1. Strategies in Mature Industries, High-Growth-Phase Industries, Declining Industries, Fragmented Industries Shailaja Menon Roll No. 24 Gautam PrabhukeluskarRoll No. 58 Komila Harry Roll No. 10 Anish Patel Roll No. 34 Aparna Kanchugar Roll No. 14 Vinay Shriyan Roll No. 61 NMIMS, PTMBA, III Year, MTKG. DIVN.–‘A’ Group No. 10

2. Strategies in Mature Industries References : Essentials of Strategic Management by Hill & Jones http://books.google.co.in/books?id=Sy8vejqbcocC&pg=PA123&lpg=PA123&dq=Strategies+in+Mature+industries&source=bl&ots=lHJ4Yc4tMU&sig=fvqrCBxblG2wG3Gj0r6a- a_Q2as&hl=en&ei=sgTZTO3gI8rJcfiHwfAH&sa=X&oi=book_result&ct=result&resnum=9&ved=0CDsQ6AEwCA#v=onepage&q=Strategies%20in%20Mature%20industries&f=true ITC Annual Reports and http://economictimes.indiatimes.com/itc-ltd/directorsreport/companyid-13554.cms

3. Strategies in Mature Industries Mature As a result of fierce competition and shakeout stages, an industry Industrybecomes consolidated, so a mature industry is dominated by small no. of large players. Although a mature industry may also contain many medium-sized companies and a host of small specialized ones, the large cos. determine the nature of the industry’s competition because they can influence the 5 competitive forces. By the time the firms reach the mature stage of the industry life-cycle, companies have learnt just how interdependent their strategies are. (Companies continually analyze each others business level strategies. The way one company changes or fine tunes its business level strategy over time affects the way the other companies in the industry pursue theirs.) Main challenge facing companies in mature industry – Adopt competitive strategy that simultaneously allows each individual company to protect its competitive advantage and preserve industry profits. (Competitive strategy revolves around understanding how large companies try collectively to reduce the strength of the 5 forces of the Industry competition) Competitive moves & tactics to reduce the threat of each competitive force

4. Strategies at work – Strategies to deter entry in Mature Industry PRODUCT PROLIFERATION PRICE CUTTING MAINTAINING EXCESS CAPACITY Strategies to manage rivalry in Mature Industry PRICE SIGNALING PRICE LEADERSHIP NON-PRICE STRATEGIES Strategies in Mature Industries

5. Strategies to deter entry in mature industry PRODUCT PROLIFERATION Broad Product Line aimed at different market segments (Soaps & Detergents) PRICE CUTTING Incumbents signal to potential entrants that if they enter the industry, the incumbents will use their competitive advantage to drive down prices to a level that the new companies will be unable to recover costs. MAINTAINING EXCESS CAPACITY Producing more of a product than customers currently demand. It serves to warn potential entrants, that if they do enter the industry, the existing firms will retaliate by increasing output and forcing down prices, so entry would be unprofitable Strategies in Mature Industries

6. Strategies to manage rivalry in mature industry PRICE SIGNALING Process by which companies increase or decrease product prices to convey their competitive intentions to other companies. (Give one another information that enables them to understand each other’s competitive product / market strategy and make co-ordinated competitive moves to protect industry profitablility.) Tit-for-Tat Strategy- A form of market signaling in which one company starts to cut prices aggressively and other competitors respond in a similar way. When this occurs nobody wins & everybody loses Strategies in Mature Industries

7. Strategies to manage rivalry in mature industry PRICE LEADERSHIP Process by which one company informally takes the responsibility for setting industry prices. (A tactic used to enhance the profitability of companies in a mature industry.) The price set by the weakest company – the one with the highest cost – is often used as the basis for competitors pricing. (Although price leadership can stabilize industry relationships and prevent head-to-head competition and thus raise the level of profitability in the industry, it carries the risk of fostering complacency. Companies may keep extracting profits without reinvesting to improve their productivity. In the long term such behaviour makes them vulnerable to companies that continually develop new production techniques to lower costs.) Strategies in Mature Industries

8. Strategies to manage rivalry in mature industry NON – PRICE STRATEGIES Market Penetration – Companies engage in intensive advertising and battle for market share. Every company feels that by not advertising it will lose market share to rivals. Huge advertising outlays constitute a deterent / barrier to entry for potential entrants. Product Development – Product replacement to create successive waves of consumer demand, which then create new sources of revenue for companies in the industry. Refining and improving products is an important competitive tactic. Gillette introducing Mach 2, Mach 3, Sensor etc. Cellphone makers / Car makers introducing new models Market Development – search for new market segments, and therefore new uses for the company’s products (Dove – not a soap, with 25% moisturizing cream it is a beauty bar) Product Proliferation - Broad Product Line aimed at different market segments Strategies in Mature Industries

9. Tobacco (Cigarette) Industry in India In India only about 15% of tobacco is consumed in cigarette form (remaining consumption is through other forms of tobacco products like bidi, and chewing tobacco) Taxation and regulations targeted almost exclusively at the cigarette industry Punitive and discriminatory approach has resulted in the share of cigarettes in total tobacco consumption in India progressively declining from 23% in 1971/72 to about 15% currently Tobacco Consumption (Million kg) Forms of Tobacco Consumption Year Cigarettes Non-Cigarette Total 1981/82 86 320 406 2008/09e 74 421 495 Difference (–) 14% (+) 32% (+) 22% Source : USDA; Tobacco Institute of India Despite having only a 15% share of consumption, cigarettes contribute more than 85% of the tax revenues from the tobacco sector. Taxes realized from every kilogram of tobacco consumed in the cigarette format are 35 times higher than those from other forms of tobacco products. Strategies in Mature Industries

10. Tobacco (Cigarette) Industry in India Union Budget 2007 - excise duty rates went up in excess of 6% and cigarettes were brought under the ambit of Value Added Tax (VAT) at a rate of 12.5% on invoice price with effect from 1st April 2007, resulting in a total tax equivalent of a 30% increase in excise duties. (Other tobacco products were either exempted from VAT or taxed at lower rates.) Union Budget 2008 - an unprecedented increase in excise duty of the order of 140% and 390% respectively on regular and micro-sized non-filter cigarettes. (forced the organized cigarette industry to substantially vacate this category.) 2009-10 - several States departing from the consensus VAT rate of 12.5%, incidence of State & other Local taxes varied from 12.5% in some parts of India to 25% in others. 2009 - 10 - graphic statutory warnings on retail packages of tobacco and tobacco products were introduced and further restrictions on sale of tobacco products were notified. Such regulations & others like the ban on smoking in public places together with the high incidence of tax on cigarettes encourage consumers to shift to cheaper and lightly taxed tobacco products. Consequently, whilst consumption of tobacco in the cigarette form is on the decline, the overall consumption of tobacco in the country continues to rise. Strategies in Mature Industries

11. Strategic Role of an SBU in a mature industry – Cash Cow of BCG Matrix ITC LIMITED – ITC dominates India’s cigarette mkt. - 84% share about 3/4 th market share MINT, Mon, Jun 8 ‘09 Economic Times 9 Apr, ‘10 Rapidly scaled up presence in its newer FMCG businesses over past few years (Branded Packaged Foods, Lifestyle Retailing, Education and Stationery products, Personal Care products, Safety Matches and Incense Sticks (Agarbatti) with Segment Revenues growing at an impressive CAGR of 38% during the last 5 years. Established several strong consumer brands including ‘Sunfeast’ and Aashirvaad’ Foray into Personal Care products (soaps and shampoos) Mandate to increase the percentage revenues contribution of FMCG non-cigarettes towards the FMCG segment Gross Income has increased from ~ Rs. 5,000 cr. in 1996 to > Rs. 26,000 cr in 2010. Profit After Tax has increased from ~ Rs. 261 cr. in 1996 to Rs. 4,061 cr. in 2010 Strategies in Mature Industries

12. Strategic Role of an SBU in a mature industry – Cash Cow of BCG Matrix ITC LIMITED – External Sales figures only (Excluding inter segment sales) Segment Revenue 2010 2009 2008 2007 ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- FMCG - Cigarette 17283.03 15115.0713825.6012833.70 FMCG - Others 3638.73 3010.00 2508.25 1686.52 FMCG - Total 20921.76 18125.0716333.8514520.22 Hotels 904.92 1014.56 1093.48 978.71 Agri Business 2388.18 2284.44 2503.03 2529.49 Paperboards, Paper and Packaging 2044.74 1719.46 1425.58 1271.62 Segment Total 26259.60 23143.5321355.94 19300.04 Strategies in Mature Industries

13. Strategic Role of an SBU in a mature industry – Cash Cow of BCG Matrix ITC LIMITED – Segment-wise Results Segment Results 2010 2009 2008 2007 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ FMCG - Cigarette 4938.12 4183.77 3634.04 3172.15 FMCG - Others (349.51) (483.45) (263.52) (201.99) FMCG - Total 4588.61 3700.32 3370.52 2970.16 Hotels 216.64 316.18 410.77 350.78 Agri Business 436.36 256.18 129.19 123.55 Paperboards, Paper and Packaging 684.26 508.63 453.14 416.78 Segment Total 5925.87 4781.31 4363.62 3861.27 Strategies in Mature Industries

14. Strategic Role of an SBU in a mature industry – Cash Cow of BCG Matrix ITC LIMITED – Boston Consulting Group ranks ITC as the world’s 6th largest sustainable value creator in the consumer goods industry – Sept 2010 According to the BCG report, ‘The very best performers...find ways to “thread the needle”, that is to combine increased cash payouts with above average profitable growth in what is a much tougher and more competitive economic environment.’ The report added, ‘What is most striking about our list is the way these top performers combine significant revenue growth with high free-cash-flow yield.’ Strategies in Mature Industries

15. Strategies in High-Growth-Phase Industries References : Mergers, Acquisitions, and Other Restructuring Activities: An Integrated... By Donald M. DePamphilis http://books.google.co.in/books?id=yf_dqMSTj_MC&pg=PA145&lpg=PA145&dq=Strategies+for+high+growth+phase+industries&source=bl&ots=PBAyJkLURP&sig=hcLk9ZiNNMpR9MK- jJsVEINX6T8&hl=en&ei=vcvcTJGgOImxcYXmyewL&sa=X&oi=book_result&ct=result&resnum=2&ved=0CB8Q6AEwAQ#v=onepage&q&f=true Strategy Planning for High Growth Firms – A Complexity-Theoretic Framework - By Christian Hillbrand Liechtenstein University of Applied Sciences Wireless Wonder: India's Sunil Mittal by By Clay Chandler, Fortune senior writer January 17 2007 http://money.cnn.com/magazines/fortune/fortune_archive/2007/01/22/8397979/index.htm At the Crossroads – Article by N. Madhavan in Oct.31 st 2010 Issue of BusinessToday (Vol. 19, No. 22)

16. 3 Generic Strategies Strategies in High-Growth-Phase Industries During the high growth phase, firms in the industry normally have high investment requirements associated with capacity expansion and increasing working capital needs. Strategies which can be employed - Product Differentiation – can be accomplished through brand image, technology features or alternative dist. Channels Focus or Niche Strategy – concentrating efforts by selling a few products to a single market and compete primarily on the basis of understanding their customers’ needs better than the competition does. Overall Cost Leadership – Supply cost, experience, product or process design or Economies of scale

17. Strategy Implementation Strategies in High-Growth-Phase Industries Selecting the appropriate implementation strategy Once a firm has decided the appropriate generic business strategy, attention must turn to deciding the best means to implementing the desired strategy. Implementation involves selecting the right option from the range of reasonable options. In theory, this decision is based on the discounting of the projected cash-flow stream to the firm from each of the options.

18. Strategy Implementation Strategies in High-Growth-Phase Industries BASIC OPTIONADVANTAGESDISADVANTAGES ----------------------------------------------------------------------------------------------------------------------------------------------- SOLO VENTURE / BUILDControlCapital & Expense requirement (Organic Growth)Limited speed PARTNERLimits Capital & Expense Lack of or limited control (shared growth,investments requirementsPotential for diverging objectives shared control) Mktg. & Dist. Alliance J.V. / License / Franchise INVESTLimits Initial Capital & ExpenseRisk of failure (Trade / MinorityrequirementsLack of control investments in other firms) ACQUIRE / MERGESpeedPotential Earnings dilution Control

19. Bharti + The High Growth Phase of Mobile telephony in India Strategies in High-Growth-Phase Industries Opportunities and Challenges Mobile telephony set to snowball in 2003 – Subscribers doubling every year With 20% share, Bharti held a slender lead in a crowded field that included rivals backed by deep-pocket Indian conglomerates such as Reliance Bharti would have to ramp up from 3 million subscribers to > 25 million within a few years, to emerge as a leader “We'd need to hire 10,000 people, maybe 20,000, within two years. Did we have the resources to do that? Were we the best company to attract that kind of talent? The answer, clearly, was no.“ Sunil Mittal Mittal doubted his ability to build out a network fast enough to keep pace with all that growth.

20. Strategies in High-Growth-Phase Industries Bharti Outsourcing Model In 2004 Mittal signed contracts worth $400 million to hand over operation of Bharti's entire phone network to Ericsson, Siemens & Nokia. The deal meant Bharti no longer has to worry about buying & maintaining equipment. Instead it paid the European vendors a fee determined by customer traffic and the quality of service the firms provide. Also in 2004, Mittal signed a 10-year, $750 million contract with IBM, farming out the bulk of Bharti's I.T services, including billing, management of customer accounts. The IBM contract was a revenue-sharing arrangement, but the objective was the same as the deal with the European equipment vendors: freeing Bharti to do what it does best - marketing, devising new services for its customers, and searching for new business opportunities. In 2007 Bharti’s wireless subscription shot past the 30 million mark Mittal figured he never owned the network in the first place. "If something goes wrong with my switch, there's no way anyone from Bharti can do anything about it. An Ericsson guy is going to have to come and fix it. I don't manufacture it; I can't maintain or upgrade it. So I'm thinking, 'This doesn't really belong to me. Let's just throw it out.'" Bharti + The High Growth Phase of Mobile-phone telephony in India

21. Strategies in High-Growth-Phase Industries Bharti moves its business model to Africa Bharti is beginning to move out its famed outsourcing model to Africa. I.B.M. will supply the computing technology and services for an upgraded cellphone network across 16 nations in sub-Saharan Africa. Under the 10-year agreement, I.B.M. will handle customer service for Bharti and provide the hardware, software and services to run everything from billing and call-traffic management to delivering new services like music and video. The deal takes the broad partnership between Bharti and I.B.M., begun in 2004, beyond India. Bharti + The High Growth Phase of Mobile telephony beyond India

22. Strategies in High-Growth-Phase Industries Sept 2010 – TVS motors forced to produce 10000 fewer bikes (5% of capacity) (Shortfall could have been greater if it would not have periodically airlifted components from abroad) Most major automakers hamstrung by inability of vendors to meet component requirements (Record Sales registered in the months of Aug. Sep. Oct. of 2010, cars & 2 wheelers) Auto majors left with no option but to resort to import – - Imports increased 58% from $ 5.2 billion (2007 – 08) to $ 8.2 billion (2009 – 10) - “Today imports account for ~30% of industry demand” ( President ACMA - Automotive Components Mfr.s Assn. ) Auto Component Makers / Auto Ancillary Industries

23. Strategies in High-Growth-Phase Industries Reason for Mismatch between demand and supply of Auto-components – Indian Auto-component industry’s reaction to the global financial crisis of 2008 - Atmosphere of Gloom and Doom - Volume demand shrunk by almost 50% overnight - Industry reaction –Laying of people Cutting back production Expansion plans put on hold (industry was running out of cash) (investment in new capacity grew by 1% instead of 33% in previous year) Caught completely off-guard by quick turnaround in fortunes of the automobile sector, on the back of government’s fiscal stimulus package ( Stimulus sent a clear signal that the state would not allow the economy to collapse and this shored up the consumer confidence driving up sales of cars and two-wheelers.To meet this surge in demand – car makers from across the world rushed to set up new capacity or ramp up existing capacity. Prodn. Capacity risen by 2 million in last 2 years). Finally when it began to shift gears -Tier II and Tier III players in the forging, casting and fabrication industry who had laid-off skilled and semi-skilled labour, found it difficult to get them back. - Bigger players – skeptical about stimulus led demand, wanted to wait before making fresh investments (yet in cash conservation mode)

24. Auto Component Makers / Auto Ancillary Industries Strategies in High-Growth-Phase Industries Estimates for High-Growth According to an ACMA-E&Y study Domestic demand expected to jump from $ 30 billion (2009) to $ 119 billion (2020) Exports expected to jump from $ 3.8 billion (2009) to $ 29 billion (2020) 1.2 million people to be added to workforce Share in India’s GDP 2.1% to 3.6%

25. Auto Component Makers / Auto Ancillary Industries Strategies in High-Growth-Phase Industries To tap this demand, domestic industry Needs to scale up significantly Should attract talent in a big way Enhance product development capabilities Tier II and Tier III players must either grow or consolidate rapidly

26. Auto Component Makers / Auto Ancillary Industries Strategies in High-Growth-Phase Industries To tap this demand, domestic industry Needs to scale up significantly ( Took 60 years to reach a capacity of 2 million cars. Next 10 years estimated to produce 9 million cars) “To invest atleast $3billion every year for next 10 years” Bharat Forge “Invest in the next 5 yrs what we have invested in last 50 years” Bharat Forge Challenge – margins are wafer thin Auto-majors compensate only for increase in cost of raw-material Industry left with very little surplus Should attract talent in a big way If India has to become a true global car mfg. hub, engineering skills would have to be dramatically ramped up. Many millions of young engineers prefer IT over the shop floor

27. Auto Component Makers / Auto Ancillary Industries Strategies in High-Growth-Phase Industries To tap this demand, domestic industry Should Enhance product development capabilities Delphi (once a part of GM), made the instrument cluster for Tata’s Nano 30% cheaper than competing products – (looking to leverage this advantage with other manufacturers as well) Tier II and Tier III players must either grow or consolidate rapidly Global giants like Bosch, Continental and Delphi are building, buying capacity & eyeing local firms to tap India as a market and a low-cost mfg. destination Wake up call for 500 odd domestic part makers, who at times cannot handle orders larger than 50000 units.

28. Strategies in Declining Industries References : Competitive strategy: techniques for analyzing industries and competitors... By Michael E. Porter http://books.google.co.in/books?id=QN0kyeHXtJMC&pg=PA255&lpg=PA255&dq=Strategies+for+Declining+Industries&source=bl&ots=jnP5YmC4Db&sig=0MuIuM9VhaiGrot5zVLVj9b- fE4&hl=en&ei=F_jgTNigK8eXccCX3JcM&sa=X&oi=book_result&ct=result&resnum=8&ved=0CEUQ6AEwBzgU#v=onepage&q=Strategies%20for%20Declining%20Industries&f=true Success Strategies in Declining Industries Marketing Master’s Thesis By Antti Sihvonen, Helsinki School of economics - Dept. of Mktg. & Mgmt

29. Strategies in Declining Industries Strategic Alternatives / Approaches in Declining Industries Leadership* Seek a Leadership position in terms of market share Niche Create or defend a strong position in a particular segment Harvest Manage a controlled disinvestment, taking advantage of strengths Divest Quickly Liquidate the investment as early in the decline phase as possible Firm may actually want to invest in strengthening its position in declining industry Business is managed to produce disinvestment, the classical goal of declining strategies * Leadership - Directed at taking advantage of a declining industry, whose structure is such that the remaining firm(s) have the potential to reap above-average profitability and leadership is feasible vis-a-vis competitors

30. Strategies in Declining Industries Declininga deteriorating environment that leads to diminished opportunities Industryfor organization operating in it it offers continuity and possibilities for organizations, as otherwise, industries would not decline but only seize to exist. success of organizations can be owed to strategy which it adopts in adapting to the deteriorating environment The definition of the decline stage is built around the concept of niche. Decline stage can be defined as a condition where niche cannot support the amount of activities - diminishing the carrying capacity of niche Decline is shrinking demand, resulting in capacity reductions among the organizations and pressure to exit the industry Can also be seen as a waiting game where organizations exit & just few end up staying. Can be seen as a post red ocean (Who blinks first ? ) Red Oceans are all the industries in existence today—the known market space. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities or niche, and cutthroat competition turns the ocean bloody. Hence, the term red oceans.

31. Strategies in Declining Industries Type of change in niche configuration Niche SizeChange in niche size refers to the diminishment of activities that the niche can support ( Decline in demand of goods or services, shrinkage of available resources resulting in either diminishing demand of the output or reduced ability to produce goods. Accordingly, carrying capacity of the niche diminishes & carrying capacity is lost.) Niche ShapeChange in niche shape means that the type of organizational activities supported by the niche is changed (the change is a result of changes such as transformation of the production technology or a change in demand. Change in niche shape therefore results in a transformation of the carrying capacity of the niche to generate a new niche or modify the existing niche. Therefore, carrying capacity is not lost but it has been transformed to support other types of activities.)

32. Strategies in Declining Industries Typology of environmental change (Zammuto and Cameron) Erosion – niche size gradually decreases carrying capacity of the niche steadily decreases - hindering the ability of firm in the niche to survive. Contraction – niche size suddenly decreases decreases the carrying capacity of niche that cannot be predicted by the organization before the change in the environment actually occurs. a rapid shock in the niche placing survival of firm under jeopardy. Continuity of environmental change Type of change in niche configuration ContinuousDiscontinuous

33. Strategies in Declining Industries Typology of environmental change (Zammuto and Cameron) Dissolution – niche gradually transforms into another due to changes such as technological change or change in demand. old way of operating progressively less acceptable in the environment. niche goes through steady evolution not necessarily resulting in loss of carrying capacity. Collapse Sudden and dramatic change in the niche shape (type of activities the niche supports which can result from changes such as rapid technological change or change in legislation.) Despite this, the carrying capacity is not lost, but transformed rapidly due to changes in demand, resources, legislation or any other similar reason. Continuity of environmental change Type of change in niche configuration ContinuousDiscontinuous

34. Strategies in Declining Industries Strategic choice perspective 4 types of strategies can be identified on the basis of the way a firm moves through the adaptive cycle. Strategic emphasis of each of the strategy types (adapted from Miles and Snow) Reactors

35. Strategies in Declining Industries Defenders (Erosion) leverage their capability for efficiency in a steadily diminishing environment Prospector (Collapse) leverage their capability to create change and respond to it in a rapidly changing niche Analyzers (Dissolution) leverage their ability to exploit current niche opportunities, while simultaneously following the development of new niches in the industry. (Bajaj Auto) Reactors Firms that do not exhibit proactive approach to the changes in the Environment. Their reactions to the changes in the environment are inconsistent and unstable and perish (Mobilink Pagers) Continuity of environmental change Type of change in niche configuration ContinuousDiscontinuous Strategy – environment Co-alignment Framework

36. Strategies in Fragmented Industries References : The Evolution of Collective Strategies in Fragmented Industries By Marc J. Dollinger, Indiana University

37. Strategies in Fragmented Industries Fragmentedone in which “no firm has a significant market share and Industrycan strongly influence the industry outcome” (Top 4 firm-concentration ratio is 40% or less) Large no. of small and medium-sized privately held firms No firm acts as a market leader for price & product level decisions Low entry barriers that characterize fragmented settings (ensure that there will be many small privately held firms) Can range from Charterered Accountant Firms / Law Firms / Restaurants to Cement players

38. Strategies in Fragmented Industries Strategies at work – Strategic Alliances / Partnerships & Consolidation (witnessed in Indian Cement Industry in the past few years) Collective Strategies - defined as systematic response by a set of organizations that collaborate in order to absorb the variation present in the environment - CONFEDERATE Strategy - Agglomeration

39. Strategies in Fragmented Industries Indian Cement Industry – Porters 5 Force Model

40. Strategies in Fragmented Industries Strategic Alliances / Partnerships & Consolidation in Indian Cement Industry – Though fragmented towards the start of 2000 but has gone through Strategic Alliances and Consolidation Cement - high-bulk, low-value, freight-intensive commodity, transporting it over distances more than 400km becomes commercially unviable. This has resulted in regional cement participants serving regional markets. Ambuja Cement and ACC entered into a strategic alliance - (both are now a part of the global cement major Holcim) Aditya Birla Group acquired the cement divison of L&T Given the high potential for growth, quite a few foreign transnationals (Holcim, Lafarge etc.) have acquired stake in domestic companies.

41. Strategies in Fragmented Industries Although consolidation has taken place in the Indian cement industry with the top five players controlling almost 60% of the capacity, the balance capacity still remains fragmented. Strategic Alliances / Partnerships & Consolidation in Indian Cement Industry – Indian cement industry has a total capacity of approximately 200 – 210 MT in FY09-10 Following are some of the major names in the Indian cement industry: (IN MILLION TONNES) Company Production Installed Capacity ACC 20.83 22.62 Gujarat Ambuja 17.75 22.00 Ultratech 15.86 21.90 Grasim 16.32 19.65 India Cements 9.11 12.95 Source : 2009 Annual Reports of these respective companies The other major players include : Jaypee Group Century Madras Cements Birla Corp.

42. Strategies in Fragmented Industries Strategic Alliances / Partnerships & Consolidation in Indian Cement Industry – Historically, due to licensing requirement and MRTP, cement industry has grown in a fragmented manner resulting in a large number of players owning a number of plants - indisciplined growth in industry During 1997-99, there was an acquisition spree French major Lafarge taking over Tisco's cement plant “We got into cement because we had a by-product which was a raw material. We didn't get into cement because it was a business. If we wanted to get into cement as a business, we would have had to invest large amounts of capital, undertake investments in different parts of India and accept that cement was a business we would be in. The next issue is that the business cycle of cement and the business cycle of steel are one and the same, maybe with a little lag.” www.tata.com/media/report Remaking Tata, September 13, 1999 A. V. Birla Group consolidating its cement business under Grasim, which acquired Shree Digvijay Cements and Dharani Cements L&T taking over Narmada Cement

43. Strategies in Fragmented Industries Strategic Alliances / Partnerships & Consolidation in Indian Cement Industry – Strategic Alliance / Partnerships Ambuja’s strategic alliance with ACC (India’s largest & most experienced cement player) Strategic alliance - in terms of sharing information, vendor development, transport etc. Further Acquisitions Lafarge acquires Raymond Cement facility in 2001 A.V. Birla acquiring L&T’s cement division (rechristened UltraTech Cement) in 2004 "This transaction reflects our commitment to build a leadership position in cement.” Kumar Mangalam Birla, Chairman, The Aditya Birla Group Holcim acquiring stakes in ACC (in 2005) and Ambuja Cement (Jan 2006)

44. Strategies in Fragmented Industries Collective Strategies CONFEDERATE Strategy Interdependence on firms of same type & level in the production chain, usually competitors. In a fragmented industries composed of many small firms, barriers to formal confederation are high and the prospects for market wide collusion are seemingly low. Yet, there are many opportunities for confederate pair wise interaction. Pair wise interaction can be found in many simple operating domains.

45. Strategies in Fragmented Industries Collective Strategies CONFEDERATE Strategy CONFEDERATE INTERORGANIZATIONAL ACTIVITIES – Direct Activities with Competitors Joint Purchase / Sales Agreements Sharing Information with Competitors Engaged in a Joint Venture / Joint Research / Joint Advertising / Joint Training Sharing Transportation Costs Bilateral Hiring of Competitor’s workers – enables firms to share intelligence (info. about markets and products), personnel practices and internal policies. Engaged in Licensing Agreements

46. Strategies in Fragmented Industries AGGLOMERATE Strategy Agglomeration is characterized by loose coupling, voluntary participation & low task structure. Member of a trade association Member of a Professional Association Using industry-wide standard costing Producing industry-wide standard items