The marketing audit is the systematic examination of a business's marketing environment, objectives, activities and strategies so as to recognise problem areas and to take advantage of opportunities with a view to making improvements where necessary (Jobber D. 2010).
The marketing audit can also be defined as a comprehensive, systematic, periodic and independent examination of a company's marketing environment and strategies with a view to making a plan of action in order to improve performance (Kotler, Gregor and Rogers 1989).
The marketing audit would enable us to have an insight into the marketing activities of Dangote Cement Plc and enable us to have an over view of the marketing performance of the company, its strategies and the environment within which it operates.
In order to fully understand the marketing environment of Dangote Cement Plc we must look at the macro-environment and the micro-environment. The macro-environment consists of actors and forces within which the company operates that affect the performance of the company in providing the services and or goods it renders and the future of the company. These factors are beyond the control of the company (Kotler, Gregor and Rogers 1989). These are political, economic, ecological, social and technological. These are referred to as PEEST analysis (Jobber D. 2010).
The micro-environment looks at the internal factors or the tasks within which the company intimately operates. These are internal factors that affect the marketing operations of the company .These include suppliers, distributors, customers and competitors (Kotler, Gregor and Rogers 1989).
Marketing Environment (Jobber D. 2010)Marketing Environment
2.2 MACRO-ENVIRONMENT: POLITICAL-LEGAL
This refers to the laws and regulations that are set by the government and other political bills that are passed within the country that affect the operations of the industry within which the company operates (Jobber D 2010). The stability of the political system can also affect the company. For example if the government awards DCP with a supply of cement and there is a change in government, the new government might not continue with the awarded contract or there might be delays in the payments for the contract.
Government Policies on Importation
The Nigerian government has been promoting the development of Cement manufacturing companies over the years since the inception of the new democratic government in 1999. These measures have provided Dangote Cement Company Plc with the acquisition of state owned cement companies like the Benue Cement Company. The government has also implemented a series of measures that are favourable to the growth of the company. These are (globaltradealert 2009):-
Banning the importation of cement to a limited number of companies with specific quotas. Companies like BUA cement. This has increased the advantage of Dangote Cement Company since the company has cement manufacturing plants within the Nigeria.
Tariff incentives for the importation of machinery, equipments and components for cement factories. This will enable DCP to increase grow by importing more machinery.
Removal of restrictions for the importation of gypsum which is a key component for cement manufacture. This provides DCP with the advantage if reducing the cost of production.
Deductable tax incentive for the conversion of production system to coal firing.
A levy of 500 naira (UK 2 pounds) has been placed for every tonne of cement imported which will be used for the development of Cement Training Institute of Nigeria (globaltradealert 2009). DCP should take advantage of this incentive by changing the plant production cement to coal firing from gas (Vetiva research 2010).
Government Projects on Infrastructural Developments
The recent rise in demand for cement due to the government implementation of a project called vision 2020, which is targeted at infrastructural development (especially housing and transportation), has provided a shortfall in supply. The budget for infrastructural development has increased by 200% from 2004 according to the central bank of Nigeria. The total consumption of cement in Nigeria is about 15 million metric tonnes which is increasing at 12% annually and the total production including imports is about 11% (BGL Research and Cement Manufacturers association of Nigeria). This has necessitated the government to reduce the tariffs on importation and the government is considering granting new import licenses to four companies Madewell Products Ltd, Eastern Bulkcem Company Ltd, Cement Company Limited and Westcom Technologies & Energy Services Limited (Vanguard 2011).
The present boom in the cement industry provides DCP with an opportunity to grow as the demand for cement is much higher that the supply. The company needs to take advantage and increase both its output and size. This can be done by increasing the number of cement plants within the country and fully utilising the existing plants through economies of scale.
The Re-opening of the railway system
The main transportation system for the movement of cement within Nigeria is by road. This has made the prices of cement to be high. However, the government has reopened the railway system in 2011. This will provide a cheaper mode of transporting cement and lead to a reduction in prices. Lafarge Cement WAPCO Nigeria Ltd has taken advantage of this opportunity by signing a contract agreement with Nigerian Railways Corporation (NRC) to move 300 tons of cement daily to its various distribution centres (Cemweek Magazine 2011). DCP should try to take advantage of the railway system as it will be much cheaper than the present truck transportation the company is using which will reduce the cost of cement to the final consumer. Furthermore, it will make the company's distribution system more flexible and reduce risk of over reliance in one mode of transportation.
Government Policies on Power Supply
For years the country has been faced with poor electricity supply which hampers the operation of the companies to be at full capacity thereby leading to shortage in supply. Most companies in the cement industry use gas and LPFO on heavy duty power generators. The government is providing tax deductable incentives to companies that will invest in switching their operating system to coal firing. Ashaka Cement Company has taken the initiative and invested in a multi-billion naira coal plant for power supply and kilns firing. The kiln firing has already started in 2009 (FSDH Research 2009).
DCP should look to invest in coal firing so as to enjoy tax incentives from the government and reduce CO2 emissions.
2.3 MACRO-ENVIRONMENT: ECONOMIC
The economic forces include the current interest rate, the exchange rate, tax, inflation and other economic factors within the country and abroad that will affect the operation of the company (Jobber 2010).
Economic Growth
The Nigerian economy is growing at 6.10% GDP -real growth which is high considering that the leading emerging market economies China and India are growing at 9.10% and 7.4% respectively. Other developed countries like the United Kingdom, has a GDP-real growth of
-4.10% (global edge 2009 World Bank records). This indicates that there is a real opportunity for the growth of the cement industries. The government is investing heavily on the development of low cost housing and the transportation network. Since cement is a key construction component, the demand for cement will continue to rise.
This provides DCP with an opportunity for a growing market which the company should take advantage of by increasing production.
Inflation
The Nigerian inflation rate is at 11.5% and steadily dropping which is due to the government intervention following the global recession in 2008. The Central bank of Nigeria has recapitalised the various sectors of the economy (especially the banking sector and the stock exchange market). The demand for products and foreign direct investment is steadily increasing which provides a good environment for business (CBN 2010).
The stability of inflation ensure that the there will be stable prices which will enable DCP to make forecast in production and be able to set prices that will be acceptable to the company and the customers.
Labour Force
Nigeria has an estimated population of 150 million with a growth rate of 2% per annum and a labour force of 47 million. The unemployment rate is 4.9% while China has an unemployment rate of 4.3% and the United Kingdom has 7%. This shows that there is availability of a work force and the cost of labour is generally low in comparison to other developed countries. The unemployment rate has been declining due to government efforts towards injecting monies into the economy (globaledge World Bank sources).
The huge size of labour in Nigeria provides Dangote Cement Plc (DCP) the opportunity to employ labour within Nigeria and the labour cost will be low since there is a huge labour market.
Taxation
The Nigerian Investment Promotion Commission (NIPC) has provided various tax and investment concessions in order to achieve government target of becoming one of the twenty largest economies in the world by 2020 (Project vision 2020). The tax incentives and investment concessions are as follows (NIPC 2011):
The company income tax has been amended to 30% to encourage local and foreign investment in all sectors.
Tax holidays are granted to all companies for the formative years
Tax relief of up to 120% for deductable for research and development to encourage innovation and growth
Capital allowance of 15% for industrial development and 20% for mining. With an annual amount of 10% on expenditure.
Companies that have setup in-plant training will have a tax concession of 2% for five years.
Companies that invest in infrastructural development which should have been provided by the government like water supply, power supply, roads and so on will benefit a tax deduction of 20%. This is applicable in most cases as the location of limestone for the production cement is usually located in rural areas.
Companies that invest in rural areas or economically disadvantaged areas will receive a 100% tax deduction. As stated above, this is suitable for the cement industry as most limestone locations are in rural areas. For example the Dangote Obajana manufacturing site in Kogi state.
Labour intensive companies that have plant equipments and heavy machinery will receive a tax concession depending on the number of employees. This is geared towards reducing unemployment in the country. For example a company employing 1000 people will receive a 15% concession. This is advantageous to the cement industry as it is labour intensive and the Dangote group presently has a workforce of 14,000 (Dangote-group 2011).
Tax allowances are granted to manufacturing companies that are working towards expansion and modernisation of production system. This is applicable to Dangote Cement Company as investments have been made to expand production in most of its factories. For example, new 5 million metric tonne production line in Obajana plant (DCP presentation 2010).
Local raw material sourcing will attract a tax allowance of 60% for five years. This is favourable to the company as it uses the limestone located within the country.
Companies in the extractive industry will have a tax holiday for three to five years.
Companies in the extractive industry will enjoy a one-off 95% capital allowance to replace or purchase machinery.
These incentives provide DCP with an opportunity for growth and expansion within the country.
Monetary Policy
Following the global economic recession, the government has been active in controlling the economy and ensuring a stable growth through injection of funds into the economy and maintaining government intervention policies. Some of these policies that affect the businesses are as follows:-
The central bank of Nigeria is maintaining a fixed exchange rate using a fixed-convertibility system. This enables the government to maintain the currency by injecting or deducting excess monies within the economy. The exchange rate is held at 150 naira to the dollar. This will ensure a continuous and stable growth. This provides DCP the opportunity to have stable prices for their product and aid the company in planning and forecasting.
The interest rate is maintained at 6.25% to encourage investors to borrow from the banks. This will encourage local investments and attract foreign direct investments. This will enable DCP to seek capital for growth and expansion through acquiring loans from banks at low interest rates.
Most of the banks have been consolidated and there have been mergers and acquisitions within the banking industry in 2006. The recent economic recession in 2008 has affected the banking industry but the government has injected funds to stabilise the affected banks. This ensures the availability of credit facilities for businesses at reduce lending rates. Stable and strong banks in Nigeria will provide DCP the opportunity to take loans from the banks so as to increase their capital base.(Central bank of Nigeria 2010)
2.4 MACRO-ENVIRONMENT: ECOLOGICAL/PHYSICAL
This refers to the forces of the physical environment like pollution; climate changes and global warming that affect the business in its daily operations. This will affect the cost of production and marketing the products (Jobber D 2010).
Global Warming:
Carbon dioxide (CO2) emissions from cement factories lead to climate changes and thus lead to global warming. The government has been granting tax deductions for cement companies that are changing their production system to coal firing. This is in an effort to reduce the emission of Carbon dioxide which is harmful (globaltradealert 2009). Ashaka cement has invested in the coal firing production system and has started operations but is not fully functional yet (FSDH Research 2009). Lafarge and other cement companies have been investing in ways to reduce CO2 emissions. Dangote Cement Company operates with LPFO and gas but recently efforts are being made for coal firing plants (DCP 2010).
Pollution:
The Federal Ministry of Environment has set environmental standards which the cement producing companies must comply to in order to operate. These standards cover water pollution, air, noise and mineral resources. Most of the companies operating within the country have complied with the standards. For example, Lafarge WAPCO Nigeria Ltd has set targets to reduce NOx and SOx emissions which it refers to as voluntary targets to cater for the environment (Lafarge WAPCO 2011). The compliance management team of UNICEM Nigeria Ltd has set standards with accordance to the Ministry of environment and conducts environmental audits to ensure compliance of the standards (UNICEM 2011). The Kogi state ministry of environment has similar policies in place to audit the activities of Dangote in Obajana plant (Kogistatenigeria).
2.5 MACRO-ENVIRONMENT: SOCIAL/CULTURAL
This is concerned with the public attitudes towards the business. It also refers to the changes that are occurring within the lifestyle of the consumers, demographic forces and the cultural beliefs, norms and values within the working environment (Kotler, Gregor and Rogers 1989).
Demographic
Nigeria has a population of 150 million which is the largest in Africa and it is ranked as the 8th populous nation in the world behind global emerging markets like China, India and Brazil. More than 50% of the population is between 14-64 years of age with the population growth per year at 1.9% (CIA 2011). This means that there is a huge market for products and growth. With the GDP real growth estimated at 6% and the government focus on providing housing and infrastructure for the growing population cement consumption will be at an increase. Cement consumption has been increasing from 8 million metric tonnes in 2004 to 15 million metric tonnes in 2009 (BGL research 2010). This provides a huge opportunity for market expansion in the cement industry.
The huge size of the population provides DCP with an opportunity for growth in the market. DCP should concentrate in increasing output to meet demand and target the market with an aggressive sales effort.
CIA Fact book 2011
Cement New Entrance Forum of Nigeria (CNEF)
CNEF have been making accusations on the operations of the major cement companies in Nigeria for price hiking, low quality production, monopolistic clauses, creating- artificial scarcity and so on. Recently there have been reports of buildings collapsing in Abuja and the price of cement is the highest in comparison to other countries. A tonne of cement is 180 dollars in Nigeria while it is sold for 98 dollars in India and 40 dollars in China (Cemweek 2011). Even neighbouring countries that import cement like Ghana and Liberia have lower prices. This has raised concerns among distributors and customers and is slowing down the building processes (Vanguard 2010).
Dangote Cement Company needs to work with the CNEF and consider the interests of the customers so as to gain competitive advantage and customer satisfaction.
2.6 MACRO-ENVIRONMENT: TECHNOLOGY
This refers to changes in the production technology and new products that are might replace the existing product. It also involves new production processes that are being created (Kotler, Gregor and Rogers 1989).
Coal-Firing
The Nigerian government has been encouraging the use of coal-firing by providing incentives to companies that are investing in coal firing plants. Companies like Ashaka cement have already invested in such projects. The coal-firing plants have less Co2 emissions which are favourable to the environment (Cemweek 2011).
Dangote Cement Plc needs to invest in coal firing so as to take advantage of the government incentives and reduce the damage to the environment. Furthermore, investment should be made in research and development to keep up with the modern trends of production in the cement sector.
Recycling
The process of recycling concrete has been investigated in developed countries. The recycled concrete according to research releases less emissions and increases efficiency. Various case studies have been conducted and countries like the United States, Japan, Netherlands and china recycle concrete from buildings and other sources (Recycling Concrete, Cement sustainability initiative 2009). DCP needs to be well informed with such trends in the cement industry so as to take advantage of new production opportunities that might be cost effective and favourable to the environment.
Alternative Fuel sources
Various new methods of energy sources have been developed to reduce emissions of CO2 and increase efficiency. The most notable is the use of discarded tyres as a source of energy. According to reports, an estimated one billion tyres are discarded each year which provides an endless source of energy for cement production. The use of discarded tyres for cement production is being fully utilised in the United States and Japan with other developed countries also taking the initiative to gain advantage. The use of discarded tyres provides lower emissions and burns longer than other sources. Other alternative energy sources are; animal meal, sewage slug, saw dust and biomass. The capture of carbon emissions to be used as a source of energy is also being taken into consideration but it is still in its early stage (Cement technology roadmap, Cement sustainability initiative 2009).
As stated earlier, DCP should invest in research and development so as to take advantage of the modern production processes that may be cost effective.
3.0 MICRO-ENVIRONMENT
The micro-environment refers to the forces that affect the operations of the company that are within its immediate environment. These are:-customers, competitors, distributors and suppliers (Jobber D 2010).
3.1 THE MARKET
Market Size
This refers to the number of buyers and sellers in a particular market (investorwords 2011). The market size enables a company to determine the number of customers and competitors within the market it operates.
There is a huge market for cement in Nigeria and the supply is yet to meet up with the high demand. The major market is divided between the Nigerian government which constitutes to more than 50% of demand and the private estate developers. The demand for cement in 2010 according to Cement Manufactures' Association of Nigeria was 15 million tonnes with the supply at 11 million tonnes. The high demand is generated due to increase in government spending on infrastructural development (especially the urban areas) with emphasis on transportation and housing, increase in GDP per capital index, increase in population, improvement in the standard of living with a growing middle class, increase in foreign reserves from the exports of oil and so on (CMAN 2010 and Lead Capital Ltd 2008).
This provides DCP with an opportunity to increase output and expand their operation to meet the increasing demand.
Cement Consumption 2004-2009 (BGL Research 2009)
The demand for cement according to the ministry of commerce is estimated at 18 million metric tonnes and the supply is 11 million metric tonnes. This creates an opportunity for growth in the cement industry.
Market Segmentation
This refers to the division of individual and organisations based on similar characteristics that aids a business in making strategic marketing decisions (Jobber D 2010).
The market from the point of view of the cement manufacturing companies is divided into two:-
The government accounts for 50% consumption (DCP report 2010) and is the major market segment which includes state and federal government agencies like the Ministry of Commerce and Industry, Ministry of works and Housing, Ministry of transport. Most of these ministries have agencies and parastatals, like Federal Housing Authority, that carry out supply orders from the manufacturers or award contracts to major construction companies like Julius Berger, Dantata & Sawoe amongst others who purchase the cement direct from the cement companies. DCP should strengthen its relationship with the government so as to increase its sales because the government is the major market within the cement industry. DCP should target not only the federal government but all the tiers of government including state and local government.
The private sector generally includes private estate development companies which the government is taking a keen interest on, in recent times, due to huge deficit in housing. According to Federal Mortgage Bank of Nigeria (FMBN) in 2011, there is a deficit of 16 million houses. These include mortgage banks, private developers and major cement dealers that distribute to retailers and wholesalers.
DCP should increase its sales effort so as to expand the market share.
3.2 CUSTOMERS
The Government
The major customers of the cement companies are the government which is the major customer in the cement industry and accounts for 50% of the markets. It operates through various government agencies and ministries. The high demand for cement is due to investment by the government in infrastructural development for transport and housing. According to the ministry of Commerce and Industry, the total effective demand for cement in 2010 was about 18 million metric tonnes and the supply is estimated at 11 million metric. This huge deficit puts the cement manufacturing companies at an advantage as the supply is limited compared to the demand. The fact that the cement industry is capital intensive and labour intensive makes it less likely there will be new competitors entering the market in the short run. With few companies operating within the market, Dangote Cement needs to expand to meet the demand deficit.
Major Dealers/Private Developers
These are the second largest customers and receive the products through various distribution centres of the cement companies. The dealers then sell to contractors and other whole sellers.
These major dealers have been making various complains about the high price of cement and the shortage in supply. This is due largely to the scarcity in diesel which is adding to the cost of distribution to various parts of the country. The cement is distributed through trucks that run on diesel. Furthermore, the restriction placed by the government on importation is adding to the shortage in supply (Cemweek 2011).
Dangote Cement Nigeria Plc has depots located in strategic locations in both the north and south of the country to ensure easy distribution to the dealers. The company has a fleet of 2000 trucks that distribute to the major dealers and purchase on credit is awarded to major dealers to ensure customer loyalty.
Local dealers
These are small wholesalers that by the cement from the depots. Cement companies like Lafarge WAPCO Plc is targeting this sector of the market by awarding prizes to these small scale dealers to further capture this segment of the market and improve customer bonding. Recently, Lafarge WAPCO Plc awarded Kia cars to its local dealers to encourage them in what the company calls "below-the-line marketing strategy" (Business Day 2011).
Dangote Cement Plc needs to penetrate the market further with similar strategies to ensure bonding, as the supply deficit will only last in short run. Bonding with the small customers and ensuring brand loyalty will be significant in the long run when the growth in the sector reaches its peak and stabilises and new entrants come into the market.
3.3 COMPETITORS
Cement Production Companies
Lafarge Cement WAPCO Nigeria Plc
Lafarge Cement Company is a multinational cement company with operations in major countries around the world including Brazil, North America, the Middle East and Africa. Lafarge which is a French company merged with West African Portland Cement Company Plc in 2001. Due to merger with WAPCO, which operates mainly in Africa, it extended its activities in Nigeria with acquisition of WAPCO in the south-west, Ashaka Cement in the north and Atlas Cement in the East (Firstglobalselect 2011). The bulk of its operation is in the south-west in Ondo. The total production capacity is 2.1 million metric tonnes and importation of 2 million metric tonnes which brings the total to 4.1 million metric tonnes per annum (Thisday 2011 and BGL research).
Lafarge Cement WAPCO Nigeria Plc has the capability for huge expansion because it is a subsidiary of the parent company Lafarge which is a multinational company that has a huge capital base and the ability to invest. Furthermore, the company is concentrating in winning the small local dealers to its brand the Portland cement. The major challenge is the lack of centralisation with the parent company and focused interest in the Nigerian market.
UNICEM Ltd
United Cement Company of Nigeria Ltd started its operation in 2009 in the eastern part of Nigeria (Calabar) where its main market and operation is located. The share holders of the company include Lafarge SA, Holchem and Flourmills. The production capacity is 2.5 million metric tonnes per annum (UNICEM 2011).
UNICEM has a market dominance that is concentrated in the east but has not made plans of expansion to date. The huge capital intensiveness in the cement sector is limiting its expansion and the fact that the company is a limited liability company further hinders its access to investments.
Ashaka Cement
The company was incorporated in 1979 by the Nigerian government and the major shareholders are Large SA and the Nigerian government which still has a stake in the company after privatisation in 1990 (CEMWEEK 2011). The main operations of the company are located in the North western region of Nigeria (Sokoto). The production capacity of Ashaka is 800,000 metric tonnes per annum.
The major limitation of the company is its lack of advancement with the changes in modern technology. Most of the equipment is outdated which hinders production and expansion. The instability of power supply in Nigeria is also adding to its lack of production at full capacity. Recently the company has made investments in coal-firing plants to resolve the power problem, reduce CO2 emissions and increase output by 200,000 metric tonnes by 2012 (BGL research 2010). The company's major customer is the government.
Cement Company of Northern Nigeria Plc (CCNN)
The company was incorporated by the government in 1962 and started operations in 1967. The company was owned by the government before it underwent a series of transformations in ownership. From the government owned company to public owned company in 1992 to Scancem International ANS which is a Norwegian company 2000. Damnaz Cement Company Limited then but the shares and became the major investor in 2007 (Sokoto Cement 2011). Presently it is owned by BUA Group and the acquisition was done in 2009 (Business World 2009).
The company is located in the northern part of Nigeria and has a production capacity of 500,000 metric tonnes but investments have been made to increase capacity by 250,000 metric tonnes in 2012. The main market of the company is the local dealers located within its operating area. The main challenge of the company is the lack of consistency in the management of the company. Most of the equipment is outdated and has not moved with the trends of modern technology.
Edo cement Company Ltd
Edo Cement Company was incorporated in 2000 and it became a subsidiary of BUA group in 2009. It has its operations in the eastern part of Nigeria located in Edo state (Business Week 2009). The total production capacity of the company is 350,000 metric tonnes with plans expanding to 1,650,000 metric tonnes by 2012.
The operation of the company is mainly regional and expansion is hindered by the lack of capital investment because the parent company BUA, concentrates on cement importations mostly from Asia. Presently the company is only doing skeletal work according to the governor of Edo state and plans are being put in motion to revoke the privatisation to BUA GROUP (Vanguard 2011).
Production capacity of the Cement Producing Companies
Million Metric Tonnes Per annum (BGL Research 2010)
Market share of the Cement producing Companies
(BGL Research 2010)
3.4 CEMENT IMPORTING COMPANIES
Flour Mills of Nigeria Plc
The company was incorporated in 1960 and mainly operates in flour production and other flour products. It expanded to the bulk importation cement and has become a major importer of cement in Nigeria (Meristem Research 2008). The company imports 2,000,000 metric tonnes per annum in the southern part of Nigeria, Lagos State. It packages the cement at its cement terminal and distributes to various dealers. It imports the cement mainly from Asia.
The limitation for the company's operation is that it has not made plans for growth in this sector since it only imports the cement and packages it for distribution. With the current government restrictions on cement importation and the rise of cement producing companies, it will not be long before the company is forced out of the market. Furthermore, the cement sector is not the company's core business as it focuses mainly in the flour industry.
Lafarge WAPCO-Atlas
Besides production of cement within the country, the company operates a cement import terminal in Port Harcourt where it off loads from the docks and packages it in cement bags before transporting it to various distribution centres within the country. The company imports 2,000,000 million metric tonnes per annum (Vetiva research 2010).
Ibeto Cement Company Ltd
The company was incorporated in 2002 under the Ibeto group of companies and has a cement import and bagging terminal in Port-Harcourt. The company imports 1,500,000 metric tonnes of cement per annum.
The company has made investments towards expanding its business by building a cement factory in the eastern part of Nigeria in Ebony State which is expected to start operations in 2011/2012 with an estimated capacity of 5 million metric tonnes (Ibeto group 2011).
BUA Group Ltd
The BUA Group is a private owned company that was incorporated in 2008 and commenced operation in the same year with share holding stakes in other cement companies like the CCNN. The company has the only floating cement terminal that is located in Lagos Nigeria. It imports 1,051,000 metric tonnes per annum (approx Vevita Reasearch 2010) and has invested heavily in a cement manufacturing plant which will start operations in 2012 (BUA group 2011).
BUA group has the potential to challenge the market with its investment in a cement producing plant and has shown plans of expansion and growth within the cement industry.
Eastern Bulkcem Nigeria Ltd
The company was incorporated in 1977 and it is based in Port-Harcourt where it imports cement in bulk, packages it and distributes to various dealers (business week 2011). The imports company imports 600,000 metric tonnes per annum.
The company has made efforts to expand to production of cement by the acquisition of a state owned cement company called Nigercem in 2002 which is located in Ebonyi State. Since the acquisition the company has been unable to start operations and for the past seven years according to the Ebonyi State governor there has been no effort to revamp the cement factory. The state government is putting efforts towards revoking the acquisition.
Market share of the Cement Importing Companies
Million Metric Tonnes Per annum (Vetiva Research 2010)
3.5 DISTRIBUTORS
The major cement manufacturing companies like Dangote cement and Lafarge WAPCO have their own trucks which they use for distribution. Dangote has a fleet of 2000 trucks for the distribution of cement which it uses to gain a competitive advantage (DCP 2010). Lafarge WAPCO has invested in 1000 trucks to compete with the market leader Dangote cement (Vanguard 2011). Lafarge WAPCO has also entered a contractual agreement with the Nigeria Railway system to improve distribution and logistics.
The other companies use independent distributors depending on the customer requirements and arrangements. The buyer might pay for the transportation of the cement or the handling charges and transport cost will be included in the bill.
3.6 SUPPLIERS
The major cement manufacturing companies have their raw materials located within the proximity of the plant and the other materials are basically imported from Asian countries of which they benefit from government subsidies.
The cement importing companies get the cement bulk from Asia especially China which is the leading cement producer with estimates of 13 billion tonnes per annum. The importation of cement will become more restricted as the cement producing companies continue to increase their output. Once the local cement producing companies can satisfy the demand within the country, the importation of cement will be restricted by the government.
DCP should continue to focus on the local production of cement since in the long run the importation of cement will be restricted once the internal supply of cement is sufficient to meet the demand.
4.0 SWOT ANALYSIS OF DANGOTE CEMENT PLC
SWOT analysis is a study of the strength, weaknesses, opportunities and threats of a business so as to evaluate the strategic position of a business. The strength and weaknesses is internal and can be controlled whereas the opportunities and threats are external and are not controllable (Jobber D 2010).
SWOT CHART OF DCP
STRENGTHS
Market leader
Strong brand
Modern Technology
Has a transportation System
Tax exemption
Closeness to raw materials
Has two operating plants
WEAKNESSES
Production oriented
One mode of transportation
Key man risk
OPPORTUNITIES
Government support
Infrastructural development
Capital generation opportunities
THREATS
Unstable power supply
Uncertainty in diesel supply
Political risk
Labour strikes
Stock market fluctuations
Strengths
Presently the market leader in both production and importation.
Has a strong accepted brand within the country
The plants operate with modern technology
Has a transportation system for distributing the product
Tax exemption and other subsidies from government to enable growth
Plants are located close to the raw materials (limestone) which reduces cost
Has plants in two locations with another in the pipeline which ensures continuous growth and prevents supply shortages
Weaknesses
Business strategy is not implemented towards a market oriented approach but rather a production oriented approach which could lead to a loss of market once the supply reaches demand.
High concentration on one mode of transportation which is trucks
The company is over reliant on the decision of a few members at the top who determine the direction of the company (key man risk)
Opportunities
Government support for expansion and nurturing of local companies
Governments concentration on infrastructural development which provides a huge market
Good opportunities for generating capital from both within the country and overseas. (e.g. The increase in foreign direct investment)
Threats
The instability in power supply
The risk of diesel scarcity and gas supply scarcity
Political risk due to the coming elections in 2011-03-18
Labour strikes and uncertainties in the village areas
Uncertainties in the stock market for which the company generates most of its capital
