Documentos de Académico
Documentos de Profesional
Documentos de Cultura
ASSIGNMENT
Submission date-21-01-2011
PAGE NUMBER
EXECUTIVE SUMMARY…………………..
INTRODUCTION……………………………… 1
OBJECTIVE ………………………………… 1
ANALYSIS ………………………………….. 2
SWOT …………………………………………. 2
PEST …………………………………………… 3
FIVE FORCES INDUSTRY …………………. 4
BCG …………………………………………… 4
CONCLUSION ………………………… 6
RECOMMENDATION ……………………. 7
REFFERENCES …………………………… 8
APPENDIX ……………………………. 9
Executive summary:
In strategy concepts and applications module assignment I have critically evaluated the
competitive position of CRH through the use of positioning tools such as PEST, SWOT,
BCG, Five forces industry analysis .i have also identified the driving factors which bring
change in the industry. after evaluating all the analysis and factors I have recommended
some future strategic options on the basis of relevant theories and frame work for CRH to
remain competitive .i have put emphasis on it’s business portfolio composition and
product market relationship. through this whole report the current competitive position of
CRH and future options are highlighted. The strengths , weaknesses, threats,
opportunities, political, economic ,socio cultural factors ,industry analysis through all
these the analysis has been done.
Introduction:
CORPORATE MANAGEMENT:
1. LAFARGE COPPEE S A:
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The company is one of the world's top makers of cement,
aggregates, concrete, and gypsum (alongside such
heavyweights as Holcim and CEMEX). Cement accounts for
about 60% of the building materials supplier's sales. Lafarge
gypsum products (about 10% of sales) include wallboard,
plasters, and insulation. The company has more than 2,000
plants operating around the world. Lafarge's growth strategy
is to shift focus from Western Europe and North America to
emerging markets such as Africa, the Middle East, Asia,
Central Europe, and Latin America, which now account for
more than half of sales.
Analysis:
In the combination of Pest and Swot analysis which reveals
driver of change in an industry. Five forces analysis can
reveal insights about potential future attractiveness of
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industry. through this whole report after analyzing Swot ,pest
BCG and five forces analysis some driving factors are
identified which bring changes in it’s industry .and also some
strategic options are offered to remain competitive and to
continue it’s unrivalled growth.
SWOT:
Some major strength are mentioned here-
STRENGTH:
Weakness:
Opportunities;
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• To remain competitive in building material industry
CRH should adopt the opportunity of development of
new plants, capacity extension and major upgrades.
To expand it’s business into different regions it
should keep the balance between different geographic
segments.
Threats;
• CRH’s expectation of earning 15% return on assets is
a threat for CRH as they were not able to achieve their
target. So, CRH should have correct estimation of
RONA to sustain development.
Pest analysis:
• Economic factors
-due to being in mature stage CRH enjoyed stable
economy.
-balance in segmentation of different geographic areas.
-high value ratio results high transportation cost which affect
it’s economy .
• Political factors:
• Technological factors:
-standard product and market affect it’s technology.
-utilization of communication technology
-use of technical advisors at divisional level. these factors
affected CRH’s competitive position.
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1.Threat of established rivals:
After analyzing I came to know the threat of rivals are low
for CRH. So, it is a big competitive advantage for CRH.
3.Threat of substitutes:
BCG:
After analyzing BCG of CRH i came to know which products
and materials are profitable for CRH and would help CRH to
maintain it’s competitive position.
STARS:
U.S asphalt ,US concrete products US architechtural glass
fabrication etc which are stars means they have high growth
and high market share. So, CRH should invest more in these
products and materials as they are enjoying a number 1
.position in an industry
QUESTION MARK:
US aggregates, US interior product distribution are question
marks which market growth rate is high and market share is
low. . They are enjoying number 3 or 4 position in an
industry.
CASH COW:
ready mix concrete (America) are cash cow enjoying number
.6 position in an industry
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UPWARD SPIRAL OF CREATIVE BUSINESS:
INFORMAL MECHANISM:
CRH continually reinforced it’s core values in formal
statements of strategy , in external and internal
communications and through corporate folklore.
3.More change:
CRH’s geographic , product and segment balance which
smoothed the economic conditions and provided greater
opportunities for growth.
The continous improvements was relentless.
4.greater profitability:
CRh had a strong and consistent track record of financial
performance. CRH enjoyed a premium of 2 % in the bell
weather return on capital employed ratio.
Cash earnings were two thirds higher than reported EPS
which is the major factor enabling CRH to fund it’s
acquisition led expansion overseas.
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From 1978 to 2006 CRH completed around 620 deals,
spending over €13.5 bn over 90%in the period since 1995.
CRH has the best track record of it’s peer group….of
growing returns through acquisitions. it was estimated that
acquisition accounted for 70%of CRH’s profit growth .
As a result, with the passage of time it will be in number 1
position .as it is already in position of top five building
material companies.
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• . from 1978 to 2006 CRH has the best track record of
it’s peer group….of growing returns through
acquisitions.
• . a major factor which enabled to acquire it’s strategy
acquisition led expansion overseas.
Conclusion:
if I relate CRH’s current competitive position with the stages
of lifecycle of a company ,it is clear that CRH is now in
mature stage. As it’s high growth rate , unrivalled growth,
stable market, customers’ homogenizing needs, market
capitalization, experienced managers all of these factors are
the indicator of it’s industry evolution stage. as we know
there are 4 stages of life cycles-introduction, growth, maturity
and decline. So, being in the 3rd stage to remain competitive
in the building material industry and to achieve it’s objective
CRH ‘s competitive positioning is very much important. for
this some positioning tools are used in this report. -SWOT,
PEST, BCG, FIVE FORCES ANALYSIS. On the basis of
these tools some future strategic options are recommended to
hold it’s position in the long run.
Recommendation:
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divisions should be continued to capitalize on local market
knowledge and a high degree of individual responsibility to
operational managers. The repair maintenance and
improvements (RMI) sector is basically greater than the half
of the total output. it has the ability to recover quickly .so,
CRH should increase investment in this sector.
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• The major strength of CRH enjoying 36 years of
unrivalled growth and performance should be
continued in the long run to hold it’s position in
building material industry. due to low competition in
this industry there is also existence of low barrier
entry.
• CRH’s approach of project evaluation, approval and
review should be more focused. CRH should also be
remain same in structuring the management team as
before. it should also maintain external and internal
relations
• CRH should have a framework for forecasting
evolution. It should adopt evolutionary change. Like
through acquisition long run changes in growth,
accumulation of experienced professionals , product
innovation etc.
• CRH should use communication technology as
opportunity to achieve operational best practice.
References:
http://biz.yahoo.com/ic/91/91789.html
http://www.dailyfinance.com/company/lafarge-coppee-s-
a/lfrgy/nao
http://www.linkedin.com/companies/cemex
http://www.cemex.com/
http://www.crh.ie/en/our-divisions.aspx
Appendix:
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The degree of rivalry determines the industry attractiveness
.the attractiveness is most likely to be high in those industries
where the threat of substitutes are present as crh has
fragmented market , there are large number of buyers and
suppliers. So , they compete mainly on the basis of price
.moreover , building materials and products are largely
commodities with little differences between suppliers.
Economies of scale:
In this industry production is often linked to the location of
reserves. in CRH due to the high transportation cost it will
charge high price as a result economies of scale is
outweighted. Which determines the radius of economic
activity become half.
Cost of entry:
Cost of entry is determined by how much an organization is
paying to enter in an industry.as in building material industry
the market is fragmented and because of undifferentiated
product the competitive rivalry is low. Most importantly, here
technology is not protected by any kind of trade mark,
patent.so, the cost of entry is low as aresult any firm can enter
in to this building material industry.
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Cost advantages:
Is not related to the size of firm but on the context of it’s
industry.so, in building material industry any other firm can
enter. CRH should lower the threat of entrants by reducing
price, achieving cheaper inputs ,use of efficient process,
better technology and experienced professionals. most
importantly CRH can reduce cost advantages through
acquisition.
Differentiation;
:
When there is a differentiation in a market an organization is
dealing with certain brand which can’t be adopted by
competitors. as CRH’s products standard are most similar
and not differentiated so the threat of new entrants are
high.CRH should focus on differentiation to lower the threat
of entrants and remain competitive.
Government regulations.
If there are so many restrictions rules and regulation imposed
by government then it will weaken CRH’s competitive
position.
3.Threat of substitutes:
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Customer is little loyal. When price is
customer's primary motivator , the threat of
substitutes is greater.
Threat of substitute for CRH is high as all
these factors are according to CRH situation.
Bargaining power are relatively high when there are few but
larger player in market and when the cost of switching
between suppliers are low .as I have stated above CRH has
fragmented market so there are no dominant buyer and
suppliers and substitutes are available, customers are
fragmanted.as a result, bargaining power of buyers are low.
Swot analysis:
Strength;
:STRENGTH
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to one of the top five building material
companies in the world with global operation
and market capitalization of 16.6bn at the end
of 2006.
• Another strength of CRH is that even
in notoriously hostile industry environment it
achieved a great success.
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acquired companies to develop a healthy mix
and depth of skills.
• The most strengthen characteristics of
CRH management is experience, stability and
continuity.
• CRH adopted market driven;
performance related remuneration policy
aimed at creating shareholder values, formal
and informal mechanisms which resulted
continuous success, low turnovers/rotations
and promotion of employees.
• CRH had a strong and consistent track
record of financial performance.
• 2006 represented the 23rd consecutive
year of increase in dividend, CRH had
experienced only two relatively short periods
of declining earning per share.
• CRH's level and consistency of
performance was also superior to its peers
internationally.
• The characteristics of CRH finance
function is extensive business knowledge and
operational contribution, diligence
conservatism and prudence. Due to these CRH
achieves prominence in financial markets.
• Cash earning were two-thirds higher
than reported EPS, this is a major factor which
enabled CRH to fund its acquisition-led
expansion overseas without compromising its
financial principles.
• CRH strategy was reinforced by
rigorous measurement, evaluation and control
processes and by value added business
contribution and advice of finance function; it
ensured early intervention and appropriate
corrective actions.
• CRH operated a group wide
management development system to develop
the critical experience base of managers, when
they are 20s and 30s.
• CRH achieved excellence in external
and internal relations.
• The culture of CRH is its key strength.
• CRH continuously reinforced its core
values in formal statements of strategy not
only internal but external communication and
through corporate folklore.
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• CRH acquisitions were add on in
nature.
• CRH strategy of acquisition was
singular in conception and execution and had
proven very difficult to replicate.
• CRH adopted a post acquisition
approach resulted high returns.
• CRH’s strategic position was clear,
durable and long lasting.
• CRH had internal audit to assure that it
add value to improve an organization’s
operations.
Weakness:
• Cross subsidization of CRH was not tackled more
attentively.
Threats:
• CRH’s view was that all kinds of operations were
required to earn 15%return on net assest. although
operation were not able to achieve that 15% target
and if they will not achieve then the company will
face losses.
Opportunities:
• CRH can invest or having an opportunity of
ongoing development corportaed new plants,
capacity extensions and major upgrades.
• balance between different geographic segments
provides an opportunity of emerging into different
regions.
Pest analysis:
Economic factors
1.one of the characteristics of building material industry is
construction is a mature sector in the western world which
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reflects stable economic activity and populations. average
growth is less than half of the rate of economic growth.
Political factors:
1.irish operation under the CRH portfolio had a low rate of
manufacturing corporation tax(12.5)%
Technological factors:
1.CRH’s bulding materials and products are standard ,similar
and stab le overtime. production processes are also standard
through the use of technology.
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2.CRH received awards over the years for innovation in
environmental practices.
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STARS QUESTION MARKS
U.S asphalt
U.S Concrete products
Construction
(accessories(Europe
(Fencing and security(Europe U.S aggregates
(Clay products(Europe U.S Interior products distribution
U.S Architectural glass
fabrication
U.S Precast concrete products
(Cement(Europe
Agricultural & chemical
(lime(Europe
HIGH
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Relative market growth
LOW
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• Price should be decrease which would
increase the sales revenue.
• Add new distribution channels and
increase the intensity of distribution in each
channel.
• Increase advertising expenditure would
increase market share unless competitor
respond with similar increases.
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