ULTRA TECH CEMENTA Microeconomics Analysis

MGT 502:Economic Analysis for Business Decisions (EABD)

GROUP 10: Cherranjivi R, Hriday Bora, Subhasni Jaiswal, Ayushi Gupta,Junaid Ali, Phanindra Reddy

AGENDA Introduction Government role in cement industry Mission, vision & values Demand & supply Production Cost of production Pricing strategy Market structure Future plan & scope Conclusion

INTRODUCTION

“ What you build will last forever Build beautiful.”

Ultra Tech cement was started in the year 1983 at Awarpur cement plant I by Aditya Birla Group of industry

Ultra Tech cement parent industry was Grasim industry Ultra Tech cement has the 63.1 million tonnes per annum production capacity FY 2014-15 They went to public on 2000 In India it has 12 grinding plants , 12 integrated plants and 5 bulk terminal Its headquarters is in Mumbai

Key Contributor: Ayushi Gupta

GOVERNMENT ROLE COMPLETE GOVERNMENT CONTROL The every cement industry should follow the government regulated price from the year 1956 - 1982. This period was starting base of growth of 6.6%. The growth rate was very slow and sharp. The entry of new player was limited because returns on investment was limited.

PARTIAL GOVERNMENT CONTROL This was from the year 1982 - 1989. To trigger growth in the industry and support emerging Indian infrastructure. The partial deregulation was required two third of all sales to government . The companies were free to sell in open market at ceiling price . The growth rate was increased to 8.2%.

FREE CEMENT MARKETThis was at 1989 were all price and distribution control was withdrawn. The industry deregulated by 1991 the result in massive expansion of cement capacity. The time at which the country was at slow pace of urbanization and the market was at which Indian company took jump start

Key Contributor: Ayushi Gupta

MISSION, VISION & VALUES

MISSIONTo deliver superior value to our customers, shareholders, employees and society at large.

VISION"To actively contribute to the social and economic development of the communities in which we operate. In so doing, build a better, sustainable way of life for the weaker sections of society and raise the country's human development index.“

VALUESIntegrity, Commitment, Seamlessness, Passion & speed

Key Contributor:Subhasni Jaiswal

DEMAND & SUPPLY

Today the second largest producer of cement in the world is India after China. The consumption of cement is expected to increase gradually as the

government focuses on infrastructure development. Cement has become a important raw material in today’s world which is used in

housing, commercial and infrastructure development. In our country the demand of cement is more compared to production capacity

due to globalization. The Ultra Tech cement demand start from government project such as building

bridges ,road , railway and irrigation. Their demand come form policy such as home for every Indian . Where the government provide subsidies for citizen.

Key Contributor:Chiranjeevi R.

DEMAND & SUPPLY When the demand of Ultra Tech cement is high the company use the capacity

to produce to maximum to cover the demand when the demand for cement is low they reduce the production of cement.

Since 2008 the real-estate in our country is booming the cement demand is growing. When there is recession in US market the demand of real-estate was falling in our country where the stagnation of cement took place.

The cement industry play a key role in development of country by providing residential and infrastructure for the people in the country.

The supply of Ultra Tech cement has been increased from year after year where the company increase their reach to customer and increased capacity of cement production.

Key Contributor:Chiranjeevi R.

MARKET STRUCTURE

COMPETITION FOR MARKET SHARE Companies – Ambuja Cement, ACC, J.K. Cement,

Dalmiya Bharat, India cements

oMarket structure is an oligopoly marketoUltra Tech has a share of 22% of production of

total’s India’s cement productionoIt’s a free entry & free exit where the cost of

capital is too high like in Dec 23,2014 Jaypee sold two MP cement units to Ultra Tech for Rs. 5,400 crore

Key Contributor:Hriday Pratim Bora

PRODUCTION Ultra Tech cement has 11 integrated plants, 1 white

cement plant, 12 grinding units in India. The key raw material are Limestone, Clay , Sand and Coal. There are 32 short run of industry from 1983 The Ultra Tech cement produce various product such as

Ordinary Portland cement, Portland blast furnace slag cement, Portland Pozzolana cement & Concrete

The Ultra Tech cement required huge amount power to produce cement where 80% is satisfied by them

They produce 63.1 Million Ton Per Annum The company's subsidiaries are Dakshin Cements Limited,

Harish Cements Limited, UltraTech Cement Lanka (Pvt.) Ltd and UltraTech Cement Middle East Investments Limited

Key Contributor:Hriday Pratim Bora

COST OF PRODUCTION Cost of Production of Ultra Tech cement depends on

two cost. Fixed cost is capital for a plant of grinding or mix unit and machine. Variable cost for them are raw material, labour ,power and repair in the industry.

The cost of production play a key role for Ultra Tech cement to increase profit by minimizing cost of production.

This play a competitive advantage for Ultra Tech cement to competition on pricing .

1 2 3 4 5 6 70.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

35,000.00

40,000.00

45,000.00

Total Fixed costTotal Variable CostTotal Cost

Key Contributor:Zunaid Ali

PRICING STRATEGY

Ultra Tech cement being India's largest producer of cement they play “Price Leadership”

Price leadership in which the dominant player fix a price and competitor follow the price

Here the Ultra Tech can play a huge game by lowering price the competitor in market can reduce in numbers. It mainly depend on the cost of production and market share of the company

They reduce the distance to market and have the optimum use of rail, road and sea transportation

Increase in the use of pet coke gives them a cost advantage

Key Contributor:Zunaid Ali

FUTURE PLANS & SCOPE

Plans & scopes for future growth includes: Cost Leadership Rising exports Retail stores Relationship management Synergies with Grasim Ready mix concrete Setting up new plants

Key Contributor:Phanindra Reddy

CONCLUSIONS

The cement consumption in our country is increasing where we are the fastest growing economy country after china. It identified its strengths and problem areas through a variety of tools. While its raw material sourcing, financial and human resource pools are sources of competitive advantage, Ultra Tech has to improve in terms of fuel costs in order to beat ACC, Ambuja Cement, Jaypee to the top position in the low margin industry. This can also be achieved by leveraging futuristic trends like branded retailing, exports and new products like ready concrete mix. Ultra Tech company is really performing well and it really has vast scope to grow and become the world’s leading cement manufacturer company.

Key Contributor:Phanindra Reddy