Group Case Work Sheet Due April 3, 2017. (1 inch margin, double space, 12 point font, with cover page) Please submit your case in Q & A style. One Bb submission per group. Based on the case material, list and appropriately categorize the various marketing environmental factors that impact cement production in Ghana. Based on the case material, develop a SWOT analysis for GHACEM. The textbook introduced two methods to analyze the growth opportunities for a marketer: Business Portfolio Analysis and Diversification Analysis. Choose one method and apply it to GHACEM case and discuss ways that the company can grow its business. The following questions require you to apply the consumer decision making theory. Illustrate the decision process that an individual consumer uses to make the cement purchase. What is the “number game” in Ghana cement industry?At which stage of the decision making process will the cement number play a role in consumer’s purchase decision?If you were a marketing consultant, what recommendations would you give to Benny in facing this number game?
331_cement_case_and_worksheet_sp17_1_.docx
Unformatted Attachment Preview
THE CEMENT NUMBER GAME
Learning Objectives
1. Identify the various environmental factors that affect a company’s marketing offer.
2. Identify the various options available to a company in responding to changes in its
competitive environment.
3. Prescribe appropriate marketing response strategy to change in competitive environment of a
company.
4. Analyze the components of the consumer decision making process of cement buyers.
Introduction
For forty years GHACEM (formerly Ghana Cement Works) was the only company in Ghana
involved in the production cement for the West African country’s market. But this is no more the
case as the company now faces competition from others, some of whom are using the mass
media to propagate a well-crafted advertising message with a big idea: numbers!
Cements come in grades of 32.5, 42.5 and 52.5 (See Table 1 for the Cement Classification
Grades). These numbers depict the ‘standard strength’, which is the minimum strength a
concrete-mix prepared using the cement achieves in 28 days. Each grade is further differentiated
based on what is technically referred to as ‘early strength’, which is the strength the cement’s
concrete mix achieves a period of 2 days or 7 days. These time periods are represented by R
(rapid) and N (normal) respectively. And so there are ‘N’ and ‘R’ versions of each grade. For
example, for grade 32.5, there exist 32.5N and 32.5R. The ‘R’ and ‘N’ labels can further be
differentiated with the following illustration – a 32.5R grade cement achieves an ‘early strength’
of 10MPa in 2 days, while a 32.5N grade cement achieves the same ‘early strength’ in 7 days.
Both grades (32.5N and 32.5R) however will end up with the equal standard strength of 32.5.
Table 1 captures the various grades of cement and their “early” and “standard” strengths.
Obviously, numbers means a lot when it comes to cement.
The issue of Numbers is central to the one question that kept bothering Benny Ashun, the Head
of Sales and Distribution at GHACEM, all weekend: “what is the best way to respond to
competitor’s tactics of portraying value via the number game?” This question has brought
Benny to the office at 6:35 am, an hour earlier than usual. Good for him he doesn’t have to drive
through heavy traffic to work as many others in the capital do all the time. He lives just five
miles away from the office located in the premier and major port enclave of the country.
Benny turns the pages of the 149 page report from Origin 8, the company’s marketing
communications agency. The agency was contracted two years earlier to collect information
from key markets that would provide insight into customer behavior including purchase
decisions. Of a particular interest to GHACEM was what the cement class numbers or grades
meant to the consumer. Cement class numbers is of interest to GHACEM because of what has
become known in the industry as the “number game”. As Benny puts it,
1|Page
“The number game is being sold as a competitive advantage, making people aware of a certain
number that is supposed to suggest quality. Yes! So the number game is up and competitors use
it to their advantage saying they sell a certain 42 for the same price as 32, so why don’t you buy
my 42 instead of buying someone else’s 32”.
Findings from the study presented to GHACEM within a year of commissioning indicated that
65.8 percent of cement patrons in the four major regions that together consume 65 percent of
GHACEM cement had no knowledge at all of these numbers. And even for those who did, only a
third of them demonstrated an understanding of what it meant.
The findings notwithstanding, Benny is well aware that consumer behavior is rarely stable and
that the increase in above-the-line advertising by competitors may have changed consumer’s
perspectives since the report was authored. The number may now be an influencing factor
informing customer’s purchasing decision.
In few days Benny is expected to present his recommendation to management on how the
company can respond to new developments in its business environment, i.e competitor
advantage.
The Company
After its independence, Ghana embarked on an ambitious development agenda of creating jobs
for its people and bridging the infrastructure gap. GHACEM was established on August 30, 1967
in collaboration with Norway as the first cement producer in Ghana. The establishment of the
company was considered a turning point in the host country’s development because of the key
role cement plays in the development of physical infrastructure. Currently, government of Ghana
has five percent (5%) shareholding in the company. Heideilberg Cement Group is the highest
shareholder with 93.1 percent. The rest is held by a private local investor
(www.ghacem.com/en/our_background).
GHACEM’s manufacturing plants located in the two port cities of the country: Tema and
Takoradi together have a combined capacity of 4.2 million tons of cement, employing a direct
workforce of more than 1000 and several others indirectly. It is the biggest cement manufacturer
with 55 percent market share1, and has contributed GHS 284 ($81.1) million in direct taxes to the
government in the previous year.
With a conveyor system housed in a tunnel extending from the company premises to the docks
area of the ports, materials are offloaded and conveyed to the factory in a more efficient manner.
The location of the production plants in the port cities is strategic for many reasons. For instance
GHACEM imports 75 percent of its raw materials for production. The location helps minimize
the need to transport the materials to any other part of the country for production.
Organizational Structure
GHACEM has a six-member board of directors who sets the long terms strategic direction of the
company. The managing director who is executive member of the board heads a ten-member
team the company refers to as top management team. The Tema factory hosts the major
administrative heads, but each of the production factories has its resident manager both of whom
are part of the top management team. Two directorates work collaborate to develop and
2|Page
implement short term strategies as far as competition in the market is concerned. These
directorates are the Strategy and Corporate Affairs, and the Commercial directorates. Benny
Ashun heads a department under the commercial directorate (Refer to Exhibit 1 for
organizational chart).
Benny Ashun
Benny was born in Ghana in 1975. He had his high school education at one of the best schools in
Ghana: Mfantsipim School, the alma mater of former UN secretary general Kofi Annan. He has
degrees in Theatre arts, media production and marketing. He has also spent about five years in
the United Kingdom working and receiving education at the Leeds College of Technology
concurrently. Currently he is pursuing an Executive MBA in marketing at the University of
Ghana Business School.
He joined GHACEM about 10 years ago as contract staff at the corporate affairs department in
Tema as Strategy and Corporate Affairs Officer, and has since then risen through the ranks to his
current position as “the Head of Sales and Distribution and Deputy Brand Custodian”. Coupled
with strategizing for the GHACEM brand, Benny is a private media practitioner. He has been a
TV presenter for key programs for 5 years, broadcast journalist and event executive at Accra
based Citi 97.3 FM and has also featured in films including “Life and Living It”, “Adams Apple”
and “PEEPS” drama series. He is married with three children.
Marketing Environment Scanning
Ghana is a country of estimated population 27 million people and growing at a rate of 1.82
percent2. The country is bounded by three French-speaking countries (Togo to the East, Ivory
Coast to the West, and Burkina Faso to the north). Ghana’s membership of the regional body
ECOWAS (Economic Community of West African States) requires it to adopt the Common
External Tariff (CET), which allows same tariff to be slapped on all items imported into the subregion3. Also part of ECOWAS is Nigeria, the closest English speaking country to Ghana on the
west coast and Africa’s most populous country with a population of over 170 million people.
Economic Environment
The county’s Gross Domestic Product (GDP) went up recently and currently stands at GHS
74,003.7 ($ 21,143.91) million, thanks to the discovery of oil offshore. This has opened up the
country for interests from many foreign investors. That notwithstanding, the country is bedeviled
with a crippling energy crisis, high inflation rate, and an unstable exchange rate which saw the
domestic currency depreciate as high as 26.6 percent in a six months4. Governments over the
years have had to sign on to programs from the Bretton Wood institutions one point in time in
their bid to rescue the economy from difficulties it faces.
The Real Estate sector, the highest consumers of cement by far has seen significant impact of the
oil find in Ghana. The sector recorded a growth of 13.9 percent from 0.2 percent in the previous
year. Accra, the capital city is ranked among the top ten Real Estate hubs in Africa. Rental prices
for residential properties in the pricy commercial areas of the cities are estimated to be on
average $ 3,000 per month for a two-bedroom house and $ 5,000 per month for a four-bedroom
executive house5. Available estimates put the housing deficit in the country at 1.7 million in
20146. The stakes seem high in the construction sector as both past and current governments
3|Page
have all pledged their support for initiatives to bridge the housing deficit. Government is not the
only party concerned about the housing deficits; individuals as well as companies are
undertaking various residential construction projects all over the country. The development in
real estate creates enormous demand for construction materials such as cement.
Social Environment
Ghana can be described as culturally diverse country with nine major ethnic groups. Even though
these ethnic groups have their separate languages which are taught in schools, English remains
the official national language. It is estimated that 67.1 percent of the total population read and
write in English and other language7.
Aside the economic gain it brings, ownership of a house is considered a social achievement in
the country, and so contributes to a higher social status in the community. In the absence of
affordable housing loans in the country, a lot of individuals resort to the use of personal savings
to undertake such projects. The result is building projects taking longer periods to complete.
In the wake of all these, local development authorities have had the cause to be more vigilant to
ensure infrastructure developments in the country meet the required standard. This is in the wake
of recent reports of collapse of buildings. As a result customers are now more mindful of the
quality of cement and other building materials they buy.
Technological Environment
The country boasts of a vibrant mass media and relatively developed telecommunication system.
There are a total of 75 licensed radio stations and 412 licensed FM stations. Mobile phone
penetration rate for instance stands at over 130 percent and mobile internet penetration at almost
70 percent8. Social media usage is vibrant, and as a result the country has suffered its share of
wild spread of rumors via social media platforms, which makes some bemoan the gullibility of
the citizenry. Marketers and brand managers have taken advantage of these new technologies to
send their messages across to target audience. Local advertisement are mostly accompany with
fun music some of which ends up as common songs and slogans including politicians.
The development of internet infrastructure in the country has also greatly impacted the use of
Information Communication Technology (ICT) systems to facilitate service delivery. Notable
among these is the implementation of the Ghana Integrated Cargo Clearing Systems (GICCS) to
help reduce time spent at the port clearing imported goods. This comes as good news to the
importers as well as local manufacturers import raw materials including cement, whom hitherto
had to spend weeks in getting their goods out of the port.
Legal Environment
The country has experienced a relatively stable political environment after returning to a multiparty system of government from after 26 years of multiple military rules, which has led to many
to commend it as an Africa’s most democratic country. The recent death of the third president in
the current (4th) republic, and the smooth swearing into office of the new president gives
credence to this notion.
4|Page
The Ministry of Trade and Industry (MOTI) is the main government agency which oversee the
operations companies that are into manufacturing of cement as well as those who import the
product too9. MOTI has presented a legislative bill to parliament which will require all cement
importers to register with the ministry, a move some see as a way to protect local manufacturers.
For companies duly registered under the Economic Community of West of African States
(ECOWAS) trade liberalization scheme however, the registration is binding.
Cement Industry
Aside the classification grades that separate cements, the amount of limestone content also
separate cements into two groups: Portland Cement (PC) and Portland Limestone Cement (PLC).
Portland cement is a fine proportional mix of Limestone, Alumina, Iron ore, and Silica. The
process of production involves heating up the main ingredient – limestone to about 2,700o F to
liberate Carbon dioxide and lime, via a process called calcination. This process produces clinker,
and the amount of energy required during this process increases with increase in the grade of the
cement. Clinker is then combined with another ingredient (gypsum) and less than 5% of
limestone to create a binder with hydraulic properties10.
It is estimated that the calcination process releases about 8% of the world’s Carbon dioxide
emissions. This has necessitated modification to Portland cement to allow for higher percentage
of limestone to produce Portland Limestone Cement (PLC).The Minnesota Concrete Council
indicated that the use of 10% crushed limestone result in about 10% Carbon dioxide reduction,
and so reduces greenhouse gas emission11.
Currently the Ghanaian cement industry consist both PC and PLC. It also has three types of
grades: 32.5R, 42.5N, and 42.5R. The total cement production capacity for the country is
estimated at Nine (9) metric tons per year, but consumption currently stands at six (6) metric tons
per year. Cement imports is also estimated to be over one (1) metric tons, which leaves total
estimate deficit of four (4) tons (http://www.globalcement.com/news/itemlist/tag/Ghana). The
situation has led to increased competition.
Chronology of Competitions
Competition in the Ghana’s cement industry only started after GHACEM enjoyed forty years of
monopoly. Currently however, the cement industry can be divided into two: the importers and
the local manufactures.
Local Manufacturers
The first competitor to GHACEM to enter the cement market in Ghana was the West African
Cement (WACEM) Company, producers of the Diamond brand of cement, which established a
plant at the eastern border town of Aflao. The company uses the neighboring country, Togo’s
port to import its raw materials. WACEM came with a product clearly differentiated by the
classification grade. Their brand name is Diamond and it is classified 42.5R, which is written in
bold on its multiwall brown paper in blue ink. Diamond since its introduction has been selling at
a price marginally lower than GHACEM.
5|Page
Photo 1: Diamond Cement. Photo Credit: www.citifmonline.com
For the first time, GHACEM had to deal with direct competition which also happens to be from a
local manufacturer. Indeed, WACEM capitalized on the abundance of mass communication tools
to put out in the public domain the selling proposition of its brand as offering a product which
achieves ‘early strength’ in a shorter period but sells at lower price (Table 2).
Just when GHACEM thought it had survived the competition from Diamond over its market
share, other entrants found their way into the market. Benny refers to these new entrants as
“importers”, probably because they do not have production plants cited in the country.
Greenview International is the registered company that deals in the Dangote brand of cement.
The product is produced in Nigeria by the Dangote Group, a conglomerate chaired by Africa’s
2015 richest according Fobes Magazine Aliko Dangote12. The company has its existing and
planned operations in 16 African countries and employs 17,000 workforce. The company’s
operation is also different from the rest because for the moment, it imports finished products and
only bags them in Ghana.
In Ghana, the Dangote Group is in its 5th year of operation. It started by importing and bagging
bulk cement- at its terminal in Tema and selling into the domestic market. Recently however, the
company has installed clinker grinding machine in the Western region of the country. The total
workforce stands at nearly 700. Dangote cement in the Ghanaian market comes in the
classification grade of 42.5R, and is bagged in 50kg pilfer free poly-sacks13. The product has
consistently been sold at a price of GHS2.00 to GHS4.00 ($0.57 to $1.14) lower than
GHACEM’s 32.5R PLC depending on the part of the country where it is being sold and the
market demand at the time (Table 2). The company currently has no exclusive distribution
channels in Ghana. However, its product is found in most retailing shops that sell building and
construction materials.
6|Page
Photo 2: Dangote Cement with new look. Photo Credit: www.dangote.com
As expected, Dangote is using the classification grades in its marketing campaigns to make
inroads into the Ghana market much faster than GHACEM might have anticipated. Benny
mentioned how he has heard of how the classification grade has been used by Dangote to make
inroads in neighboring English speaking country- Nigeria where the company originates. The
increase in competition has already affected GHACEM’S market offering in many ways.
Importers
Aside Dangote, there used to be several imported products. Almost all these products are
imported from Asia, and sells at much cheaper price. Most of these products are however
perceived an inferior. Benny however believes cement importers have some unfair advantage
over the local producers because they had found a way to pay lesser duties (CFI) on their
finished products, compared to how much GHACEM pays on their raw materials. These
companies are able to pay less CFIs by classifying their products raw materials instead of as
imports. Benny however expressed relief that the government has acted on petitions local
manufacturers submitted with evidence which show the comparative disadvantage they suffer.
The government’s action has led to most of these importers moving out of the market. The
number of importers currently in operation he recalled are SCL and SOL (Refer to Exhibit 2 for
chart on market share).
Cement Consumer Market
Cement consumers in Ghana are diverse. There are the giant corporate developers who undertake
high impact constructions like the bridges, roads, high rise commercial buildings among others.
There are also several real estate developers apparently in response to the huge housing deficit in
the country. Then there exist a large number of small businesses and individuals who hold
themselves up as real estate developers, but are usually into developing 2 to 5 units of houses at a
time. A segment of the small businesses are also into what is locally known as “block cutting”:
these business manufacture building and pavement blocks for …
Purchase answer to see full
attachment
Recent Comments