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This paper talks about the changing scenario in industrial marketing in India post liberalization in the cement industry

Submitted By: Abhendu Chandra Saha Adnan Ahmad Sasmita Guru Amarjeet Kumar Niharika Gupta

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1.0 Introduction
The Indian Cement industry is the second largest cement producer in the world, with an installed capacity of 144 million tonnes. The industry has undergone rapid technological up gradation and vibrant growth during the last two decades, and some of the plants can be compared in every respect with the best operating plants in the world. The industry is highly energy intensive and the energy bill in some of the plants is as high as 60% of cement manufacturing cost. Although the newer plants are equipped with the latest state-of-the-art equipment, there exists substantial scope for reduction in energy consumption in many of the older plants adopting various energy conservation measures. The Indian cement industry is a mixture of mini and large capacity cement plants, ranging in unit capacity per kiln as low as 10 tpd to as high as 7500 tpd. Majority of the production of cement in the country (94%) is by large plants, which are defined as plants having capacity of more than 600 tpd. At present there are 124 large rotary kiln plants in the country. The Ordinary Portland Cement (OPC) enjoys the major share (56%) of the total cement production in India followed by Portland Pozzolana Cement (PPC) and Portland Slag Cement (PSC). A positive trend towards the increased use of blended cement can be seen with the share of blended cement increasing to 43%. There is regional imbalance in cement production in India due to the limitations posed by raw material and fuel sources. Most of the cements plants in India are located in proximity to the raw material sources, exploiting the natural resources to the full extent. The southern region is the most cement rich region while other regions have almost same cement production capacity. The Indian cement industry is about 90 years old and its main sources of energy are thermal and electrical energy. The thermal energy is generally obtained from coal, and the electrical energy is obtained either from grid or captive power plants of the individual manufacturing units. The cement industry has witnessed phenomenal changes over the years. Some of the drivers of change are: 1. Government 2. Real Estate

3. Infrastructure

2.0 Review of Literature

With the explicit initiation of the economic reforms in 1991(liberalization) India adopted a new development paradigm. Instead of government-led development, India is now seeking outward looking market-led development, and instead of remaining what Anne Krueger called "a rent seeking society" (Krueger 1974), India has now adopted the structural adjustment package designed by the International Monetary Fund and the World Bank to move towards a deregulated open economy to get integrated with the global economy as a solution to its basic problems of low growth and structural mass poverty. Development policies including industrial policy in India in the post reform period have been formulated according to this paradigm. It is argued that the government has no role to play except for providing essential public goods as the costs of such interventions will be very high (Lal 1997, Tsai 1997), while on the other hand it is felt that the government has a role to play (though not for wholesale or inefficient intervention), particularly to improve the technical capabilities of the sector (Lall 1994 and 1996). It is also argued that even in "the miracle countries" on the basis of whose experience the new paradigm gets it empirical support, the state has played a crucial role in directing and promoting industrial development (Krugman 1994, Mommen 1996) Based on the experiences of post-liberalization industrial development in one of the industrially fast growing states in India (Hirway and Shah 1998), it is shown that there are quite a few issues that call for a review of the neo liberal development paradigm in the context of industrialization in this sector. There are other infrastructure markets that compete with cement industry like that of wood , Iron & steel etc. All these infrastructure markets are defined as industrial markets. In industrial markets the buying and selling units are organizations represented by several different individuals. Persons in the industrial organizations make purchase decisions based on the organization's goals and not only on the individual decision maker's needs and wants (Muth and Hendee 1980). Purchase decisions in infrastructure markets cannot be predicted with accuracy based on the individual's demographics and attitudes. This may be due to the organizational structure and the changes in goals from the individual to the organization. In the industrial market, it is organization leadership and norms that often decide the direction of the purchase decisions. This may cause market research on industrial purchase decisions to be based on these influences instead of those used in consumer markets such as demographics. Therefore, marketing efforts must be tailored to fit the industrial organization.

3.0 Discussion & views

In the Period of Restriction (1969-1982): The cement industry in India was severely restrained by the government during this period. Government hold over the industry was through both direct and indirect means. Government intervened directly by exercising authority over production, capacity and distribution of cement and it intervened indirectly through price control. In 1977 the government authorized higher prices for cement manufactured by new units or through capacity increase in existing units. But still the growth rate was below par. In 1979 the government introduced a three tier price system. Prices were different for cement produced in low, medium and high cost plants. However the price control did not have the desired effect. Rise in input cost, reduced profit margins meant the manufacturers could not allocate funds for increase in capacity.

In the Period of Partial Control (1982-1989): To give impetus to the cement industry, the Government of India introduced a quota system in 1982. A quota of 66.60% was imposed for sales to Government and small real estate developers. For new units and sick units a lower quota at 50% was affected. The remaining 33.40% was allowed to be sold in the open. These changes had a desired effect on the industry. Profitability of the manufacturers increased substantially, but the rising input cost was a cause for concern.

After Liberalization: In 1989 the cement industry was given complete freedom, to gear it up to meet the challenges of free market competition due to the impending policy of liberalization. De-licensing resulted in an accelerated growth for the industry and availability of state of the art technology for modernization. To maximize the opportunity available in the form of global markets, the industry laid greater focus on exports. The role of the government has been extremely crucial in the growth of the industry. The industry's capacity grew five-fold in the first two decades after controls were partially lifted. Today after three decades of liberalization, the industry has multiplied its capacity to 290 million tonnes a ten-fold increase. India's cement industry has completely transformed from being an inefficient, shortage ridden one to the world's second largest cement industry in size and best in terms of technology, quality, energy efficiency and carbon footprint.


A. Corporate Governance and Branding The business environment has been changing over the years with increasing expectations from key stakeholders including regulatory bodies. Recent stock exchange regulations also require listed companies to enhance corporate governance and business practices and improved disclosure norms. While striving to achieve business objectives, companies and operating management are expected to enable a good working board and board committees, allow adequate transparency in operations, imbibe good business practices that are ethical, foster and institutionalize systems and controls in all spheres of activity. While cement is largely branded, there is a continuous effort to project the brand, improve brand recall by the customer across a wide geographical coverage and provide superior quality of product and service. Example: L&T was a premium brand and now that Grasim has acquired the company, it is easier for Grasim to get into the premium brand market. Secondly, one cannot have two brands from the same capacity. It is necessary to have two different brands coming from two different capacities. It is largely difficult to cut down the cost of logistics, dealer networking and branding. Though there is some duplication of expenses, one has to absorb such a cost structure and then be with two brands.

B. R&D and Innovation Companies do not have much of application-oriented research and development efforts but this will become critical for future success. To a large extent, this is related to creating the application and customer of the future and understanding customer needs based on the emerging environment. Companies will need to create niche products and develop the market for such products by providing solution-based offerings to the customer. Innovation will be very important, to create high-grade and cheaper quality of cement. Indian companies have been moving from lower grade cement to higher over the years, and would have to continue to roll out even better quality to compete with the global players, and local competition. New cement products like RMC (Ready Mix Concrete) will help create a company carves out a niche in the market. It is imperative for innovators in the concrete and cement industry to consider a heterogeneous approach to materials and to integrate knowledge of other fields under a triple bottom-line of economic, social and environmental criteria. Stakeholder concerns have increased over the years and there are questions raised as regards sustainable development. While the world is conscious of the problem, there is a need to act now owing to better eco efficiency, industrial ecology, design for a better environment.

C. Process Automation The significant nature of changes to the Information technology area and the manner in which information will be processed will be drastic over the next 10-15 years. This had an impact on the cement industry. Higher levels of technology, its seamlessness and functionalities that have wider acceptance and usage will also bring down operating costs considerably. It is envisaged that Indian companies, which operate several plants across states in India, will need to monitor plant operations on a centralized basis through the use of process automation.

3.0 Conclusion
We expect that in the presence of global competitors and a global market, Indian companies would be able to acquire most of the share of by following as summarized below: The problem of up scaling and surviving competition with multinational companies calls for Consolidation and Globalization amongst all Indian cement players. Indian companies would have to identify the threat from global cement players entering the market and find demand for the product in neighboring countries and continents. Smaller companies should consolidate their businesses to survive in the market, which will be dominated by larger players. To produce high quality cement and in the cheapest and most efficient manner possible, new technologies have to be adapted. New technologies have to be introduced and implemented across various plants and factories for enhanced control and efficient production of the product. Process Automation has to be employed to create high quality products. To gain a high visibility in the market and pose stiff competition to most multinational brands, Research is going to be the key. Research to develop newer, cheaper and more efficient technologies for creating cement and other products. Niche products like cement with Fragrance, pre-colored plasters can also be developed for increased consumption. Considering the growing demand for cement in India and higher capacity utilization over the years, key Indian players have already begun to revisit their business strategies. Further, as cement is a commodity and the process is well known, there is no USP as far as this product is concerned. Therefore, the differentiation would largely relate to operating efficiencies, cost optimizations and reduction, and providing superior product and service and marketing strategies such as the presence of a stable and proactive marketing leadership, targeting specifically various customer and market segments, an expansion in product profile complemented with aggressive sales promotion and advertising

will be the key to unlocking the puzzle of profit and expansion in the Indian cement industry in the 21st Century.

[1] Shubhav Gupta, Corporate Strategy: Indian Cement Industry, April, 2010. [Online].Available:[Accessed: August 10,2010] [2] Aiyagari R. Mohan, Cement making in India, 2009. Industry and General Applications, IEEE Transactions, pp: 121-145 [3] BMR Advisors, Global Cement Industry, 2008.Available: [4] Cement industry in India, October 2009. [Online]. Available: [Accessed: August 3, 2010]