Gujarat Ambuja: Redefining Operational Efficiency


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Case Details:

Case Code : OPER009
Case Length : 12 Pages
Period : 1993 - 2002
Organization : Gujarat Ambuja (GACL)
Pub Date : 2005
Teaching Note : 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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Background Note Contd...

In December 1999, GACL acquired a 51% stake in Delhi based DLF Cement for Rs 3.5 billion. DLF Cement had started its operations in 1997 in Rajasthan with a plant of capacity 1.4 mtpa. After this merger, GACL became the fourth largest cement manufacturer in India after ACC, L&T and Grasim.

In the same month, GACL also acquired a 7.2% stake in Associated Cement Companies (ACC) for Rs 4.55 billion. ACC was the largest manufacturer of cement in India. With 14 manufacturing units in India, it had a total capacity of over 11 mtpa. It was one of the largest integrated cement companies in the world.

By the late 1990s, GACL had emerged as one of the most energy efficient and technologically advanced cement manufacturers in India. In December 2001, GACL began trial production at a new 2 mtpa plant in Chandrapur, Maharashtra, taking its total capacity to 12.5 mtpa (Refer Exhibit I). For the financial year 2000-01, the company recorded a turnover of Rs 12.52 billion and a net profit of Rs 1.5 billion (Refer Exhibit II).

GACL had a large distribution network of 11,500 outlets. It was one of the first cement companies in the country to recognize the importance of brand building. The company's cement, sold under the Gujarat Ambuja brand name, enjoyed good brand equity and sold at a premium. The company was the overall market leader in the Indian cement industry (Refer Table I).

GACL was not only the market leader, it ALSO ranked very high on the profitability criteria. Its new plants, use of better quality limestone, innovative energy management efforts, and strong retail presence in Mumbai, Gujarat and Punjab gave it a strong edge over its peers.

Its cost per rupee of sales was much lower than most of its competitors, resulting in much better operating margins (Refer Tables III, IV and Figure I).

Industry observers unanimously agreed that GACL was the most efficient cement manufacturer mainly because of its operational excellence. The company had done well in spite of the fluctuations in the cement industry by adopting aggressive productivity improvement and cost-cutting measures. GACL had won a host of awards for management excellence, quality, business strategy and environment management (Refer Exhibit III). Ever since its inception, the company believed in doing things in an innovative and unconventional way, so as to reap benefits in new ways, using new methods...

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