Case # 6
Padecio, Alvin Francis
Prof. Rosalinda Lacerona
MGE 11A- BSA2J/3:00-4:30PM
It was 1914 when the Philippines began manufacturing cement with the establishment of the Rizal Cement Company. In 1993, there were 13 cement plans that with combined capacity of 8.5 million metric tons or 214 million bags per year located in different parts of the country. Cement industry capacity increased dramatically in 1964 to 1973 when the Development Bank of the Philippines (DBP) actively promoted the expansion of the industry through long-term lending and loan guarantees.
The large capacity expansion caused overproduction as to the number of the demand. The oil crisis in the 1970s and the overcapacity in the industry resulted in losses for most of the firms and the closure of four of the twelve newly established cement companies.
The government’s resolution against the crisis is the establishment of the Philippine Cement Industry Authority that monitors the competition among the remaining cement firms and the DBP had to restructure the loans of the cement firms to avoid further bankruptcies.
The difficult periods in the 1970s and 1980s brought about consolidation in the industry. The more successful companies bought out the less successful ones. The ownership has become more concentrated. PHINMA was the largest cement producer in the Philippines during 1995. It owned six of the eighteen cement plants operating in the country. The general practice in the industry is contract cement plant construction to foreign suppliers
I. Statement of the Objectives
* To have the ability to face competition against foreign companies especially Korean competitors that have lower capital costs and better equipment sourcing. * To develop mastery of cement technology.
* To gain more experience and expertise in cement plant construction to minimize the project cost. * To have more prospect consumers outside the country.
II. Central Problems
The PHINMA does not have to worry on surviving in local cement industry competition because of the years of experience and expertise in manufacturing and constructing plants. But the foreign competitors which have lower capital costs and better equipment sourcing and have the capacity to manufacture some of the major pieces of cement equipment have plans on penetrating and investing cement in the Philippines which may lead to stiff competition. The economic instability and oil crisis gives concern to local cement industry because it may affect the total number of demand and the cost of producing cements which could cause huge operating losses for most of the firms and closure of the less successful companies.
III. Areas of Consideration (SWOT Analysis)
* PHINMAs massive expansion throughout the country by purchasing the less successful companies * PHINMA had acquired considerable operating expertise in cement manufacturing over the years and became globally competitive. * Harder to enter the cement industry because of expensive government requirements which leads PHINMA as monopoly or have the major share in the market. * Dedicated and skilled founder, top level managers and engineers. * Support of the DBP through actively promoted the expansion of the industry through long-term lending and loan guarantees and the government by the establishment of the Philippine Cement Industry Authority.
* Foreign competitors have lower capital cost and better equipment sourcing. * Lack of external linkages
* Not capable of being a turnkey contractor to foreign cement companies. * The industry was heavily affected by economic instability and oil crisis.
* Pioneering company in the industry.
* Expansion of the company internationally.
* Capacity of manufacturing more bags to purchasing other local cement companies. * Sufficient experience to...
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