Scribd Logo
Upload

Welcome to Scribd!

  • 1K views

    Cemex Case Analysis: Group 6

    Uploaded by

    Ekta Gulechha
    The document analyzes CEMEX's strategy in Egypt, specifically their decommoditization strategy and reward program for retailers. CEMEX invested $125M to improve production facilities, increase capacity, develop logistics networks, and infrastructure for ready mix distribution. Their strategy was to position themselves as a premium product producer and develop a distribution strategy through partnerships with small retailers. Their reward program aimed to motivate retailers to sell more CEMEX products and avoid price wars. Analysis showed the program increased average retailer sales and consumption compared to the previous year, though it had a high dropout rate. Suggested improvements included less frequent but longer-term rewards to reduce dropout rates.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd

    Cemex Case Analysis: Group 6

    Uploaded by

    Ekta Gulechha
    1K views19 pages
    The document analyzes CEMEX's strategy in Egypt, specifically their decommoditization strategy and reward program for retailers. CEMEX invested $125M to improve production facilities, increase capacity, develop logistics networks, and infrastructure for ready mix distribution. Their strategy was to position themselves as a premium product producer and develop a distribution strategy through partnerships with small retailers. Their reward program aimed to motivate retailers to sell more CEMEX products and avoid price wars. Analysis showed the program increased average retailer sales and consumption compared to the previous year, though it had a high dropout rate. Suggested improvements included less frequent but longer-term rewards to reduce dropout rates.

    Original Description:

    Cemex Case study

    Original Title

    cemex final.pptx

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document analyzes CEMEX's strategy in Egypt, specifically their decommoditization strategy and reward program for retailers. CEMEX invested $125M to improve production facilities, increase capacity, develop logistics networks, and infrastructure for ready mix distribution. Their strategy was to position themselves as a premium product producer and develop a distribution strategy through partnerships with small retailers. Their reward program aimed to motivate retailers to sell more CEMEX products and avoid price wars. Analysis showed the program increased average retailer sales and consumption compared to the previous year, though it had a high dropout rate. Suggested improvements included less frequent but longer-term rewards to reduce dropout rates.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    1K views19 pages

    Cemex Case Analysis: Group 6

    Uploaded by

    Ekta Gulechha
    The document analyzes CEMEX's strategy in Egypt, specifically their decommoditization strategy and reward program for retailers. CEMEX invested $125M to improve production facilities, increase capacity, develop logistics networks, and infrastructure for ready mix distribution. Their strategy was to position themselves as a premium product producer and develop a distribution strategy through partnerships with small retailers. Their reward program aimed to motivate retailers to sell more CEMEX products and avoid price wars. Analysis showed the program increased average retailer sales and consumption compared to the previous year, though it had a high dropout rate. Suggested improvements included less frequent but longer-term rewards to reduce dropout rates.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 19

    CEMEX Case Analysis

    Group 6

    CEMEXS STRATEGY IN EGYPT Transforming Assiut Cement into a market leader


    Need for a good product and a good marketing strategy to avoid price based competition Investment of $125M: improvement of production facilities increase of capacity development of logistics network infrastructure to distribute ready mix

    DECOMMODIZATION STRATEGY 1. Positioning as a producer of premium product 2. Distribution strategy based on a partnership with a network of small retailers

    DECOMMODIZATION STRATEGY
    1. Positioning as a producer of a premium product
    Characteristics: Dark, smooth, and fresh Specialty needs: resistant to salt water, customized for sulfate rich soils, low-price line Marketing stressed on quality, commitment to customers, and Egyptian roots

    2. Distribution strategy: network of small retailers Avoid brutal price negotiations, sell directly to retailers New logistics: agreement with Banque Misr so that the retailer does not need to come to the plant Retailer selection: legally established, 500 tons of cement sold/month, sells to end customers, has storage and sales area, willing to forge a partnership Need for retailers to know how to sell the product, and teach end users how to use the cement need for them to be loyal (loyalty & reward programs)

    How does the Reward Program fit in this strategy?

    Strong Retailer Network & Locus of Power Pushing premium priced products

    Motivating retailers to sell our products while ensuring good returns

    Reward Program allowed higher emphasis on Premium products through points allocation Cemex products were reaching the end customer without cutting off the prices

    Avoiding Price wars

    Controlling variability & volatility of demand

    Setting fixed monthly targets & assuring reliable estimates of monthly production

    Why did Llotop choose the Reward Program and not another incentive programs for retailers?

    Retailers margins and loyalty discounts were not strong enough incentives to achieve the target growth rate

    Moving away from usual incentives being given by competitors Pushing premium products A minimum sales volume was assured as opposed to Discounts and rebates Reward Program helped in targetting the competition loving nature of Egyptians

    Did the Reward Program motivate retailers to sell more CEMEX products?

    Reward Program 2002


    Not Participant 400.00 300.00 200.00 Still In Tournament Dropped

    100.00
    0.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Avg Sales Dec

    Average Sales
    325.00 250.00 175.00 100.00 Still In Tournament Not Participants Dropped
    317.18

    Participant Type Not Participant

    Number

    Sales

    960
    2020 2231 5211

    230196
    479200 458335 1167731 573785

    239.79
    237.23 205.44 224.09 317.18

    239.79

    205.44

    SIT (Till May02) Dropped

    SIT (After May02)

    41.51 %

    1809

    Reward Program 2003


    Still In Tournament 400.00 300.00 200.00 Dropped

    100.00
    0.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

    Average Sales
    225.00 200.00 175.00 150.00 125.00 100.00 Still In Tournament Dropped
    148.54 222.10

    Participant Type SIT (Jan03)

    Number

    Sales

    Avg Sales 300.29

    505

    175665

    Dropped

    4443

    659960

    148.54 49.52 %

    SIT (Feb03)

    1992

    442407

    222.10

    Comparison 2002 V/s 2003


    Exhibit 2
    Consumption (MMT)
    2003
    25

    10.71%
    28

    2002 23 24 25 26 27

    28

    29

    Exhibit 12 Sales
    2003
    182.06

    26.61%
    248.08

    2002 150.00 175.00 200.00 225.00

    250.00

    Comparison 2002 V/s 2003


    Still In Tournament
    400.00 300.00 200.00 100.00 0.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2002 2003

    Dropped
    300.00 200.00 100.00 0.00 Jan Feb Mar Apr May Jun Jul Aug

    2002

    2003

    Sep

    Oct

    Nov

    Dec

    2002 Still In Tournament (Avg Sales) Dropped (Avg Sales) 317.18 205.44

    2003 222.09 148.54

    % Drop 29.98% 27.69%

    Ques 4 :What characteristics of the Reward Program do you like the most? And the least? Why? Positives

    Encouraged loyalty and retained retailers Sales representatives detailed the retailers about the program Did not just focus on sales numbers but also on product portfolio: variable point system Monthly targets : Reduced forward buying Easy for production scheduling Clearly quantified goals e.g. 70% of target per month to be ordered, buy at least 150 tons of Assiut cement Diversity of retailers considered: Small and big retailers had different parameters of evaluation Regional grouping gave fair chance to all the retailers as the economic development of regions was different Monthly feedbacks to retailers Voluntary participation- no pressure on retailers Consideration shown towards those who remained till the end TV given as reward but was not an appropriate reward

    Negative

    Keeping a part of the bonus would affect the initial decision of participation Reward system was too complex High rate of elimination of participants Should have had a quarterly / semi annual rewarding system to encourage the participants and reduce drop out rate No disclosure about the parameters on the basis of which the number of prizes per region was decided

    E.g. West Delta has appx. ratio of 8:1


    East Delta also had ratio of appx. 8:1

    But Qena had 17:1, Qena had average performance is greater than West Delta

    The number of winners remained same for the regions in 2003 despite of increase in number of retailers for all the regions

    What are the advantages and disadvantages of specifying quantities of each type of product in retailer targets? Would you think a generic target of dollar sales, or dollar contribution margin, could have been more effective in supporting CEMEX strategy?

    Advantage and Disadvantage of specifying quantities of each type

    Advantages:

    Indirectly drive and monitor the sales Ensure minimum purchase in different categories Push Sales strategy Disadvantage: Quantities fixed need not reflect local demand of the region

    Need for the reward system


    Grow in a stagnant market Supply side exceeds demand in local cement industry Push sales for premium products

    Retailer score computation

    Existing

    Proposed

    Sales
    Basic PRM SRC Point Calculation Basic PRM SRC Total Points 175 35 0 250 50

    Quota
    70% 70%

    Sales
    200 80 20

    Quota
    0% 70% 50%

    Points Basic PRM SRC

    1 5 9

    0-

    175 175 0 350

    0 56 10

    0 280 90 370

    Retailer should fulfill minimum quantity of 120 tons Or He should fulfill the quota for premium products

    Loyalty Cash-back
    Quantity Range and Products Existing (LE/Tn) First 0-400 tons From 401-800 tons From 8011200 tons Over 1201 tons PB SRC Loyalty Rewards Quanti Existing Propsed ty System System Basic 200 800 400 1600 600 2200 800 2800 1000 3200 1200 3600 1400 3800 1600 4000

    Proposed (LE/Tn) 4 3 2 1 4 4 3 3 2 2 4 4

    600 1200 1800 2400 2800 3200 3600 4000

    This will help in promoting premium products as retailers will have greater incentive

    Reward System performance in 2002 and 2003

    Per Retailer Sales


    350 300 250 200 150 100 50 0

    Jan

    Feb

    Mar

    Apr

    May

    Jun

    Jul

    Aug

    Sep

    Oct

    Nov

    Dec

    Per Retailer Sales (2002) Per Retailer Sales (2003)

    Per Retailer Sales (2002) Per Retailer Sales (2003)

    Per Retailer Sales (2002)

    Per Retailer Sales (2002)

    Per Retailer Sales (2003)

    Non Participa nts Participants Dropped Participants Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 194 155 212 234 228 235 181 182 194 232 201 191 192 154 220 239 280 297 225 238 246 310 240 229 0 0 0 0 0 0 159 163 169 211 174 162 221 165 168 147 159 171 185 172 164 149 179 172

    Dropped
    0 112 114 101 104 110 123 120 108 102 91 120

    Assumpti on 2002 % of Sales Points Basic PB SRC 96% 3.5% 0.5% 0.96 0.175 0.045 1.18 % of Sales 92% 7% 1% 2003 Points 0.92 0.35 0.09 1.36

    The Suggested Rewards system

    The rewards should be evaluated on a half- yearly basis, this will incentivize the smaller retailers, while also ensuring lesser dropouts. The loyalty cashbacks should be reduced for basic cement to promote premium products. The target of 150 tons along with individual quotas should be reduced Egyptians, and Arabs in general, like competing with each other. Hence we would suggest continuing with a reward program rather than target of dollar sales

    You might also like