Market Audit and Competitive

Market Analysis of "SHAH Cement In

Philippines"

Submitted to:

Dr. Md. Ridhwanul Haq

Assistant Professor; School of Business

North South University

Submitted By:

Md. Ashraful Islam; ID: 111 0693 090

Sultan Mahmud Sarkar; ID: 091 0476 060

M. Tanim Hasan; ID: 101 0360 090

Mosabbir Alam; ID: 101 0462 090

Taskin Fatema; ID: 101 0433 090

Tahmina Matin; ID: 101 0491 060

Submitted on: 28 April 2012

Executive Summary:

The report conducted here is based on feasibility study of exporting

Bangladesh Manufactured Shaha Cement to Philippines. We have gone

through all the processes involved to establish a new brand in a new market.

We have analyzed the Cultural aspects of Philippines. In which we have tried

to compare our product’s relative advantage, compatibility, complexity and

others as required. We have found that though there were complexities we

have enough strength to survive & grow in Philippines market. We have

studied the competitors in Philippines. In most of the specifications we found

our product will be preferred by the consumers of Philippines if we can

communicate properly taking help from the agencies. Though distribution of

cement will be a bit expensive when compared with Bangladesh, but we will

be able to make it smooth with the transportation agency & taking help from

our local distributors. We are going to use the best Medias available in the

market so that we can reach the consumers fast & effectively. All through

our study we have tried to understand the market & the competitors. We

found in our favor & hope we will be able to grow as we demanded.

Introduction:

The marketing audit is a fundamental part of the marketing planning process. It is

conducted not only at the beginning of the process, but also at a series of points

during the implementation of the plan. The marketing audit considers both internal

and external influences on marketing planning, as well as a review of the plan itself.

The Product: "Shah Cement"

Shah Cement is a fine powder which is the principal strength-giving and property-

controlling component of concrete. It is a high quality, cost-effective building

material. Based on both internal and external research, Shah Cement believes that

we can be the world’s leading producer of cement taking into account sales,

production capacity, geographical positions, technological development and quality

of service. At year-end 2009, the Group’s consolidated businesses operated 120

cement, 32 clinker grinding and 8 slag grinding plants, with an annual production

capacity of 203 million tons (total capacity of entities controlled by others Cement

Company).

Shah Cement produces and sell an extensive range of cements and hydraulic

binders for the construction industry, including basic Portland and masonry cements

and a variety of other blended and specialty cements and binders. Shah Cement

offers customers a broad line, which varies somewhat by market. Our cement

products (all of which are referred to as “cement” in this report) include specialty

cements suitable for use in a variety of environmental conditions (e.g. exposure to

seawater, sulfates and other natural conditions hostile to concrete) and specific

applications (e.g. white cement, oil-well cements, blended silica fume, blended fly-

ash, blended pozzolana, blended slag cements and road surfacing hydraulic

binders), natural lime hydraulic binders, masonry cements and ground blast furnace

slag. We design our cements to meet the varying needs of our customers, including

high performance applications for which enhanced durability and strength are

required. We also offer our customers a number of extra services, such as technical

support in connection with the use of our cements, ordering and logistical

assistance to ensure timely delivery to the customers, plus documentation,

demonstrations and training relating to the properties and appropriate use of Shah

Cement.

Relative Advantage:

At the hydration period Limestone accelerates the reaction of C3A, which results in early setting and early strength developed in the concrete and mortar. Due to this behavior, the following advantages are evident at construction site –

          - Shah Cement enhances the work progress with respect to concrete strength

development

          - Shah Cement better performs in the earthquake zone

•   In the mortar work (Brick/Plastering), the surface of the plaster turns smoother

when compared to PCC cement

•   The concrete becomes more durable due to less porosity in concrete that is

made of Shah Cement

•   The hydration heat is less, resulting in less thermal crack and hair crack in the

surface

•   Mortar remains rich because Shah Cement requires less remixing with water

•   Easy to apply, comparatively minimal effort required

Compatibility:

Cement is made by crushing and grinding calcium carbonate, silica (sand), alumina

and iron ore in appropriate proportions and heating the resulting mixture in a kiln to

approximately 1,500°C. In the more modern “dry process” used by around 88% of

Lafarge’s plants, the ore mixture enters the kiln dry, as opposed to the older

process in which it is mixed with water. Each process produces “clinker”, which is

then finely ground with gypsum to make cement powder. A breakdown of the

production cost of cement (before distribution and administrative costs) is

approximately: energy 31%, raw materials and consumables 29%, labor,

maintenance and other production costs 28%, and depreciation 12%. Raw materials

for making cement (calcium carbonate, silica, alumina, and iron ore) are usually

present in limestone, chalk, marl, shale and clay, and are available in most

countries. Cement plants are normally built close to large deposits of these raw

materials. For most of our cement plants, we obtain these materials from nearby

land that we either own or over which we hold long-term quarrying rights. The

quantity of proven and permitted reserves at our cement plants is believed to be

adequate to operate the plans at their current levels for their planned service life.

Where technically available and economically viable, we may substitute ground

blast furnace slag, pozzolan or fly ash for certain raw materials when making

cement, or mix slag, pozzolan or fly ash with cement at the end of the process.

Ground blast furnace slag is a by-product of steel manufacturing, and fly ash is a

product of burning coal in electric utility plants. Whether and how they are used

depends on the physical and chemical characteristics of the slag or ash and on the

physical and chemical properties required of the cement being produced. These

materials help lower our capital costs per ton of cement produced. Their use is

environmentally friendly since it increases cement supplies by recycling post-

industrial material that would otherwise be used as landfill.

Complexity:

Cement prices in Philippines are market driven and volatile. 

Prices vary from zone to zone and customers are invoiced at the

specified rate for consignee's location

Even though, Cement companies try to create Product differentiation,

market share is highly dependent upon Price and hence, “Cost control” in

Production as well as Logistics is very important

Prices include taxes & freight hence realization calculation is complex

Most payments are on-account type and not linked to invoices

Complex system of discounts and incentives

Strong syndicate / union presence (Cement Manufacturing Association of

Philippines)

Consignments of both road and rail sometimes needed to be reallocated /

rerouted

Incentives and associated credit/debit generation

Delivery tracking

Accounting for damaged cement (bags)

Transporter Billing on retrospective basis

Trialability:As Shah Cement is already exporting in various countries (India) in the world. We

are planning to send to the testing authority at Philippines very soon and after

words we well send our products to the mass Pilipino market.

Observability:

B. Major problems and resistances to product acceptance based on the preceding evaluation.

One of the major problems of the Philippines is the brand loyalty of the consumers.

The consumers in the Philippines market are very brand loyal. For a new entrant in

the market it is going to be a problem.

Another potential resistance that we might face is the syndication of locality. There

is a strong syndicate present in the Philippines market. No new brand is allowed to

enter in the market without entering first in the syndicate. So, naturally presumed

we are going to face some resistance from the market.

The MarketGeographic Location:

The square kilometers, respectively. They, together with the cluster of the Visayan

Islands that separate them, represent the three principal regions of the archipelago

that are identified by the three stars on the Philippine flag. Topographically, the

Philippines is broken up by the sea, which gives it one of the longest coastlines of

any nation in the world. Most Filipinos live on or near the coast, where they can

easily supplement their diet from approximately 2,000 species of fish. Philippine

archipelago lies in Southeast Asia in a position that has led to its becoming a

cultural crossroads, a place where Malays, Chinese, Spaniards, Americans, and

others have interacted to forge that unique cultural and racial blend known to the

world as Filipino. The archipelago numbers some 7,100 islands and the nation

claims an exclusive economic zone (EEZ) of 200 nautical miles from its shores. The

Philippines occupies an area that stretches for 1,850 kilometers from about the fifth

to the twentieth parallels north latitude. The total land area is almost 300,000

square kilometers. Only approximately 1,000 of its islands are populated, and fewer

than one-half of these are larger than 2.5 square kilometers. Eleven islands make

up 94 percent of the Philippine landmass, and two of these--Luzon and Mindanao--

measure 105,000 and 95,000 kilometers, respectively. They, together with the

cluster of the Visayan Islands that separate them, represent the three principal

regions of the archipelago that are identified by the three stars on the Philippine

flag. Topographically, the Philippines is broken up by the sea, which gives it one of

the longest coastlines of any nation in the world. Most Filipinos live on or near the

coast, where they can easily supplement their diet from approximately 2,000

species of fish.

Off the coast of eastern Mindanao is the Philippine Trough, which descends to a

depth of 10,430 meters. The Philippines is part of a western Pacific arc system that

is characterized by active volcanoes. Among the most notable peaks are Mount

Mayon near Legaspi, Taal Volcano south of Manila, and Mount Apo on Mindanao. All

of the Philippines islands are prone to earthquakes. The northern Luzon highlands,

or Cordillera Central, rise to between 2,500 and 2,750 meters, and, together with

the Sierra Madre in the northeastern portion of Luzon and the mountains of

Mindanao, boast rain forests that provide refuge for numerous upland tribal groups.

The rain forests also offer prime habitat for more than 500 species of birds,

including the Philippine eagle (or monkey-eating eagle), some 800 species of

orchids, and some 8,500 species of flowering plants.

The country's most extensive river systems are the Pulangi (Rio Grande), which

flows into the Mindanao River; the Agusan, in Mindanao which flows north into the

Mindanao Sea; the Cagayan in northern Luzon; and the Pampanga, which flows

south from eastCentral Luzon into Manila Bay. Laguna de Bay, southeast of Manila

Bay, is the largest freshwater lake in the Philippines. Several rivers have been

harnessed for hydroelectric power.

Forms of Transportation and Communication in Philippine:

The transport sector of Philippines consists of a variety of modes. The country being

a flat plain, all three modes of surface transport, i.e. road, railway and water are

widely used in carrying both passengers and cargo.

Philippines has 1400 KM of railway track owned by the Manila Rail Road Company.

There are 22960KM of Highway in Philippines. These are two -lane roads.

Philippines has 3219KM water ways. 480 ships travel around the country through

waterways. Out of that, 150 bulk ships and 122 Cargo ships will be used for our

cement Transportation.

From Philippines we will send our products through sea to Port of Manila. From there

the distributor will release from the cargo.

For transportation in Philippines there are lots of cost effective ways. For distance,

we can use train, and road ways. Water are also available for short distance we can

use roadways. We can rest cargos and trucks which are available in Philippines.

Consumer Buying Habits:

Product-use patters

Philippines consumers are aggregately more unfavorable towards marketing

practices in comparison to transitional countries and less unfavorable in comparison

to developed ones. The marketing sentiment scale showed evidence of divergent,

convergent and predictive validity. The results from the structural equation paths

provided evidence that associations do exist between attitudes toward marketing,

satisfaction and government regulation variables. The study also revealed that

there were no significant differences in attitude towards government regulation with

respect to various demographics variables.

Shah Cement Feature preferences:

Shah Cement announced a new beginning of their flagship cement brand. Shah

Cement going to start with a new and improved product and pack and with a new

communication theme. In a

press conference the managing director Mr. Abu Sayeed Chowdhury of Shah

Cement said, “Shah Cement will take a lead in fulfilling dreams. We dream innovate

and design the best products and apply the best practices. We want to lead the

building materials industry in a country and always come up with innovative

solutions for our customers; because, we believe that this is our responsibility to

share our expertise for the betterment of the society, and the nation as a whole.”

The company wants to invest 280 million US Dollar, which is one of the largest

Foreign Direct Investments in Philippines.

Shopping Habits:

Brand loyalty is consumer preference to buy a particular brand of cement in

Philippines. It occurs because consumer perceived that the brand offer image or

level of quality at the right price. The consumers of Philippines subconsciously

exercise a great deal of selectivity as to which aspect of environment or which

stimulating they perceived.

Consumers subconsciously exercise a great deal of selectivity as to which aspects

of the environment of which stimuli they perceive. A person may give importance to

some things ignore others and may turn away from still others. Their previous

experience as it affects their expectations and their motives at the particular time.

For consumers, purchase intention and purchase satisfaction are related to price

perception in their mind. Perceived value of our Cement should match with the

perceived to value of the cement.

Distribution of the product

Typical Retail Outlets:

A typical Cement distribution channel network flows through from producer to

consumer with distributor and small retail in the middle. A special case like bulk

sales where the consumer buys in big quantity the company sometimes takes the

initiative to supply the stock directly to the consumer. Consumers’ previous

experience as it affects their expectation and they motives and that particular

times.

Product Sales by other middle men:

Middles mans in Cement sector are Distributors, Dealers and Retailers. Distributor sells quantity but gets

a low margin of profit. Dealers are also like distributor who works under Dealers. Retailers get more

profit but less quantity. Shah Cement would only distributors and Retailers in between them and

consumers. Distributors will profit a low margin. So transportation cost will be bearded by them and

they will also deliver to the Retailers.

Advertising media for Shah Cement:For advertising we will use all types of media to reach the consumers. Television & daily news papers are

highly used medias in Philippines. They use both. Billboards and signboards are also used.

Sales Promotions:

Newspaper Advertising

Promotional Campaigns

Wall paintings

Signboards and light boxes

Customized Accessories

Events Sponsorships

Television

Internet

Radio

Magazine

Pricing Strategy

Customary Markups:

The pricing of cement of various companies are very close to one another. (refer to figures Market price

in Manila & outside of Manila). There are a number of components which are taken into consideration

while price fixations of cement bags are carried out. The components are discussed below. Cost of the

raw materials and production of the cement. To start with, the cost of producing the cement itself is

taken into account. This includes the cost of importing raw materials, cost of production and the cost of

packaging all inclusive of other fixed costs consisting of inventories and human resource required for

production. The market demand also plays a dominant role in the price fixation of cement. The supply of

the raw materials and supply of cement by other companies in the market in addition to the market

demand of the product also determines the final price of the product. When the demand of their

product is high, the price of their product is also increases and vice versa. Seasonal demand of the

product. The other important factor which has an effect on the changing price of the product is that of

the seasonal demand of the product in the market. There are mainly three dominant seasons in terms of

demand of cement in the cement industry. They are as follows: Peak Season: January to April/ May, Dull

Season: June to September, Off Season: October to December In the cement industry, January to April

which sometimes also stretches till May is considered as the peak season when the demand of cement

in the market is very high. As per the climate of Philippines, there is little or no rainfall in the country.

The time for starting work of constructing buildings and other infrastructural development projects

during this season. As the demand of cement is high during this time, as a result the price of the

products of Shah Cement is also higher than that compared to the rest of the year. This is also true for

other cement companies operating in the country. The month of June to September is considered as the

dull season in cement industry when the overall sale of cement is quite low compared to that of the

peak season. This is the time of the year when rainfall is most evident in the country. Rather than

constructing buildings, this time of the year is mostly used for curing. Curing is one of the most

important steps in concrete construction. Curing mainly increases the strength and durability of

concrete to a great extent. The concrete hardens as a result of hydration which is a result of the

chemical reaction between cement and water. However, hydration occurs only if water is available and

the temperature of the concrete stay within a suitable range. The rainfall in this dull season helps the

concrete surface to stay moist naturally and allows the hydration process to take place. The Off season

for the cement industry usually starts from October and ends in December. During this time the sale of

the cement is normally the lowest or almost close to nil. This is also the time just before the peak

season. From past observations, it has been seen that usually the other materials related to cement

(mainly referring to the other building materials) are not available during this time of the year. This is

also another prevailing reason for this period of the year to be regarded as the dull season. Taking this

situation into consideration, the price of the cement of almost all companies in Philippines is usually the

lowest compared to that with the other two seasons due to the fall in market demand and sales. Price of

competitor’s product currently, 20 cement companies are operating in the cement industry of

Philippines who are producing similar products. Due to the presence of homogeneous products in the

market, price war is a sensitive issue in this industry which exists from time to time in the cement

market. Another component which is taken into consideration while fixing the price of cement bags is

done by observing the price of the competitor’s products.

Types of discounts Available:

Shah Cement is planning to have two types of sales. One is Corporate Sales &

Channel Sales. We will offer special discounts to the corporate clients, specially to

the Government for big construction projects and for the Channel sales we will offer

promotional gift on bigger purchase.

 Competitor's product(s):

Brand Name:

The following major competitors are available in Philippines:

1. Holcim Cement Philippines

2. Lafarge Cement Philippines

3. Cemex Philippines

4. Apo Cement Corporation

5. Republic Cement Competition

6. Taihieiyo Cement inc.

7. Iligan Cement Corporation

8. Lloyds Cement Corporation

9. Richfield Industrial Corporation

10.Mandanao Portland Cement Corporation

11.Northern Cement Corporation

12.Pacific Cement Philippines

13.Solid Cement Corporation

Competitor Features:

Particulars HOLCIM Lafarge Cemex Shah

Cement

Cement over clinker ratio 1.23 1.28 1.27

1.29

L.O.I. (max) 4.5 5.0 4.7 4.5

MGO (max) 4.5 5.0 4.9 4.5

SO3 (max) 3.8 3.5 3.6 3.5

Fineness .09mm .08mm .10mm .0

9mm

Compressive Strength (03 days) 21mpa 22mpa 19mpa

24mpa

Compressive Strength (28 days) 38mpa 40mpa 40mpa

48mpa

Bending Strength (03 days) 3.8mpa 4.0 mpa 3.8mpa 4.2

mpa

Bending Strength (28 days) 6.0mpa 6.2mpa 5.9 mpa

6.9 mpa

Competitor's Prices:

Brand Price in USD

HOLCIM Philippines $5.60

Lafarge Philippines $5.70

Cemex Philippines $5.55

Shah Cement $5.55

Competitors’ promotion and advertising methods:

Newspaper Advertising

Promotional Campaign

Wall Paintings

Signboard and Light Boxes

Event Sponsorship

Television

Magazine

Competitors Distribution Channel:

The distribution channel like Bangladesh is pretty straightforward

Estimated industry sales for the planning year:

The total industry consists of 12 competitors. Last year (2011) the total industry

volume grossed at 20 million Metrtic Tons valued at $990 milliion USD

Source: www.cmap.org.ph

Estimated sales for Shah Cement:

The ultimate target for Shah Cement is Capturing 15% of the market share at the

end of 10th year. In value terms it’s almost $15o million USD.

Volume in Million Tons.

Agencies that can help us

Embassy of Bangladesh

Advertisement Agency (Ogilvy One, Worldwide Manila, Campaigns & Grey)

Legal Agencies (88DB Philippines)

Market Research Firm (Ogilvy One, Worldwide Manila, Campaigns & Grey)

Transport Agency (Allway Transport Agency)

Regulations to follow:The Bureau of Trade Regulation of Philippines is committed to develop responsible

consumer sector. We have to follow the following regulations to enter the market:

1. We have to abide by fair trade law

2. Operate within International Standard safety Regulations

3. Labour Law of Philippines

4. Health regulation of Philippines

5. Internal Tax & VAT regulation

6. Environment policy of Philippines

7. Tariff Regulations of Philippines

8. Philippines customs Act

Source of Information:

Appendixes