Blue Circle Cement

Blue Circle Cement

Syndicate 4

South Africa in 1996  New South Africa was 2 years old. MASTER STAMP  President Nelson Mandela divorced Winnie Mandela after 38 year marriage.  Bafana Bafana won a tournament.

 Competition board ruling that cement cartel (Alpha, PPC and Blue Circle Cement) must disband came into effect in 1996.

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Situational Analysis  Cement industry Cartel – 25 year alliance. MASTER STAMP  3 Members: • Alpha • PPC • Blue Circle Cement

 Colluded on price and Market share

 Cartel operation controlled by Cement Marketing Organisation (CMO)  Controlled all orders and distrubution  Through this maintained allocated market share as follows: Company % Market share Blue Circle Cement

23.875

PPC

45.000

Alpha

31.125

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Situational Analysis  Political

MASTER STAMP

 The country was at the beginning of a very exciting political period. The ANC government had just been elected into power

 Economic  GDP growth was definitely on the rise, with huge growth in 1994 and then continued growth to 1996. The forecasts at that stage were very positive for economic growth.

 Social  Socially South Africa was very much in a stage of growth. There was now the early emergence of the growing black middle class. All races were getting opportunities previously denied by the apartheid government.

 Legislative  Competition Board ruled against the cartel and instructed the cartel to disband by 30 September 1996. This signalled a new era for the cartel members with regards to their competitive positions and respective approaches to marketing of their products. 4

Situational Analysis  Competitors

MASTER STAMP

 Due to the nature of the cartel, there was no differentiation between the companies and no real competition between them.  Cross subsidisation of prices across regions were used as a deterrent to new competitors. • For example, Natal Portland Cement’s (equally controlled by the cartel members) prices were reduced to eliminate a competitor whose product entered through Durban harbour, while the cartel’s prices in other regions were increased.

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Situational Analysis  Marketing mix  Product

MASTER STAMP

• Limited product range. • No innovation from the three companies.

 Price • Fixed pricing. • Price adjustments took place to realign the market shares.

 Promotion • Promotion by individual members of the cartel was discouraged. • Sales forces were considered unnecessary.

 Place • Transportation “Route to market” was done privately. • Customers expected to collect from large regional depots or directly from Lichtenberg.

 Market segmentation • Broadly segmented into “bulk” buyers and “bag” buyers. • The cartel simply controlled pricing, and produced according to demand. No thought was given to segmentation, targeting or positioning. 6

SWOT Analysis Environment

Internal

Evaluation MASTER STAMP Positive

Negative

Strengths

Weaknesses

•Few competitors, all in similar •No brand equity. situation.

•Don’t know customers.

•Good product knowledge.

•Lowest market share. •No sales force.

External

Opportunities

Threats

•Control entire value chain.

•Route to market being controlled by competitors. •Imported products/ new competitiors

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SWOT Analysis Environment Internal

Evaluation MASTER STAMP Positive

Negative

Strengths

Weaknesses

•Few competitors, all in similar situation. •Good product knowledge. •Good customer knowledge. •Strong brand. •Efficient and reliable supply chain. External

Opportunities

Threats •Imported products/ new competitors.

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Current issues facing Blue Circle MASTER STAMP 1. To get to know their customers and understand their behavior.

Information flow

Information flow

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Current issues facing Blue Circle STAMP 1. To ensure that they are ableMASTER to fully control the “route to market.”

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Current issues facing Blue Circle MASTER STAMP 1. To create Brand equity. Differentiate themselves from the rest.

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The Buying Centre (Grewel & Levy, 2008) Person who first suggests buying the particular product or service.

Person whose views influence MASTER STAMP other members of the buying centre in making the final decision.

Person who ultimately determines any part of or the entire buying decision, whether to buy, what to buy, how to buy, or where to buy?

Person who controls information, or access, or both, to decision makers and influencers.

Person who consumes or uses the product or service.

Person who handles the paperwork of the actual purchase. (Grewel & Levy, 2008) 12

Buying Centre for Cement Industry Buying Centre -

Influence Bulk Buyers

Bulk

roles 1 2 3

Initiator Influencer Decider

Bag Buyers

MASTER STAMP

Criteria Low High High

Bag Criteria

Main building

Price,

Small works

Price, Promotion

contractor

Promotion

contractor

Cement company

Product,

Hardware store

Product,

rep

Promotion

assistant

Promotion

Main contractor –

Price,

Small works

Price

Site manager,

Product,

contractor

Concrete company

Place

procurement 4

Buyer

Low

Quantity surveyor

Price

Small works

Price

contractor 5

User

Medium

Contract workers

Product

Small works

Product

contract workers 6

Gatekeeper

High

Contracts director , Price, Concrete company manager

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Product

Home owner

Price, Product

Marketing mix for buying centre roles Bulk Buyers Marketing mix -

Bag Buyers MASTER STAMP

%

Marketing mix –

element

•

•

• •

%

element

Product

40%

Product

20%

Price

35%

Price

50%

Place

15%

Place

10%

Promotion

10%

Promotion

20%

Promotion must be used to introduce the contractors and procurement departments to the product. Product – obviously very important as quality must be mainyained throughout to meet the commercial standards. Place - readily available. Price is an absolutely essential criteria on which any supplier will be evaluated on.

•

•

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Promotion is important here, this will introduce the bag buyers to the product and allow the hardware store assistant a good opportunity to promote the product for the company. Price is very important in this market as product quality in the small works construction industry is not as important as in the commercial industry.

Adding value to a Commodity like Cement  The value chain is a tool that can be used to create value. MASTER STAMP The value chain consists of two main activities namely: Primary activities, and Support activities. (Grewel & Levy, 2008)  Primary activities:     

Inbound logistics – acquire of limestone (raw materials), To convert the raw materials into cement, Outbound logistics - the transportation of the cement, Marketing the cement (which includes sales), and Servicing.

 Support activities:    

Procurement, Technology development, HR management, and Blue Circle Cement (BCC) infrastructure.

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Cement Supply Chain  A demand chain management approach doesn’t just push MASTER things through the system. It emphasizes whatSTAMP solutions customers are looking for, not what products we are trying to sell to them. (Kotler, Keller, 2009)

 BCC should therefore establish who their target market is and then design their supply chain backwards.  Introducing supply chain management (SCM) software, the value chain network will be managed effectively.  Enterprise resource planning (ERP) to manage cash flows, manufacturing, human resources, purchasing, and other functions. 16

Cement Supply Chain  BCC operated as a product manager only, they STAMP concentrated MASTER on producing cement. They need to become network managers (upstream activities), and customer managers (downstream activities).

 BCC will have to ensure the following to add value through their supply chain  BCC’s value proposition to customers: On-time delivery; and ordering and billing standards.  The channel design and network strategy: How many warehouses and their locations?  Develop operational excellence: Sales forecasting, warehouse, and transportation management.  Implement solutions with: information systems, equipment, 17

th

Marketing Recommendations  The executives and top management need to buy into the MASTER STAMP idea of becoming a customer-centric organization, with their support the backing staff will follow suit, thus the culture will change.  The company’s marketing needs to change as the environment changes.  BCC must develop, design and implement marketing programs, processes and activities.  Holistic marketing is an effort to understand and reconcile the scope and complexities of marketing activities.

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Holistic Marketing MASTER STAMP

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Holistic Marketing  Relationship marketing

MASTER STAMP

 BCC must foster relationships with all stakeholders (customers, employees, marketing partners and members of the financial community) who can influence BCC’s marketing activities.  Understand stakeholders’ capabilities and resources.  Build an effective network of relationships.  Each customer must be seen as an individual and where possible customise service to each individuals needs.  Retain customers

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Holistic Marketing  Integrated marketing

MASTER STAMP

 The marketing mix (4P’s) is a tool that BCC can use to create, communicate and deliver value to customers. Once BCC understand their trade channels and customer/s they can customise their product according to their needs.  BCC should establish who their target market is and then design their supply chain backwards.  Effective communication creates brand awareness.  Create value for the customer, through an effective supply chain.  A different price structure should apply to the different customer segments.  Treat each customer as an individual with specific needs.  Improve the ordering and delivery processes, invest in supply chain management software.

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Holistic Marketing  Internal marketing

MASTER STAMP

 Hiring, training and motivating staff forms part of internal marketing.  Senior management must be an example to other staff members.  Each person in BCC must think from the customers point of view customer.  Key points for each department need to be identified, these will asses if they are customer orientated. • For example: Sales Assessment – – – –

Knowledge about the customers industry. Strive to give customers the best solutions. Keep to promises made. Share the knowledge about customers with other departments (Kotler& Keller, 12th ed, 2006)

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Holistic Marketing MASTER STAMP

 Performance Marketing  Performance marketing is incorporated in holistic marketing.  It is imperative to measure the financial effect of the above marketing efforts.  Through effective measurement and control, other opportunities will be identified which might lead to differentiating BCC from their competitors even more. (Jacques, F, HBR 2007)

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Thank you