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Marketing Strategy of Ciments Fran&ccedils

Marketing Strategy of Ciments Fran&ccedils

Discuss Marketing Strategy of Ciments Fran&ccedils within the Marketing Management forums, part of the PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT category; Statistics: Public Company (72% Owned by Italcimenti Group) Incorporated: 1881 as Société des Ciments Fran&ccedils et des Portland Employees: 13,000 ...

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Marketing Strategy of Ciments Fran&ccedils
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Anjali Khurana
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Marketing Strategy of Ciments Fran&ccedils - December 15th, 2010

Statistics:
Public Company (72% Owned by Italcimenti Group)
Incorporated: 1881 as Société des Ciments Fran&ccedils et des Portland
Employees: 13,000
Sales: EUR 2.64 billion (FFr 17.34 billion) ($2.5 billion) (2000)
Stock Exchanges: Euronext Paris
Ticker Symbol: CMFAY
NAIC: 3273 Cement and Concrete Product Manufacturing; 327310 Cement Manufacturing


Company Perspectives:

The group's businesses can be summed up as a range of treatments destined to valorize natural resources by transforming them into quality products responding to the needs of the construction and public works industries.


Key Dates:

1881: Société des Ciments Fran&ccedils et des Portland is founded.
1941: Company forms Société des Ciments Fran&ccedils with Compagnie des Portland, in Desvres.
1967: Société des Materiaux de Construction de la Loisne is acquired.
1970: Ciments Portland de Rombas et d'Hagondange is acquired.
1971: Poliet et Chausson's cement operations are acquired.
1976: Coplay Cement Manufacturing Company (U.S.A.) is acquired.
1978: Sablières Modernes is acquired.
1985: Louisville Cement (U.S.A.) is acquired.
1986: Ciments de Champagnole and Lake Ontario Cement (Canada) are acquired.
1988: Essroc Corporation (U.S.A.) is created.
1989: Company changes name to Ciments Fran&ccedils; enters Turkey; acquires Cementos Rezola et de Financiera y Minera (Spain).
1990: Compagnie des Ciments Belges, San Juan Cement (U.S.A.), and Halyps (Greece) are acquired.
1992: Italcimenti acquires majority control.
1994: Company sells off Essroc industrial concrete operations; disposes of Portuguese operations.
1996: Company disposes of German and Czech Republic operations.
1998: Devnya Cement (Bulgaria) is acquired; 49.5 percent of Jalaprathan (Thailand) is acquired.
1999: Company acquires 70 percent of Vulkan (Bulgaria) and 50 percent of Asia Cement Public (Thailand).
2001: Company acquires 50 percent of Kuari Cement (India).


Company History:

One of Europe's leading manufacturers of cement and concrete products, Ciments Fran&ccedils also provides the foundation for the international operations of parent and 72 percent shareholder Italcimenti of Italy. With manufacturing operations in 12 countries spanning more than 30 cement plants, 300 ready-mixed concrete production facilities, and 98 aggregates quarries, Ciments Fran&ccedils is among the top three cement and concrete providers in most of its market areas, including the number two position in France, number three in Belgium, Greece, and the United States, and number one in Basque Spain and Bulgaria. Ciments Fran&ccedils is also active in Thailand, where the company's acquisition of Asia Cement in 1999 has given it the number four position. Ciments Fran&ccedils continues to target the Asian market for growth; in January 2001, the company reached an agreement to acquire 50 percent of Zuari Cement, part of India's Zuari Industries--Ciments Fran&ccedils's first entry into the Indian market. Ciment Fran&ccedils posted EUR 2.6 billion in sales in 2000, two-thirds of which was provided by its cement products. At nearly half of total sales, France remains the company's largest market; combined with the other European countries, some two-thirds of sales remain within Europe. Since Italcimenti first acquired a shareholding in Ciments Fran&ccedils in 1992, the Italian cement leader has steadily increased its shareholding in its French counterpart. In an effort to reduce costs, the two companies now share most of their top management positions, with Italcimenti's Rodolfo Danielli taking the position of director general for both companies, while Ciments Fran&ccedils Yves-René Nanot is the group's CEO. Nonetheless, and despite Italcimenti's majority position, the two companies expect to remain separate, publicly listed entities for the near future, preferring to invest instead in developing the group's international operations.

Cementing France in the 20th Century

Ciments Fran&ccedils was formed as the Société des Ciments Fran&ccedils et des Portland in Boulogne-sur-Mer in 1881. Joined by Compagnie des Portland, in Desvres, the two companies combined to form the Société des Ciments Fran&ccedils in 1941. The company profited from France's postwar construction boom, as the country rebuilt from the damage caused by World War II, and entered into an extended period of economic growth that came to a peak during the 1960s. It was during this time, too, that Ciments Fran&ccedils--the company would not, in fact, simplify its name until 1989--began to impose itself on the national market.

An important development in Ciments Fran&ccedils's history was French banking powerhouse Paribas's investment in the company, which placed Ciments Fran&ccedils as part of Paribas's growing portfolio of industrial investments and gave Ciments Fran&ccedils the capital to begin its national and international expansion. Ciments Fran&ccedils's first major acquisition came in 1967, when it purchased Société des Matériaux de Construction de la Loisne.

That acquisition was the first of several that extended through the 1970s and established the company as one of France's leading construction materials firms. Another major step in this development came in 1970, when Ciments Fran&ccedils acquired the industrial and commercial operations of Ciments Portland de Rombas et d'Hagondange. It was the acquisition the following year of the cement operations of Poliet et Chausson, another Paribas holding, however, that placed Ciments Fran&ccedils among the leaders in the French cement market.

Like Ciments Fran&ccedils, Poliet et Chausson had been founded at the turn of the century; initially focused on lime production, Poliet et Chausson had quickly added the production of concrete, cement, and other construction materials. By the 1930s, the company had captured the leadership position in cement production in France. Following World War II, Poliet et Chausson turned its focus to building up a distribution network for its construction materials, and by the 1960s was the French leader in this activity as well. The investments needed to build its position, however, brought Poliet et Chausson under control of Paribas by 1969. Paribas replaced Poliet et Chausson's management with its own team in 1970 and restructured the company, now focusing its future on its distribution wing. The transfer of Poliet et Chausson's cement production operations to Ciments Fran&ccedils was accomplished for the price of FFr 70 million and a 25 percent share of the enlarged cement production empire.

Expansion and Diversification into the 1990s

The Poliet et Chausson acquisition had cemented Ciments Fran&ccedils's position in its French home market. During the 1970s the company turned to international expansion. Moving into new markets was expected to protect the company from the traditionally cyclical nature of its business&mdash construction activity slowed during the winter seasons&mdash well as from economic downturns in its single-market focus. The effects of just such a downturn, as France weathered the recession brought on by the Arab Oil Embargo in the early 1970s, encouraged Ciments Fran&ccedils to make its first international move at mid-decade. In 1976, the company acquired Coplay Cement Manufacturing Company, which became Ciments Fran&ccedils's spearhead into the large U.S. and North American market.

At the end of the 1970s, the company also shored up its French operations, purchasing Sablières Modernes, boosting its supply of sand and other raw materials. This move marked the beginning of a diversification drive, bringing Ciments Fran&ccedils into the granulates and ready-mix concrete markets. Toward the middle of the 1980s, the company stepped up its expansion moves. In 1985, the company acquired Louisville Cement, boosting its U.S. activity. Ciments Fran&ccedils extended deeper into the North American market with the purchase of Lake Ontario Cement, in Canada, in 1986. Mexico was to follow two years later when the company acquired a shareholding in Grupo Lacosa.

Meanwhile, after adding Ciments de Champagnole to its French operations in 1986, Ciments Fran&ccedils entered the Spanish market, acquiring an interest in Cementos Molinos in 1987. The following year marked an intensification of the company's expansion, with the acquisition of France's Entreprises Leon Chagnaud and the establishment of two new foreign subsidiaries, Promsa, in Spain, and Terrazul in Portugal. At the same time, the company restructured its growing U.S. operations into a new subsidiary, Essroc Corporation.

The company adopted the simplified name of Ciments Fran&ccedils in 1989. Its activities, however, were increasingly international. Spain became one of its most important foreign markets beginning that year with the acquisition of Cementos Rezola et de Financiera y Minera. The company then entered an entirely new market, with the purchase of Anadolu Cimento, in Turkey. Overseas, Essroc grew with the purchase of Virginia Precast. Up in Canada, the company also acquired Gormley.

New Owners for the 21st Century

At the start of the 1990s, Ciments Fran&ccedils continued to invest massively in its expansion. In 1990, the company made a number of major acquisitions, including those of Compagnie de Ciments Belges, Moreau, and CBF, giving it a leading share in the Belgian market. Ciments Fran&ccedils then turned to Germany, acquiring Stuna GmbH and Unitbeton GmbH. Other new markets included Greece, with the acquisition of Halyps, and the establishment of its Ciments du Maroc operations in Morocco. In the United States, the company acquired San Juan Cement, topping a year that saw the company mark a new period as a major cement, concrete, aggregates, and granulates group.

Yet the company's aggressive expansion quickly made it highly vulnerable. The collapse of the worldwide construction market and the lapse into an extended recession now placed the debt-heavy company under new pressures. By 1992, the company had come under the control of Italian cement leader Italcimenti, which had acquired a majority of Ciments Fran&ccedils's shares from Paribas. Until then, Italcimenti had been entirely concentrated on its domestic market; the takeover of the majority of Ciments Fran&ccedils gave it the international scope it had been missing as well as the leading position among European cement and concrete manufacturers. Yet the purchase quickly led to scandal, as Ciments Fran&ccedils's losses--which neared FFr 700 million in 1993--exposed a series of alleged insider trading and other illegal practices by Paribas management, leading to a refund of a significant portion of the Ciments Fran&ccedils purchase price to Italcimenti.

A new management, led by Yves-René Nanot, who had previously helped rescue a number of struggling Total subsidiaries, coupled with a revised strategy, helped reduce the company's losses to FFr 171 million by 1994 and restore Ciments Fran&ccedils to profitability by 1995. The company's strategy emphasized four main points: a refocus on the company's core cement operations; a streamlining of the company's international activities; a cost reduction drive; and the shedding of the company's high debt burden. Among the concrete steps taken at this time was the elimination of the company's North American industrial concrete operations and the exit from the Portuguese, Czech Republic, and German markets. Coupled with the prevailing economic downturn, the company's sales dropped by more than FFr 1 billion into the mid-1990s, from a high of FFr 13.5 billion in 1993 to FFr 12.2 billion in 1996.

The two companies also began moving closer together during the late 1990s, combining a number of key operations. Italcimenti continued to build up its shareholding position, which rose to 72 percent of Ciment Fran&ccedils's voting rights by the end of the decade, culminating in the adoption of a common group identity and logo in 1997. Meanwhile, Ciments Fran&ccedils had returned to profitability, posting profits of FFr 318 million in 1996 and then, with revenues once again rising to FFr 13 billion in 1997, reaching profits of FFr 615 million for the year.

Ciments Fran&ccedils returned to developing new markets in 1998, when it acquired Bulgaria's Devnya Cement. The company also bought up cement operations in Kazakhstan, then made its first entry into the Asian market, buying a 49 percent share in Thailand's Jalaprathan cement company. The next year the company bought up 70 percent of that country's Vulkan, placing Ciments Fran&ccedils as the leader in the Bulgarian market. The company's Ciments du Maroc at the same time captured the second place in Morocco's market with the acquisition of that country's Asmar. The company then turned to the Asian market, buying a share of Asia Cement Public, Thailand's fourth largest such company. These moves helped to counter criticism that Ciments Fran&ccedils's absence from the Asian and South American market hampered its competitiveness against the larger players in the global cement market.

Ciments Fran&ccedils continued to post strong revenue increases as the century drew to an end, with sales rising to FFr 13.68 billion (EUR 2.09 billion) in 1998 and profits nearing FFr 900 million (EUR 136.9). One year later, the company's revenues had soared to FFr 13.68 billion (EUR 2.37 billion), and its profits topped FFr 1.16 billion (EUR 177 million). Yet the company's relatively small size and its less developed international structure left it vulnerable to a number of market fluctuations. Chief among these was the price of fuel oil, particularly as the company found its production facilities unable to meet demand in some of its core markets, including the United States. As a result, Ciments Fran&ccedils was forced to import from its other operations, with the added transport and fuel costs cutting directly into the company's margins. The rise in the company's sales to EUR 2.64 billion (FFr 17.34 billion) in 2000 was barely reflected in the company's profits for the year, which reached just EUR 178 million.

Together with Italcimenti, Ciments Fran&ccedils went on a cost-cutting drive in 2001, switching some of its facilities to other fuel sources, such as coal in Bulgaria. The companies also moved to reduce a number of redundancies in its top management slots. Italcimenti's director general took over the same position at Ciments Fran&ccedils, while a number of positions were similarly streamlined to just one executive for both companies. Despite the apparently de facto merger of the two companies' operations, Italcimenti announced that it had no intention to complete its control of Ciments Fran&ccedils--the company's other major shareholder, Italian bank Mediabanco, held 9 percent of voting rights, while the remaining 19 percent was held by private shareholders. Instead, both companies stated a preference to direct their investment interest toward building Ciments Fran&ccedils's position on the international market. The company took a new step toward boosting its global presence in February 2001, when it reached an agreement to acquire 50 percent of India's Zuari Cement.

Principal Subsidiaries: Asia Cement Public Co Ltd. (Thailand; 50%); Asment de Temara (Morocco); Axim; Afyon Cimento Sanayi (Turkey); Ciments Calcia; Ciments de l'Adour; Ciments de Maroc; Ciments Fran&ccedils Europe (Netherlands); Ciments Fran&ccedils International (Luxembourg); Essroc Corporation (U.S.A.); Financiera y Minera (Spain); Socli; Calixa; Cimalit; Compagnie des Ciments Belges; Compagnie Financière des Ciments (Belgium); CTG Spa (Italy); Halyps (Greece); Italmed (Cyprus); Jalaprathan Cement Public (Thailand); Procimar (Morocco); Set Group (Turkey); Vulkan (Bulgaria).

Principal Competitors: Blue Circle Industries PLC; Cemex, S.A. de C.V.; 'Holderbank' Financière Glaris Ltd.; Holnam Inc.;
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