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Blue Circle Cement

Syndicate 4
South Africa in 1996
 New South Africa was 2 years old. MASTER STAMP
 President Nelson Mandela divorced Winnie Mandela after 38
year marriage.
 Bafana Bafana won a tournament.

 Competition board ruling that cement cartel (Alpha, PPC and


Blue Circle Cement) must disband came into effect in 1996.

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Situational Analysis
 Cement industry Cartel – 25 year alliance.
MASTER STAMP
 3 Members:
• Alpha
• PPC
• Blue Circle Cement
 Colluded on price and Market share

 Cartel operation controlled by Cement Marketing


Organisation (CMO)
 Controlled all orders and distrubution
 Through this maintained allocated market
Company share
% Market as follows:
share
Blue Circle Cement 23.875
PPC 45.000
Alpha 31.125

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Situational Analysis
 Political MASTER STAMP
 The country was at the beginning of a very exciting political
period. The ANC government had just been elected into power
 Economic
 GDP growth was definitely on the rise, with huge growth in 1994
and then continued growth to 1996. The forecasts at that stage
were very positive for economic growth.
 Social
 Socially South Africa was very much in a stage of growth. There
was now the early emergence of the growing black middle class.
All races were getting opportunities previously denied by the
apartheid government.
 Legislative
 Competition Board ruled against the cartel and instructed the
cartel to disband by 30 September 1996. This signalled a new
era for the cartel members with regards to their competitive
positions and respective approaches to marketing of their
products. 4
Situational Analysis
 Competitors MASTER STAMP
 Due to the nature of the cartel, there was no differentiation
between the companies and no real competition between them.
 Cross subsidisation of prices across regions were used as a
deterrent to new competitors.
• For example, Natal Portland Cement’s (equally controlled by the
cartel members) prices were reduced to eliminate a competitor
whose product entered through Durban harbour, while the cartel’s
prices in other regions were increased.

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Situational Analysis
 Marketing mix
 Product MASTER STAMP

• Limited product range.


• No innovation from the three companies.
 Price
• Fixed pricing.
• Price adjustments took place to realign the market shares.
 Promotion
• Promotion by individual members of the cartel was discouraged.
• Sales forces were considered unnecessary.
 Place
• Transportation “Route to market” was done privately.
• Customers expected to collect from large regional depots or directly
from Lichtenberg.
 Market segmentation
• Broadly segmented into “bulk” buyers and “bag” buyers.
• The cartel simply controlled pricing, and produced according to
demand. No thought was given to segmentation, targeting or
positioning. 6
SWOT Analysis

Environment Evaluation
MASTER STAMP

Positive Negative

Internal Strengths Weaknesses


•Few competitors, all in similar •No brand equity.
situation. •Don’t know customers.
•Good product knowledge. •Lowest market share.
•No sales force.

External Opportunities Threats


•Control entire value chain. •Route to market being
controlled by competitors.
•Imported products/ new
competitiors

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SWOT Analysis

Environment Evaluation
MASTER STAMP
Positive Negative
Internal Strengths Weaknesses
•Few competitors, all in similar
situation.
•Good product knowledge.
•Good customer knowledge.
•Strong brand.
•Efficient and reliable supply
chain.

External Opportunities Threats


•Imported products/ new
competitors.

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Current issues facing Blue Circle

1. To get to know their customers and


MASTER STAMP

understand their behavior.

Information Information
flow flow

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Current issues facing Blue Circle

1. To ensure that they are ableMASTER


to fully
STAMP

control the “route to market.”

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Current issues facing Blue Circle

1. To create Brand equity. Differentiate


MASTER STAMP

themselves from the rest.

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The Buying Centre (Grewel & Levy, 2008)
Person who first Person whose
suggests buying views influence
MASTER STAMP
the particular other members of
product or the buying centre
service. in making the final
decision.

Person who ultimately


Person who controls determines any part of
information, or access, or the entire buying
or both, to decision decision, whether to
makers and buy, what to buy, how
influencers. to buy, or where to
buy?

Person who Person who


consumes or handles the
uses the product paperwork of the
or service. actual purchase.
(Grewel & Levy, 2008)

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Buying Centre for Cement Industry
Buying Centre - Influence Bulk Buyers Bulk Bag Buyers Bag
MASTER STAMP
roles Criteria Criteria
1 Initiator Low Main building Price, Small works Price, Promotion
contractor Promotion contractor
2 Influencer High Cement company Product, Hardware store Product,
rep Promotion assistant Promotion
3 Decider High Main contractor – Price, Small works Price
Site manager, Product, contractor
Concrete company Place
procurement
4 Buyer Low Quantity surveyor Price Small works Price
contractor
5 User Medium Contract workers Product Small works Product
contract workers

6 Gatekeeper High Contracts director , Price, Home owner Price, Product


Concrete company Product
manager 13
Marketing mix for buying centre roles
Bulk Buyers Bag Buyers
MASTER STAMP

Marketing mix - % Marketing mix – %


element element
Product 40% Product 20%
Price 35% Price 50%
Place 15% Place 10%
Promotion 10% Promotion 20%
• Promotion must be used to • Promotion is important here,
introduce the contractors and this will introduce the bag
procurement departments to the buyers to the product and allow
product. the hardware store assistant a
• Product – obviously very good opportunity to promote
important as quality must be the product for the company.
mainyained throughout to meet • Price is very important in this
the commercial standards. market as product quality in the
• Place - readily available. small works construction
• industry is not as important as
Price is an absolutely essential
criteria on which any supplier will in the commercial industry.
be evaluated on. 14
Adding value to a Commodity like Cement
 The value chain is a tool that can be used to create
MASTER STAMPvalue.
The value chain consists of two main activities namely:
Primary activities, and Support activities. (Grewel & Levy, 2008)
 Primary activities:
 Inbound logistics – acquire of limestone (raw materials),
 To convert the raw materials into cement,
 Outbound logistics - the transportation of the cement,
 Marketing the cement (which includes sales), and
 Servicing.
 Support activities:
 Procurement,
 Technology development,
 HR management, and
 Blue Circle Cement (BCC) infrastructure.

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

 BCC should therefore establish who their target market is


and then design their supply chain backwards.
 Introducing supply chain management (SCM) software, the
value chain network will be managed effectively.
 Enterprise resource planning (ERP) to manage cash flows,
manufacturing, human resources, purchasing, and other
functions.
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Cement Supply Chain
 BCC operated as a product manager only, they STAMP
MASTER concentrated
on producing cement. They need to become network
managers (upstream activities), and customer managers
(downstream activities).

 BCC will have to ensure the following to add value through their
supply chain
 BCC’s value proposition to customers: On-time delivery; and
ordering and billing standards.
 The channel design and network strategy: How many
warehouses and their locations?
 Develop operational excellence: Sales forecasting, warehouse,
and transportation management.
 Implement solutions with: information systems, equipment,
17 th
Marketing Recommendations
 The executives and top management need to buy
MASTER into the
STAMP
idea of becoming a customer-centric organization, with their
support the backing staff will follow suit, thus the culture will
change.
 The company’s marketing needs to change as the
environment changes.

 BCC must develop, design and implement marketing


programs, processes and activities.
 Holistic marketing is an effort to understand and reconcile the
scope and complexities of marketing activities.

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Holistic Marketing

MASTER STAMP

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

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

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Holistic Marketing
 Internal marketing MASTER STAMP
 Hiring, training and motivating staff forms part of internal
marketing.
 Senior management must be an example to other staff
members.
 Each person in BCC must think from the customers point of view
customer.
 Key points for each department need to be identified, these will
asses if they are customer orientated.
• For example: Sales Assessment
– Knowledge about the customers industry.
– Strive to give customers the best solutions.
– Keep to promises made.
– Share the knowledge about customers with other departments
(Kotler& Keller, 12th ed, 2006)

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Holistic Marketing

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

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Thank you