Strategic Decision of Setting Sail in Cement Industry through VRM Technology by

Bashundhara Group
Bashundhara Group established in 1987 which is mainly renowned for its real estate venture
business along with multiple other industries has recently expanded their operations towards
cement industry. According to the Financial Express article, countries biggest conglomerate
had set its sail at Mongla by starting biggest Vertical Rolling Mill (VRM) in November,
2012. Chief advisor to Bashundhara Group Chairman Mahaboob Morshed Hassan said that
for the first time BG decided to produce VRM technology cement in the country which is a
milestone and revolution in the cement industry of the country (Financial Express, 2012).
Bashundhara Group has 20 Years of experiences in cement industry (BG own Meghna
Cement Mills Limited). So they are targeting to be the market leader in the industry by
introducing innovation like VRM technology along with their experience. At present other
companies in Bangladesh producing cement in Ball Mill. The specific power consumption
of a Ball Mill higher than that of a Vertical Roller Mill (VRM) carrying out the same
operation. At the same time it provides 20-25% more grinding capacity than Ball Mill
(Fahrland & Dr. Ing, 2016). So strategic decision of introducing innovation in production was
mainly targeted to be the market leader through providing quality cement at a competitive
price while ensuring smooth products delivery and technical service towards consumers
which is also the mission of the company.
In analysing this strategic decision of Bashundhara Group in the perspective of competitive
forces model major factor would be risk of entry. Although Bashundhara Group has 20 years
of experience in cement industry but the whole system in this section is new. Company has to
bear a certain risk in introducing VRM technology because it includes higher setting cost,
higher maintenance cost and also a complex system to handle. So a better trained workforce
needed to operate this complex system. Any kind of problems to handle this complex VRM
system can results into failure. All this thing together indicating towards higher fixed costs.
Other than those risk Bashundhara Group is a renowned company which gives the cement a
brand value.
Competition is intense between rivalries in the cement industry. More than 70 company
produces cement in Bangladesh. Currently, the demand for cement stands at 17.5 million
metric tons against production capacity of 28 million metric tons as of 2013. Demand has
increased almost by 4 million metric tons from 2010 to 2014 but at the same time capacity
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has increased by 8 million metric tons (Shadat, 2014). Moreover Shah, Heidelberg, Meghna,
Holcim and Lafarge together holds 48.12% market share as of 2013 (According to IDLC
research report). So in a nutshell, demand is lower than capacity at the same time industry is
dominated by few big companies which is a concerning and competitive factor for
Bashundhara Cement. Also there is no exit barrier for Bashundhara Cement because their
tools and resources can be used by Bashundhara Groups another company Meghna Cement
Mills Ltd which is also situated in Mongla.
Bargaining power of buyer in cement industry in Bangladesh is another competitive factor.
As there are excess capacity than demands, buyers can easily negotiate to have lower cost
from various manufacturers. Manufacturers are largely depends on consumers for large
percentage of total orders.
Bargaining power of suppliers is a minor threatening factor for Bashundhara Cement. Most of
the raw material for cement companies comes from foreign country and its not monopoly.
Some multinational companies can easily arrange to bring raw materials from abroad at a
lower price from their others units. For example Lafarge Surma Cement Ltd has a 17 km long
conveyer between Chattak and Meghalaya of India which allows them to bring raw materials
at a lower cost. All the local and multinational companies brings clinker from abroad except
Lafarge Surma Cement Limited (Bhuiyan, 2016). Bashundhara Groups suppliers of raw
materials are mainly from China, India, Indonesia, Malaysia and Korea. Political uncertainty
and unfavourable government policy for importing raw materials can hinder supply chain and
operations. Bashundhara Cement does not need to worry about of product substitution.
At present, the production capacity of Bashundhara Cement is 3.72 million MT per year
(Bashundhara Industrial Complex Limited, n.d.). It has derived competitive advantage
through lower price and differentiation. For this, it has introduced innovation of VRM
technology along with superior efficiency. VRM technology provides Bashundhara cement
ability to produce cement at a lower price than existing companies who use Ball Mill. Also
positioning places an important strategy for Bashundhara Cement. The company has to bear
lots of transportation cost for the distance, which it has to, at the end add in the price of the
cement bag. Bashundhara Cement is produced in two most modern factories of the country at
Mongla and Madanganj (Narayanganj) (Bashundhara Industrial Complex Limited, n.d.). The
factory is situated beside the river of Pashur at Mongla, Bagerhat and river of Shitalakshya at
Narayanganj. So they can easily transport both their raw materials and finished goods through

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the river ways at a cheap cost. According to market information Bashundhara Cement and
other local brands are now selling per bag cement lower than 400 taka which are over 410
taka for multinational companies (Bhuiyan, 2016). Multinational companies share is
gradually falling as local makers, such as Shah, Bashundhara, Seven Circle, Fresh, Premier,
and Crown have significantly expanded their capacities efficiently. So it is so far successful
in terms of efficiency and low cost strategy.
The strategic decision of introducing Bashundhara Cement back in 2012 is a good decision if
we see the companys position in present situations. It is cost efficient and production has
variations. Bashundhara Cement produces Ordinary Portland Composite Cement (OPC) for
general constructions. It also produces higher compressive and flexural strength based
Portland Composite Cement (PCC) which is designed for high rise constructions, bridges and
flyovers (Bashundhara Industrial Complex Limited, n.d.). This variations will help
Bashundhara Cement to survive in coming time because it is expected that the Padma bridge,
elevated expressway, metro rail, several flyovers, a tunnel in Chittagong and seaports will
boost demand for cement. The market is likely to grow 20-25 percent over the next five years
which will help Bashundhara Cement to boost and gain a bigger market share using their low
cost innovative VRM technology (Rahman, 2015).

References
Bashundhara Industrial Complex Limited, n.d. Bashundhara Cement. [Online]
Available at: http://www.bashundharacement.com/about-us/
[Accessed 17 January 2016].
Bhuiyan, A. K. H. (Depoo Incharge, Lafarge Surma Cement Limited, 2016. Cement Industry Oveview
[Interview] (17 January 2016).
Fahrland, T. & Dr. Ing, K. Z., 2016. Cements Ground in The Verical Roller Mill Fulfil The Quality
Requirements of The Market , Duesseldorf: LOESCHE .
Financial Express, 2012. Bashundhara Cement sets sail. Financial Express, 14 November.
Rahman, S., 2015. Cement makers eye a turnaround. The Daily Star, 11 October.
Shadat, N., 2014. Market Insight: Cement Sector. Light Castle Blog, 28 October.

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