Description
Marketing report on RMC ready mix. The Document comprehensively covers the complete marketing plan for a manufacturing industry.
Marketing Plan for RMC Readymix India
Table of Contents
PART A – Market and Consumer Profile
1. Executive Summary 2. Company Introduction 3. Situation Analysis a. Products offered by RMC Readymix India b. Industry Analysis c. SWOT Analysis d. Competitive Forces e. Porter’s Force Field Analysis f. Customer Analysis g. Critical Points & Keys to Success 4. Marketing Environment for consumer behavior analysis
PART B – Marketing Strategy
1. 2. 3. 4. 5. 6. Mission Marketing Objective Financial Objective Segmentation and Targeting Positioning Marketing Mix
PART C – Financials and Forecasts
1. Sales and Expense forecast 2. Breakeven Analysis
Executive Summary
Ready-mix concrete (RMC) is a type of concrete that is manufactured in a factory or batching plant, according to a set recipe, and then delivered to a worksite, by truck mounted transit mixers. This results in a precise mixture, allowing specialty concrete mixtures to be developed and implemented on construction sites. The first ready-mix factory was built in the 1930s, but the industry did not begin to expand significantly until the 1960s, and it has continued to grow since then. Ready Mixed Concrete, or RMC as it is popularly called, refers to concrete that is specifically manufactured for delivery to the customer's construction site in a freshly mixed and plastic or unhardened state. RMC Readymix (India) Limited is a joint venture company between the RMC Group p.l.c. of UK and Hatchways Investment Limited - a Rajan Raheja Group enterprise. The company aims to promote the concept and develop the use of ready mixed concrete all over India by setting up strategically located batching plants, built to the highest international standards. This plan aims to provide insights into how the company can use the available market opportunities to expand into the ready mix concrete market with specific reference to the Udupi district.
Basic Company Information
RMC Readymix (India) Limited is a joint venture company between the RMC Group p.l.c. of UK and Hathway Investment Limited - a Rajan Raheja Group enterprise. RMC Group p.l.c. is an international company operating in 30 countries. By annual turnover, the Group is the world’s 4th largest heavy building materials company, focused principally on aggregates - sand, gravel, rock - ready mixed concrete and cement. The company was established with its Headquarter in Mumbai. The company aims to promote the concept and develop the use of ready mixed concrete all over India by setting up strategically located batching plants, built to the highest international standards. Operations of RMC Readymix (India) Limited began in India by setting up three state-of-the-art batching plants at Taloja & Mahape in Navi Mumbai and Bandra, Mumbai. Ready mixed concrete is a new idea for the construction industry in India. RMC Readymix (India) Limited is the vehicle, which brings to doorsteps, ready mixed concrete produced to the highest international quality standards. A venture of Hathway Investments Pvt. Ltd., RMC Readymix (India) Pvt. Limited began commercial production in 1996. Under the guidance of RMC UK, the world's largest producer of ready mixed concrete, RMC India broke new ground when it set up India's first Ready Mixed Concrete plant using the world's best machinery, quality assurance & quality control systems. As well as fully qualified engineers instead of semi-skilled staff as was the practice prevalent in the industry at that time. RMC made a conscious decision from the outset to introduce the best available international technology when entering the Indian market. While it may have been easier to opt for a low-cost, low-tech solution,
all plants were imported from Europe at a considerable cost, (largely due to prevailing import tariffs) to ensure a high standard of technological hardware. A major reason for this was the company’s goal to establish a quality differentiation in this potentially huge market. In addition, this approach, adopted in part by several competitors, has the effect of increasing barriers to entry, thus encouraging only the more serious players with a long-term commitment to this embryo sector.
The 10 years that RMC has spent in the manufacture and marketing of Ready Mixed Concrete, have helped reinforce and sharpen certain traits that the Company has become known and respected for such as setting benchmarks in Best Practices, Quality Assurance and Customer Service or driving up standards in Health, Safety and Environmental Protection, plus a high degree of integrity, transparency and courtesy. It has been only 2 years since they have started operating in the Udupi district. They provide ready mix concrete, sand and gravel products to a variety of customers, including but not limited to, contractors, subcontractors, individuals and owners of both private and public construction projects. The business strategy that is followed has the below primary objectives: ? ? ? Closely monitor the demand and evaluate the cost-effectiveness and timing of their operating hours; Manage our fixed asset base to minimize ongoing fixed costs while maintaining sufficient capacity to meet the demands of our customers and remain adequately prepared Seek to obtain cost savings through minimizing overtime, seeking optimum pricing of raw materials purchased from third parties, renegotiating minimum royalty levels at certain leased properties, maintaining staff count at appropriate levels, eliminating or reducing costs in numerous areas of our operations; Improve our competitiveness in certain market segments — particularly the public infrastructure segment; Increase market intelligence and awareness to be sensitive to potential opportunities that may result from the strengths or weaknesses of competitors in our market, including attractive divestiture or acquisition opportunities
? ?
Marketing Plan Part 1: Market and Consumer Profile
Situation Analysis
Product
RMC’s provides ready mix concrete to its customers based on their requirements. RMC is preferred to on-site concrete mixing because of the precision of the mixture and reduced worksite confusion. It facilitates speedy construction through programmed delivery at site and mechanized operation with consequent economy. It also decreases labour, site supervising cost and project time, resulting in savings. Proper control and economy in use of raw material results in saving of natural resources. It assures consistent quality through accurate computerized control of aggregates and water as per mix designs. It minimizes cement wastage due to bulk handling and there is no dust problem and therefore, pollution-free. However there are some disadvantages of RMC too, like double handling, which results in additional cost and losses in weight, requirement of godowns for storage of cement and large area at site for storage of raw materials. Aggregates get mixed and impurities creep in because of wind, weather and mishandling at site. Improper mixing at site, as there is ineffective control and intangible cost associated with unorganized preparation at site are other drawbacks of RMC. There are always possibilities of manipulation; manual error and mischief as concreting are done at the mercy of gangs, who manipulate the concrete mixes and water cement ratio.
Raw Material Expenses
10% 10% 75% 3% 2% Cement Sand Aggregates Chemicals Water
From the raw material perspective, cement is the most expensive and important raw material used in the production of ready mix concrete. So to ensure that there is no blockages in production, RMC
Readymix purchases cement from multiple suppliers and this helps them to build strong relationships. Below chart shows the breakup of expenses for every Rs 100 spent on RMC. If we look at the position of the product on the BCG matrix, we find that in the Mangalore region, it is positioned as a Cash Cow whereas in the Udupi district where the company has just entered, it is positioned as a Star. Also given that there is very little competition currently in the Udupi/Manipal market, there is a huge potential for the company to turn this Star into a Cash Cow if the right strategy is followed.
Udupi District
Mangalore
Also this is evident from the below graph which shows the trend in sales of RMC by RMC Readymix Indian in the Udupi district (which includes the forecasted sales)
Sales
120000 100000 80000 60000 40000 20000 0 2007-08 2008-09 2009-10 2010-11 75000 62000 90000 Sales 104000
Industry Analysis
Ready mix concrete industry in India is still in its infancy but it is an emerging sector. The first ready-mix factory, which was built in the 1930s, remained in a standstill position till 1960s, but continued to grow since then. The leading ready-mix concrete supplier worldwide is the Mexican concrete and cement company Cemex, and their main competitor is France-based Lafarge. The Ready mix concrete business in India is in its infancy. Where as in developed countries, nearly 70 per cent of cement consumption is in the form of ready mix concrete and 25 per cent in the form of recast, in India, ready mix concrete accounts for less than 5 per cent and as much as 82 per cent of cement consumption is in the form of site-mixed concrete. While 70% of cement produced in a developed country like Japan is used by Ready Mix concrete business there, here in India, Ready Mix concrete business uses around 2% of the total cement production. There are several reasons for this. In early 70s both pricing and distribution of cement was controlled due to shortage of supply. Ready mix concrete technology could not be implemented as investors felt that Ready mix concrete plant will starve due to non-availability of cement. The levy of additional taxes & duties on RMC, entry tax, excise duty also contributed to the slow development of the concept. The growth of RMC is predominantly driven by demand from the metro cities. In cities like Mumbai, the mandatory use of RMC is in construction of flyovers provided the requisite impetus to growth, according to an ICRA analysis. RMC is particularly useful when the building activity is located in congested sites where little space is available for siting the mixer and for stock piling of aggregates. The use of RMC is also advantageous when only small quantities of concrete are required or when concrete is to be placed only at intervals. Even as the concept of ready-mix concrete (RMC) is still catching up in the country, cement majors are keenly focusing on entering the new area in a big way. Anticipating huge potential for the product, cement majors, including Associated Cement Companies, Grasim, L&T, India Cements, Priyadarshini Cements, Chettinad Cement and Madras Cements, are foraying into the RMC business and the share of RMC is expected to go up from present levels of around 5 per cent of the total cement production to the global average of 70%. The teething troubles has been overcome by the RMC Industry and at present there are over 37 RMC plants delivering over one lakh cubic meters of mixed concrete every month. RMC plants are working in Delhi area also. Envisaging higher demand, the 16.4-million tonne cement major; ACC is planning to beef up its existing RMC infrastructure of 11 units with two new RMC units - one at Noida and the other in Mumbai, during the current year. During the last fiscal, Madras Cements set up two RMC plants near Chennai, with a capacity of approximately 9 lakh cubic meters, while Chettinad Cements installed an RMC facility near Coimbatore. For growth of the industry, government bodies, private builders, architects/engineers, contractors, and individuals required to be made fully aware about the advantages of using ready mix concrete, government bodies/consultants needs to include ready mix concrete as mandatory in their specification for execution, government specifications for CPWD and PWD jobs should include Ready mix concrete as
a mandatory item. Apart from this, tax breaks are required for the growth of RMC and developers/contractors needs to be discouraged from piling up materials like metal, sand etc. on roads/foot paths.
SWOT Analysis of RMC Readymix Ltd
Strengths ? ? High Quality RMC Unique flexibility of providing tailor made concrete suited for different applications. On time and prompt delivery Goodwill of the company Highly trained and qualified employees Excellent Customer service Opportunities Tie ups with possible customers can be done. Expanding into newer areas. With decrease in free land, local site mixing is becoming difficult giving an opportunity for the growth of RMC ? Weaknesses Lack of promotions as there are limited competitors in Manipal. Due to this they are not taking the opportunity of acquiring new business.
? ? ? ?
Threats ? ? Threat from local contractors who at times prefer local site mixing for concrete. Threat from laborers who try to object use of RMC
? ? ?
Competitive Forces
In India, market share of RMC is abysmally low when compared to developed nations. Initially, ready mix concrete was used only in metro cities. However, in the last few years it has spread to second- and thirdlevel cities. Slowly, the concept is catching up and people are realizing the advantages of using ready mix concrete. The major players who operate in the RMC business include RMC Readymix India, L&T, UltraTech, ACC etc. The industry on the whole is highly competitive. The ability to compete in the market depends largely on the below factors:? ? ? proximity of the customers’ job sites to the ready mix concrete plant locations, the plant operating costs and the prevailing ready mix concrete prices in each market
Price is the primary competitive factor among suppliers for small or simple jobs, principally in residential construction, while timeliness of delivery and consistency of quality and service as well as price are the principal competitive factors among suppliers for large or complex jobs. Our competitors range from small, owner-operated private companies to subsidiaries or operating units of large, vertically integrated cement manufacturing and concrete products companies. The main competitors in the Mangalore region include L&T, UltraTech and a local company called Loney. The below chart shows the market share of RMC Readymix in the Mangalore region. As it can be seen clearly, it is the leader in terms of market share.
Market Share in Mangalore
8% 25% 4% 2% RMC Readymix India UltraTech 61% L&T Loney
While in Udupi district, RMC Readymix is the only branded player and hence occupies almost 98% of the market. The other 2% is held by the local contractors who prefer local site mix over RMC. One of the local contractors is CCCL builders. Local site mixing is a major competitor especially for local contractors as it helps them to save money. Also laborers tend to be against use of RMC as otherwise it would lead to a loss of income for them.
Porter’s Force Field Analysis
Industry competition The RMC and cement industry is one of the most competitive industries in the country with many different players fighting for the same pie. High growth prospects make it attractive for new players to enter in the industry. Another major factor that adds to the industry rivalry is the fact that the entry barriers to this industry are very low. Many smaller players that are focused on a particular region have a better hang of the distribution channel, making it easier to succeed, albeit in a limited way.
Bargaining power of buyers When we look at the buyer's power, we look at the influence they have on the prices of the product. In this industry, the buyers are developers and contractors and they as such do not wield much power in the pricing of the products. However, government with its policies plays an important role in regulating pricing. Bargaining power of suppliers The RMC industry depends upon several raw materials like cement, sand, aggregates and chemicals. The cement and chemical industry are again very competitive and fragmented. The chemicals used in the the industry are largely a commodity. The suppliers have very low bargaining power and the companies in the RMC industry can switch from their suppliers without incurring a very high cost. Threat of substitutes Till quite recently, local site mixing was preferred as it was cheaper and at the same time provided employment. However, in recent times, the advances made in the field of technology, can prove to be a threat to the local concrete mixing industry as now the ready mix concrete is much better in terms of quality. This has lead to an increase in the usage of RMC even though at present, the only close substitute it has the local site mixed concrete. Barriers to entry The RMC industry is one of the not as easily accessible as some other industries for an entrepreneur in India. The capital requirement for the industry is comparatively high. However, creating brand awareness is the key for long-term survival. Also, quality regulations by the government may put some hindrance for establishing new manufacturing operations.
Business practices
Manufacturing
? Due to the number of competitors, it will ? The marketing campaign to make this be hard to make customers switch. ? Given the wide array of brands it becomes a challenge for RMC Readymix India to stand out brand popular requires more promotional expenditures than its current expenditure. ? Close proximity to raw materials required.
Customer Analysis
RMC Readymix mainly targets concrete subcontractors, prime contractors, home builders, commercial & industrial developers. Also there is a heavy dependence on repeat customers. Management and dedicated sales personnel at each location have been responsible for developing and maintaining successful long term relationships. The main customers of RMC Readymix in the Udupi district are as below: ? ? ? ? ? ? ? Saipradha Developers Ballal Constructions Premier Builders Shamthan Builders Swaroopa Engineers Udaya Shetty Projects Vineet Amin
These customers contribute to a majority of the sales and almost in equal amounts. Also the RMC bought is used for different purposes i.e. for construction of apartments, residencies, commercial buildings, institutions, public works etc. Below is a pie chart which shows the distribution.
apartments, 60% Other, 25%
Commercial Buildings, 20% Public Works, 5%
Residencies, 15%
The residential sector of the construction market has historically been a key contributor to the business. As can be seen, majority of the RMC is bought for apartment construction. There is a significant contribution towards commercial building construction which includes buildings for institutes like TAPMI.
Critical Points & Keys to Success
India’s bureaucratic environment: - With the traditional hierarchical approach to working, the rigid Indian administration poses a number of challenges. This includes extensive procedural formalities, lack of continuity, fluctuations in taxation levels, acquisition of land for development etc. Importance of training: - Training and development activities were essential to attract the right employees. Success lay in providing focused training, development and balanced discussion to develop more improved ways of conducting their business. High quality and customer service: - A major part of RMC Readymix India has been due to the high quality and customer service it provides. This has formed one of the main differentiating factors for the company. Other than this, there are some factors that affect the market and RMC Readymix’s plant construction decisions:? ? ? the expected production demand for the plant; the expected types of projects the plant will service; and the desired location of the plant.
Marketing Environment
Marketing Environment for Consumer Behavior Analysis
The test markets selected for the survey of the product include the towns of Manipal and Udupi. The population in this area is approximately 20 lakhs with a literacy rate of 80%. This is important as with the increasing number of educated people, there is a tendency for increase in demand for quality products.
Consumer Behavior
To analyze the consumer behavior with respect to RMC, interviews were taken with the major customers (as mentioned above). This data was collected from the Udupi-Manipal region.
Some of the main findings from these interviews are as below:
Reason for choosing RMC over site mix: The contractors and builders tend to prefer RMC mainly due to the below reasons: ? ? ? ? Better quality concrete is produced Time required is greatly reduced. Elimination of storage space for basic materials at site. Reduction of costs as labor costs will be reduced
Reason they prefer RMC Readymix over the competitors: The main reasons why the customers prefer RMC Readymix were as follows: ? ? ? ? ? Assured of a high quality product Assured of timely delivery Company has a good reputation Excellent customer service Highly technical and efficient workforce
Why RMC Readymix is preferred
10% 8% 30% 7% 45% High Quality Timely Delivery Reputation Customer Service Workforce
The above pie chart shows that quality, timely delivery & customer service are major differentiating factors for RMC Readymix giving it its competitive advantage.
Marketing Plan Part 2: Marketing Strategy
Marketing Objectives
Being the case of a B2B business and the product being a commodity product, the objectives of the marketing plan are strategically centered on the following criteria: ? ? To create a strong consumer awareness towards the product. To establish a wide brand recognition through the capture of market shares by penetration and expansion into new areas.
On the Ansoff growth matrix, the strategy of RMC Readymix would fall into the quadrants of Market Penetration and Market Development as shown below.
Marketing Program
Target Market & Segmentation Strategy
SEGMENTATION VARIABLES AND BREAKDOWNS FOR RMC READYMIX INDIA MAIN DIMENSIONS Region Udupi district including Manipal as well as expansion to the north of Manipal towards Murdeshwar. Occupation General contractors, subcontractors, public works department, design engineers, architects, homebuilders, commercial and industry property developers. User status Loyalty status Non-user, regular user None, medium, strong VARIABLES BREAKDOWNS
Based on the analysis done, we believe that the company should target the segment mentioned above. This includes developers and organizations of all income levels. With regard to occupation, the target customers are professional developers and organizations like the government. This segment is similar to the ones already being targeted by the competitors. Also in addition, they should also target the end customers (who are finally getting the residence built) as they can direct the contractor to get the product if they believe in the strengths and benefits of the same. Also in addition to the existing area, we believe that the company should look to expand to the north part of the district towards Murdeshwar. This area has lots of opportunities especially in Murdeshwar where a majority of the construction is done by R. N. Shetty.
Positioning Strategy
Being a commodity product, differentiation would not be in terms of price but would rather be based on the attributes of the product. The most important attribute(s) that can be linked to RMC Readymix is seen from the survey as the quality of the product and the excellent customer service. Hence based on
this, we believe that the company should position itself on the quality front. The aim would be to position itself in the mind of the customers as a high quality product.
Strategy on the 4Ps
Product Given that this is a commodity product, no differentiation can be done by changing the physical attributes of the product. The area where RMC Readymix can focus on with regard to the product would be on creating the perceived differentiation based on its superior product quality and excellent customer service. Pricing When compared to its competitors, RMC Readymix charges a slightly higher price. But we believe this should be continued as this will help to showcase that this is a high quality product and hence a premium is being charged for the same. Distribution Channels Given that the ready mix concrete should be made available to the customer within 4 to 5 hours, the only channel that is currently being used includes the direct channel. In this case distributors cannot be used as the order needs to be placed directly at the office from where the supply would then be made. Promotion Strategy Given the commodity nature of the product, most of the promotional activities would be different than when compared to products like chips, chocolates etc. In this case, more focus should be given on creating relationships and awareness among the customers and end customers. Some strategies which we believe RMC can follow include: ? Advertisements:Being a B2B business, advertisements should be used to attract developers. But as the interest of the normal public would be less, the advertisement should also include the benefits of RMC over site mix. This will help to ensure that it gets the attention of the end customers as well. This would help in case they plan to get residences built for themselves in which case they can get the contractor to use RMC.
?
Tie ups with end customers With some of the end customers being large corporations like Manipal Press, it would be a good idea to form relationships with them. There are a number of projects lined up for these end customers and by having these relationships built, they would be able to get them to get their developers to use RMC than site mixing.
Also in case of expansion, they can form tie ups with new developers like R. N. Shetty which will help to increase their market share in the area and also allow them to get the first entrant’s advantage. ?
Seminars in engineering colleges By giving these seminars in colleges, RMC Readymix will be able to educate the students especially the civil engineering students in the benefits/advantages of RMC. This would help them in the long term.
?
End- customer education Most of the end customers do not know about RMC and its advantages and disadvantages. Given that RMC Readymix wants to penetrate more into the residence segment as well, it is important for them to educate these end customers on the benefits they can get by using RMC over the local site mixes. This can be done through advertisements/pamphlets. Also one more area where they need to focus is that given that the free area available to do site mixing is reducing with the increasing population, they should stress on the fact that this would not be required if RMC is used.
Also with a large proportion of the population being educated, they should focus on the quality aspect as people would tend to be more quality conscious. ?
On-site visits Trained personnel, technicians and managers can regularly visit potential construction areas to promote the brand and to acquire deals. Given that a large part of the market is held by RMC Readymix in this district, the aim would be to only promote the advantages of RMC over local mixes.
?
Allowances and discounts: Loyal and repeat customers can be provided discounts to ensure that they remain customers in the long term as well.
doc_980314344.docx
Marketing report on RMC ready mix. The Document comprehensively covers the complete marketing plan for a manufacturing industry.
Marketing Plan for RMC Readymix India
Table of Contents
PART A – Market and Consumer Profile
1. Executive Summary 2. Company Introduction 3. Situation Analysis a. Products offered by RMC Readymix India b. Industry Analysis c. SWOT Analysis d. Competitive Forces e. Porter’s Force Field Analysis f. Customer Analysis g. Critical Points & Keys to Success 4. Marketing Environment for consumer behavior analysis
PART B – Marketing Strategy
1. 2. 3. 4. 5. 6. Mission Marketing Objective Financial Objective Segmentation and Targeting Positioning Marketing Mix
PART C – Financials and Forecasts
1. Sales and Expense forecast 2. Breakeven Analysis
Executive Summary
Ready-mix concrete (RMC) is a type of concrete that is manufactured in a factory or batching plant, according to a set recipe, and then delivered to a worksite, by truck mounted transit mixers. This results in a precise mixture, allowing specialty concrete mixtures to be developed and implemented on construction sites. The first ready-mix factory was built in the 1930s, but the industry did not begin to expand significantly until the 1960s, and it has continued to grow since then. Ready Mixed Concrete, or RMC as it is popularly called, refers to concrete that is specifically manufactured for delivery to the customer's construction site in a freshly mixed and plastic or unhardened state. RMC Readymix (India) Limited is a joint venture company between the RMC Group p.l.c. of UK and Hatchways Investment Limited - a Rajan Raheja Group enterprise. The company aims to promote the concept and develop the use of ready mixed concrete all over India by setting up strategically located batching plants, built to the highest international standards. This plan aims to provide insights into how the company can use the available market opportunities to expand into the ready mix concrete market with specific reference to the Udupi district.
Basic Company Information
RMC Readymix (India) Limited is a joint venture company between the RMC Group p.l.c. of UK and Hathway Investment Limited - a Rajan Raheja Group enterprise. RMC Group p.l.c. is an international company operating in 30 countries. By annual turnover, the Group is the world’s 4th largest heavy building materials company, focused principally on aggregates - sand, gravel, rock - ready mixed concrete and cement. The company was established with its Headquarter in Mumbai. The company aims to promote the concept and develop the use of ready mixed concrete all over India by setting up strategically located batching plants, built to the highest international standards. Operations of RMC Readymix (India) Limited began in India by setting up three state-of-the-art batching plants at Taloja & Mahape in Navi Mumbai and Bandra, Mumbai. Ready mixed concrete is a new idea for the construction industry in India. RMC Readymix (India) Limited is the vehicle, which brings to doorsteps, ready mixed concrete produced to the highest international quality standards. A venture of Hathway Investments Pvt. Ltd., RMC Readymix (India) Pvt. Limited began commercial production in 1996. Under the guidance of RMC UK, the world's largest producer of ready mixed concrete, RMC India broke new ground when it set up India's first Ready Mixed Concrete plant using the world's best machinery, quality assurance & quality control systems. As well as fully qualified engineers instead of semi-skilled staff as was the practice prevalent in the industry at that time. RMC made a conscious decision from the outset to introduce the best available international technology when entering the Indian market. While it may have been easier to opt for a low-cost, low-tech solution,
all plants were imported from Europe at a considerable cost, (largely due to prevailing import tariffs) to ensure a high standard of technological hardware. A major reason for this was the company’s goal to establish a quality differentiation in this potentially huge market. In addition, this approach, adopted in part by several competitors, has the effect of increasing barriers to entry, thus encouraging only the more serious players with a long-term commitment to this embryo sector.
The 10 years that RMC has spent in the manufacture and marketing of Ready Mixed Concrete, have helped reinforce and sharpen certain traits that the Company has become known and respected for such as setting benchmarks in Best Practices, Quality Assurance and Customer Service or driving up standards in Health, Safety and Environmental Protection, plus a high degree of integrity, transparency and courtesy. It has been only 2 years since they have started operating in the Udupi district. They provide ready mix concrete, sand and gravel products to a variety of customers, including but not limited to, contractors, subcontractors, individuals and owners of both private and public construction projects. The business strategy that is followed has the below primary objectives: ? ? ? Closely monitor the demand and evaluate the cost-effectiveness and timing of their operating hours; Manage our fixed asset base to minimize ongoing fixed costs while maintaining sufficient capacity to meet the demands of our customers and remain adequately prepared Seek to obtain cost savings through minimizing overtime, seeking optimum pricing of raw materials purchased from third parties, renegotiating minimum royalty levels at certain leased properties, maintaining staff count at appropriate levels, eliminating or reducing costs in numerous areas of our operations; Improve our competitiveness in certain market segments — particularly the public infrastructure segment; Increase market intelligence and awareness to be sensitive to potential opportunities that may result from the strengths or weaknesses of competitors in our market, including attractive divestiture or acquisition opportunities
? ?
Marketing Plan Part 1: Market and Consumer Profile
Situation Analysis
Product
RMC’s provides ready mix concrete to its customers based on their requirements. RMC is preferred to on-site concrete mixing because of the precision of the mixture and reduced worksite confusion. It facilitates speedy construction through programmed delivery at site and mechanized operation with consequent economy. It also decreases labour, site supervising cost and project time, resulting in savings. Proper control and economy in use of raw material results in saving of natural resources. It assures consistent quality through accurate computerized control of aggregates and water as per mix designs. It minimizes cement wastage due to bulk handling and there is no dust problem and therefore, pollution-free. However there are some disadvantages of RMC too, like double handling, which results in additional cost and losses in weight, requirement of godowns for storage of cement and large area at site for storage of raw materials. Aggregates get mixed and impurities creep in because of wind, weather and mishandling at site. Improper mixing at site, as there is ineffective control and intangible cost associated with unorganized preparation at site are other drawbacks of RMC. There are always possibilities of manipulation; manual error and mischief as concreting are done at the mercy of gangs, who manipulate the concrete mixes and water cement ratio.
Raw Material Expenses
10% 10% 75% 3% 2% Cement Sand Aggregates Chemicals Water
From the raw material perspective, cement is the most expensive and important raw material used in the production of ready mix concrete. So to ensure that there is no blockages in production, RMC
Readymix purchases cement from multiple suppliers and this helps them to build strong relationships. Below chart shows the breakup of expenses for every Rs 100 spent on RMC. If we look at the position of the product on the BCG matrix, we find that in the Mangalore region, it is positioned as a Cash Cow whereas in the Udupi district where the company has just entered, it is positioned as a Star. Also given that there is very little competition currently in the Udupi/Manipal market, there is a huge potential for the company to turn this Star into a Cash Cow if the right strategy is followed.
Udupi District
Mangalore
Also this is evident from the below graph which shows the trend in sales of RMC by RMC Readymix Indian in the Udupi district (which includes the forecasted sales)
Sales
120000 100000 80000 60000 40000 20000 0 2007-08 2008-09 2009-10 2010-11 75000 62000 90000 Sales 104000
Industry Analysis
Ready mix concrete industry in India is still in its infancy but it is an emerging sector. The first ready-mix factory, which was built in the 1930s, remained in a standstill position till 1960s, but continued to grow since then. The leading ready-mix concrete supplier worldwide is the Mexican concrete and cement company Cemex, and their main competitor is France-based Lafarge. The Ready mix concrete business in India is in its infancy. Where as in developed countries, nearly 70 per cent of cement consumption is in the form of ready mix concrete and 25 per cent in the form of recast, in India, ready mix concrete accounts for less than 5 per cent and as much as 82 per cent of cement consumption is in the form of site-mixed concrete. While 70% of cement produced in a developed country like Japan is used by Ready Mix concrete business there, here in India, Ready Mix concrete business uses around 2% of the total cement production. There are several reasons for this. In early 70s both pricing and distribution of cement was controlled due to shortage of supply. Ready mix concrete technology could not be implemented as investors felt that Ready mix concrete plant will starve due to non-availability of cement. The levy of additional taxes & duties on RMC, entry tax, excise duty also contributed to the slow development of the concept. The growth of RMC is predominantly driven by demand from the metro cities. In cities like Mumbai, the mandatory use of RMC is in construction of flyovers provided the requisite impetus to growth, according to an ICRA analysis. RMC is particularly useful when the building activity is located in congested sites where little space is available for siting the mixer and for stock piling of aggregates. The use of RMC is also advantageous when only small quantities of concrete are required or when concrete is to be placed only at intervals. Even as the concept of ready-mix concrete (RMC) is still catching up in the country, cement majors are keenly focusing on entering the new area in a big way. Anticipating huge potential for the product, cement majors, including Associated Cement Companies, Grasim, L&T, India Cements, Priyadarshini Cements, Chettinad Cement and Madras Cements, are foraying into the RMC business and the share of RMC is expected to go up from present levels of around 5 per cent of the total cement production to the global average of 70%. The teething troubles has been overcome by the RMC Industry and at present there are over 37 RMC plants delivering over one lakh cubic meters of mixed concrete every month. RMC plants are working in Delhi area also. Envisaging higher demand, the 16.4-million tonne cement major; ACC is planning to beef up its existing RMC infrastructure of 11 units with two new RMC units - one at Noida and the other in Mumbai, during the current year. During the last fiscal, Madras Cements set up two RMC plants near Chennai, with a capacity of approximately 9 lakh cubic meters, while Chettinad Cements installed an RMC facility near Coimbatore. For growth of the industry, government bodies, private builders, architects/engineers, contractors, and individuals required to be made fully aware about the advantages of using ready mix concrete, government bodies/consultants needs to include ready mix concrete as mandatory in their specification for execution, government specifications for CPWD and PWD jobs should include Ready mix concrete as
a mandatory item. Apart from this, tax breaks are required for the growth of RMC and developers/contractors needs to be discouraged from piling up materials like metal, sand etc. on roads/foot paths.
SWOT Analysis of RMC Readymix Ltd
Strengths ? ? High Quality RMC Unique flexibility of providing tailor made concrete suited for different applications. On time and prompt delivery Goodwill of the company Highly trained and qualified employees Excellent Customer service Opportunities Tie ups with possible customers can be done. Expanding into newer areas. With decrease in free land, local site mixing is becoming difficult giving an opportunity for the growth of RMC ? Weaknesses Lack of promotions as there are limited competitors in Manipal. Due to this they are not taking the opportunity of acquiring new business.
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Threats ? ? Threat from local contractors who at times prefer local site mixing for concrete. Threat from laborers who try to object use of RMC
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Competitive Forces
In India, market share of RMC is abysmally low when compared to developed nations. Initially, ready mix concrete was used only in metro cities. However, in the last few years it has spread to second- and thirdlevel cities. Slowly, the concept is catching up and people are realizing the advantages of using ready mix concrete. The major players who operate in the RMC business include RMC Readymix India, L&T, UltraTech, ACC etc. The industry on the whole is highly competitive. The ability to compete in the market depends largely on the below factors:? ? ? proximity of the customers’ job sites to the ready mix concrete plant locations, the plant operating costs and the prevailing ready mix concrete prices in each market
Price is the primary competitive factor among suppliers for small or simple jobs, principally in residential construction, while timeliness of delivery and consistency of quality and service as well as price are the principal competitive factors among suppliers for large or complex jobs. Our competitors range from small, owner-operated private companies to subsidiaries or operating units of large, vertically integrated cement manufacturing and concrete products companies. The main competitors in the Mangalore region include L&T, UltraTech and a local company called Loney. The below chart shows the market share of RMC Readymix in the Mangalore region. As it can be seen clearly, it is the leader in terms of market share.
Market Share in Mangalore
8% 25% 4% 2% RMC Readymix India UltraTech 61% L&T Loney
While in Udupi district, RMC Readymix is the only branded player and hence occupies almost 98% of the market. The other 2% is held by the local contractors who prefer local site mix over RMC. One of the local contractors is CCCL builders. Local site mixing is a major competitor especially for local contractors as it helps them to save money. Also laborers tend to be against use of RMC as otherwise it would lead to a loss of income for them.
Porter’s Force Field Analysis
Industry competition The RMC and cement industry is one of the most competitive industries in the country with many different players fighting for the same pie. High growth prospects make it attractive for new players to enter in the industry. Another major factor that adds to the industry rivalry is the fact that the entry barriers to this industry are very low. Many smaller players that are focused on a particular region have a better hang of the distribution channel, making it easier to succeed, albeit in a limited way.
Bargaining power of buyers When we look at the buyer's power, we look at the influence they have on the prices of the product. In this industry, the buyers are developers and contractors and they as such do not wield much power in the pricing of the products. However, government with its policies plays an important role in regulating pricing. Bargaining power of suppliers The RMC industry depends upon several raw materials like cement, sand, aggregates and chemicals. The cement and chemical industry are again very competitive and fragmented. The chemicals used in the the industry are largely a commodity. The suppliers have very low bargaining power and the companies in the RMC industry can switch from their suppliers without incurring a very high cost. Threat of substitutes Till quite recently, local site mixing was preferred as it was cheaper and at the same time provided employment. However, in recent times, the advances made in the field of technology, can prove to be a threat to the local concrete mixing industry as now the ready mix concrete is much better in terms of quality. This has lead to an increase in the usage of RMC even though at present, the only close substitute it has the local site mixed concrete. Barriers to entry The RMC industry is one of the not as easily accessible as some other industries for an entrepreneur in India. The capital requirement for the industry is comparatively high. However, creating brand awareness is the key for long-term survival. Also, quality regulations by the government may put some hindrance for establishing new manufacturing operations.
Business practices
Manufacturing
? Due to the number of competitors, it will ? The marketing campaign to make this be hard to make customers switch. ? Given the wide array of brands it becomes a challenge for RMC Readymix India to stand out brand popular requires more promotional expenditures than its current expenditure. ? Close proximity to raw materials required.
Customer Analysis
RMC Readymix mainly targets concrete subcontractors, prime contractors, home builders, commercial & industrial developers. Also there is a heavy dependence on repeat customers. Management and dedicated sales personnel at each location have been responsible for developing and maintaining successful long term relationships. The main customers of RMC Readymix in the Udupi district are as below: ? ? ? ? ? ? ? Saipradha Developers Ballal Constructions Premier Builders Shamthan Builders Swaroopa Engineers Udaya Shetty Projects Vineet Amin
These customers contribute to a majority of the sales and almost in equal amounts. Also the RMC bought is used for different purposes i.e. for construction of apartments, residencies, commercial buildings, institutions, public works etc. Below is a pie chart which shows the distribution.
apartments, 60% Other, 25%
Commercial Buildings, 20% Public Works, 5%
Residencies, 15%
The residential sector of the construction market has historically been a key contributor to the business. As can be seen, majority of the RMC is bought for apartment construction. There is a significant contribution towards commercial building construction which includes buildings for institutes like TAPMI.
Critical Points & Keys to Success
India’s bureaucratic environment: - With the traditional hierarchical approach to working, the rigid Indian administration poses a number of challenges. This includes extensive procedural formalities, lack of continuity, fluctuations in taxation levels, acquisition of land for development etc. Importance of training: - Training and development activities were essential to attract the right employees. Success lay in providing focused training, development and balanced discussion to develop more improved ways of conducting their business. High quality and customer service: - A major part of RMC Readymix India has been due to the high quality and customer service it provides. This has formed one of the main differentiating factors for the company. Other than this, there are some factors that affect the market and RMC Readymix’s plant construction decisions:? ? ? the expected production demand for the plant; the expected types of projects the plant will service; and the desired location of the plant.
Marketing Environment
Marketing Environment for Consumer Behavior Analysis
The test markets selected for the survey of the product include the towns of Manipal and Udupi. The population in this area is approximately 20 lakhs with a literacy rate of 80%. This is important as with the increasing number of educated people, there is a tendency for increase in demand for quality products.
Consumer Behavior
To analyze the consumer behavior with respect to RMC, interviews were taken with the major customers (as mentioned above). This data was collected from the Udupi-Manipal region.
Some of the main findings from these interviews are as below:
Reason for choosing RMC over site mix: The contractors and builders tend to prefer RMC mainly due to the below reasons: ? ? ? ? Better quality concrete is produced Time required is greatly reduced. Elimination of storage space for basic materials at site. Reduction of costs as labor costs will be reduced
Reason they prefer RMC Readymix over the competitors: The main reasons why the customers prefer RMC Readymix were as follows: ? ? ? ? ? Assured of a high quality product Assured of timely delivery Company has a good reputation Excellent customer service Highly technical and efficient workforce
Why RMC Readymix is preferred
10% 8% 30% 7% 45% High Quality Timely Delivery Reputation Customer Service Workforce
The above pie chart shows that quality, timely delivery & customer service are major differentiating factors for RMC Readymix giving it its competitive advantage.
Marketing Plan Part 2: Marketing Strategy
Marketing Objectives
Being the case of a B2B business and the product being a commodity product, the objectives of the marketing plan are strategically centered on the following criteria: ? ? To create a strong consumer awareness towards the product. To establish a wide brand recognition through the capture of market shares by penetration and expansion into new areas.
On the Ansoff growth matrix, the strategy of RMC Readymix would fall into the quadrants of Market Penetration and Market Development as shown below.
Marketing Program
Target Market & Segmentation Strategy
SEGMENTATION VARIABLES AND BREAKDOWNS FOR RMC READYMIX INDIA MAIN DIMENSIONS Region Udupi district including Manipal as well as expansion to the north of Manipal towards Murdeshwar. Occupation General contractors, subcontractors, public works department, design engineers, architects, homebuilders, commercial and industry property developers. User status Loyalty status Non-user, regular user None, medium, strong VARIABLES BREAKDOWNS
Based on the analysis done, we believe that the company should target the segment mentioned above. This includes developers and organizations of all income levels. With regard to occupation, the target customers are professional developers and organizations like the government. This segment is similar to the ones already being targeted by the competitors. Also in addition, they should also target the end customers (who are finally getting the residence built) as they can direct the contractor to get the product if they believe in the strengths and benefits of the same. Also in addition to the existing area, we believe that the company should look to expand to the north part of the district towards Murdeshwar. This area has lots of opportunities especially in Murdeshwar where a majority of the construction is done by R. N. Shetty.
Positioning Strategy
Being a commodity product, differentiation would not be in terms of price but would rather be based on the attributes of the product. The most important attribute(s) that can be linked to RMC Readymix is seen from the survey as the quality of the product and the excellent customer service. Hence based on
this, we believe that the company should position itself on the quality front. The aim would be to position itself in the mind of the customers as a high quality product.
Strategy on the 4Ps
Product Given that this is a commodity product, no differentiation can be done by changing the physical attributes of the product. The area where RMC Readymix can focus on with regard to the product would be on creating the perceived differentiation based on its superior product quality and excellent customer service. Pricing When compared to its competitors, RMC Readymix charges a slightly higher price. But we believe this should be continued as this will help to showcase that this is a high quality product and hence a premium is being charged for the same. Distribution Channels Given that the ready mix concrete should be made available to the customer within 4 to 5 hours, the only channel that is currently being used includes the direct channel. In this case distributors cannot be used as the order needs to be placed directly at the office from where the supply would then be made. Promotion Strategy Given the commodity nature of the product, most of the promotional activities would be different than when compared to products like chips, chocolates etc. In this case, more focus should be given on creating relationships and awareness among the customers and end customers. Some strategies which we believe RMC can follow include: ? Advertisements:Being a B2B business, advertisements should be used to attract developers. But as the interest of the normal public would be less, the advertisement should also include the benefits of RMC over site mix. This will help to ensure that it gets the attention of the end customers as well. This would help in case they plan to get residences built for themselves in which case they can get the contractor to use RMC.
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Tie ups with end customers With some of the end customers being large corporations like Manipal Press, it would be a good idea to form relationships with them. There are a number of projects lined up for these end customers and by having these relationships built, they would be able to get them to get their developers to use RMC than site mixing.
Also in case of expansion, they can form tie ups with new developers like R. N. Shetty which will help to increase their market share in the area and also allow them to get the first entrant’s advantage. ?
Seminars in engineering colleges By giving these seminars in colleges, RMC Readymix will be able to educate the students especially the civil engineering students in the benefits/advantages of RMC. This would help them in the long term.
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End- customer education Most of the end customers do not know about RMC and its advantages and disadvantages. Given that RMC Readymix wants to penetrate more into the residence segment as well, it is important for them to educate these end customers on the benefits they can get by using RMC over the local site mixes. This can be done through advertisements/pamphlets. Also one more area where they need to focus is that given that the free area available to do site mixing is reducing with the increasing population, they should stress on the fact that this would not be required if RMC is used.
Also with a large proportion of the population being educated, they should focus on the quality aspect as people would tend to be more quality conscious. ?
On-site visits Trained personnel, technicians and managers can regularly visit potential construction areas to promote the brand and to acquire deals. Given that a large part of the market is held by RMC Readymix in this district, the aim would be to only promote the advantages of RMC over local mixes.
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Allowances and discounts: Loyal and repeat customers can be provided discounts to ensure that they remain customers in the long term as well.
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