Case 4 Lafarge Aget Heracles case study Erik Moutenot
Erik Moutenot
Dr. Pelham
MKT 370-01
12/15/14
Case 4: Lafarge – Aget Heracles
1. Argue the potential influence of competitive forces upon the cement industry.
The cement buyers influence competition by merging up and piling pressure on the suppliers, which in turn makes the suppliers to reduce prices in order to maintain or increase the market share. The decrease in prices in turn affects the company’s profit margin. Equally, with some of the customers, like governments and hospitals, in need of specific types of cements, the players in the industry are forced to use more input in order to create the desired quality of cement. However, they are not in a position to inflate the prices, given that the cement price is standardized. For that reason, it is likely that the companies would make minimal profits or losses, if they do not make a long term investment plans. The raw material supplies, which include the quarry and coal that is used during the production process, have a high bargaining power,. This is because since they maintain a monopoly over the services that they offer.
2. Is Aget’s contemplated expansion into Lebanon, Kuwait and UAE advisable or Inadvisable? Argue your position.
The contemplated expansion of Aget is advisable. It is important to note that the global market in the field of construction is contemplated to have a 22.6% increase within the period of up to 2008. Considering the financial structure of Aget being strong and stable, as depicted on their profit and loss account that shows a marginal increase from the year 2003, it is advisable that they invest in Lebanon, Kuwait, and UAE. With a low utilization rate of 76%, Aget has excess capacity that it has not utilized, which makes it not able to fully utilize its profit margin. Similarly, Aget has maintained a feasible market position in the Middle East that has been made possible due to as a result of distinctive futures. Having already built a good image that has already penetrated in
Dr. Pelham
MKT 370-01
12/15/14
Case 4: Lafarge – Aget Heracles
1. Argue the potential influence of competitive forces upon the cement industry.
The cement buyers influence competition by merging up and piling pressure on the suppliers, which in turn makes the suppliers to reduce prices in order to maintain or increase the market share. The decrease in prices in turn affects the company’s profit margin. Equally, with some of the customers, like governments and hospitals, in need of specific types of cements, the players in the industry are forced to use more input in order to create the desired quality of cement. However, they are not in a position to inflate the prices, given that the cement price is standardized. For that reason, it is likely that the companies would make minimal profits or losses, if they do not make a long term investment plans. The raw material supplies, which include the quarry and coal that is used during the production process, have a high bargaining power,. This is because since they maintain a monopoly over the services that they offer.
2. Is Aget’s contemplated expansion into Lebanon, Kuwait and UAE advisable or Inadvisable? Argue your position.
The contemplated expansion of Aget is advisable. It is important to note that the global market in the field of construction is contemplated to have a 22.6% increase within the period of up to 2008. Considering the financial structure of Aget being strong and stable, as depicted on their profit and loss account that shows a marginal increase from the year 2003, it is advisable that they invest in Lebanon, Kuwait, and UAE. With a low utilization rate of 76%, Aget has excess capacity that it has not utilized, which makes it not able to fully utilize its profit margin. Similarly, Aget has maintained a feasible market position in the Middle East that has been made possible due to as a result of distinctive futures. Having already built a good image that has already penetrated in