Gujarat Ambuja Cement Ltd- Innovating to Leadership position

Gujarat Ambuja Cement Ltd.

-Innovating to Leadership Position
I. Introduction
Gujarat Ambuja Cement Ltd (GACL), is one of the major players in the cement industry of India
today. The Group's principal activity is to manufacture and market cement and clinker for both
domestic and export markets. It is ranked as one of the best well managed companies in India. Its
continous drive for cost efficiency and quality has taken GACL to the position of frontrunners in
the country.

This case study analysis report is striving to highlight, especially, the management strategies
followed by GACL, which within 10 years, has brought the company to the top position. This
will also put some light on the market conditions existing in the country, what other players
missed etc.

In this first section, first, an attempt is made to chart the history of the company. All the major
incidents in the growth trajectory are studied. Secondly, the company’s present status, its
position in the market, recognitions etc are focused.

In the second section, an analysis of the strategy is being done. An honest attempt is made to
perform a SWOT analysis and discuss the nature of the company’s corporate level strategy.

In the third and last section, a discussion on the various factors that made the company a
successful enterprise is done.

a. History and development

The company was established in the year 1986, the main promoter being Mr.N.Sekhsaria. The
market demand at those times was very moderate, but promising. GACL started with a 0.7
million tonnes per annum (mtpa) plant in Ambuja Nagar, Gujarat. But the growth was promising,
given that there were only few large players in the market and also the fact that the demand for
cement will only go on increasing, since it will never become obsolete. For a country to grow,
cement is a must and India was on its way to become a very rapid, growing economy.

During the early years, GACL also tried diversification, but later switched to focusing on cement
only. The volumes and growth has been increasing ever since.

Paven Raj,Roll No-9, PGPCM

 Gujarat Ambuja Cement Ltd- Innovating to Leadership position

Increasing volumes

Realising the importance of volumes, GACL lit a second kiln in Ambujanagar, called Gajambuja
cement, which was of 1 million tone capacity, in 1993. Again, GACL started production at the
new 1.5 mtpa kiln at Suli in Himachal Pradesh, in 1995. GACL finished setting up this plant in a
record three months. This is a remarkable feat given the difficult and remote terrain. The average
production from this plant has been more than 100%.

The company set up a third 1 million tone cement plant in Ambujanagar in 1996.. One more
cement mill was added in Himachal Pradesh to cater to the increasing demand from the
neighbouring states. This gave a sustainable logistic advantage to the company over the
competitors, owing to the distance the competitors have to negotiate.

In 1997, GACL acquired Modi Cements, and named it as Ambuja cement Eastern Ltd, giving it
good exposure to eastern India. GACL took over DLF cement in 1999, becoming the fourth
largest cement producer in the country.

Strides in Logistics, Efficiency and Capacity

One of the most remarkable decisions taken by GACL was “to ship cement from Gujarat plant”.
It had the advantages of remarkable reducing the travel time, distance and per kg cost to the
company due to the bulk nature. This also made possible to export cement to emerging markets
like Middle East.

But this demanded creating infrastructure, technology and convenience. Many jetties, ports and
ships were set up. The technology to deliver cement the way the customers demanded helped
GACL deliver cement to virtually every corner. By 1996, GACL’s three ships carried 8.24 lac
tones to cement.

Another landmark occurred when GACL successfully handled coal imports at Port Ambuja, by
which GACL considerably reduced fuel costs. In short, the sea movement gave GACL the
advantages of scale and scope, reduced fuel cost, and the flexibility to transcend geographical
boundaries.

The strive to improve efficiency has been a continous effort as far GACL is concerned. All
efforts to reduce power consumption has been taken by GACL and the company has achieved
remarkable fetes. A new method to crush limestone saved considerably saved time and
electricity. The extensive tests in R&D, helped in producing types of cement as per demand.

GACL put in efforts to expand its power capacity. All efforts are directed to strengthen
Ambjua’s position as the lowest cost cement producer in India.

Paven Raj,Roll No-9, PGPCM

 Gujarat Ambuja Cement Ltd- Innovating to Leadership position

b. Present Status

Currently, GACL has a port terminal at Muldwarka, Gujarat. It is an all weather port that handles
ships with 40,000 DWT. The port has a fleet of seven ships with a capacity of 20500 DWT to
ferry bulk cement to the packaging units. The company has bulk cement terminals at Surat,
Panvel, and Galle. The Surat terminal has a storage capacity of 15,000 tonnes and Panvel
terminal has a storage capacity of 17,500 tonnes. Both the terminals have bulk cement unloading
facility. The port at Galle, 120 km from Colombo, Sri Lanka, handles million tonnes of cement
annually.

Major Achievements of GACL

 Most profitable cement company in India.

 Lowest cost producer of cement in the world.
 Its environment protection measures are at par with the best in the world. The pollution
levels at all its cement plants are lower than the rigorous Swiss standards of 100
mg/NM3.
 The only cement company to be awarded with the National Quality Award.
 First cement company to first to receive the ISO 9002 quality certification.
 Received ISO 14000 Certification for environmental systems.
 India's largest exporter of cement.
 Received Best Award for highest exports by CAPEXIL.
 First company to introduce the concept of bulk cement movement by sea in India.

The company has three subsidiaries, viz, Ambuja Cement Rajasthan Limited (ACRL), Ambuja
Cement Eastern Limited (ACEL) and Ambuja Cement India Limited (ACIL). Ambuja also has a
strategic investment in ACC through its subsidiary (ACIL).

Very recently, the company has entered into a strategic partnership with Holcim, the second
largest cement manufacturer in the world. Holcim had, in January, bought a 14.8 per cent
promoters` stake in the GACL for Rs 21.4 billion. Currently (2010) Holcim holds about 46% of
shares in GACL Limited.

Paven Raj,Roll No-9, PGPCM

 Gujarat Ambuja Cement Ltd- Innovating to Leadership position

II. Strategic Analysis

a. SWOT Analysis
From the case, it is very evident that GACL has numerous strengths. A very efficient
management is most obviously the driving factor for the success of GACL. The following
strength can be identified in the strategy of GACL.

 GACL gave very high regard to efficiency. To improve efficiency technological

breakthroughs were made during the development. Its continous drive for cost efficiency
and quality are derived from an emphasis on replicating global best practices and
continous innovation.
 GACL gave importance to adoption of new technology for controlling and ensuring
quality with minimum environmental hazards. The use of Australian surface miners is an
example for this. This ensured that considerable time and cost are saved. Many such
innovative leaps were taken in technology.
 GACL has planned the location of its plants very strategically. It has planned in such a
way that there is maximum exposure to all parts of India.
 GACL strives to reach optimum efficiency in logistics management. The planning of sea
route is a perfect example to illustrate this. This move not only saved time and
transportation cost, but gave access to new and emerging markets.
 GACL has maximum efficiency in fuel usage. The system in place for importing coal cut
down the cost of fuel remarkably.
 GACL has its own captive power plant and this has made GACL the world leader in low
cost of cement production.
 GACL has acquired stakes in DLF, ACC and other small players, which has given it
access to a good distribution system. Within a short period, GACL has achieved a unique
position amongst the cement manufacturers in India. With plants in Gujarat, HP, and
Punjab, and a complete infrastructure of bulk cement sea movement, the company has
access to the richest markets in India.
 GACL has a very good reputation in the market and has a high brand value. This gives
the access to large funds and the freedom to choose funding options. Mobilisation of Rs
1500 crore for expansion earlier, was achieved easily, considerable amount being from
debt markets.
 GACL has empowered employees, who are committed, motivated and encouraged to the
growth of the organization. There is an ‘I can’ culture in the organization.

Paven Raj,Roll No-9, PGPCM

 Gujarat Ambuja Cement Ltd- Innovating to Leadership position

The following were/ are the opportunities for GACL:

 The per capita consumption of cement in India now is only 85Kg compared to the global
average of 250Kg. This shows that the cement industry can keep growing at a very high
rate. This indirectly means that the current strategy of expansion will still reap benefits in
future.
 The cement manufacture industry is a capital intensive one. This will prevent the other
small players from entering the market and capturing a decent market share. The huge
capital involved in the deals between outside companies and the Indian ones are an
indication of how capital intensive the industry is.
 The situation of restrictions for other companies to access to all geographical areas is a
big opportunity to the GACL. Any company, if from now on, wants to expand its reach,
will have to face many obstacles such as setting up new plants, identifying proper area
and accessing distribution networks

b. Corporate level strategy

As far as GACL is concerned, the growth strategy is very clear- “get volumes and achieve
dominant market shares”. For this, over the last 20 plus years, what GACL has been trying to do
is expand its reach to all the boundaries. GACL has been setting up plants which give them
strategic and location advantages over the competitors. They have been acquiring small, medium
and large competitors at very high prices. The company right now has a mission of reaching 20
million tones production capacity.

Paven Raj,Roll No-9, PGPCM

 Gujarat Ambuja Cement Ltd- Innovating to Leadership position

III. Conclusions and Recommendations

GACL has a very good position in the Indian market. It has an efficient management system,
good use of technology, a reputed position in the market, a good brand value, good distribution
network. With all of these, of GACL can hold on to this the same way they have done it over the
years, their ultimate dream of market dominance is not far away from them.

There are other cement producers like Ultratech, which acquired Grasim Cements, L&T, ACC
etc who are GACL’s prime competitors. To compete with them, GACL has to give more
importance to the latest technology, and also better emphasis on marketing. Ultratech has good
reach in South India, where development is taking place in a big way. GACL should find a
strategy to reach to South India in a better way.

With the promising growth in India, it is an infinite market for all players. The only struggle is to
reach first and sell most.

Paven Raj,Roll No-9, PGPCM