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Marketing Strategy of Colas S.A.

Marketing Strategy of Colas S.A.

Discuss Marketing Strategy of Colas S.A. within the Marketing Management forums, part of the PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT category; Statistics: Public Company Incorporated: 1929 as Société Routière Colas Employees: 42,000 Sales: FFr 29.5 billion (US $5.12 billion) (1998) Stock ...

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Marketing Strategy of Colas S.A.
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Anjali Khurana
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Marketing Strategy of Colas S.A. - December 15th, 2010

Statistics:
Public Company
Incorporated: 1929 as Société Routière Colas
Employees: 42,000
Sales: FFr 29.5 billion (US $5.12 billion) (1998)
Stock Exchanges: Paris
Ticker Symbol: Colas
NAIC: 23411 Highway and Street Construction


Company Perspectives:

To maintain the pace of growth set over the past ten years, Colas is developing its international network through a strategy of external expansion which focuses on regions offering high growth potential.


Key Dates:

1922: 'Cold Spray' road surfacing method receives patent.
1929: Société Routière Colas is founded to exploit Cold Spray patent in France.
1949: Colas du Maroc is created.
1950: Colas d'Algérie is formed; Société d'Entreprises de Routes en Algérie, based in Oran, is acquired.
1958: Company acquired by Société Parisienne Raveau-Cartier.
1961: Public listing on Paris stock exchange.
1965: Acquisitions of Arboroute (Belgium), Fabit Ltd. and Modern Paving (Canada).
1966: U.S. subsidiary in Vermont is established.
1993: Sacer of France is acquired.
1997: Screg of France is acquired.


Company History:

France's Colas S.A. is the world's leading road construction and road infrastructure maintenance company, with operations in more than 45 countries employing more than 42,000 worldwide, with some 90,000 projects completed worldwide. Colas not only builds and maintains roads, airport runways and surfaces, parking lots, and parking garage surfaces, the company also produces the raw materials for its roads. Each year Colas produces more than 49 million metric tons of aggregates used for road construction, as well as nearly 36 million metric tons of asphalt mix. Colas is also the world's number two leading producer of bitumen emulsions for road surfacing, producing 1.18 million tons, to place it behind the United States' Koch. Historically active in France and the former French colonies, which together represent more than 62 percent of the company's annual sales, Colas also has built a strong presence in North America (18 percent of annual sales) and in the rest of Europe (15 percent of sales). Whereas road construction and maintenance and sales of road materials together produced 85 percent of Colas's sales in 1998, the company is also active in pipes and mains and other civil engineering projects and in road signs and other traffic signs, as well as highway management, through a 12 percent participation in French Autoroute concessionaire Cofiroute. Colas has targeted acquisitions for its continued growth; nonetheless, in the traditionally locally oriented road construction industry, the company's subsidiaries retain a large degree of autonomy. In most cases, management of new acquisitions remain in place and under the same company name. Led by CEO Alain Dupont, Colas has seen its revenues more than triple in the years between 1987 and 1998. Trading on the Paris stock exchange, the company is 57 percent owned by French construction and telecom giant Bouygues.

Surfacing in the 1920s

'Société Routière Colas' was formed in May 1929 to exploit a patent for a new type of road surfacing material--the first usable bituminous emulsion. Originally called Cold Spray, this method of surfacing roads was considered revolutionary and quickly became the basis of the modern roadway. Cold Spray was invented at the beginning of the 1920s by Hugh Allan Mackay and George Samuel Illay in England, receiving a patent in 1922. By then, Mackay had formed his own company, Asphalt Cold Mix Limited, to exploit the patent in the United Kingdom. The pair, however, sought to license their emulsion procedure overseas.

Cold Spray was soon brought to the attention of Alexandre Giros, one of France's most prominent construction and road building figures, who arranged an agreement with Mackay to give the Sociètè Générale d'Entreprises (SGE) the exclusive rights to the Cold Spray patent in France. Testing of the product began in 1924, at first as Suresnes, then along the route between Bayonne and Biarritz, and finally in the then-French colonies Algeria and Tunisia. By then, however, other emulsions began to appear, often as counterfeits under the Cold Spray. In 1924, therefore, the product's name was changed to 'Colas,' as an abbreviation of Cold Asphalt.

Colas operated as a division of the SGE through the end of the decade, achieving great success. By 1925, the emulsion technique had its first application on a runway, serving to pave the airfield at Monthléry. Colas also found a strong market beyond France, finding sales in Romania, Algeria, Polond and Tunisia. Steady demand led to increased production needs. In 1926 the SGE opened a new Colas production facility at Grand-Couronne; two years later, the SGE added five more production facilities, at Alger, Bergerac, Lyon, Montluçon and Port St.-Louis-du-Rhône.

By then, however, the huge demand for the Colas product and paving method outpaced the SGE's ability to finance the division's growth. In 1929, then, the SGE sought a partnership with the Anglo-Dutch petroleum giant Shell. The company Société Routière Colas was set up as a joint venture between two Shell subsidiaries, the U.K.-based Colas Flintkote and the Netherlands-based Nederlandsch Indisch Industrie Maatschappij, and the SGE, with each of the three entities holding equal parts of the new subsidiary. Société Routière Colas operated in France and France's colonial possessions; at the same time, Shell developed other Colas companies around the world, linked by a central research facility operated by the London-based company Colas Products. Alexandre Giros and Georges Mathieu took the lead of the French operation. Giros served as the company's first president, but Colas's major growth came under the guidance of Georges Mathieu, who served as president from 1932 to 1948.

Société Routière Colas started official operations at an inauspicious time: the stock market crash of 1929 plunged the world into a decade-long depression. Yet Colas nevertheless achieved strong growth during this time. Where roads had previously been paved in expensive concrete or tar, the Colas procedure proved more durable, safer, and less expensive and faster to apply, in that it could be used even during the rain. France's road network, in large part damaged during the First World War, was in dire need of repair and development. Despite a shortage of funds, the government invested heavily in the country's road network. Colas quickly extended its operations across all of France; by the end of the decade the company also had moved into the country's colonial possessions, opening subsidiary operations in Algeria, Morocco, and other French African possessions, while also reaching the French Antilles.

Part of Colas's success was Mathieu's early decision to extend operations beyond simply manufacturing asphalt and emulsions. At the same time, Mathieu was credited with creating a separate Colas company culture and winning more and more autonomy from its investors. Under Mathieu's leadership, Colas began to take over its own research and development needs, financing this activity through its own profits. Generating these profits was a series of new products, including Colas 50 and Colasmix, a cold-bitumen-based concrete emulsion introduced in 1929; the concentrated Colas 60 and Colas 65; a freeze-resistant emulsion, Colas Hiver (winter); and Colsol Normal, an emulsion useful for the stabilization of sand-based roadways, particularly useful in the company's colonial markets.

By the end of the 1930s, Colas had diversified successfully to provide a full range of roadwork services, from raw materials, to materials transport, to road construction itself. Colas also was aided by its association with Shell, which had built a strong presence in France during the same period. Shell decided to reinvest Colas's profits into growing the emulsion company's infrastructure. This strategy, which enabled Colas's capital nearly to double its worth by the mid-1930s, also provoked the departure of the SGE from the Colas shareholding, as the SGE sought to recoup its investment in the face of the difficult economic climate.

By the end of the 1930s, Colas had expanded to a full-scale operation, with 19 factories in France and seven more factories in Algeria, Morocco, Senegal, and Martinique. The years leading up to the Second World War, with the rapid buildup of Europe's militaries, the adoption of new mobile military tactics (in contrast to the previous war's reliance on fixed trenches), as well as the introduction of the airplane at the heart of the armed forces, encouraged the rapid deployment of extensive road networks and airports with runways capable of serving the larger and faster airplanes. Colas found its road and surfacing products in high demand.

The outbreak of the Second World War nearly ended the company's existence, however, as France capitulated to the Nazi forces. As a subsidiary of the Anglo-Dutch Shell, Colas was classified as an enemy possession and, therefore, was taken over by the German invader. Deprived of raw materials, Colas's activities ground to a standstill.

Postwar Growth

Mathieu regained his position as Colas's president after the Liberation. Rebuilding the company's fortunes, however, fell to Mathieu's successor, Henry Forien, named CEO at the beginning of January 1948. Forien, who served as CEO for more than ten years, succeeded in recapturing Colas's position as the leading French roadwork company, ahead of such long-term rivals as Sacer and others. Forien quickly added new production units, including a new French bitumen processing facility and three new factories to the company's colonial operations. Forien also worked to boost the company's presence in the colonies, especially in northern Africa. To develop its overseas operations, Colas transformed what had previously been branch offices into full-fledged subsidiary operations, beginning with the creation of Colas du Maroc in 1949, followed by Colas d'Algérie in 1950, and the acquisition of Société d'Entreprises de Routes en Algérie, based in Oran. The company's reinforced presence in northern Africa brought strong revenue growth and profits, encouraging Colas to expand its Antilles operations, where the company was awarded contracts for constructing the Guadeloupe and Martinique airports.

During the 1950s, the company diversified its activities to protect itself against the market fluctuations that had been hampering its growth. The company turned to road construction, increasing its presence in this area especially with the participation in the construction of the country's first high-speed 'autoroutes' freeway network. The company also stepped up its activities in airport runway construction, taking on the newly developed NATO alliance as a major client, building NATO airstrips in Luxeuil-Saint-Saveur, Lure-Malbouhans, and Haute Saône, as well as airstrips in Turkey.

Another important development was the establishment of Société Routière Colas's own research and development department, entirely independent from Shell and the rest of the network of international Colas companies. During the early years of the 1950s, Colas developed several new products, in particular that of a new cationic emulsion, which enabled the use of silicates, and the acid emulsions Colacid R series and Colacid E series. In the middle of the decade, the company rolled out a series of anionic emulsions--Colaster A, Colaster B, Colsol HP, and Colsol ST. The company also developed its own homogenizing machine, which was capable of topping 12 tons of emulsion per hour.

By the end of the 1950s, Société Routière Colas had come a long way toward independence from its primary shareholder, Shell. The last step was taken at the end of the decade, when Shell turned the majority of its shares in Colas to the Société Parisienne Raveau-Cartier. Georges Raveau had been active in North Africa before the outbreak of the Second World War, where he operated a fuel distribution network. During the war, Raveau had used his network to support the Allied cause and, in the process, aided Shell as well. After the war, Shell rewarded Raveau with a majority shareholding in Colas; Shell's participation was reduced to 15 percent, with an additional eight percent held by banking house Worms & Cie.

World Leader in the 1990s

In 1959 the sudden death of Henry Forien placed Georges Raveau at the head of Société Routière Colas, a position he retained until 1973. Raveau greatly expanded the company, particularly with extensive investments in research and development. Colas quickly established a world leadership position in a number of areas, especially that of emulsions. New products, such as Colmat and Colflex gave Colas new market successes. The company's importance in the development of road surfacing and road building technologies was recognized, too, by a growing collaboration between Colas and the French department of roads and bridges. This collaboration eventually grew to give Colas more or less a monopoly in the French road materials market.

Raveau eyed greater growth during the 1960s. In 1961 Colas went to the market, listing on the Paris stock exchange. The company also began a policy of external growth, primarily through acquisitions. This policy soon established Colas as a globally operating company.

During the 1960s and 1970s, Colas expanded its operations in Africa, increasing its presence in what were now the former French colonies, particularly with greater activity in Tunisia, the creation of subsidiaries in Martinique and Guadaloupe, and the creation of separate subsidiaries for Cameroon, the Ivory Coast, and Mali, while spreading the company's operations throughout the so-called 'Zone Franc' of Africa. In the mid-1960s, the company also began expanding beyond the French-speaking countries, opening operations in Nigeria and Kenya. Back home, Colas began expanding into other European countries, starting with Germany, where the company acquired a number of local companies, including J.J. Ipendorf A.G.

Colas's policy of expansion through acquisition began during this time. At the same time, Colas developed its policy of maintaining its network of subsidiaries as more or less autonomous, locally based companies. From Germany, Colas quickly expanded into other European countries, including Belgium, Spain, and Switzerland. The company also entered North America, beginning operations in Mexico.

Colas continued to grow steadily in France as well, making a number of strategic acquisitions, including those of the Compagnie Lyonnaise des Goudrons de Bitumes; France-Route; Routes Modernes; Compagnie Métropolitaine de Asphaltes; and Maison Devaux. Overseas, the company's acquisition trail gave it Arboroute in Belgium, in 1965, and Canadian companies Fabit Ltd. and Modern Paving. The Canadian purchases led to the company's entry into the United States market in 1967, when the company established a subsidiary in Vermont. By the end of the decade, Colas was particularly active in the New England region, where it became involved in the construction of a number of the region's freeways and highways.

Colas's international growth took the forefront into the 1980s, even as the company maintained its leading position in its traditional French and French African bases. During the 1980s, Colas found new ownership, as the French construction giant Bouygues entered the company's capital, building a solid 57 percent share. At this time, Colas was grouped under the Société d'Investissement de Travaux Publics (SITP), a partnership between Bouygues (66.6 percent) and Colas's longtime shareholder, Shell (33 percent). The SITP structure enabled Colas to buy up the various Shell-backed 'Colas' subsidiaries around the world; by the end of the decade, the French Colas remained the sole Colas, and the world's leading road builder.

In its position in the SITP, Colas, which posted revenues of FFr 8.5 billion in 1987, found itself together with two of its principal French rivals, the companies Screg and Sacer, both of which were also Bouygues subsidiaries. In the 1990s, however, Colas and Bouygues embarked on a consolidation drive: in 1992 Colas took over the operations of the smaller Sacer, boosting Colas's revenues to FFr 16.5 billion for 1993. A similar move was undertaken in 1997, when Colas took over the Screg operations. By 1999, Colas's revenues of FFr 29.5 billion, for net income of more than FFr 500 million, gave it the leadership position in the worldwide road construction market. With an annual investment program of more than FFr 1.5 billion per year, Colas, which pledged to continue investing in and upgrading its industrial base, also saw a long smooth road ahead of potential acquisitions in the unconsolidated road construction industry.

Principal Subsidiaries: SPAC (France); Sacer S.A. (France); Screg (S.A.); Carrières Roy (France; 49.98%); Cofiroute (France; 16.66%); Colas Martinique; Colas Guadeloupe; Colas de Nouvelle-Calédonie; Colas GmbH (Austria); Colas Bauchemie GmbH (Germany); Jouret (Belgium); Colas Danmark A/S; Valtatie Oy (Finland; 50%); Colas Ltd. (UK); I,C,B Emulsions (Ireland); Eszakkö (Hungary); Strada Sp. Zo.o. (Poland; 50.90%); Sorocam (Romania; 51%); Colas S.A. (Switzerland); Sintra Ltee (Canada); Barrett P.M. Inc. (US); Colas Inc. (US); Reeves Construction Company (US); Sloan Construction Company (US); Sully-Miller Construction Company (US); Routière Colas de Côte-d'Ivoire; Routière Colas de Gabon (89.89); Colas du Maroc; Colas Emulsions (Morocco; 95.66%); Wasco (Indonesia; 50%); Thai Slurry Seal Co. Ltd. (Thailand; 49.65%); Raycol Asphalt Co. Ltd. (Thailand; 38.98%); Hincol (India; 29.99%).

Principal Competitors: Eiffage; Ferrovial; FCC; Societe Generale d'Entreprises; Granite Construction; Italcementi; Jean Lefebvre; Lafarge SA; Peter Kiewit Sons; RMC Group; Skanska; Suez Lyonnaise des Eaux; Tarmac.
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