“ANALYSIS OF EXTERNAL

ENVIRONMENT CEMENT
INDUSTRY OF BANGLADESH”
 Table of Contents
Introduction .................................................................................................. 3

Industry overview ......................................................................................... 4

The External Environment ........................................................................... 6

M.E. Porter’s Five Forces Model in the Cement Industry Analysis .......... 13

Competitive Environment .......................................................................... 16

Strategic Group: ......................................................................................... 17

SWOT Analysis.......................................................................................... 19

Conclusion .................................................................................................. 20

References .................................................................................................. 21
 Introduction

As time passes, the world experiences development in all sectors. Development leads
to urbanization, reflecting economic growth, which brings upon infrastructure
development and construction. Bangladesh’s economic growth is reflected by an
acceleration in urban development, with the construction of houses, apartment blocks,
road infrastructures and public facilities. The country’s increasing urbanization has
stimulated the building materials sector and has generated considerable needs for
cement. Cement is a major component in this chain.

So, Cement industry in any country plays a major role in the growth of the nation and
economy. Bangladesh is the 40th largest producer of cement. It is one of the fastest
growing, intensely competitive sectors of economy in our country. Due to boost in
various infrastructure projects, housing facilities and road networks, the cement
industry in Bangladesh is currently growing at an enviable pace. By this way Cement
industry is leading Bangladesh from the respect of infrastructure development.

If we want to get a brief description on the cement industry of Bangladesh, we will

have to discuss about the industry’s external environment, strength, threats, weakness,
and opportunities. We will also have to discuss on competitive forces on the industry.
After discussing all the points, we will give some recommendation or ways how the
industry’s companies can be improved. So the main objective-

(1) Analyze external environments of the industry.

(2) Discuss M.E. Porter’s five competitive forces.
(3) Discuss SWOT analysis.

Before discussing these, we have prepared a short description on the industry

overview. The description helps to meet new knowledge on cement industry of
Bangladesh.
 Industry overview
Since the liberation war in 1971, major urbanization and industrialization took place
in the country, which led to a rise in demand for cement. As the companies saw an
opportunity in the field, they undertook capacity expansion plans. The birth of the
cement industry in Bangladesh dates back to 1994. Later, in 2003 Crown Cement (M.I
Cement Factory Ltd.) first started exporting. Till now, several cement producers have
exported their products. Within the span of the two to three years of embellishing,
cement industry expanded capacity of the product with stable growth rate of
consumption.

After a decade, currently 123 companies are listed as cement manufactures in the
country. Among them 63 have actual capacity while 32 are in operation and there are
mainly 27 types of cement, which can be grouped into 5 general categories and 3
strength classes. Also there are 7 public limited company are listed in the DSE (Dhaka
Stock Exchange).

Till 1990 about 95 per cent of the country's demand for cement had been met through
import. But the process of producing cement is now highly energy-intensive. Presently
cement is being exported to India, Myanmar, Nepal, the Maldives and Sri Lanka.
Bangladesh exports 0.5 to 0.6 million MT of cement a year to the Seven Sisters in
India. Multinational cement companies are facing intense competition from local
companies which are grabbing the top slot of the industry by operating in economy of
scale and with deft marketing strategy. Multi-national companies (MNCs) now hold
only 25-30 per cent of the total market share. The well known MNC cement
companies are- CEMEX Cement Bangladesh Limited., Holcim Limited, Lafarge
Cement Limited, Heidelberg Cement Bangladesh Limited etc.

A list of well-known cement companies which are operated in our country are given
below-
Company Name Established Products Name
Premier Cement Mills Limited 2004 Premier Cement
Shah Cement Industries Ltd. 2002 Shah Cement
Mir Cement Limited - Mir Cement
Madina Cement Industries Ltd. 1978 Tiger Cement
M.I. Cement Factory Ltd. 1994 Crown Cement
CEMEX Cement Bangladesh Ltd. 1906 Cemex Cement
Holcim Limited 1912 Holcim Cement
Meghna Cement Mills Ltd. 1992 King Brand Cement
Bashundhara Group 1987 Bashundhara Cement
Confidence Cement Limited. (CCL) 1994 Confidence Cement
HeidelbergCement Bangladesh Ltd. 1874 Scan Cement
Lafarge Surma Cement Ltd. 1833 Supercrete Cement
Seven Circle (BD) Ltd. 1988 Seven Rings Cement
 The External Environment
External environment refers to the environment that has an indirect influence on the
business firm. The environment may be political, demographic, economic etc. For the
cement industry we will have discussed six different external environment. These are

(1) Economic Segment

(2) Socio-cultural Segment
(3) Global Segment
(4) Technological Segment
(5) Political Segment
(6) Demographic Segment

These are explaining below-

(1) Economic Segment-

(a) High Inflation Rate- As we can see the inflation rate of Bangladesh is
increasing day by day. Last one year inflation of Bangladesh has shown that the
inflation rate is raising. The graph is shown below-

As result the purchasing power of cement easily lacks. When people bought a
cement bag at 300-400 TK 2-3 years ago. But at present people have to buy the
same product at 400-500TK. So inflation rate decrees the sell and will impact the
cement companies.
(b) Higher/lower interest rate- if the interest rate increases, the cement companies
will get low return. Because high interest rate reduces return. If the interest rate
decreases, the cement companies get higher return.
(c) Trade deficits- higher trade deficits makes high complexity. As a result
multinational cement companies can not easily enter our country to operate
their business. For example- two of the global cement group, UAE-based
Emirates Cement and Mexico-based Cemex have recently divested their
Bangladesh operations.
(d) Surplus Budget- When a government of a country expenses higher than its
revenue, it is called surplus budget. It is also know to all that every fiscal year
of Bangladesh has surplus budget. So surplus budget is severe problem in the
economy of our country. Surplus budget also creates problems with the
country’s industries. So the cement industry has affected by surplus budget.
(2) Socio-Cultural Segments-
(a) Huge employment- There are more than 100 cement industry in our
country. In these industries, a huge number of employees work. Although
Bangladesh is a densely populated county, the government can not provide
proper employment opportunities for the people. As a result, people of the
country are unemployment mostly.
So the cement industries creates employment and reduces the
unemployment of our country. It is a great advantage for our country.
(b) Quality working environment- the cement industry creates quality working
environment so that the employees can work safely. It is a great news for
cement industry that till now there has only few and nominal accidents
occurred in the cement industry. So the cement company create satisfied
working environment that affects socio-cultural segments.
(c) Less concern on environment- the cement companies have less concern on
environment. Although cement industry heavily pollutes the environment.
The industry also produces harmful gas and pollutes river water. But the
companies should be responsible for polluting the environment.
 (d) Attention on CSR- CSR means Corporate social responsibilities. The
cement companies involves CSR. For Example- premier cement Ltd. hold a
number of occasions to distribute blankets during winter, food items during
eid holidays, relief packages during floods, etc. The company has always
tried to be at the forefront in responding to the needs of the disadvantaged
people in and around its operations at the trying times.
(3) The Technological Segments-
(a) New Product innovations- the cement companies of Bangladesh has
promoted their product’s quality by using high technology. The research
departments of the company innovate new and more effective products than
old product.
(b) Private and Government R&D expenditures- the government of our country
has invested a huge amount money for R&D (Research & Development).
As a result new products like- cement can be invented. Or the existing
products can be developed. So R&D expenditures from the government
have affected most in the cement industries. Moreover private sector has
invested for R&D.
(c) New communication technology- New communication technology has
brought about a revolutionary changes in our society. At present people can
easily communicate other people within a seconds.
It has also brought about a great changes in the cement industry. Now
consumers can easily get cement’s product information from the company’s
website. They can also buy products using internet and mobile
telecommunication technology.
(4) Demographic Segments
(a) Population Size- We have said before that Bangladesh isa densly populated
country. People have been cement for individual home, real-state
developers, public organization. So the cement companies have to produce
a huge amount of cement. A research shows that Out of total production,
73 percent cement is consumed in Dhaka & Chittagong divisions and the
rest in other divisions.
As a result, cement companies have to supply cement products mostly in Dhaka and
Chittagong Purchasing Approach- cement is widely used in the public organizations,
real-estate developers and individual for constructing building or other construction.
In the chart, we have seen that cement is mostly used in the public organization
(30%). Real-estate developers have used cement products for commercial use (30%).

(b) Seasonal variation- Generally there is peak season (January-April) in our

country for building construction. Because the month from January to April
is the summer season of our country. Summer season is good for
construction works. So the cement companies have to produces more
cement bags than other times. In the winter and rainy season, constructional
works may face problems because off indifferent weather. So these season
are the off-peak seasons for construction.
(5) Global Segmentation
(a) Deduction in clinker price- although the prices of cement is increasing day
by day, the consumption rate of cement is no changed at all. We have seen
that per capita consumption for cement products is 105 KGS. China is the
most uses of consuming cement bag (1700 KGS). The reason for raising
cement consumption is that the reduction of clinker price. The cement
companies have tried to reduce production cost as much as possible. As a
result the price of cement on the basis of production can be affordable for
consumers. In other countries like India, the price of per cement is higher
because the government of India has added extra tax for cement.
Bangladesh Cement Manufacturers Association (BCMA) is the association
of cement industry in our country. The organization has controlled the prize
of cement has controlled according to the global standard.
(b) Increases in global price of Cement- The price of cement are increasing
globally day by day. This problem affects the cement industry in developing
countries especially in our country. Because our country has good
reputation on cement industry. If the price of cement becomes higher, the
cement industry may face reduction selling. The Percentage that change in
cement prices worldwide from 2012 to 2017 are given below-
 Year Percentage Change
2012 -5.1%
2013 -0.1%
2014 3.8%
2015 3.7%
2016 3.6%
2017 4.4%

We have seen that the percentage of cement price in the year 2017 is much higher than
the last 3 years.

(c) Huge Tax- the local cement company industries export a huge amount of
cement every year. But the companies bear high amount of Tax for exporting their
products. It is a great disadvantage for the local cement companies. As a result, the
price of per cement bag may be high in the global market in case of paying excessive
tax.

(d) Personal relation with surrounding countries- we have said before that
Bangladesh export its cement product in India, Sri Lanka, and Myanmar. As a result a
good relationship is building up with the countries. Recently Tripura (A state of India)
has imported cements from Bangladesh. This business relation has build up business
and cooperative relationship with India.

(e) Increase the demand of cement in the world- the demand of cement is
increasing day by day Because of constructing new bridges, high-storeyed building,
and complex design. We think that the demand of cement will be increasing more
globally in future.

(6) Political Segments-

(a) Government Restriction- Multinational companies of cement industry have

faced various local restriction. As a result the companies cannot easily operate their
business activities. The renowned MNC are Holcim limited, Lafarge Cement Ltd.,
Heidelberg Cement Bangladesh Ltd., Cemex cement Ltd etc. Sometimes this problem
affects the local companies.

(b) High Amount of Tax- The cement companies of Bangladesh have to bear
high amount of tax for producing cements. Although the production cost of cement
bag is low. But the price of cement becomes because of paying excessive amount of
Tax.

(c) Limited investment- the government investment for garments industry is

limited. As a result the industry is experiencing low development from the
government. This thing also affects our cement industry for political perspective.

(d) No Subsidiary- the government of Bangladesh gives nominal subsidiary for

the cement industry.

(e) Rein less political clash- Poetical clash is a common problem in our
country. The political situation of Bangladesh is dangerous. The politics of
Bangladesh is currently ranked 142nd out of 176 countries according to the
Transparency International Corruption Perception Index. Political clash between the
government party and opposite party between has occurred continuously in our
country. As a result business firms cannot operate their business properly. So this
problem also affects our cement industry.
M.E. Porter’s Five Forces Model in the Cement
Industry Analysis

Porter's Five Forces is a simple tool for understanding the competitiveness of your
business environment, and for identifying your strategy's potential profitability. This
is useful, because, when you understand the forces in your environment or industry
that can affect your profitability, you'll be able to adjust your strategy accordingly. For
example, you could take fair advantage of a strong position or improve a weak one,
and avoid taking wrong steps in future.

The five forces model are-

(1) Threat of New Entrants

(2) Threat of Substitutes

(3) Bargaining Power of Buyers

(4) Bargaining Power of Suppliers

(5) Current Rivalry

For the perspective of cement industry of Bangladesh, these are explaining below-

(1) Threat of New Entrants-

 For a cement company in our country, the threat of new entrants is low.
Because cement company is not a small type of business. The company needs
huge amount of capital for opening a business. Moreover high production cost,
large number of workers, heavy types productions machines & equipments are
also appeared in the garments company. So the treat of new entrants for the
cement industry is low.
 High entry barriers also appeared in the cement industry. As a result MNC
(Multi National Companies) cannot easily enter in our country.
  The cement company has to pay Huge tax and freight cost.
 Availability of raw materials is low for producing cement products in our
country.
 As the cement industry of our country is in growth stage, and it is developed
day by day. So there is no chance for opening and operating a new cement
company properly.

(2) Threat of Substitutes-

 Though There is no substitute product of cement. So the threat of substitute

products is low.
 But it has been predict by the analysts of the cement industry that around the
year of 2050, cement structures are likely to be replaced by steel structures or
more developed substitute product. But This prediction does not pose much
threat to the cement industry.

(3) Bargaining Power of Buyers-

 The Bargaining power of buyer is always high. Bangladesh has many cement
products with different types of quantity and price. As a result
consumers/buyers can easily purchase another company’s product.
 Sometimes the power of buyer is low. Because when a building is constructed
with a specific cement product, the consumers have to buy same products for
further construction. On the other hand. Government is the main buyer of
cement industry to take decision for constructing new bridge; the engineers
have taken one specific cement product for completing construction. Real
Estate & Developers also do this thing.

(4) Bargaining Power of Suppliers-

 The bargaining power of supplier for our country’s cement industry is low.
Though Bangladesh has huge natural resources. The major raw materials are
 available in our country. As a result the companies have bought anywhere in
our country.
 But sometimes the bargaining power of supplier becomes high. Because the
heavy machines and equipments for cements industry are not so available in the
world. So the companies have to buy these machines from few and specific
machines manufacturer companies.

(5) Current Rivalry-

 The threat of rivalry is high. Because currently there are 123 companies are
listed as cement manufactures in the country. At present, 81% of the total
market share is held by top ten manufacturers. So the threat of rivalry is low.
 Competitive Environment

Cement industry in Bangladeshi s playing a very important role in the development of

infrastructure as the economy is growing over the years. Though there have strong
competition in the market of Bangladesh. Because there are 123 cement company
remaining in our country. Currently they are not only fulfilling the local demand but
also exporting cements.

The multinational companies of cement industry which are operating in our country
have huge assets, market distribution channel, market share. Not only the
multinational companies but also local companies have large amount of assets. It is
good news for Bangladesh that the local companies has international prestige for
higher production.

A pie chart is given below on the basis of market share of cement industry in
Bangladesh-

Other Shah Cement

Premier Cement 20% 19%
8%
King Brand Cement
9%

Supercrete Cement Scan Cement

11% 11%

Fresh Cement Holcim Cement

7% Crown Cement 9%
6%

Because of failure to penetrate market, two of the global cement group, UAE-based
Emirates Cement and Mexico-based Cemex have recently divested their Bangladesh
operations. However, completion of acquisition of Holcim by Lafarge Surma will
reshape the industry dominance in Bangladesh as both the companies already operate
their own business here. On acquisition, Lafarge Holcim has the 2nd place in terms of
market share.

Strategic Group:

Shah cement

High profitable

Lafarge Holcim

Crown Cement

Shah Cement

Exporting group

Premier Cement

Fresh Cement
 Seven circle Cement

Multinational
companies
CEMEX Cement

Lafarge etc

Chhatak Cement
company LTD.
(Gov. com.)
Clinker producer

Lafarge Surma
Cement LTD.
 SWOT Analysis
It is important to identify SWOT Analysis for the cement industry of Bangladesh.
SWOT analysis aims to identify the key internal and external factors seen as important
to achieving an objective. SWOT analysis groups key pieces of information into two
main categories:

1. Internal factors – the strengths and weaknesses internal to the

organization
2. External factors – the opportunities and threats presented by the
environment external to the organization.

For the perspective of cement industry the SWOT analysis are explained below-

(1) Strengths-

(a) High Quality Product.

(b) Each cement firms has strong financial backup.

(c) High entry barriers for new entry.

(2) Weaknesses-

(a) Heavy reliance on limestone based cement

(b) Inadequate investment in research & development.

(3) Opportunities-

(a) High tax rate on imported cement which creates an opportunity to produce
clinker.

(b) Wide range of market environment.

(4) Threats-
 (a) Reduction in global prices of cement which has become a threat for the
industry.

(b) Weak road linkages result in delayed distribution.

(3) Inaccessible situation of certain regions.

Conclusion

Since the eighties and early nineties the country experienced the establishment of
cement industries in the private sector. Before that, the country had to import almost
95 per cent of the construction materials including cement from outside of the country.
The country experienced huge demand for construction materials including the cement
at the beginning of the 21st century. Cement sector of Bangladesh has been considered
as the 40th largest market in the world. Cement industry provide an important portion
in the nation’s economy of a country.

As the threat of new entrants is high because of the huge investment, cement as a
business can be profitable. Though the main buyer of cement is the government. So by
the help of government cement industry of Bangladesh can be more developed.

While doing this report we got to know a lot about Cement industry, which would be
huge help for our future in corporate world.
 References

 Anon, 2015. Cement Sector of Bangladesh. Research & Innovation Lab, pp.1–
2.
 Sub, Sub Editior, 2017. Bangladesh Cement Industry. Bangladesh Cement
Industry,40th Largest Market in the World By Prosanta Laskar, 1st, 08.
 Dhaka Stock Exchange Ltd.. 2017. List of Companies Selected Industry:
Cement. [ONLINE] Available at:
http://www.dsebd.org/companylistbyindustry.php?industryno=21. [Accessed
25 December 2017].
 Premier Cement Mills Limited. 2013. About Us. [ONLINE] Available at:
http://www.premiercement.com/about.html. [Accessed 25 December 2017].
 Madina Group. 2017. Corporate Profile. [ONLINE] Available at:
http://www.madina.co/corporate-profile.php. [Accessed 25 December 2017].
 Wikipedia. 2017. Cemex. [ONLINE] Available at:
https://en.wikipedia.org/wiki/Cemex. [Accessed 25 December 2017].
 Crown Cement. 2017. Berif History. [ONLINE] Available at:
http://www.crowncement.com/company/about-us/brief-history/. [Accessed 25
December 2017].
 Confidence Cement Limited (CCL). 2017. Company Profile. [ONLINE]
Available at:
http://www.confidencecement.com/php_files/contents/contents.php?cmd=conte
nts&cms_view=profile&p_id=31. [Accessed 25 December 2017].
 Trading Economics. 2017. Bangladesh Inflation Rate. [ONLINE] Available at:
https://tradingeconomics.com/bangladesh/inflation-cpi. [Accessed 25
December 2017].
 EBL Securities Ltd.. 2017. Cement Industry of Bangladesh. [ONLINE]
Available at:
http://www.eblsecurities.com/AM_Resources/AM_ResearchReports/SectorRep
 ort/A%20Comprehensive%20Review%20of%20the%20Bangladesh%20Ceme
nt%20Industry.pdf. [Accessed 25 December 2017].
 Premier Cement Mills Ltd.. 2017. CSR. [ONLINE] Available at:
http://www.premiercement.com/csr.html. [Accessed 25 December 2017].
 Anon, 2015. Cement Sector of Bangladesh. Research & Innovation Lab, pp.4–
5.
 Wikipedia. 2017. Bangladesh Cement Manufacturers Association. [ONLINE]
Available at:
https://en.wikipedia.org/wiki/Bangladesh_Cement_Manufacturers_Association.
[Accessed 25 December 2017].
 Statista. 2017. Percent change in cement prices worldwide from 2012 to 2018.
[ONLINE] Available at: https://www.statista.com/statistics/248359/change-in-
global-cement-prices/. [Accessed 25 December 2017].
 Investopedia. 2017. Porter's Five Forces. [ONLINE] Available at:
https://www.investopedia.com/terms/p/porter.asp. [Accessed 25 December
2017].
 Wikipedia. 2017. SWOT Analysis. [ONLINE] Available at:
https://en.wikipedia.org/wiki/SWOT_analysis. [Accessed 25 December 2017].