Lafarge Project Preparation

8/6/2019 Lafarge Project Preparation

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A Report on organization study at

Lafarge India pvt. Ltd. (Jamshedpur)

Submitted in Partial fulfillment of the requirement for the award of the Degree ofMaster of Business Administration.

Name of the Candidate : Amit Kumar Singh

Reg. No. :

Name of the Specialization : HUMAN RESOURCE

Partner Institution : Acharyas Bangalore B School

Under the guidance of

External Guide Internal GuideMrs. MAYA TIWARI PROF. KAMINI DHRUVA

(HR, Lafarge India pvt. Ltd.) (Acharyas Bangalore B school)

Centre for ParticipatoryBangalore University

( JULY-AUGUST 2011)

CERTIFICATE


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This is to certify that the project work entitled Organization study at LAFARGEINDIA PVT. LTD. submitted to Bangalore University in partial fulfillment of therequirements for the award of the Degree of Master of BusinessAdministration in HUMAN RESOURCE MANAGEMENT is a record of theoriginal work done by Amit Kumar Singh under my Supervision and guidanceand that this project work has not formed the basis for the award ofany Degree/Diploma/Associate ship/Fellowship or Similar title to any candidate ofany University.

(Seal) Signature of the Guide

Name and Designation

Forwarded by

Program In-Charge

Submitted for University Examination held on______________________________

Internal Examiner External Examiner

DECLARATION


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I hereby declare that this project work titled Organization study at Lafarge IndiaPvt. Ltd. is a record of Original work done by me under the guidance of Prof.KAMINI DHRUVA and that this project work has not formed the basis for theaward of any Degree/Diploma/Associate ship/Fellowship or similar title to anycandidate of any University.

Signature of the candidate

Name : AMIT KUMAR SINGH

Result :

Course with Specialization: MASTER OF BUSINESS ADMINISTRATION,

HUMAN RESOURCE

Date :

Countersigned by

Signature of the Guide

(with seal)

ACKNOWLEDGEMENT


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Throughout the course of study, as I analyzed and compiled this report, innumerablepeople have given suggestions, encouragement, complaints and opinions, all ofwhich have been in some way or the other contributed to the final report. I think it isessential to thank all those who contributed to our understanding of the subject andhelped us through the duration of the project.

I thankful to Prof. Kamini dhruva under whose supervision and guidance this reportwas completed successfully.

I express my gratefulness to Prof. Venkat Raman (Program coordinator of Masterof Business Administration), for their endless support throughout my summertraining.

I would also like to thankMrs. Maya Tiwari (HR, Lafarge India pvt. Ltd.) and all

the faculties & Lafarge India Pvt. Ltd. Employees who have supported me during mysummer training, my parents and friends who rendered their wholehearted co-operation in the successful completion of the project work.

Finally, I am thankful to all the people who willingly responded to our questions andwhose contribution has been invaluable. This project would not have been completedwithout their participation.

Amit Kumar Singh

SYNOPSIS


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The primary objective of this report is all about Lafarge India pvt. Ltd. To find outthe awareness of Lafarge India pvt. Ltd. among the people, what are the reasons toleave the Lafarge India pvt. Ltd. consumer and what could be the possible solutionsto come more consumers.

I hope that the report has made the text interesting and lucid. In writing this report, Ihave benefited immensely by referring to many publications and articles. I expressmy gratitude to all such authors and publishers.

Any suggestions to improve this report in contents or in style are always welcomeand will be appreciated and acknowledged.

CONTENTS


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1. INTRODUCTION TO THE INDUSTRY

2. INTRODUCTION TO COMPANY

1. ABOUT US

2. MISSION, VISION AND OBJECTIVE

3. DEPARTMENTS

4. FUNCTIONS OF THE DEPARTMENTS

5. PRODUCTS

6. SWOT ANALYSIS

7. ORGANIZATIONAL STRUCTURE & HIRARCHY

8. CONCLUSION

9. SUGGESTIONS

10. BIBLIOGRAPHY

CEMENT INDUSTRY IN INDIA


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India, being the second largest cement producer in the world after China with a totalcapacity of 151.2 Million Tonnes (MT), has got huge Cement Company. With thegovernment of India giving boost to various infrastructure projects, housing facilitiesand road networks, the cement industry in India is currently growing at an enviable

pace. More growth in the Indian cement industry is expected in the coming years. Itis also predicted that the cement production in India would rise to 236.16 MT inFY11. It's also expected to rise to 262.61 MT in FY12.

The cement industry in India is dominated by around 20 companies, which accountfor almost 70% of the total cement production in India. In the present year, the Indiancement companies have produced 11 MT cement during April-September 2009. Ittook the total cement production in FY09 to 231 MT.

Introduction

Cement is the glue that holds the concrete together, and is therefore critical formeeting society's needs of housing and basic infrastructure such as bridges, roads,water treatment facilities, schools and hospitals. Concrete is the second mostconsumed material after water, with nearly three tonnes used annually for each

person on the planet.

Being one of the basic elements for setting up strong and healthy infrastructure,Cement plays a crucial role in economic development of any country. Having morethan a hundred and fifty years history, it has been used extensively in construction ofanything, from a small building to a mammoth multipurpose project.

The manufacturing process of cement consists of mixing, drying and grinding oflimestone, 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 subsequentlyground with gypsum to form 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 mixinglimestone and water (called slurry) and blending it with soft clay. In the dry processtechnology, crushed limestone and raw materials are ground and mixed togetherwithout the addition of water.


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The dry and semi-wet processes are more fuel-efficient. The wet process requires0.28 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.

There are different varieties of cement based on different compositions according tospecific end uses, namely, Ordinary Portland Cement, Portland Pozzolana Cement,White Cement, Portland Blast Furnace Slag Cement and Specialized Cement. The

basic difference lies in the percentage of clinker used.

Ordinary Portland cement (OPC): OPC, popularly known as grey cement,has 95 per cent clinker and 5 per cent gypsum and other materials. It accountsfor 70 per cent of the total consumption.

Portland Pozzolana Cement (PPC): PPC has 80 per cent clinker, 15 per cent

Pozzolana and 5 per cent gypsum and accounts for 18 per cent of the totalcement consumption. It is manufactured because it uses fly ash/burnt clay/coalwaste as the main ingredient.

White Cement: White cement is basically OPC - clinker using fuel oil(instead of coal) with iron oxide content below 0.4 per cent to ensurewhiteness. A special cooling technique is used in its production. It is used toenhance aesthetic value in tiles and flooring. White cement is much moreexpensive than grey cement.

Portland Blast Furnace Slag Cement (PBFSC): PBFSC consists of 45percent clinker, 50 per cent blast furnace slag and 5 per cent gypsum andaccounts for 10 per cent of the total cement consumed. It has a heat ofhydration even lower than PPC and is generally used in the construction ofdams and similar massive constructions.

Specialized Cement: Oil Well Cement is made from clinker with specialadditives to prevent any porosity.

Rapid Hardening Portland cement: Rapid Hardening Portland Cement issimilar to OPC, except that it is ground much finer, so that on casting, thecompressible strength increases rapidly.

Water Proof Cement: Water Proof Cement is similar to OPC, with a smallportion of calcium stearate or non- saponifibale oil to impart waterproofingproperties.


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INDUSTRY BACKGROUND

The history of the cement industry in India dates back to the 1889 when a Kolkata-based company started manufacturing cement from Argillaceous. But the industrystarted getting the organized shape in the early 1900s. In 1914, India CementCompany Ltd was established in Porbandar with a capacity of 10,000 tons and

production of 1000 installed. The World War I gave the first initial thrust to thecement industry in India and the industry started growing at a fast rate in terms of

production, manufacturing units, and installed capacity. This stage was referred to asthe Nascent Stage of Indian Cement Company. In 1927, Concrete Association ofIndia was set up to create public awareness on the utility of cement as well as to

propagate cement consumption.

The cement industry in India saw the price and distribution control system in the year1956, established to ensure fair price model for consumers as well as manufacturers.Later in 1977, government authorized new manufacturing units (as well as existingunits going for capacity enhancement) to put a higher price tag for their products. Acouple of years later; government introduced a three-tier pricing system withdifferent pricing on cement produced in high, medium and low cost plants.

Recent Investments in the Indian Cement Industry

In a recent announcement, the second largest cement company in South India,Dalmia Cement declared that it's going to invest more than US$ 652.6 millionin the next 2-3 years to add 10 MT capacity.

Anil Ambani-led Reliance Infrastructure is going to build up cement plantswith a total capacity of yearly 20 MT in the next 5 years. For this, the companywill invest US$ 2.1 billion.

India Cements is going to set up 2 thermal power plants in Andhra Pradesh andTamil Nadu at a cost of US$ 104 billion.

Anil Ambani-led Reliance Cementation is also going to set up a 5 MT

integrated cement plant in Maharashtra. It will invest US$ 463.2 million forthat.Jaiprakash Associates Ltd has signed a MoU with Assam MineralDevelopment Corporation Limited to set up a 2 MT cement plant. Theestimated project cost is US$ 221.36 million.

Rungta Mines (RML) is also planning to invest US$ 123 million for setting upa 1 MT cement plant in Orissa.


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Major Players in Indian Cement Industry

There are a number of players prevailing in the cement industry in India. However,there are around 20 big names that account for more than 70% of the total cement

production in India. The total installed capacity is distributed over around 129 plants,owned by 54 major companies across the nation.

Following are some of the major names in the Indian cement industry:

Company Production Installed Capacity

ACC 17,902 18,640

Gujarat Ambuja 15,094 14,860

UltraTech 13,707 17,000Grasim 14,649 14,115

India Cements 8,434 8,810

JK Group 6,174 6,680

Jaypee Group 6,316 6,531

Century 6,636 6,300

Madras Cements 4,550 5,470

Birla Corp. 5,150 5,113

Section 1: Global Scenario


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Global Consumption

The demand for cement is a derived demand, as it depends on industrial activity, realestate, and construction activity. Since growth is taking place all over the world, inthese sectors, the global consumption is also increasing. During the period from 2006to 2008, total cement consumption grew from 2,568 million tonnes to 2,8572 milliontonnes, at a Compounded Annual Growth Rate (CAGR) of close to 7%.

The rapid increase in global cement consumption is led by increasing demand forinfrastructure in emerging economies, with Asia accounting for 66% of the globaldemand. China was the worlds largest consumer of cement in 2008 and accountedfor 48.73% of total cement consumption.

Studies4 have shown that there is a direct linkage between cement consumption andglobal macro-economic growth and contraction. This was also evident during the oilshock of early 1970s and 1979-80 and also during the East Asian crisis in late1990s, when the world cement consumption witnessed a sharp decline. At theopposite end of the spectrum, the relatively healthy growth in many economies, inrecent years has helped spur cement consumption.

The demand for cement consumption per capita tends to follow a bell-shaped curve.This is because, emerging economies, during their high growth phase, tend toconsume large quantities of cement to meet their infrastructure and housing needs5.In figure I below X-Axis represents the GDP per capita of a country and the Y-Axisrepresents the cement consumption per capita. The size of the bubble on the otherhand represents, the countrys total consumption.

Figure I


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* Since, the cement consumption was not readily available, in the calculations

above, cement consumption data has been calculated by deducting countrys

cement exports from its total cement production.

As visible in figure I, countries with large per capita GDP numbers consume smaller

quantities of cement, while countries with the highest per capita cement consumptionare part of the emerging economies group.

Interestingly, amongst all the economies under consideration, India has the lowestlevel of per capita cement consumption. Even though, the per capita cementconsumption in the country has increased from 28 kg in 1980-81 to around 147 kg in2008-09, it is still relatively low compared to other major economies. Averagecement consumption in Saudi Arabia is at around 1,245 Kg, in Japan at 491 Kg, andin United States at around 285 Kg. Even amongst the BRIC economies India has the

lowest level of per capita cement consumption, with Chinas per capita consumptionat around 1,040 Kg, 271 Kg in Brazil and 378 Kg in Russia.

This low per capita cement consumption in India and the process of catching up withinternational averages along with rapid economic growth and increased focus oninfrastructure development is expected to drive future growth in the industry, alsomaking it an attractive sector for international investment.


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Global Production

Cement is produced in 156 countries across the Globe. During 2008, the globalproduction capacity of cement stood at around 2,872 million tonnes with Chinaaccounting for approximately 1,400 million tones and India a distant second withtotal production of 183 million tonnes. The production of Cement is highly skewedwith top ten countries together accounting for close to 70% of total cement

production. These countries account for close to 70% of total population.

Figure II

High concentration of cement production may be attributable to high capital costs

and long gestation periods in cement industry. Access to limestone reserves(principal raw material for the manufacture of cement) also acts as a significant entrybarrier for newer companies.

Regionally, Asia contributed about 67% to world production and included 9 of the 20leading producing countries. Western Europe had about 8% of total output; theMiddle East (including Turkey) and North America, nearly 6% each; Africa, Central


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America and South America (combined), and the Commonwealth of IndependentStates, about 4% each; and Eastern Europe, about 2%.

Global Trade Profile

The global cement consumption data closely mirrors that of cement production,underlying the relatively low7 level of international cement trade volumes to worlddemand. The volume of cement entering world trade has traditionally been lowcompared to overall production and consumption, typically accounting for about 6%to 7% of total cement production (around 6% in 2008).

Figure III

Low volume of cement trade may be attributable to low unit value of cement, thewidespread availability of raw materials (lime stone) and the link between economicgrowth and cement consumption which favors domestic production rather than

import dependence. A high freight cost is also among the major reasons for lowcement trade.During the period from 2001 to 2008, total cement trade grew at a CAGR of 13%from US$ 4.1 billion to US$ 11.1 billion. During the same period exports increasedfrom US$ 2.2 billion to US$ 5.5 billion (CAGR of 11.6%), while imports increasedfrom US$ 1.8 billion to US$ 5.5 billion (CAGR of 14.5%).


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Figure IV

United States is the largest trader of cement in the world, with total trade of US$1,396 million during 2008, followed by Germany, Belgium and Netherlands withtotal trade of US$ 945 million, US$ 744 million and US$ 562 million, respectively.Despite being the second largest producer of cement in the world, India is notamongst the major traders of cement.

Major Exporters

Germany was the largest cement exporter during 2008, with exports of US$ 756million. Belgium, China and Italy followed Germany with annual exports of US$ 607million, US$ 507 million and US$ 310 million, respectively. The top ten countriestogether accounted for 63% of total cement exports during 2008.


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Figure V

Major Importers

United States was the worlds largest cement importer during 2008, with importsworth US$ 1,170 million. US rely heavily on imports of cement to meet its domesticcement consumption. This is also reflected in its high cement trade deficit of US$944.5 million.US is followed by Netherlands, France and Germany with annual imports of US$

409 million, US$ 326.4 million and US$ 189.4 million, respectively.

Figure VI


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Section 2: Indias Trade Profile and Market Access

The Indian cement industry is one of the oldest industries. It has been catering toIndia's infrastructure and housing requirements since its emergence during the British

Raj. Though the majority of players in the Indian cement industry were private sectororganisations, the industry was highly regulated.

However, with liberalization and globalization of the economy, the cement industryrestructured itself to survive with alterations in the global economic and tradingsystem. The industry underwent a period of rapid technological upgradationincluding modernisation and improvement of plant processes, which helped it inreducing manpower costs11. This pursuit of cost efficiency and technologicalupgradation has made some of the Indian cement companies the most efficient acrossglobal majors. The Indian business group, Grasim, is amongst the top ten companies

in the world. Indian major, Gujarat Ambuja is one of the most cost efficient firms inthe world. Most Indian cement majors in fact compare favourably to the worldcement majors in terms of profitability.

Today with a total capacity of 219.2 million tonnes (including mini plants) in March2009, the Indian cement industry has emerged as the second largest market afterChina, surpassing developed nations like the USA and Japan.

The rapid growth rate of Indian economy achieved since 1990s, has given a

tremendous fillip to the infrastructure12 development in the country. The increase ingovernment spending on infrastructure and housing, as well as rapid urbanisation andindustrialisation activities by private players has resulted in increased demand forupdated quality building material; including cement. During 2008, cementconsumption in India increased by nearly 9%. This trend is likely to continue in thecoming years.

Cement production in India has increased at a CAGR of 8.1 per cent during the lastdecade with a production level of around 181 million tonnes at the end of 2008-09.The cement industry comprises 125 large cement plants (capacity more than 0.198million tonnes per annum) with an installed capacity of 148.28 million tonnes andmore than 300 mini cement plants (capacity less than 0.198 million tonnes perannum) with an estimated capacity of 11.10 million tonnes per annum. The industryworked at an estimated 83 per cent capacity in 2008-09. Small plants, however, workat an installed capacity of around 55 per cent.


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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 ResistingPortland Cement. The share of blended cement in total cement production hasincreased from 29 per cent in 1997-98 to 54.5 per cent in 2003-04.

However, despite this, the cement industry in India remains somewhat fragmentedand merger and acquisition possibilities are strong. Investment norms includingguidelines for foreign direct investment (FDI) are investor friendly. All these factors

present a strong case for investing in the Indian market.

Indias Cement Trade

Cement has traditionally not14 been among Indias major traded products. During

2008, India was the 44th largest cement-trading nation in the world. However,increased focus on infrastructure development in recent years has led to a splurge ofconstruction activity in the country, resulting in higher cement imports and hencetrade.

Trade in cement is also underway with the neighbouring countries and countries inAfrica and West Asia. L&T (now a part of Grasim), Gujarat Ambuja Cements Ltdand Jaiprakash Industries are the top exporters. The western region, due to its

proximity to the coasts, accounts for 92.4 per cent of total exports, of which Gujaratholds a share of 76 per cent.

During the period from 2001 to 2008, Indias cement trade increased from US$ 4.1million to US$ 44.2 million, a CAGR of 40.3%. The increase in trade was led by risein imports, which increased, from US$ 0.3 million in 2001 to US$ 37.1 million in2008, at a CAGR of 91.3%. Indias cement exports on the other hand increased at aCAGR of 9.9%, from US$ 3.7 million to US$ 7.2 million.

China was Indias main source of cement imports, during 2008 with imports worthUS$ 13.9 million followed by Italy and Taiwan with imports worth US$ 13.5 million

and US$ 2.5 million, respectively. Indias top five import sources together accountedfor close to 92% of Indias total cement imports during 2008.


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Figure VII

Malaysia and UAE were the major destinations for Indias Cement exports during2008. The two countries together accounted for 63% of Indias total cement exports.These countries were followed by Germany, Maldives and USA, which accountedfor 6.8%, 5.7% and 3.6% of Indias total cement exports.

Figure VIII


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India has an immense potential to tap cement markets of countries in the Middle Eastand South East Asia due to its strengths of location advantage, large-scale limestoneand coal deposits, adequate cement capacity and production of worldclass quality ofcement with the latest technology. However for this Indian cement industry will haveto become cost competitive vis--vis China. Cement companies in India oftencomplain that the entire gamut of direct and indirect taxes and the freight fortransporting cement from hinterland to the port substantially increases the price ofcement. Moreover the infrastructure facilities at port to handle bulk/bagged cementare poor leading to delays in exportingcement.

Indias sectoral competitiveness

This paper measures Indias changing pattern of trade specialization by applying anapproach originally adopted in Lafay (1992). The Lafay Index16 defines a countrystrade specialization with regard to a specific good as the difference between the trade

balance of that good and the countrys overall trade balance, weighted by the goodsshare of total trade.

The Lafay index for the cement sector in India has been computed at a disaggregatedlevel of 6-digit HS classification. The results of which are given below.

Table 1


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The Competitiveness Matrix

Major Inputs and Issues

The cement industry is a highly energy intensive sector. Energy and raw materials(coal and lime stone) together form the most critical component in the production ofcement.

Figure X

*This is not an exhaustive list of inputs. Infact it only shows major merchandise

inputs used in the production of cement. The intention here is to show share of

various inputs and the customs duties that these inputs attract in India.


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Figure 4 above shows the MFN tariffs on various cement inputs and the share ofthese inputs in the production of cement. As visible in the graph, coal accounts for ashare of 10.3% of the inputs used in the production of cement, while lime stoneaccounts for a share of 10%. Structural clay and plastic products account for a shareof 6.9% and 6.2%, respectively in the production of cement.

On the import duties front, while the tariff on cement in India was reduced from12.5% to nil in January 2007 and it continues to be at the same level till date, theinputs used in the production of cement continue to attract customs duty at the levelsclose to 10%. The coal and petroleum products attract customs duty of close to 5%and the cement clinkers18 attract a customs duty of 10%. As a result the weightedcustoms duty of various cement inputs, in the production of cement, is at around6.8%.

This has created an inverted duty structure for the cement sector in India, which actsas a disincentive for domestic cement producer, who has to pay higher price for theraw material while the finished product (cement), can be imported duty free. Thismay also partly explain the surge in Indias cement imports in recent years.

The Union Budget 2010-11 has also increased excise duty on cement and cementclinkers. It has also been proposed to impose a new cess, to be called the CleanEnergy Cess, on coal and lignite and peat produced in India, which will be collectedas a duty of excise from coalmines. This cess would also apply to imported duty asCVD.

Issues

The input costs that primarily control the price of cement are coal, electricity tariffs,railway transport and freight, royalty and cess on limestone. However, interestingly,government controls the prices of all these components. The main concerns thatindustry faces in using these inputs for cement production are as follows:

Coal: Coal is the main fuel for manufacture of cement in India. The

consumption of coal in a typically dry process system ranges from 20-25% ofclinker production.20 This means for per ton clinker produced 0.20-0.25 ton ofcoal is consumed. The cement industry consumes about 10 million tonnes ofcoal annually. Since coalfields like Bharat Coking Coal Limited (BCCL),Central Coalfields Limited (CCL) supply poor21 quality of coal, the industryhas to blend high-grade coal with it. However, non-coking coal and petroleum


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coke attracts a customs duty of 5%, which increases the cost of production inthe sector.

Electricity: Cement industry consumes about 5.5 billion units of electricityannually with one tonne of cement requiring approximately 120-130 units ofelectricity. Since state governments supply electricity in India and sincedifferent states have different tariff structure, the power tariffs vary accordingto the location of the plant and on the production process. As a result, cement

plants in different states attract different power tariffs. Another majorhindrance to the industry is severe power cuts. Most of the cement producingstates such as Andhra Pradesh, Madhya Pradesh experience power cuts to thetune of 25-30% every year causing substantial production loss.

Limestone: This constitutes the largest bulk in terms of input to cement. For

producing one tonne of cement, approximately 1.6 tonnes of limestone isrequired. Since, the plants near limestone deposits pay less transportation costthan others, the location of cement plant is determined by the location oflimestone mines. The total limestone deposit in the country is estimated to be90 billion tones, with Andhra Pradesh enjoying the largest share of 34%,followed by Karnataka, Gujarat, Madhya Pradesh and Rajasthan, withrespective shares of 13%, 13%, 8%, and 6.5%. However, cementmanufacturing companies have to shed large sums of money by way of royalty

payment to the central government and cess on royalties levied by the stategovernment.

Transportation: Cement is mostly packed in paper bags now. It is thentransported either by rail or road. Road transportation beyond 200 kms is noteconomical therefore about 55% cement is carried by the railways. There isalso the problem of inadequate availability of wagons especially on westernrailways and southeastern railways. Under this scenario, there is a need toencourage transportation through sea, which is not only economical but alsoreduces losses in transit. Today, 70% of the cement movement worldwide is bysea compared to 1% in India.

Firm level performance

The performance of the cement industry is directly liked with the performance of theeconomy. A robust economy with booming construction activities ensures highercement consumption. The same is true for the Indian cement industry. A look at


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Figure XI below shows Indias GDP growth and the growth in Profit After Tax(PAT) of Indias Cement industry closely follow each other.

Figure XI

During 2002-03, when Indias GDP growth slumped to 3.8%, PAT of Indian cementindustry fell by close to 30% over its level in 2001-02. Similarly when Indian GDPgrowth increased to 9.7% in 2006-07, PAT of the cement industry skyrocketed to

199%, and the industrial sales jumped to 41.1%.

Structure of the Indian Cement Industry

The structure of the industry can be viewed as fragmented, although theconcentration at the top has increased, as the top 10 players control around 73% ofmarket share, which was 70% during 1990-91, whereas the other 27% of marketshare is distributed among 32 players. This is also confirmed by the results ofHerfindahl Index (HI). The HI is a measure of industry concentration equal to thesum of the squared market shares of the firms in the industry and an indicator of

amount of competition among them.

Our calculations show a very low value of Herfindahl index in the cement industry inIndia, indicating a very high competition and a low market power. High level ofcompetition in the cement industry is a result of the low entry barriers and the readyavailability of technology.


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Figure XII

Figure XIII


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Major Domestic Players

Associated Cement Companies Ltd (ACCL): Associated CementCompanies Ltd manufactures ordinary Portland cement, composite cement andspecial cement and has begun offering its marketing expertise and distributionfacilities to other producers in cement and related areas. It has fifteenmanufacturing plants located throughout the country.

Birla Corp: Birla Corp's product portfolio includes acetylene gas, auto trimparts, casting, cement, jute goods, yarn, calcium carbide etc. The cementdivision of the company has seven plants, with an installed capacity of 57.8lakh tonnes. The company has two plants in Madhya Pradesh, Rajasthan andWest Bengal and one in Uttar Pradesh and holds a market share of 2.8 percent.It manufactures Ordinary portland cement (OPC), portland pozzolana cement,

fly ash-based PPC, Low-alkali portland cement, portland slag cement, low heatcement and sulphate resistant cement. Large quantities of its cement areexported to Nepal and Bangladesh.

Century Textiles and Industries Ltd (CTIL): The product portfolio of CTILincludes textiles, rayon, cement, pulp & paper, shipping, property & landdevelopment, builders and floriculture. Cement is the largest division of CTILand contributes to over 40 per cent of the company's revenues. The companyhas an installed capacity of 7.8 million tonnes. CTIL has four plants thatmanufacture cement, one in Chhattisgarh, two in Madhya Pradesh and one inMaharashtra.

Grasim Cement: Grasim's product profile includes viscose staple fiber (VSF),grey cement, white cement, sponge iron, chemicals and textiles. With theacquisition of UltraTech, L&T's cement division in early 2004, Grasim hasnow become the world's seventh largest cement producer with a combinedcapacity of 45.7 million tonnes. Grasim (with UltraTech) held a market shareof around 16.7 per cent in 2008-09. It has plants in Madhya Pradesh,Chhattisgarh, Punjab, Rajasthan, Tamil Nadu and Gujarat among others.

Ambuja Cements Ltd (GACL): Gujarat Ambuja Cements Ltd was set up in1986. In the last decade the company has grown tenfold. The total cementcapacity of the company is 18.5 million tonnes. The company has a marketshare of around 10 per cent, with a strong foothold in the northern and westernmarkets. Gujarat Ambuja is India's largest cement exporter and one of the mostcost efficient firms.


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India Cements: India Cements is the largest cement producer in southernIndia with three plants in Tamil Nadu and four in Andhra Pradesh. Thecompany has a market share of 5.4 per cent.

Jaiprakash Associates Limited: Jaiprakash Industries, now known asJaiprakash Associates Limited (JAL) is part of the Jaypee Group with

businesses in civil engineering, hospitality, cement, hydropower, designconsultancy and IT.

Madras Cements: Madras Cements Ltd is one of the oldest cementcompanies in the southern region and is a part of the Ramco group. Thecompany 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 cementplant in Karnataka. It has a total capacity of 10 million tonnes annually andholds a market share of 4 per cent.

Mergers & Acquisitions

The globalisation of Indian cement industry has also encouraged many foreigncement manufacturers to engage themselves in agreements and deals with theirIndian counter parts to enjoy a share of pie in the rapidly growing Indian cementmarket. These engagements have been primarily through various mergers andacquisitions deals. Some of the major M&A deals between domestic and foreigncement manufacturers in recent years have been-

Lafarge India: It is a subsidiary of the Lafarge Cement Company of France. Itwas established in 1999 in India with the acquisition of the Tisco and theRaymond cement plants. Lafarge currently has four cement plants in India:two integrated plants in the state of Chhattisgarh, one grinding station each inJharkhand & West Bengal. Total cement production capacity of Lafarge in theIndian market currently stands at around 6.5 million tons. The company

produces different types cements like Portland Slag Cement, PortlandPozzolana Cement.

Heidelberg Cement - Indorama Cement Ltd: In March 2006, HeidelbergCement Company entered into a 50:50 joint venture with the IndoramaCement Ltd. Heidelberg Cement Company is the leading German cementmanufacturing company, which was setup in 1873. It has its operations in


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various countries across the Globe. The Company has two manufacturing unitsin India - a grinding plant in Mumbai and a cement terminal near Mumbaiharbour.

Holcim Cement - Gujarat Ambuja Cements (GACL): Holcim Cemententered into a strategic partnership with GACL, in 2006, to acquire 14.8% inGACL. Currently Holcim holds around 56% stake in the company. HolcimCement Company is among the leading cement manufacturing and supplyingcompanies in the world. It is one of the major employers in the world, having awork force of 90,000.The Holcim Cement Company has units in excess of 70countries all over the world.

Italcementi cement - Zuari Cement Limited: In 2006, Italcementi CementCompany with the help of the Ciments Franais, a subsidiary for its global

activities, entered into an agreement to acquire shareholding of Zuari CementLimited, through a 50:50 joint venture. Italcementi Cement is among thelargest cement manufacturing companies in the world. The company enteredthe Indian market in January 2001 when it acquired 50% of Zuari Cement

plant in Andhra Pradesh in southern India.

Profitability of Cement Companies

To evaluate the competitiveness of firms in the Indian cement industry, the papermeasures the dispersion in the performance of all the public listed cementmanufacturing companies in India, on the basis of following parameters:

Profit Margin: It measures how much profit does a company earn out ofevery rupee of sales. It is calculated as PAT/Net Sales.

Interest incidence: Interest incidence measures the burden of interestexpenses on total profits of the company. It is used to measure the cost of

borrowed capital for a company.

Gross fixed assets turnover ratio: Gross fixed assets turnover ratio measureshow efficiently fixed assets are utilized to generate sales.

These performance indicators have been chosen, since it is possible to compare theseindicators across companies, irrespective of their size and years of operation.


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Competitiveness of firms

In the overall profitability rankings, Grasim Industries Ltd, was the most profitablecompany in the Indian market, followed by Ambuja Cements and ACC Ltd. Over a

period from 2000-01 to 2008-09, the profits of Grasim Industries grew at a CAGR of17.7%, and that of Ambuja Cements increased by 14.1%. ACC Ltd and ShreeCement Ltd saw the fastest increase in profits among the top five most profitablecement firms in the Indian market. While the profits of ACC Ltdincreased at aCAGR of 40.5%, the profits of Shree Cement Ltd increased at a CAGR of 49.7%.

Profit Margin

A look at the profit margin of all the cement companies in India shows that theprofits per rupee of sales stood in the range of 0.01% and 0.29%, during 2008-09,

which was lower than the profit margins during 2006-07, when the cement industrywas booming. During 2006-07 profit margins stood in the range of 0.1% and 0.5%.Apart from the decline in cement demand, due to financial crisis, the decline in profitmargins may be attributable to excess capacity and decline in cement prices duringthe period.

Figure XIV


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Interest incidence

The cost of capital, on the other hand, for cement companies declined, during 2008-09, compared to 2006-07, when the interest incidence on profits was in the range of5% to 70%. Interest incidence during 2008-09 was in the range of 5% to 25%. Thiscould be explained by various liquidity infusion measures that the Reserve Bank ofIndia initiated towards the latter half of 2008 to reduce the cost of credit for Indianindustry.

Figure XV

Gross Fixed Assets Turnover Ratio

During 2008-09, the gross fixed assets turnover ratio for Indian cement companies0% to 2.7%, in the same range as during 2006-07.


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Figure XVI


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INTRODUCTION TO COMPANY

SUMMARY & CONTEXT

In 1999 Lafarge, number one producer of building materials in the world reorganizesinto five business divisions and decentralizes a number of HQ functions and roles. AsDirector Learning & Development, I was asked to develop a vision and strategy forLearning, build an organization to support that vision and facilitate Learning andDevelopment interventions throughout the organization.

Due to an intensive program of recent acquisitions there was a need to pull the 60business units (countries) together and develop an overall vision, strategy andprocesses in several major areas as technology, finance, HR, management practices,

etc

From the beginning we excluded a corporate university type of approach, withlarge catalogues of central training programs. Our vision on learning anddevelopment was based on learning from experience, maximize involvement,learning embedded in the managerial processes, learning as the result of workingtogether (social constructivism), etc Our aim was to build a learningorganization.

In line with that vision on learning, we wanted to shape an L&D organization thatwas able to drive the learning organization. This L&D organization was based onthree pillars:

In each unit a L&D manager. He/she consults management on learning &organizational development and facilitates learning interventions in his/herunit

The network of unit L&D managers. A vehicle to develop vision, strategy andskills on learning, facilitation and process consulting & share experiences

A small central L&D team to support the network provides leadership andconsults the L&D managers in the units. We deliberately kept this team small(5 people in an organization of 85.000) to avoid the team from taking over andkilling involvement of network members.


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OBJECTIVES

The L&D network was a crucial instrument in developing a vision on learning, wheremanagers and teams were drivers of their own development, based on the collectivereflection on their work reality and experience. We tried to position the network asthe driver for organizational learning in Lafarge. The main objectives of our workwith / as network were: Developing a common vision & values on learning and development from

which each BU could derive its own business related learning strategy

Creating a platform and energy to implement the vision on learning anddevelopment in all BUs

Developing and distributing company wide tools and methodology for learning

(coaching, intervision, instructional design processes, )

Developing the competencies of the L&D community (internal consulting,process interventions, instructional design, facilitation, change management.)

Involving newly acquired businesses and give new L&D managers a chance tocontribute rapidly to the Learning and Development community and allowthem to have a jump start in their new position fueled by experiences, tools,methodology, from colleagues in the network.

Sharing experiences and knowledge between BUs : learn from diversity in thenetwork

A CONTEXT FOR COLLABORATION

The fact that the L&D function still had to be created within the Cement Division,was an opportunity to mark the difference from what happened before and create anew context for the L&D managers in the units in terms of :

Vision, strategy and interventions on learning and development

Their own role and responsibility

The attitude and role of the central Learning & Development team


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The working relations in between unit L&D managers


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From the start we created direction by clearly stating the main elements ofLafarges vision on learning & development and communicated our changed visionand expectations on the role of unit L&D Managers.

But at the same time we offered our help and assistance as central L&D team tohelp unit L&D managers to cope not only with those changed expectations but alsowith the operational demands coming from their local management.

COLLABORATIVE STRATEGIES

In order to really create a network that is capable of building a common vision andimplementing a companywide global strategy, you need more than a few networkmeetings. We needed a common practice throughout the L&D community. Wedeployed four strategies to make that happen, which we presented as levers forlearning for the organization.

Those levers were seen as ways to create a common identity for the approach andintervention of learning throughout the organization irrespective of where theintervention originated: locally in the units or as a central initiative.

1. COMMON TOOLS, METHODOLOGIES AND PROCESSES

The network becomes real through the common use of a number of tools,methodologies and processes. Some of these were proposed by the central team,

Some of them were collectively developed as an initiative of the network, or could bea unit L&D tool shared through the network with all other units. A few examples:

A methodology for needs analysis and contracting with internal customers

Coaching methodology and tools (coaching guide)

Instructional materials and workshop design for implementing the newperformance management process

An intranet with several functions as: share good practices, post materials,tools, etc. for sharing, open up local / central training programs for enrollmentfrom other units.


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2. L&D NETWORK ACTIVITIES

The network becomes a reality also, through the actual meeting, discussing, sharingand working together in the flesh. Every six months we convened as a network.These network activities were not congress type of activities but were shaped aslearning organizations in itself, where we tried to live the vision on learning anddevelopment in the organization. A few examples of activities and methodologies:

Project work (developing tools, materials, designs, etc for use throughoutthe organization)

Intervision (to learn from each other, but also to live the methodology in orderto use it in the units)

Experiential games and activities


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Role play and simulations (ex : internal consulting, needs analysis, )

Share and present local initiatives, experiences with others

Brainstorm, mind map, (to translate vision on learning into effectiveinterventions)

Regional meetings to coordinate and collaborate on regional level

Individual coaching and feedback

Workshops on specific skills for L&D managers (sometimes specificallygeared to new members / new methodology, or to introduce a new initiative.)

3. INTERNAL CONSULTANCY PRACTICE

Designing a consulting practice, was seen as a lever to engage the organization intheir reflection on learning and development and supporting management in drivinglearning in the organization. It was seen as an opportunity for the central team toactually work with the business unit managers and at the same time to create acommon practice with the L&D managers from the network.

We developed four areas of consulting:

Accompanying (process) major project, change efforts, improvementinitiatives in the Organization, like implementing companywide performanceimprovement programs, support integration of newly acquired business,implement new safety culture and practices, etc

Helping networking communities within the organization to develop aneffective Collaborative process

Supporting local interventions with specific instructional expertise aroundcoaching, training design, needs analysis methodology, intervision, developing

job-aids, etc

Advising HR and L&D managers in the units on how to develop a learningculture in their organizations


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By always associating the BU L&D manager to the consulting work done in his unitby the central L&D team we manage to :

Accompany new appointed L&D managers in taking their role as processconsultant in the organization

Boost their confidence in their new role as L&D managers (very different fromthe logistic and administrative role they had before)

Build their credibility with their local business management

Develop a common and consistent OD consulting practice throughout theorganization

To build an internal customer relationship with business management


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4. COMPANY WIDE INTERVENTIONS

As fourth lever, we introduced a limited number of worldwide development tracksfor several reasons:

They served as examples of experiential instructional design for the L&Dcommunity.

They offered an opportunity to work with the L&D unit managers on projectsfor the organization as a whole (not only their unit)

We avoided positioning those programs as central programs by:

Having them organized by a host L&D manager in a unit invitingparticipants from all other units.

Using local faculty from that unit, giving a clear signal that everybody canlearn from everybody in this organization.

It was amazing to see how the simple fact of trusting local L&D managers andfaculty, to deliver a companywide program, created enthusiasm and sense of

belonging to the L&D community.

To create and maintain their energy to uphold these companywide programs wemade sure we limited the number of programs and focused on common needs andtarget groups. We needed projects that were priorities for all units in order for

people to put their efforts in and not consider it as extra work or something theywere forced into. We focused on:

Development of new plant engineers

Development of newly appointed plant managers

Development of newly appointed team leaders

Development of technical consultants in the Technical Centers


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CRITICAL SUCCESS FACTORS

After five years of working with that network, with hindsight, I would list thefollowing elements as success factors :

Create ongoing opportunities for network members to actually work with eachother, have experiences in common so they have something to share, toembrace, to care for during the meetings.

Clear leadership and direction from the beginning and then build gradually to amore shared leadership

Give guidance and leadership in terms of vision and process, but avoid

creating a semi hierarchical relationship. Make sure network members do notperceive the central team as controllers, making sure the central policies arewell implemented. But to the contrary, position the leadership as consultingsupport for issues and difficulties the L&D managers encounter in their

businesses.

Dont build the collaborative work only from the needs of corporateheadquarters. Make sure that the individual members and their respective

businesses see direct added value for them, in the different projects you

launch.

Make sure network activities are integrated fully in the local priorities ofpeople. Network members will not have the support of their local hierarchy iftheir effort in the network is not crucial for the local business and a priority forthe hierarchy. It will be seen as extra work as a sort of hobby and thereforewill not be sustainable.

Communicate and work where possible also with the bosses of the networkmembers (in this case the Unit HR Directors)

The design of the network activities and the way you lead the process needsto be in line with the vision on learning and development: very experiential,

participative, open and confronting, supportive.

As central team, or corporate L&D director, do not work with Unit businessmanagers, without fully involving the unit L&D manager. Otherwise you


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alienate the unit L&D manager from his/her own internal customers and hurthim in his/her credibility as internal consultant towards unit management.

This network was in the first place about work, but it only worked because wedeveloped a real interest in each other as persons and colleagues and took ourtime during our activities to invest in each other personally (room for reallymeeting each other).

ACTIVITY PROPOSED TO YOU DURING MOPAN CONFERENCE

TESTIMONY: introduction to the reality of the L&D network in Lafarge,with examples of projects, activities, methodology we used, etc

BE NETWORK: An intervision session where people can tap into each

others experience and work together on issues they have in their network.

SHARE LESSONS LEARNED: Brainstorm around two or three majorIssues like conditions for productiveness, shared leadership, deal withdiversity and share my perspective on that from the Lafarge experience.

COACHING AS THE DRIVER FOR LEARNING

Introducing coaching practices to develop engineers in the Cement DivisionA Good Practice.

CONTEXT

Through acquisitions and with the steady growth of the Lafarge business, a lot ofnew engineers are entering the Cement Division every year. The danger is that thedevelopment of these new engineers is not properly looked after and that it takes 2 to3 years before they can really contribute to the business. It becomes necessarytherefore, to ensure that their development is well managed, and that they contributegreatly towards the continued performance of the Lafarge business.

CHALLENGE

The challenge for the Division therefore, is to ensure that this employee population isworldwide developed in a structured way, fast and in line with the business needs, in


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order that they quickly become effective, become autonomous and take upresponsibility very early in their careers.

Keeping in mind also the vast differences in the business units, in resources,competencies and technological advancement, it is also necessary to ensure thatevery engineer, regardless of location, is exposed to the same challenges and giventhe same basics and foundation on cement manufacturing. Early exposure to theLafarge know-how, databases and benchmarking becomes very key to all newengineers in this respect in order that they develop and are aware of Lafarge best

practices.

SOLUTION

The solution was to create a formalized coaching track for all the newly hired plant

engineers. The objective was that the direct bosses would become coaches : setchallenging objectives, question and follow up on a regular basis and give feedbackin order to improve behaviors and competencies that they see as being ineffective.Help engineers to learn and share on-the-job.

Coaching as a driver for learning was introduced for the plant engineers throughthe Cement Professionals Development track. One of the strengths of the track is thatit is flexible and adaptable to the local needs. The main emphasis of this track is theexperiential learning philosophy, which largely encourages learning by doing.The track is in 4 phases, the Explored, a 2 week Training-Session (the only phase totake place outside the job) and the Dig-in and Take-off phases. (See graph)


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Together with the implementation of this program, it was necessary to ensure thateach business unit took real ownership for the program in terms of following up thecoaching process, on-the-job learning and adapting the program to suit localconditions. The divisional Learning and Development team, prepared the unit L&DManagers supported them in launching the program in their units and created anumber of tools to support the coaching practice.

EFFECT

Since the program was launched in 2000, up to 250 participants have gone throughthe program, which has involved between 90-95% of the total units in the CementDivision. The end result is that more than 50% of the coaches changed theirmanagement style since they started coaching and a lot of coachees feel a lot more

autonomy and responsibility in their functions. Heard in a recent survey from thecoaches and coachees:

Coach: Because I have more frequent contacts with my coachee, I know himbetter. I see what my coachee needs to develop and can give him step by stepbigger tasks. I know what he is able to do and that makes me feel morecomfortable in delegating tasks.

Coachee: Coming fresh from university I had no idea of what I was able to doand didnt feel comfortable in doing things on my own. I discovered howevermy competencies and that I could always find a solution on my own, becausemy coach was never instructing me what to do. By questioning he let me findsolutions myself, that made me more self-confident.

Coach: I develop my coachee, but at the same time he develops me by givingme feedback and telling me his experiences. Together we bring each other upto a higher level.

77% of the coaches say their coachees were autonomous faster and more than 50% ofthe coachees feel they were integrated faster into their jobs.

We still encounter difficulties with coaching here and there, because coaching is noteasy, it requires great investments of commitment and time, but for 80% of thecoaches who are coaching today within the Cement Professionals developmentProgram, it has become the way to manage.


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Documents

Lafarge Project Preparation