Gujarat Ambuja - Cost Leader in the Indian Cement Industry
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Case Details:
Case Code : OPEA002
Case Length : 16 Pages
Period : 2000 - 2003
Organization : Gujarat Ambuja
Pub Date : 2004
Teaching Note :Not Available
Countries : India
Industry : Cement
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Introduction
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Gujarat Ambuja Cement Ltd (GACL), which had grown tenfold during the late 1990s,
was the third largest producer of cement in India in 2004 next only to Birla
Groups (consisting of Grasim Cements and Larsen & Toubro Cements) and Associated
Cement Companies (ACC) &. In 2003, GACL had a capacity of 12.5 mn tonnes and
generated revenue in excess of Rs. 2,500 crores. The company had posted a net
profit of Rs 221.73 crore for the year ended June 30, 2003. GACL was the lowest
cost producer in the Indian cement industry.
GACL's quest for cost leadership had been driven by productivity improvement and
cost cutting measures.
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The company had won various awards for management excellence, quality, and
environment management. Ever since its inception, the company had believed
in doing things in innovative and unconventional ways. GACL's modern plants,
large kilns, high degree of automation, low manpower costs, low power tariff
and low fuel costs had helped it to become the cost leader in the industry.
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GACL had cut energy costs by reducing the usage of coal through use of
substitutes like crushed sugarcane. GACL operated most of its plants at
above 100% capacity utilisation. The company had pioneered the use of ship
transportation to cut freight costs and also established the necessary
infrastructure like ports, freight and handling terminals.
Low-cost funds had helped GACL to cut the cost of capital. The company's
engineers had picked up best practices during visits to overseas plants in
countries like Japan and Australia. GACL had also reduced pollution levels
at its cement production plants and complied with the Swiss standards of 100
milligrams per cubic nanometer. |
Background Note
GACL was established as Ambuja Cements Private Ltd. (ACPL) in 1981 by Narotam
Satyanarayan Sekhsaria (Sekhsaria), a businessman from Gujarat in western India.
Originally a cotton trader, Sekhsaria liked the cement business because of its
stable demand, lack of substitutes and limited competition. With the support of
Gujarat Industrial Investment Corporation (GIIC), Sekhsaria and his two
partners, Suresh Neotia and Vinod Neotia, set up APCL. Suresh Neotia was
appointed Chairman while Sekhsaria took charge as the Managing Director...
Gujarat Ambuja - Cost Leader in the Indian Cement Industry
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