locations in 36 countries worldwide. This case study will

examine how it has achieved this phenomenal growth.

CRH GROU P STRATEGY

Successful businesses plan for the future. Many people are

familiar with the phrase “fail to plan, plan to fail”. Different

types of planning exist, including mission statements, strategic

plans, tactical plans and manpower planning. Planning is the

setting down of specific goals and objectives and the putting in

place of strategies that allow the business to achieve its stated

goals and objectives.

Many businesses draw up a mission statement, which is

displayed in the head office and written in company reports

and on their website. Mission statements are visionary

statements outlining who the business is, what the business

does and where the business is going. It gives an insight to

the stakeholders of the business into what makes the

business “tick”.

STRATEGIC PlANSStrategic plans are long-term plans prepared by the senior managers, covering a period of five years or more. They outline how the long-term goals of the business are to be achieved and can help businesses to establish acquisition opportunities. CRH’s strategy is “to sustain and grow a geographically diversified business which caters for all segments of construction demand”. This enables CRH to achieve its mission of being a responsible international leader in building materials.

TACTICAl PlANSTactical plans are short-term plans which break the strategic plan into shorter, more manageable objectives. They are usually drawn up by middle managers. Tactical plans benefit a business by helping it to achieve its overall strategic plan or long-term goals. Examples of tactical plans include reducing operational costs or reducing employee turnover.

CASE STU DY OvERvI Ew• Managementactivities-planningand

organising

• Expansion-organicandinorganicgrowth

• Categoriesofindustry

• International/Globalbusiness

INTERNATIONAl PERFORMANCE AND GROwTH

Tobearesponsibleinternationalleaderinbuildingmaterials,deliveringsuperiorperformanceandgrowth.

MISSION

CRH GROU P OvERvI Ew

Based on market capitalisation, CRH is among the top three

building materials companies in the world. The group operates

in three product segments (materials, products and distribution)

in each of its regional markets (Europe and Americas).

The organisation structure of CRH is a combination of

functional, geographic and product structures (see organisation

chart below).

Organisation chart for CRH

MATERIAlS

CRH continuously invests in plant and equipment to ensure

quality, efficiency and customer service while seeking out

expansion opportunities through developing greenfield sites

and acquiring businesses.

Eu ropEMaTEr Ials–26%ofEBITDa

Europe Materials is a major producer of primary building

materials (including cement, aggregates, asphalt, ready mixed

concrete and lime) and operates in 20 countries. Europe

Materials is actively involved in CRH’s development efforts in

Asia. Major markets are Poland, Finland, Switzerland, Spain,

Ukraine and Ireland together with India and China in Asia

and Turkey in the Mediterranean. Europe Materials employs

approximately 11,600 people at close to 650 locations.

aMEr ICasMaTEr Ials–32%ofEBITDa

Americas Materials operates in 44 out of 50 American

states. Operations are geographically organised. The main

products are aggregates, asphalt and ready-mixed concrete

with asphalt paving services. Americas Materials employs

approximately 17,800 people at close to 1,200 locations.

PRODUCTSCRH manufactures products for use in residential, non-residential and infrastructure construction projects. These include building systems and engineered concrete solutions for use in the electrical, transportation and communications industries as well as architectural products to enhance the façade and surroundings of buildings, e.g. pre-cast concrete products, concrete blocks, masonry, pavers, roof tiles, patio products, security gates, fencing and glass fabrication. These products can be used for new buildings as well as to repair and maintain existing buildings.

Eu ropEproDuCTs–12%ofEBITDa Europe Products is divided into three groups of manufacturing

businesses. It operates in 19 European countries, with the Netherlands, Belgium, UK, France, Germany and Switzerland being the main markets. Approximately 16,600 people are employed at close to 400 locations.

aMEr ICasproDuCTs–10%ofGrou pEBITDa Americas Products operates mainly in the United States,

although it has a significant presence in Canada. It is sub-divided into Building Products (pre-cast and architectural concrete, concrete accessories, clay, fencing products, etc.) and Building Envelope solutions (glass and aluminium glazing systems). Americas Products is also a leading producer of clay building products in Argentina and operates glass fabrication in Argentina and Chile. Approximately 15,000 people are employed at close to 380 locations.

DISTRI bUTIONCRH distributes building materials to general contractors and DIY customers in Europe and to professional contractors in the United States. With almost 750 branches in Europe and 180 in the USA, CRH is a leading building materials distributor, which concentrates on building an extensive network of locations in major cities. It concentrates on the growing RMI (repair, maintenance and improvement) market.

Eu ropEDIsTr I BuTIon–16%ofEBITDa Europe Distribution encompasses professional builders’

merchants, heating and plumbing distributors and DIY stores and operates in seven countries, including Belgium, Switzerland, Austria, Germany and France. Approximately 12,100 people are employed in over 760 locations.

aMEr ICasDIsTr I BuTIon–4%ofEBITDa Americas Distribution operates mainly in the United States.

Approximately 3,300 are employed at over 180 locations.

EUROPE

MaTErIalsMaTErIals

proDuCTsproDuCTs

DIsTrIBuTIonDIsTrIBuTIon

aMErICas

CHIEF ExECUTIvE

FINANCE

HUMAN RESOURCES

DEvElOPMENT

ENvIRONMENT,HEAlTH & SAFETY

CRH InternationalperformanceandGrowth

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ORGAN IC AN D I NORGAN IC GROwTHCRH has become a global business by constantly expanding. The two main methods of expanding are organic growth and inorganic growth. Organic growth is the growth that comes from a company’s existing businesses, e.g. opening a new branch, increasing sales by selling to new markets or by selling new products and by franchising or licensing the businesses products.

Inorganic growth on the other hand is the quick expansion of a business which is achieved by merging with, taking over or forming an alliance with another business. CRH has chiefly used inorganic methods of expansion to achieve rapid growth in its sector.

1. A merger is a friendly/voluntary amalgamation of two firms for their mutual benefit. It involves the mutual consent of two equal companies to combine and become one entity. A single legal entity is formed once the merger is approved by shareholders and neither business has control over the other. In 1970 Cement Limited and Roadstone Limited merged to become Cement Roadstone Holdings.

2. A takeover (also known as an acquisition) occurs when 51% (or more) of the shares in a business have been purchased in either a hostile or friendly manner. The acquiring company absorbs the other company, which may lose its identity after the acquisition, becoming part of the acquiring company. The cost of a takeover can be very expensive, as it may be necessary for the acquirer to pay more than the nominal value of the company to achieve control.

Benefits of mergers and takeovers include:

• Quick method of expansion compared with organic growth

• Although mergers and takeovers are expensive, in the long-run costs will be lower due to availing of economies of scale and sharing of costs and resources.

• By merging/taking over a business in another country, CRH can access new markets quickly, e.g. giving CRH instant access to markets in China and India.

• Possible spreading of risk by diversifying into new product areas. This avoids a business “having all its eggs in one basket”.

Risks of mergers and takeovers include:

• Different organisational cultures can lead to conflict between different management teams who are used to their own styles and systems. These risks can be reduced by having a comprehensive integration plan.

• There will often be redundancies, which can cause industrial relations problems.

3. A strategic alliance or joint venture is an agreement between two or more businesses to share resources and/or expertise and work together over a specified period of time to complete a specific project. Unlike mergers and acquisitions, all parties maintain their separate identities. With strategic alliances/joint ventures all the businesses involved benefit from sharing complementary expertise and skills and increased resources.

The benefits of alliances as a form of expansion are:

• It is a cost effective method, as resources are shared and costs are divided between the parties.

• The risks of expansion are shared between the partners.

• It provides each business involved with an extended business network and market.

OPERATI NG AN I NTERNATIONAl bUSI N ESS – TH E CRH bUSI N ESS MODElCRH consistently reinvests its existing assets and acquires well-run businesses while also diversifying into new development opportunities. CRH typically acquires small to mid-sized companies although occasionally it engages in larger deals.

In developed economies, CRH’s strategic plan is to continue to reinvest in its established businesses to improve efficiency, product quality and customer service as well as to develop the existing business through acquisitions and take-overs. In Western Europe and North America, CRH has built up a range of businesses which supply building materials for the construction industry. CRH has chosen to diversify its product range to provide a wide range of goods to its customers.

DEvElOPI NG AN D EMERGI NG MARkETSIn developing and emerging economies, CRH’s strategic plan is to work in partnership with strong local businesses with good regional market positions. In the mid-1990s, CRH used this approach to enter the Polish market and now it is the leading building materials company in Poland. CRH is now using a similar approach in India and China, two major markets for building and construction.

In the early 2000s, CRH began a review of Asian markets to identify possible opportunities to enter the building materials sector in the region. Market size and scale, population growth and GDP were used as leading indicators for success in the construction industry.

China and India, with their cement markets were identified as being of particular interest. Both countries have strong population growth, GDP growth of between 7 - 9% and are becoming increasingly urbanised, so the potential for growth in these markets was clear and CRH chose them as the primary targets for entry into Asia.

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In China, CRH purchased Harbin Sanling Cement Company in February 2007 in northeast China. In early 2009, it acquired a 26% shareholding in Yatai Building Materials Company, the leading construction suppliers in China’s northeastern provinces of Heilongjiang, Jilin and Liaoning and one of the top ten cement suppliers in China. Since early 2009, Yatai has increased its production capacity from 14 million tonnes to nearly 26 million tonnes.

In India, CRH entered the market in mid-2008 with a 50% joint venture in “My Home Industries Limited” (MHIL), which is a cement producer with modern production facilities, a strong market position and excellent reserves in Andhra Pradesh state. Since then MHIL has increased annual cement production from 3 million to 4.2 million tonnes due to the addition of a new grinding plant.

CRH’s focus in Asia is driven by increasing shareholder value and return on investment. As the Chinese and Indian markets develop, more sophisticated construction markets will emerge and as CRH’s experience in Poland has shown, a wide range of value-added construction products will be required, enabling further expansion.

COMMU N ICATION wITH SHAREHOlDERSCRH believes in the importance of communicating effectively with shareholders. There is regular communication between CRH and its shareholders and presentations are made at the release of interim and annual reports. Technology has made this process more efficient and effective in a number of ways. Conference calls are held following the interim management statements being issued and major announcements by CRH. These communications allow the company directors to hear investors’ reactions to their announcements and their views on other issues. Interim management statements are issued in May and November.

Major acquisitions are notified to the Stock Exchanges to meet the requirements of listing Rules. Development updates of acquisitions completed and major capital expenditure projects are issued in January and July of each year.

CRH’s website, www.crh.com provides the full text of the annual and interim reports for all stakeholders, the Corporate Social Responsibility (CSR) report, trading statements, interim management statements and copies of presentations to analysts and investors. News releases are made available in the News and Media section of the website immediately after release to the Stock Exchanges. Webcasts of key investor briefings are broadcast live and are made available as recordings in the Investor Relations section of the website.

CONClUSIONSince 1970, CRH has grown from the merger of two Irish businesses to being one of the leading companies of its kind in the world. Despite the extremely challenging economic situation of the last five years, CRH has continued to grow successfully by engaging in joint ventures, mergers and takeovers, in its traditional markets and in the developing economies of China and India.

findoutmoreon:www.crh.com

GlOSSARY

STU DENT ACTIvITY

Aggregates: A broad category of materials used in construction, including sand, gravel and crushed stone.

EbITDA: An accounting acronym which stands for Earnings Before Interest, Taxes, Depreciation and Amortisation.

GDP: Gross Domestic Product is the market value of all the goods and services produced in a country during a given period. It is considered a good indicator of the standard of living in a country.

listing Rules: A set of rules applicable to any company listed on the Stock Exchange. They set out the mandatory requirements for any company that wishes to list its shares for sale to the public.

1. CrHhasconcentratedonusinginorganicmethodsofexpansiontobecomeagloballeaderinconstructionmaterials. Many other Irish businesses use organicmethods of expansion, e.g. franchising, licensingoropeningnewbranches.outline thebenefitsanddrawbacks of franchising for the franchisor andfranchisee.

2. By expanding the business through mergers andtakeovers, CrH has become a global business.Companies involved in global business faceadditional marketing challenges. outline fourof these challenges, using examples to supportyouranswer.