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 shareBlue Circle Cement PPC Alpha 23.875 45.000 31.125

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Situational Analysis PoliticalMASTER 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 CompetitorsMASTER 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 Cements (equally controlled by the cartel members) prices were reduced to eliminate a competitor whose product entered through Durban harbour, while the cartels prices in other regions were increased.

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Situational Analysis Marketing mix Product Limited product range. No innovation from the three companies.MASTER STAMP

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 AnalysisEnvironment Positive Internal Strengths situation. Good product knowledge. Evaluation MASTER STAMP Negative Weaknesses Dont know customers. Lowest market share. No sales force.

Few competitors, all in similar No brand equity.

External

Opportunities Control entire value chain.

Threats Route to market being controlled by competitors. Imported products/ new competitiors7

SWOT AnalysisEnvironment Positive Internal Strengths 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. Evaluation MASTER STAMP Negative Weaknesses

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

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Current issues facing Blue CircleMASTER 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 controls information, or access, or both, to decision makers and influencers.

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 consumes or uses the product or service.12

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

Buying Centre for Cement IndustryBuying Centre roles1 2 3 Initiator Influencer Decider Low High High Main building contractor Cement company rep Main contractor Site manager, Concrete company procurement 4 5 Buyer User Low Medium Quantity surveyor Contract workers Price Product Small works contractor Small works contract workers 6 Gatekeeper High Contracts director , Price, Concrete company manager13

Influence Bulk Buyers

Bulk CriteriaPrice, Promotion Product,

MASTER STAMP Small works contractor Hardware store assistant Small works contractor

Bag Buyers

Bag CriteriaPrice, Promotion Product, Promotion Price

Promotion Price, Product, Place

Price Product

Home owner

Price, Product

Product

Marketing mix for buying centre rolesBulk BuyersMarketing mix element Product Price Place Promotion 40% 35% 15% 10% %

Bag Buyers MASTER STAMPMarketing mix element Product Price Place Promotion 20% 50% 10% 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.

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.

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

Support activities:

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Cement Supply Chain A demand chain management approach doesnt just push MASTER STAMP things through the system. It emphasizes what 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 MASTER concentrated 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 BCCs 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,17th

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 companys 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 MarketingMASTER STAMP

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Holistic Marketing Relationship marketingMASTER STAMP

BCC must foster relationships with all stakeholders (customers, employees, marketing partners and members of the financial community) who can influence BCCs 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 marketingMASTER STAMP

The marketing mix (4Ps) 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 marketingMASTER 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 MarketingMASTER 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