HOLCIM Strategic Plan 2012- 2014 The Team Kamilia Charkaoui : k.charkaoui@aui.ma Leila Hasnaoui Amri :L.Hasnaouiamri@aui.

maMustapha Chrifi Alaoui : M.chrifialaoui@aui.ma Sara El Bourakkadi:s.elbourakkadi@aui.ma 5

HOLCIM Strategic Plan 2012- 2014 Executive Summary Our capstone project is a comprehensive analysis of one of the largest businesses inthe Moroccan constructions sector, Holcim. By using several evaluation tools such as EFE,IFE, CPM, SWOT as well as other matrices to position the company, our team had developedstrategies to be carried out by the firm. The major strengths of Holcim are: third largestmarket shares in the industry, strong distribution channels, and an strong production capacity.On the other hand, its major weaknesses are: it is the most leveraged company in the industry,a high production costs, and it provides no credit selling.The SWOT matrix that merged these internal factors with the industry opportunities,specifically, increase in population growth, expectation of high demand because of infrastructure and projects, and cement is the most essential building material in Morocco, aswell as with the industry threats; such as, aggressive competition in the market, The cementindustry knows a surplus in the supply, and no strict regulations to forbid entrance of other foreign companies to the Moroccan cement industry.Based on our overall analysis, our gaols setting includes increasing the sales growth to9% by the end of the year 2013 and maintaining our position in terms of market share (3rd position 25%). In order to achieve these objectives we have mainly two major strategies. Thefirst one has to do with going from product oriented to client oriented, and it will beimplemented through three main sub strategies: provide the potential customers with a creditselling option, use hedging contract with the BGC, and assign one Token/Tone (Value of 20DHS), to remain competitive in the market. The second set of strategies is market penetration,and it will be executed through distributing Holcims product in

the non-exploitable regionsand signing a partnership with Marchika Med organization. 6

HOLCIM Strategic Plan 2012- 2014 Our aims are to help holcim raise its sales growth, and maintain its market share in theindustry, and we believe that these strategies generated by this project will be very effective in pursuing those goals. 7

HOLCIM Strategic Plan 2012- 2014 Table of Contents: Executive Summary .................................................................................................Company Overview ......................................................................... Company Overview Holcim Ltd, Group ......................................................................... Holcim Ltd, Group Holcim Maroc: .................................................................................... Holcim Maroc: Mission & Vision Analysis ....................................................... Mission & Vision Analysis 1- Mission statement analysis: ......................................... Mission statement analysis: 2- Vision statement analysis: ............................................. Vision statement analysis: External Audit ...........................................................................................................1-

Industry analysis: ...................................................................... Industry analysis: 2- PESTEL ANALYSIS: ................................................................ PESTEL ANALYSIS: 3- Porters five forces Model: ............................................ Porters five forces Model: 4- The External Factor Evaluation Matrix :........ The External Factor Evaluation Matrix: 5- The Competitive Profile Matrix: .............................. The Competitive Profile Matrix: Internal analysis: ......................................................................................................1Financial Analysis :................................................................ Financial Analysis

: 2- Distribution and Marketing Department: .......................... Market Positioning Map 3- Management Department: ............................................. Management Department: 4- Human Resources Department: .............................. Human Resources Department: 5- Management Information System: ....................... Management Information System: 8

HOLCIM Strategic Plan 2012- 2014

6- Holcim Maroc Operations: ............................................. Holcim Maroc Operations: I- Internal Fatcors Evaluation: ......................................... Internal Fatcors Evaluation: Issues and Objectives: .................................................................. Issues and Objectives: I- Major Issues .................................................................................... Major Issues II- Minor Issues .................................................................................... Minor Issues III- Long-term Objectives: ..................................................... Long-term Objectives: IV- Short-Term Objectives: .................................................. Short-Term Objectives:Alternatives Strategies:.......................................................................................................... ...............301-SWOT Matrix................................................................................................................. ..........30Recommendations:.............................................................................. .................................................33 I- The SPACE Matrix: ................................................................. The SPACE Matrix: II- QSPM MATRIX:.......................................................................... QSPM MATRIX: III- Recommendations: .............................................................. Recommendations: Implementation: ................................................................................................ .......1- Product Development Strategies: .......................... Product Development Strategies: 2- The Market

penetration ..................................................................................Strategy 1 ..........................................................................................................Strategy 2: ......................................................................................................... 9

HOLCIM Strategic Plan 2012- 2014 Company Overview Holcim Ltd, Group Company Profile: Holcim is a company whose core business is the manufacturing and distribution of cement, in addition to the production, processing and distribution of aggregates (crushed 10

HOLCIM Strategic Plan 2012- 2014 stone, gravel and sand), ready-mix concrete and asphalt. Holcim has other services to offer toits customers such as consulting, research, trading, engineering, and other services. Company Operations and Strategy: Holcim is a global company employing around 80,000 people, with production sites inaround 70 countries. Holcim has a market presence in every continent and is moreinternationally spread than any other building materials company. The companys businessstrategy is based on continuous growth in emerging and developed economies. Holcimsthree-quarters operational capacity comes from its subsidiaries all over the world, whichaccounts for almost half of the Groups net sales. Holcims market-oriented structures, product innovations, skilled employees and efficient environmental management systemsenable it to record sales of over 21 billion Swiss francs in 2010.From 2005 to 2008, Holcim Group had been named "Leader of the Industry" in the DJSIIndex and was recognized as the company with the best sustainability performance in itsindustry for four consecutive years. Holcim Maroc: Holcim Maroc is a subsidiary of Holcim Ltd., one of the international leaders inthe production and distribution of cement, concrete and aggregates; with

an annual productioncapacity of 4.5 million tones. The company operates on the Moroccan territory, and it hasthree plants: Oujda, Fez and Settat, has a center for grinding and bagging and distribution in Nador and a center for bagging and distribution in Casablanca. Holcim Maroc has seperatesubsidiaries for its concrete named Holcim Btons which operates under 10 manufactorieslocated in Fez, Nador, Settat, Casablanca, Rabat, and Tangier.Holcim has been operating in Morocco for 33 years as one of the wellestablished cementcompanies in the Kingdom since 1979. 1979: Commissioning of the plant Oujda that starts with a production capacity of 1, 2million tons per year. 11

HOLCIM Strategic Plan 2012- 2014 1980-1982: Installation of two bagging centers in Fez and Casablanca with a respectivecapacity of 500,000 tons per year and 350,000 tons per year. 1989 : Installation of grinding center in Fez with a capacity of 350,000 tons/year. 1990: Start of work for the realization of a complete line of production of clinker in Fezand launch of the GRP activity with the installation of a concrete plant in Fez. 1993: Start of the unity of Fez, bringing the combined production capacity of CIOR 1, 9million tons per year. And privatization has resulted in the sale of 51% of its share capitalin Swiss group Holcim Ltd. (formerly Holderbank), and listing in the stock market withan initial price of 230 MAD.

1997: Installation of a Beton plant in Rabat. 1998: Installation of another Beton plant in Casablanca. 1999: Construction of a second Beton plant in Casablanca and commissioning of aCentre for grinding and bagging in Nador, and startup activity AFR (recovery of waste incement kilns). 2001: Cement Oujda receives the ISO 9001 and ISO 14001. 2002: CIOR changes name and visual identity and becomes Holcim Morocco; StartingHolcim Aggregates. 2005: Startup of a bagging and a distribution center in Settat. 2007: Startup of the cement plant in Settat. 2008: Launch of the project to double production capacity of the plant in Fez. ISO 9001and ISO 14001 acquisition for the Nador Center. Mission & Vision Analysis The first thing to start with when dealing with a strategic analysis of any type

of companyis to make sure that the vision answers the question: What does the business want to become?Whereas for the mission it should include the necessary components. In our case, we have 12

HOLCIM Strategic Plan 2012- 2014 analyzed both the mission and the vision statements to come up with the following proposedmission and vision: Mission statement analysis: Holcim Maroc mission statement: Our mission is to bring to the market products and proven solutions, successful and sustainable accompanying the economic and the social development of Morocco in the sectors of construction. According to Vern McGinnis, a mission statement should define what the organization isand what the organization aspires to be, it should be limited enough to exclude some venturesand broad enough to allow for creative growth, it has to distinguish a given organization fromall other, and finally it must be stated in terms sufficiently clear to be widely understoodthroughout the organization. Thus, lets first make sure that the company mission actuallyincludes all the 9 components. COMPONENTSYES / NO CUSTOMERSNoPRODUCTS & SERVICESYesMARKETSYesCONCERN FOR SURVIVALNoTECHNOLOGYNoPHILOSOPHYYesSELF CONCEPTYesCONCERN FOR PUBLIC IMAGENoCONCERN FOR EMPLOYEESNo Table 1: MISSION STATEMENT EVALUATION. Proposed Mission statement: At Holcim Maroc, Our teams concerns are to continuously improve the mutuallybeneficial relationships with our stakeholders through superior quality products and services. In everything we do we are committed to act up on ethical standards to protect our environment. To remain always among market leaders, we are devoted to bring to the 13

HOLCIM Strategic Plan 2012- 2014 market successful products and proven solutions that would support the economic and the social development of Morocco in the sectors of construction. Vision statement analysis: The following is Holcims current vision statement: Our Vision is to be the promoter of professional pathways and construction of sustainable development in Morocco. The vision statement always answers the basic question what do we want to become? In other words, the vision statement shows to the general public which directionthe company is taking. The current vision statement is a good one, but we added what wethought to be important. Proposed Vision statement: To remain among leaders in the Cement industry, our vision is to be the promoters of professionalism in construction sector and supporters of sustainable development in Morocco. 14

HOLCIM Strategic Plan 2012- 2014 External Audit Industry analysis: The cement industry is a structured and distributed across the country, theliberalization of the sector and the investment made in the early 90s allowed Morocco tomeet the needs of the market. It was at this time that the cement industry in Morocco has 15

HOLCIM Strategic Plan 2012- 2014 strengthened its upgrade. Since then, the profession is pursuing a strategy of sustainabledevelopment, with the major objectives: improving performance, enhancing thecompetitiveness and optimizing the value of consumption of natural resources. In the recentyears, the market has known a continuous

growth in consumption of cement that is sustainedmainly by the real estates that is among the sectors that have the highest growth rates. Thisincrease in growth also follows the policy of major works, especially the accelerated highway program and various other constructions: football stadiums, Plan Azur tourism developmentzones, etc..The cement market in Morocco is composed of four companies: Lafarge Morocco,Morocco's Cement, Holcim Morocco and Asment Temara. They provide the entire marketsupply of material consumption approximately 11.36 million, representing a utilization rate of 93%. But because of the tremendous increase in the demand of cement, all the actors havenoticed the need to do some new investments; mainly because there was a mismatch betweenthe supply and the demand (the demand has exceeded the supply). This was seen as anopportunity that has attracted all the actors and some non-actors (Chaabi lil iskane, Addoha)and has pushed them to either establish a new production plant or to simply double the production capacity of the existing units of production in order to meet the domestic demand.The annual production of 11.36 million tonnes in the past years is expected to be 24.2 million by the end of this year. (See appendix, Figure1: Market Share)The cement industry has known a continuous increase in consumption, according to APC(Association profesionelles des cimentries), the cement consumption has known an increaseof 9.9%, 3.36%, 0.3% in 2008, 2009, 2010 respectively. Compared to the previous three yearswhich recorded growth rates relatively high (10.4 in 2006, 12.6 in 2007, and 9.9 in 2008),those statistics shows us that the demand is going toward stability at an amount of 14.5 Mtones/ year, thus the market is going toward stagnation. See appendix, Figure 2:APC:Conjuncture 2010 16

HOLCIM Strategic Plan 2012- 2014 The consumption growth rate of the cement industry has increased during the pastthree decades, and the increase in the last decades (7,21%) is considered to be strongcompared to the decades 80 (2.4%) and 90 (4.7%). In addition, we can see that theconsumption has almost stagnated in 2010 with an amount of 14500 tones/year (+0.3%compared with 2009), this is mainly due to the effects of the crisis already seen in 2009, thestructured programs for housing, the major infrastructure projects such as investments, andtourism significantly slowed down. Moreover, the social housing schemes, which had drawnheavily cement consumption in previous years, have been almost nonexistent in 2010. ( seetable 4: ciment consumption)During the last years, the net profit margins that the cement industry attains are veryhigh compared to other industries in the country. CIMAR achieved a turnover of

2.8 billionDH and a net profit of 1.7 billion MAD giving a net margin of 42%. Concerning LafargeMaroc, it displays a turnover of 4.5 billion MAD and a net profit of 1.16 billion MAD whichresults in a net margin of 36.2%. For Holcim Maroc, its performance was not as the two firstones; however, it was still considered as high. In 2009, Holcim has a net margin of 24.1%originated from a turnover of 2.32 billion DH and a net profit of 560 million MAD.So now we know that Major infrastructure project such as tourism investment havesignificantly slowed; also we know that the public housing programs, which were heavilyfired up the cement consumption in the previous year have been almost nonexistent.According to the APC, its said that the cement industry knows a surplus in the supply, thismainly because all the actors were expecting an increase in the consumption in the comingyears, and based on their expectations, all of them have lunched the extension projects of their existing plant. The arrival of the new actor, Chaabi lil iskane has also contributed in thisexcess supply that our national market is suffering from, based on the last statistics, the excess production is expected to be around 4.3 million tones of cement; and The majority of thisexceeding capacity is concentrated on the central and the eastern regions that are considered 17

HOLCIM Strategic Plan 2012- 2014 attractive to new investments. All this have pushed the actors to start a price war in order toget rid of the excess inventory they have. PESTEL ANALYSIS: We will perform what is called the PESTEL analysis in order to analyze more the cementindustry, the pestel analysis consist of an analysis of the Political, economic, social,technological, environmental, and legal factors that affect our company; so lets first startwith the political factors. Political, Governmental factors: Morocco has known a series of recent developments on both internal and external frontsthat has reduced its political risk profile in the eye of foreign investors; the Moroccangovernment has started many initiatives to combat issues such as: Corruption,Unemployment, and Terrorism. Those issues are considered to be the main priorities in termsof reforms. According to the Economy and finance minister, Mr Salahdine Mezouar, thegovernments 2011 appropriation bill foresees the creation of 18,800 new jobs through building Schools, Hospitals and houses.Moreover, The Moroccan government has signed a free trade agreement with the EU in2002, concerning the import of

Clinker and Cements that are initially subject to tariffs of 32.5%, the two parties agreed on a progressive 10-year exemption from those tariffs at a rateof 10% per year; this means that in 2013 the tariffs for importing the cement and the clinker will be almost 0% ( appendix). Besides, Moroccan cement companies are suffering from thetaxes that the government is imposing (0.10 MAD per Kilogram sold, 100MAD/tone. Economic factors: Morocco market economy proposes many advantages not only for national investors butalso to the international ones (low labor costs, strategic position). Morocco has entered manyfree trade agreements especial with the United States and with the European Union; it is becoming more and more cosmopolitan with investors from all over the globe looking at 18

HOLCIM Strategic Plan 2012- 2014 investments in many areas and this mainly because of our economic and political stability. Wehave seen how the Moroccan economy had a remarkable performance in spite of the financialcrisis in the last three years. Concerning the cement industry, from the ProfessionalAssociation of Cement, it is considered as a strategic sector of the Moroccan economy since itoccupies a prominent place in the Moroccan economic factors, Contribution of 6% of theindustrial GDP with an annual turnover of about $600 million (APC, 2010).According to Businessmonitor.com, Morocco was North Africas outperformer in2009, recording an economic growth of 4,6% compared with 2,4% Tunisia, -0.9 in Libya, and-3.3 in Algeria. Consequently, this can be considered as a sign of good economical status; inaddition, the continuous increase of the Moroccan GDP can be a sign of a high expected purchasing power. Social Factors: The Cement industry is an industry that is indirectly affected by the social factors asany other industry; we know that this industry is directly linked to the construction and building materials sector, at the same time, its directly linked to the governmentalinvestments that are mainly affected by some social trends such as change in income, number of births, number of death, demographics and culture. We highlight the Social housing, theenergy, and the tourism sector as the major infrastructure project that the government isworking on.The way of life of Moroccans is changing, women have started to work and they alsocontribute in the everyday life financing; people put

more emphasis on educating their children because they are more aware of its importance. In addition, the Moroccan populationis growing year after year and it is expected to reach thirty-eight million inhabitants by 2030(InfoDuMaroc, 2010). If we look at those information, we can easily expect that the demandfor cement for the coming years will be much higher than what it is now, especially becausethe government is lunching many development and tourism projects, also this coming population will need houses where to live, and all this actually contribute to the higher 19

HOLCIM Strategic Plan 2012- 2014 demand of real estate which has a direct relationship with the cement industry. Technological factors: According to the Ministry of Industry, Trade and New Technologies, the Moroccangovernment has launched a development program that is called Le Maroc Numric 2013with a budget of 5.2 billion MAD. This new development plan focuses on three main areas: broadband internet access, the local chain of information technology, and the computerizationof small/medium enterprises. Today we can see that most companies are more and morewilling to computerize their management systems, almost all medium and large companieshave websites and programs that facilitate their everyday operations. Internet now haschanged the way we do business, it has brought many advantages in the business world, for example, it facilitate communication within companies, it helps companies in advertizing their products, and not only this, but it also helps the transfer of inventories between distributers. Inthe cement industry we can see that all companies have a website that presents a deepdescription of their businesses, finance, and human resources.According to businessmonitor.com, two major power plant projects are being undertakenwhich, when completed, are expected to provide two-thirds of the countrys energy needs by2020( 38% of the Moroccans electricity). Which means that the energy cost in the near futurewill diminish; this is a good sign because we know that the energy cost represent almost 34%from the production cost of cement. Legal factors: The Cement is the first certified product in Morocco; its a product that was standardizedsince 1974, with the creation of the Moroccan standards, NM 10.1.004 on hydraulic binders,composition, specifications and conformity

criteria. This standard has undergone variousrevisions to take into account the specific needs of the Moroccan market. Moreover, the public construction sector Btiments et Travaux Publiques is controlled by state laws.Moreover, in the recent years the government has putted some barriers on the import of 20

HOLCIM Strategic Plan 2012- 2014 cement, this mainly for the purpose of protecting this industry from international competitors, but for the export there is no legal preventions to export cement from Morocco. Porters five forces Model: Threat of substitutes Cement and its complementary products are very important in the Moroccan buildings.Wood and other building material which can be substitutes in other countries are not seen thesame way in Morocco. Cement is the main and essential building material in use. Taking alook at the Moroccan market, we will notice that almost all buildings are build using cement.The threat of substitutes can be reduced to zero in this case. However, types of cement arefacing an increase in variety. This latter is raging from discreet colour types to environmentalcements. This categorizing of cement cant be considered as substitution; it is only productdifferentiation. In conclusion and due to the limited number of substitutes, the threat isminimal and can even be null. Threat of new entrants The threat of new entrants in the Moroccan Cement market is high. There are no strictregulations to forbid entrance of other foreign companies to the Moroccan cement industry.There are some companies that entered the Moroccan market such as Ciment du Maroc belonging Italcementi Group . The most flagrant barrier to entry to this industry is the cost of launching a new cement business. The start-up costs are tremendously high: machinery,factories, etc. Combining the lack of regulations and the high start-up and functioning costs,we will get a high threat of new entrants

because even if the regulations arent that strict, thecosts remain a great obstacle for other new companies to operate in this industry. Rivalry among existing firms In the Moroccan Cement industry, rivalry among existing firms is very important becauseof the current high demand. To meet this demand, the industry attracted national andinternational companies. The most important competitors are: Lafarge, Ciment du Maroc, 21

HOLCIM Strategic Plan 2012- 2014 Asment, etc. The rivalry among existing firms is currently high and could be easily increaseddue to the potential entrances to this industry. Bargaining Power of Suppliers For the cement industry and more precisely for Holcim, the suppliers have a medium bargaining power. In fact, Holcim has suppliers at the national and international levels. Their bargaining power is medium because if Holcim decides to switch suppliers it has the possibility to do it but at certain costs. The costs arent the only factors making this bargaining power to be medium, the limited number of suppliers for this industry is also limited.Therefore, the bargaining power of suppliers is rated at a medium level since both Holcim(Actually, any other company operating in this industry) and the suppliers have the sameequal level of power from a B to B perspective. Bargaining Power of Buyers In this overall industry, the power of buyers is low. Basically, the companies operating inthis industry arent that much. Therefore, buyers do not have that many companies to choosefrom. The power of buyer is also low because of the production capacity. One firm isntenough to respond to the entire Moroccos demand. The value of the Five Forces Model After studying these forces, we can determine the attractiveness of the cement industry by making the following table: Competitive ForceLowMediumHigh Threat of substitutes X

Threat of new entrants X Rivalry among existing firms X Bargaining power of suppliers X Bargaining power of buyers X 22

HOLCIM Strategic Plan 2012- 2014 The External Factor EvaluationMatrix: Note that Holcims total weighted score equals 2.65, which is considered to be abovethe average mid-point of 2.5; thus Holcim is doing pretty well, taking advantage of theexternal opportunities and avoiding the threats facing the firm. Company managers should nottake this as a good sign because there are many ways for improvement; Holcim needs tocapitalize more on the export of the cement, also Holcim managers must take intoconsideration the fact that they can capitalize on developing a new variety product that wouldgive more value to customers. (Refer to appendix, Table1:EFE Matrix) The Competitive Profile Matrix: Lafarge has got the highest score, this can reflect the fact that its the market leader notonly in term of market share, but also Lafarge is the market leader in inventory management,financial position, Production capacity, and Finally Management Experience. However, wecan see from the table above that Holcim is the market leader in terms of sales distribution,Customer service. Thus, we are highly recommending the company to work on its inventorysystem, its financial position, just to get closer from the market leader and the major competitor Lafarge. (See appendix: Table2: CPM) 23

HOLCIM Strategic Plan 2012- 2014

Internal analysis: 24

HOLCIM Strategic Plan 2012- 2014 Financial Analysis : Liqudity RatiosCurrent Ratio : For this ratio, we know that it measures a company solvency by indicating its ability to pay current liabilities out of its current assets. We decided on calculating this ratio and alsothat of the competitors in order to be able to compare the company solvency with the solvencyof its competitors.Holcim Marocs current ratio is below the one of the competitors by a significantamount especially in 2010. Thus Holcim will have a problem meeting its short term debtwhen they come due, and by this measure we can see that the company liquidity is weak.(Refer to appendix, Graph 1: Current ration) Quick Ratio: Another measure of the liquidity of a company is the quick ratio; its a conservative measureof a firms liquidity, it measures the extent to which the company is dependent on the sellingof its inventories in order to pay its short term obligations. (see appendix: Graph 2: Quick Ratio)Again, Holcim is falls far below the rule of thumb of 1:1, which means that thecompany doesnt passes the test of liquidity especially when measured against industrystandards. Holcim realy depends on the selling of its inventory in order to be able to pay back its short-term obligation. Thus, we are expecting large problems of liquidity in the near future,this is why we are recommending the company to begin building a cash reserve as a precautionary measure. Leverage Ratios:Leverage ratios measures the financing supplied by a firms owners against thatsupplied by creditors. In addition, Those ratios not only measures the degree of financial risk in a company, but also they show the extent to which a company relies on debt capital rather 25

HOLCIM Strategic Plan 2012- 2014 than equity capital, to finance its operating expenses, capital expenditures, and expansioncosts. Debt to total assets: This ratio measures the percentage of total assets financed by the company creditorscompared to its owners; we have seen that in the past three years, Holcim was highlyleveraged, creditors have provided 62.89%, 56.84%, 58.73% of the company total assets in2008, 2009, 2010 respectively. This high debt are especially due to the large investments thatHolcim is taking, such as the new plant in Settat, and the doubling of production capacity inthe unit of Fes. Thus, the debt ratios of the two main competitors. (Refer to Appendix:Graph3: Debt to Total Assets)Thus, this graph confirms what we have just said about the company leverage, Holcimappear to be overburdened with debt, which means that the company might have difficulty borrowing additional money, especially from conservatives lenders. Debt To Equity ( Debt to net worth): Times interest earned: This ratio actually measures the firm ability to make its interest payments on debt. Ittells how many times a company earnings cover the interest payment on the debt it iscarrying. Even if Holcim is highly leveraged, but still its ability to pay back its interest payment tends to be high, Holcim earnings were 12 times greater than its interest over theaccounting period. This ratio is somewhat high which tells us that the company might have alittle difficulty meeting the interest payment on its loans, and creditors see this as a sign of safety for the future. (see appendix, Graph 5: Times Interest EarnedEven if Holcims earnings are high enough to cover the interest payment on its debt, but still compared with the competitors we can see that those last had a large capability in2008 o pay the interest payment, for example, Lafarge earnings were 5651 times higher thatthe interest payment. But as the time goes along and the number of investment has increased,this has diminished. 26

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Operating Ratios:In every financial analysis, the operating ratios actually helps as evaluate the overall performance and enable us to have an idea about how effectively the business employs itsresources. Those following ratios will help us identify the area that must be improved toremain competitive in the market. Inventory turnover: By calculating this ratio we will be able to measure the number of times inventoriesare sold out and turned over during the accounting period (See appendix, Graph 9: AverageInventory turnover)The Inventory at Holcim is moving at a really high pace; but still within the industry,the company is the last in terms of inventory turnover, this why, company managers have toanalyze their inventory and reevaluate the inventory control procedures. (Refer to Appendix,Graph 5: Average inventory turnover) Average collection period: This ratio measures the number of days its takes to collect Account receivable, bycalculating this ratio we were able to notice that Holcim has reduced the collection periodfrom an average of 30 days in 2008, 2009 to 15 days in 2010. However, we have seen that thecompetitors have both increased their credit sales and also they have enlarged the collection period to 40 days in 2010.( See appendix, Graph 10: Average Collection Period) Profitability Ratios: Net profit marginThis ratio measures the firms profit per every dollar of sales, from our analysis we haveseen that during the last three years the profitability over the sales was quasi-stable, but stillthe comparison have shown us that Holcim is the least profitable company in the market.(Refer to Graph6: Net Profit Margin in the appendix) Return on assets : 27

HOLCIM Strategic Plan 2012- 2014 This ratio shows us how much profit the company generate for each dollar of assets itowns. We have seen that Holcims profitability over the assets has increased during the lastthree years, which can be considered as a good sign for our company. In 2008 the profitabilityover the assets was around 10%, it has increased until 13% in 2009 and in 2010 it has beenshrinked to 12.08%. If we see those numbers we can say that the company is actually doing agood job in capitalizing over its assets; however, in reality its not the case as its the rankedlast in terms of asset capitalization in the industry; Lafarge is again the leader in terms of assets capitalization. Refer to appendix, Graph 7: Return on Total Assets) Net profit to Equity Ratio:This ratio measure the owners rate of return on investment, Holcim owners have earn onaverage an amount of 28 cent per every 1 mad they have invested in the company, comparedwith the competitors, Holcim comes second after Lafarge again, which is something good for our image. (See appendix, Graph 8: Return on Stockholders Equity) Market Positioning Map Four main competing companies in building material sector in Morocco: Lafarge,Ciments du Maroc, Holcim, and Asment Temara. One of the key elements in this sector is 28

HOLCIM Strategic Plan 2012- 2014 growth potential and market share, and the market positioning map serves the need to analysethese points. After the elimination of the gentlemens agreement, the competition will be moresevere, as each company will try to target the other companys region in order to increase itssales as well as its market share, the fact that will cause price war in the market.Concerning the market share, Lafarge is first with 41%, then Ciments du Maroc isranked second and has 26% market share whereas Holcim has 25% and Asment has 8%.Holcim could maintin or even increase its market share to get closer to Lafarge in the map. If it fully takes advantage of the elimination of the gentlemens agreement and target other markets/regions by benefiting from its high production capacity. Strengths and Weaknesses:

Holcim major strengths and weaknesses are strong distribution channels, which is duemainly to its market research and strong customer relationship management. HolcimHolcim has been certified the ISO 9 001 and ISO 14 001 which allowed the company to gainan important brand image in the building material industry. Another important strength is itshighly experienced workers who are the companys major cause of its strong productioncapacity Internal Fatcors Evaluation: The most important factors to be successful in Holcim Maroc are the distributionchannel and the database that keeps truck of and maintain the customer relationshipmanagement. Also, we notice that the fact that Holcim was certified by the ISO 9001 and14001 standards, this shows to the general public that Holcim is a company that is interested by the quality of its production line, also it shows that we are caring about the environment;thus, this can really enhance our image in the eyes of our customers.The Internal factor Evaluation matrix stated that the company weighted score is 2.73,which means that our company is actually strong internally, but even there is always ways for 29

HOLCIM Strategic Plan 2012- 2014 improvement. The company must reduce its debt amount, also increase its sales; it shouldoffer a credit option to its customer in order to increase their utilization rate, and also to get back its old customers that left the company for its competitors for that reason. (See appendix,Table 3: IFE) Distribution and MarketingDepartment: The distribution and marketing department in Rabat plans and controls the distributionstrategy to follow by all the Manufactories of Holcim in Morocco. The main activity of thisdepartment is the distribution and marketing of the finished products. This department existsin every manufactory of Holcim and markets the cement either in bags or bulks. HolcimMaroc has two types of clients: clients with long-term or short-term contracts, and occasionalclients. The contractual clients receive their invoices either per week or after 15 days and payaccording to the terms of the contract, whereas the occasional clients receive their invoicesimmediately and pay before the loading of the merchandise in the trucks.Holcim has been certified the ISO 9 001 and ISO 14 001 in 2001 even before many of itscompetitors which has made the company gain a good reputation when it comes to productquality, and helps it gain competitive advantage over its competitors.Advocating the

modernization of distribution channels for building materials, the GroupHolcim Morocco has initiated the first distribution of building materials in Morocco named"Distribution Batipro. Through this network, based on professionalism, quality andtransparency, Batipro Distribution wants to federate independent distributors from different backgrounds around a common ideal and make them share the same good business practicesfor the benefit of improving their competitiveness and better customer satisfaction. Theambition of Batipro Distribution is to be the first reference network in the industry 30

HOLCIM Strategic Plan 2012- 2014 Management Department: Holcim follows the strategic management concepts as that can be seen through itsestablished vision, mission and its position within the Moroccan stock exchange. Another indicator is that Holcim establishes its short and long term objectives while keeping in mindassessing its internal performance as well as competitors. Implementations of its strategies areusually implemented in a well-organized way and time frame. Also, Holcim makes sure toassess and evaluate its executed strategies on a regular basis in order to check the efficiencyand the effectiveness as well as the performance of its employees based on performancestandards, and taking counteractive actions. Furthermore, as part of the managementinformation system, Holcim has an important database warehouse that helps it keep track of its customers and maintain its customer relationship management. Human Resources Department: This department manages the workforce of Holcim and makes sure to hire competentemployees in order to meet the requirements of each department in the company. The humanresources department is responsible for the training, recruitment, and communication withemployees. Management Information System: Holcim is using SAP: Software Applications Products, for its management informationsystem. SAP is the market and technology leader in business management software, providingall-inclusive business software through SAP

applications, services and SAP Products for data processing. La FARGE who is

the cement leader in Morocco has implemented the URBAinformation system in 2010 to manage its internal operations and communication system. Thecompanys management information system is weak compared to that of Holcim, as it doesntinclude the management of the companys customers relationship. 31

HOLCIM Strategic Plan 2012- 2014 Holcim Maroc Operations: The Raw Materials : Limestone Schist Iron ore SandLimestone, a key raw material, is derived directly from the quarry near the companys plants.The rest, is either taken from sources in the region or is imported. The production Process : Crushing Raw Grinding Preheating Cooking

Cooling Storage Cement Grinding Crushing : Involves the drying of raw materials in the form of large blocks. Thesematerials once dry they are put in a hammer crusher to be used in small dimensions. Raw grinding : Involves the grinding of the mixture of the constituents (withoutgypsum) in an amount prescribed by the laboratory and performed by controlling theflow of output. The resulting product is stored in a silo homo capacity of 600 tons thatenables the homogenization of the flour Preheating : involves a heat exchange between the flour and gases from the furnace ina preheater named 'Tour DOPOL' Cooking : The resulting materials from preheating are put in a cylindrical rotaryfurnace of 62m, 3.8m internal diameter inclined at a slope of 3% with a temperature between 1200 C and 1500C. This step results in the Clinker formation. Cooling : The cooler is placed below the furnace and cools a total of 1230 tons per day

 Storage : The clinker is put then in storage with a capacity of 5000 tons. Cement grinding : The clinker is then put in a grinder. Limestone and gypsum areadded to the clinker depending on the required quantity. Bagging : The resulting cement is either put in bags of 50kgs or sold in bulks. 32

HOLCIM Strategic Plan 2012- 2014 Holcim Marocs overall production capacity is 4.5 tons annually which falls in betweenthat of its competitors. The production capacity of Lafarge Maroc is 6.5 tons annually andCiments du Maroc is 2.2 tons. Even though Holcim has a greater production capacity thanCiments du Maroc it doesnt support the companys sales as Ciments du Maroc has greater sales than Holcim. Company Organizational Structure :Issues and Objectives: Major Issues Cement industry consumes large quantities of combustible and electricity, theenergy bill is the main expense of Holcim (Morocco). [Holcim Trading/ ONE]. Importation tariffs of the clinker and the cement will reach 0% by 2013. [Signedagreement with EU on October 1 st

, 2002]. [put the table in the appendix] New entrants such as Chaabi Lil Iskane and Addoha [Atlas] which have created an excesssupply of Cement in the market. Holcim is The most leveraged company in the market Minor Issues Holcims Sales decreased in the east region (Oujda, -1.0%), and in the west region (Settat,-1,6), and this due to the new entrants, and the fears competition from Lafarge. 33

HOLCIM Strategic Plan 2012- 2014 Aggressive competition, because the cement companies are no more distributing productson regional basis due to the elimination of the gentleman agreement. The transportation costs become equal to the production cost, once the transportationdistance exceeds 300Km. The cement sector is characterized by a seasonality of activity, due to the slowdown inconstruction sites during the religious holidays, and to high pluviometeric periods. Long-term Objectives: The major issues facing Holcim Maroc are the High production cost due to cost of Energy, Excess supply in both Oujda and Settat units, importation tariffs will be almost 0% bythe year 2013, and finally, based on our analysis we have found that Holcim is the mostleveraged company in the market. Thus, the first objective for the company is

to increase thesales growth to 9% by the end of the year 2013 , considering the opportunities it has. Thisobjective will be fulfilled by the strategies presented in the following section.Concerning the high cost of production, the second objective for the company is to be thecost leader in the market by the end of the year 2014. In the following section, we willexplain how this objective will be fulfilled.Last but not the least; the last objective is to maintain our position in terms of marketshare (Third position 25%). Short-Term Objectives: Regarding the Minor issues, we have seen that Holcim faced a decrease in the salesvolume in both east and west region, knowing that it is the only company that operates in theeast region; thus the first short-term objective is to maintain its leader position in thisregion; by providing value to its customers. The strategies to reach this objective will bediscussed in the following section.Knowing that Holcim has the largest production capacity in the west region, also knowingthat Holcim has a strong distribution channel ( Batipro, and a strong logistics chain), this can 34

HOLCIM Strategic Plan 2012- 2014 be considered as a major strengths to increase the customer utilization rate in thisregion.Moreover, because of the elimination of the gentleman agreement; our objective is to increase our market share by 10% in the west region [Rabat Zemmour Zaer, GrandCasablanca, Doukala Abda, and finally Marrakesh Tansift el Haouz]. Alternatives Strategies: SWOT Matrix Based on the SWOT matrix that can be found in the Appendix, we were able to constructsome strategies that would allow us to achieve our objectives. i-SO strategies

by mixing both the strengths and the weaknesses, we were able to come up with thefollowing strategies: a.Use the distribution channels to distribute the product in the NonexploitableRegions

by performing an external analysis for the ciment industry, we have seen that the major actorsused to operate under the gentlemen agreement, that has divided the market into threeregions, each actor was responsible for a specific region, and the competitors did not have theright to operate in the others regions; kind of monopoly. However, in the last year, the Excesssupply has pushed the actors to eliminate this agreement. Thus, we are highly recommendingthe company to use its distribution channels, they are considered to be strong, in order to penetrate the non-exploitable regions. According to the APC (professional Cementsassociation), the sales in the north region have increased from 20% to 23%, which create anopportunity for our company. b. The Excess supply will be left for export( Central africa) Based on market analysis, the cement industry knows an excess supply, and more precisely, for Holcim, the Settat and Oujda units have reduced their capacity to avoid theexcess inventory. According to the World Bank report CEMENT SECTOR PROGRAM 35

HOLCIM Strategic Plan 2012- 2014 IN SUB-SAHARAN AFRICA, in 2003, Sub-Saharan Africa cement production was around26.6 million tones. However, in the last years, the International Finance Corporation (IFC)found that the SSA consumed 60.6 Mt of cement knowing that the production capacity wasonly 56.3 Mt. Indeed, it is clear enough that there is a real need for either a capacity extensionor import of ciment from abroad to offset the negative difference between the demand andsupply. As Holcim Group has facilities in both South Africa and Senegal, our team hasdecided to export the excess of supply to those regions.

c. Partnership with the MarchikaMed Company Under the high instructions of His Majesty the King Mohamed VI, Morocco has decided totake benefit from the potential lagoon of Nador: Marchika. The major investors are theMinistry of Economy and Finance and the Funds of Hassan II for the economic and the socialdevelopment. The Marchika MED organization was established to be the designer and theoperator of this great project of Tourism Development. Since Holcim Group is the onlycement manufacturer in the North East region (oriental), we decided to build a partnershipwith this organization to supply them with the needed construction material. As a result of this partnership, we are pretty sure that we will boost our sales and absorb the excess supply. d.Develop a new type of product that will bring value to customers According to the APC 2010 conjuncture, the cements with higher resistance has gained moreand more market share, the CPA 55 (+83%) increased from 806,424 t in late December 2009to 1,474,850 at end of December 2010. However, the CPJ 45 and the CPJ 35 have recorded adecline of 4% and 6% respectively. Indeed, the BPE and the construction industry recordedsimultaneously a better penetration. It is a slow but steady trend that continued in the field of progressive industrialization of certain sectors of construction materials. The decision of our team was to develop a new type of product that has a higher resistance and will bring more 36

HOLCIM Strategic Plan 2012- 2014 value to our customers. Our future task is to contact the Research and Developmentdepartment to try to discuss the previous strategy. e. Increase the users utilization rates via Batipros Advocating the modernization of distribution channels for building materials, the GroupHolcim Morocco has initiated the first distribution of building materials in Morocco named"Distribution Batipro. Batipro distribution was one of the major strength that Holcim has;thus, our team has decided to use this distribution channel in order to increase the sales of Holcim. We decided on some promotions that we will explain in the implementation stage. ii-

WO Strategies We have identified two (Weaknesses/ Opportunities) strategies that emphasize theimprovement of Holcims weaknesses to take advantage of its opportunities. The followingare the identified strategies: a.Reduce the production cost to increase profitability and to remain competitive inthe market From our analysis, we have found that the energy cost represent 38% of the productioncost; the concerned energies are the Electricity, and the PetCoke as a combustible that is usedto turn our machines. In addition, the cost of energy has increased in the last three years ,electricity bills have increased by 18%, Petcoke price has increased as the Oil price hasincreased. We have seen how the excess supply has pushed the cement producers to eliminatethe Gentleman Agreement, also it has pushed them to start price war. Thus in order for our company Holcim to remain competitive in the market, and to increase its profitability; thesuggested strategy is to reduce its production cost; in the implementation stage we will talk more about this strategy, and we will try to explain how we are going to implement thisstrategy. b.Use credit selling as a Strategy to get back old customers and attract new ones 37

HOLCIM Strategic Plan 2012- 2014 According to Mr, Samir Rais, the Selling administrative and Credit manager, Holcimhas knew a serious issue of losing customers mainly due to the absence of credit selling. Healso added that 34% of their customers left Holcim and started to do business with Lafarge because Lafarge gives them 40 days to pay their payables; Holcim in the past used to appealto an insurance company called ACMAR to protect it from the customer risk, but this lastdoes not cover the totality of Holcim credit selling and sometimes it does not cover thetotality of the ceiling credit asked by the commercial for several reasons. (Analysis of thecustomer file passed on by the commercial).Based on this, we established a credit strategy that would help us getting back oldcustomers and attract new ones. You may ask how we are going to cover ourselves from thecustomer risk. As a team, we decided to assign a new task to the financial accountant that will be perform a financial analysis to evaluate the solvency, leverage, and the profitability of theinterested customers; via this financial analysis, we will reduce the cost of

doing business because we are going to avoid the insurance costs that reached last year 10 million MAD. iiiST strategies: As a team, we have been identified by using Holcim internal strengths to avoid or to reducethe impact of external threats. Those strategies are as follows: a. Provide more value to customers by helping them in managing their businesses(Bton) Holcim deals with 5 types of customers; one of them is the BPE/ Prefa. The prefabrication, the BPE and the construction industry recorded simultaneously better penetration over the last three years, Holcim generate 16% from its sales revenues from thistype of customers which can be considered as an important %. Knowing also that Holcim hasa division that is specialized in Concrete that is present on the market of the Eastern, Centraland North Central with 10 stations (Fes, Nador, Settat, 2 Rabat, Tangier 2 and 3 inCasablanca). We decided to provide our BPE customers with the necessary raw materials 38

HOLCIM Strategic Plan 2012- 2014 (Cement, Granulat.) and also some services if necessary. For example, if one of our customers has a problem with the management of his/her business, we take charge of redirecting and solving the problems with the help of our engineers who have both theexperience and the expertise in the field. b.Assign One Token/Tone ( Value of 20 DHRS), to remain competitive in themarket As we stated before, Holcim has 5 types of client, one of them is Distributors. One has toknow that distributors are the major source of revenue of Holcim with more than 47% of thesales revenues. This type of client cannot be neglected. Thus, as a team, we have built another strategy that will be directed to this type of customers besides the one of credit sales. We willexplain it in the following section.

iv-WT Strategy: a. Joint venture with governement agencies such as CDG, CGI.. After that both Chaabi lil Iskane and Addoha have created their own cement units; theremaining government agencies such as CDG, CGI, Al Omrane represent a goodopportunity for our company. Agreement with this type of agencies will really allow us toachieve our main objective that consist on maintaining our market share, and as the time goeson, our sales also will increase. Al Omrane for example is one of the leading companies in thereal estate industry; and it consumes large amounts not only of cement but also of granulatsand concrete. Thus, we will not provide it with only cement but with all the neededconstruction materials. 39

HOLCIM Strategic Plan 2012- 2014 Strategies Formulation The SPACE Matrix: 40

HOLCIM Strategic Plan 2012- 2014 To construct this SPACE matrix, we rated the Elements with regards to the External and theinternal analysis previously discussed. Consequently, Holcim Maroc has fallen within theAggressive quadrant, H (0.752, 0.70). thus we can see that Holcim is in an excellent position touse its internal strengths to take advantage of external opportunities, to overcome internalweaknesses, and to avoid external threats. Therefore, the suggested strategies based on thespace matrix analysis are: Market Penetration, Market Development, Product Development,Backward Integration, Forward Integration, Horizontal Integration, and finally related andunrelated Diversification. Matching our previously developed strategies with the ones mentionedabove generates the following classification: Market Penetration:

 Partnership with the Marchika Med Company Increase the users utilization rates via Batipro Assign One Token/Tone ( Value of 20 DHRS), to remain competitive inthe market Market development: The Excess supply will be left for export( Central Africa) Product Development: Use credit selling as a Strategy to get back old customers and attract newones Develop a new type of product that has a high resistance, which will bringvalue to customers QSPM MATRIX: There is only one analytical tool that is designed to determine the relative attractiveness of feasible alternative actions, the QSPM; this tool will be used in order to determine which is best to be implemented best. As a result of this evaluation, we decided on implementing fivestrategies that comes under two different categories; the first category is the product 41

HOLCIM Strategic Plan 2012- 2014 development and the second category is the market penetration. Under the first category, wehave mainly 4 strategies: Tokens strategy, Hedging with BGC, Credit selling, andManagement services. On the other hand we have two main strategies, targeting nonexploitable regions and signing a partnership contract with Marchika Med organization.Based on the QSPM

Attractiveness scores, our team has decided on implementing five major strategies which had the highest scores; three from the first category, and the two from thesecond one: the Tokens strategy, Hedging contract with BGC, credit selling strategy. Theattractiveness scores for these strategies are, 3.33, 3,43, and 3,99 respectively. As for the other two strategies: targeting non exploitable regions and the Marchika partnership have: 4, 32 and4, 05, respectively. (See Excel File) Recommendations: Going back to our long-term objectives, the increase of sales by 9% by nearly the end of 2013 comes in the first position followed by maintaining our position in terms of marketshare. Thus, all the following strategies were mainly developed to help us achieve our objectives:1 st Objective: Increase the sales growth to 9% by the end of the year 2013 . Strategy 1: Distribute the product in the non-exploitable regions. Strategy 2: Negitiation with the Marchika Med organization. 2 nd Objective: Maintain our position in terms of market share (3 rd position 25%). Strategy 3: Provide the potential customers with a credit selling option. Strategy 4: Use hedging contract with the BGC

 Strategy 4: Assign One Token/Tone (Value of 20 DHRS), to remaincompetitive in the market.Concerning the third objective, to be the cost leader in the industry by the year 2014we couldnt get the cost information, managers at the company said that it is highly 42

HOLCIM Strategic Plan 2012- 2014 confidential. As a matter of fact, we decided to forget about this objective for the moments,and to focus on the other objectives and strategies. 43

HOLCIM Strategic Plan 2012- 2014 StrategyImplementation To respond to change in our competitive environment and facing thenecessity to continuously improve our competitiveness, we have decidedto change our business functions by opting for a client orientedorganization, instead of being product oriented.1 - The sales force will be organized according to the nature of the activityof our client with one hand the technical segments (construction44

HOLCIM Strategic Plan 2012- 2014companies, precast, BPE, Road companies....) and on the other hand thedistribution (Distributors and franchisees). This customer-focusedorganization will enable us to develop synergies to create packagestailored to the needs of our customers.2 - A review of process support functions will go along with this change,the sales organization will be implemented in two stages with anintermediate phase. When the distributors will be still attached to thetechnical segment, and the second phase is when this type of client will beunder the distribution direction (Batipro) to allow Batipro to consolidate itsposition.Consequently, the organization's executive committee will evolve businessfunctions cement, concrete and aggregates will be consolidated into amarketing and sales director:- Directions structured channels (Trading, Construction & CivilEngineering, Roads & Infrastructure, BPE & Prefs Great project and

largeaccounts), these channels will occur throughout the Moroccan market.Maintaining strong coordination commercial/production to produceBPE and Aggregate to supply respectively the Building & CivilEngineering and Roads & Infrastructure.- Strengthening of logistics and marketing activities in marketing andsales direction.After discussing the main fundamentals functions of our new business, weopted as we mentioned before for a client oriented organization. Thiscustomer-focused organization will enable us to develop synergies to45

HOLCIM Strategic Plan 2012- 2014create packages tailored to the needs of our customers. Those packageswill be communicated in terms of strategies in the following section. 1- Product Development Strategies: This category actually involves three strategies:Strategy 1: Provide the potential customers with a credit option. From our analysis, we have found that almost 16% of Holcim clients have left thecompany and they started doing business with one of our major competitors(Lafarge) for the simple reason that Holcim does not offer credit selling.Regarding the intensive competition in the market and many other externalfactors discussed before our team has decided on providing the potentialcustomers with the credit option. The Allocation process will be divided into two parts. The first part is theinformation gathering stage; the sales person is the one that is responsible forthis. The following list summarizes the types of information that we search for: - The date of the creation of the company.- Legal status (LIMITED COMPANY, SARL, Company of collective names etc.).- Name of one or several leaders of the prospective customer.- Legal Privileges if existing with the other entities.The partners of prospect (these last ones offer precious information on solvency and payment time of the concerned company).- Banks (even if they are subjected to the professional secret).- The last three balance sheets and the account of the profits.After this, if the client passes this stage then we will move to the next step; the credit manager will perform a financial analysis via financial ratios to test the liquidity, the solvency, theleverage, and finally the profitability.Table and figure in the appendix summarizes theallocating process. 46

HOLCIM Strategic Plan 2012- 2014

Client StatusSituationDecision Customer in CashNo Customer risk Customer in account Customer guaranteed byACMAR Customer risk is insured andguaranteed by the InsurancecompanyCustomer not guaranteed byACMAR Case to be studied:Proposition of our creditoption. Agreement of theceiling credit amount thatcould be offered by thecompany. 47

HOLCIM Strategic Plan 2012- 2014 a. Methodology of allocation: 48

HOLCIM Strategic Plan 2012- 2014 IV. Follow up of the customers whose internal risk was granted:Via the followup of the fallen: Fallen InvoicesAction First monthRaising the awareness of the commercial30 to 60 daysReduction of the ceiling granted by 50 %60 to 90 daysBlocking of the customer and the transmission of the file to thedebt collection agency for amicable or judicial covering of theoutstanding debts.In case of refusal of payment of the debt by the customer, this incident will be settled asfollows:- The accountant is going to record the credit not paid off in the account of reserve.- Preparation of the file by the ADV of the point of expedition concerned (order forms,slips of sealed deliveries and invoices accused by the customer)- Transmission of the file to the persons in charge of credits management whom aregoing to pass it in their turn to the office of covering recognized for amicable covering or judicial one.Strategy 2: Tokens Strategy:After analyzing the external market, we noticed that there is a severe competitionsurrounding the industry which led to a price war. One of our major objectives is to maintainthe industry position and to remain competitive. As a team, we decided on a strategy that willallow us to achieve our previously stated goals. Our strategy consists of price cut.The Tokens promotion consists of the following: To its distributors, Holcim salesmanager gives what we called tokens for every one tone sold; this token has a value of 10MAD that the distributors give to their clients in terms of discounts. Once the distributersreach a total of 1000 token, they

contact Holcim to get paid immediately. To promote thisstrategy, we have decided to create new flyers dedicated to the Tokens strategy only. 49

HOLCIM Strategic Plan 2012- 2014 However, after discussing this idea with three managers at Holcim Fes, they rejected it and proposed direct communication with their distributers. They have argued that the flyers would be costly and that the best promotion would be the word of mouth. They will contact their distributers directly through the phone and let them know about the new service. Thesedistributers will then communicate this offer to their clients and the message will get going.Strategy 3: HedgingThe next type of clients is the BCG (Btiment Genie Civil), the Big Clients (grand projets etgrand comptes), and Partners. To acquire this type of clients we have decided to use hedgingagainst the fluctuations of commodities prices of cement in order to fix the cement prices.After analyzing the cost components of Holcims cement production we have found that themajor cost about 50% is incurred from the cost of the petroleum coke (Petcoke). (table)Petroleum coke is a carbonaceous solid derived from oil refinery coker unitsand usedmainly in cement industries as a high energy fuel. Petcokes prices depend on the fluctuationsin the prices of its derivate the crude oil which causes fluctuations in the cement prices aswell. Source: APC Holcim like any other cement company bears some of these prices fluctuations and transfersthe rest to its customers. The customers are mainly entrepreneurs, who bid for different projects by offering the lower costs for the suggested projects. These entrepreneurs calculatetheir costs on the basis of the price fluctuations of the cement then they add their marginal benefit. Some entrepreneurs who are optimistic and believe that the cement prices wouldremain stable end up in a case of cement price increase loosing big amounts from their marginal benefits. On the other side the pessimistic entrepreneurs, would normally increasethe average price of the cement and end up losing the bid on projects. 50

HOLCIM Strategic Plan 2012- 2014 In order to acquire these clients, increase our sales and hence maintain our market share andour profit margin we have decided to hedge in three steps. Step 1:

Hedging Futures Contracts : We have decided to hedge using the futures contracts. The futures contracts for Petcoke havea size of 1550 tons, an initial Margin of around 16% and its symbol on the exchange market isPTC. Exchange & Product NameContract SizeInitial MarginSymbolNYMEX Petcoke Futures 1550 tons16%PTCHolcim would calculate how much petcoke it needs to produce 1 ton of cement. If a customer wants to buy 100 tons of cement to be delivered in a year, the price of the cement will becalculated based on the cost of petcoke in a year. Once the sale is made, holcim will have tohedge the amount of petcoke needed to produce the 100 tons of cement. Any profit in thefutures market will be used to cover the increased costs in the physical market and vice versa.Holcim will have to go long when it makes the sale and close its position by going short whenit goes long in the physical market. Step 2: Hedging Foreign Exchange Market: Once the hedge of commodities price fluctuations is made, the company will have to hedge itsforeign exchange risk since the clients will pay in MAD and the prices of the Petcoke are inU.S Dollars. For this reason, Holcim will use Forward contract to hedge the value of thefutures contract. Step 3: Hedging Credit risk of the customers In case the cement prices go down and the client defaults on its obligation, Holcim will incur a loss (credit loss). To hedge against this risk, we have contacted an insurance companyACMAR that is willing to insure at a low premium of 0.01% because it will only insure thedifference between the predetermined price and the market price. 51

HOLCIM Strategic Plan 2012- 2014 1- Other recommendations: Market penetration strategies consist of two Strategies: 1. Distribute the produc t in the non-exploitable region: The purpose would be to acquire new customers from those non-exploitable regions. This will have a direct impact on our sales. Holcim ispresent in three different regions on the Moroccan territory (west, central,and Oriental) and one of our major strengths is the strong distributionchannel. Holcim can benefit from the elimination of the gentlemanagreement and therefore increase its sales. 2. Partnership with the Marchika Med organization :Negotiation with the Marchica Med requires no implementation steps 1- Forecasting: The forecast involves the impact of our strategies on Holcims future salesand hence its market value. Our forecast tests the impact on sales of eachstrategy then the impact of the strategies on Holcims market value as awhole. The following table summarizes our calculations: (The detailedcalculations can be referred to in the excel sheet provided along with thedeliverables).EquityMAD 2 498 087000DebtMAD 1 478 059000 TotalAssetMAD 3 976 14600052

HOLCIM Strategic Plan 2012- 2014WACC7,42%Cost of equity0,0938 Total Expenses as a percentage of sales77%Beta1,1Net Profit Margin23%Risk free4,10%Expected Growth Rate Of Demand 7%Market Return8,90%Expected Inflation Rate3%Cost of debt5,86%Last year quantity of cement sold3572069,23debt ratio0,371732increase in sales thanks toHedging the strategy5,00%Equity to totalasset ratio0,628268Price of cement Last year(Average)987tax rate30%20112012201320142015Incremental Quantity of Ciment178603187534196910206756Price of Ciment (adjusted toinflation)1036106710991132incremental revenues 185095697200180997216495748234140151Incremental expensesexcluding taxes)142523687154139367166701726180287917incremental tax expenses 0000Incremental Cash Flow 42572010460416294979402253852235DCF 39632375428624144635570050133690NPV of the strategy178984179 The previous table shows the impact of every single strategy on our sales.For

example, the first column shows the incremental quantity of cement53

HOLCIM Strategic Plan 2012- 2014as results of the strategy. Then, we have assumed that the price of cement will increase at least at the rate of the inflation (3%). Theincremental revenues are the product of the incremental quantity and theprice of the cement, whereas for the incremental expenses, we know thatthe company has control over its cost and we considered them to be fix;the total expenses represent approximately 77% of the sales, thus, thevalues presented there are the product of Incremental revenues and the77% (1- Net profit margin).Worst casesenarioNeutral Best casesenario NPV of strategy 1( Hedging) 100534547175812861302513556 NPV of strategy 2 (Creditselling)137303124216134949397060027 NPV of strategy 3 (Tokens)175812861216134949258343085 Total increase in the firm value413650532608082759957916668 Expected market value of thecompany115869905321178142275912131256668 Expected market Price of thestock2 752,25MADMAD 2798MAD 2882 Expected % increase in thevalue of the firm3,70%5,44%8,57%WAincreaseWeight0,30,40,35,86%Inc revenues minus the Inc costs give us the incremental cash flows thatwe have discounted by the Weighted Average cost of capital (WACC) to54

HOLCIM Strategic Plan 2012- 2014get the NPV of the strategy. From the table, we can say that the discussedstrategies would increase the value of the firm on average by 5,86%.Concerning the first strategy (Credit Sales), we assumed that the growth insales will be in the worst case 2%, 3% in the neutral scenario, and 5% atthe best scenario. For the hedging, we assumed 1.5%, 2.5%, and 4%respectively. For the last strategy, Tokens strategy, we assumed that itwill increase or sales by 2.5% in the worst case, 3% in the neutral case,and 3.5% in the best scenario. Strategy Evaluation: 55

HOLCIM Strategic Plan 2012- 2014 The balanced score card: Areas of ObjectivesMeasureor TargetsTimeExpectationsPrimaryResponsibilityCustomers: - MaintainMarket Share- New Clients- Marketshare3

rd positionwith 25% of themarketBy 2013-Afford creditselling-Communicate theTokens strategy toour clients Financials: - IncreaseSales Growth-Revenues-Sales15% by 20169% by 2013-Target nonexploitableregions-Partnership withMarchika MedOrganization Production/Operations: - Decrease productionscosts-COGSBy 2013 - Partnership withBCG and Bigclients 56

HOLCIM Strategic Plan 2012- 2014 Conclusion: During past years, Kingdom of Morocco has known a significantgrowth in the construction and building sector. However, due to theelimination of gentlemen agreement that dismissed the authority of eachcompany on its region, a severe competition occurred the fact that causeda price war. These facts are threatening Holcim Maroc, the third largest companyin the building materials industry. Therefore, the firm has to react to thismarket change and benefit from its strengths and opportunities, and workto get rid of its weaknesses, in order to maintain its market share andincrease its sales growth.Based on our internal and external analysis and a good sue of concepts and tool taught during our capstone course. Our team hasdeveloped a set of strategies to be implemented by the firm. Thesestrategies includes: going from product oriented to client oriented, andthereafter, under this umbrella we have 5 main strategies: hedging,tokens, credit selling, targeting non exploitable regions, and partnershipwith Marchika med Organization.Our team has critically analysed all possible strategies,implementation, success, and evaluation, and we believe that if HolcimMaroc adopt these strategies it will enhance its position in the industryand better face its competitors.57

HOLCIM Strategic Plan 2012- 2014 References:

 Government spending increase. http://www.immobiliertanger.ma/english/blog/economic-news-ofmorocco/appropriation-bill-grants-interest-to-social-sectors/ Central Africa ciment industry http://wbi.worldbank.org/wbi/Data/wbi/wbicms/files/drupalacquia/wbi/FinalReportAfricaCementSector090420.pdf Marchica Med http://www.marchicamed.com/index2.html APC 2010 conjuncture. http://www.apc.ma/images/stories/statistique/conjoncture-ciment-2010.pdf

http://www.leconomiste.com/article/cimenteries-en-boursebrrestructurationmais-risque-de-surcapacite-aussi Appendix: Figure1: Market share distribution 58

HOLCIM Strategic Plan 2012- 2014 Figure 2: APC: Conjuncture 2010 59

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Table1: EFE Matrix Critical SuccesFactorsLafargeHolcimCiment du MarocWeight Ratin g Weighted Score Ratin g Weighted Score Ratin g Weighted Score Market Share0,1540,620,330,45Inventory System0,0840,3230,2430,24Financial Position0,140,420,230,3Product Quality 0,0630,1830,1820,12Customer Loyalty0,0730,2130,2130,21Sales distribution0,1230,3640,4820,24 60 Key External Factors Evaluation(EFE)Weight ScoreWeighted ScoreOpportunities The Population is growing0,0740,28There are no legal restrictions on exporting cementfrom Morocco0,110,2There is an expectation of high demand because of infrastructure and private projects0,0830,24There is a potential development of new varieties of cement0,0820,16Technological advancement0,0720,14Cement is the main and essential building material inuse in Morocco0,140,4 Threats The demand has reached its maximum level at the present time.0,120,2There is an Aggressive competition in the market0,0840,32The cement industry knows a surplus in the supply0,120,2The actual market knows a price war in order to get ridof the excess inventory the firms have0,0730,21The development projects launched by the governmentslowed down0,0820,16There are no strict regulations to forbid entrance of other foreign companies to the Moroccan cementindustry0,0720,14Total1,000 2,65

HOLCIM Strategic Plan 2012- 2014 Global Expension0,120,220,220,2Organizationalstructure0,0530,1540,230,15Produc tion capacity 0,0640,2430,1810,06Customer Service0,130,340,430,3Price competitive0,0620,1220,1220,12Managementexperience0,0540,240,220,1To tal1 3,28 2,91 2,49 Table2: CPM key Internal Factors Evaluation Weight ScoreWeighted Score Strengths Strong distribution channel0,0940,36

Holcim follows t he Strategic ManagementModel0,0630,18Holcim has been certified the ISO 9 001 and ISO14 0010,0840,32Customer Relationship Management0,0730,21Strong Brand Image0,0930,27High Profit on Equity Ratio0,0530,15High Experienced Workers0,0640,24Batipro Distribution0,0840,32Strong Production Capacity0,0630,18 Weaknesses The most leveraged company in the industry isHolcim0,0710,07The company liquidity is weak.0,0720,14 No credit selling0,0810,08Holcim is the least profitable company in themarket0,0720,14High Production costs0,0710,07Total1 2,73 Table 3: IFE Matrix 61

HOLCIM Strategic Plan 2012- 2014 Graph1: Current RatioGraph2: Quick RatioGraph 3: Debt to Total AssetsGraph 4: Debt to EquityGraph 5: Times Interest EarnedGraph 6: Net Profit MarginGraph 7: Return on Total Assets Graph 8: Return on Stockholders EquityGraph 9: Average Inventory Turnover Graph 10: Average Collection Period Importation tariffs. Facture energitique The government launched a ten year investment plan (2005-2015) for constructing 15000KM of rural roads and the creation of under passages in the city of Casablanca. The housing and plan minister, Toufik Jhira, reported a state of crisis in social 62

HOLCIM Strategic Plan 2012- 2014 housing which represents 70% of the national market and actions must be made to avoid adisaster in this sector. The government encourages the construction of social houses sincetheir number is only 35000 in 200. 63

HOLCIM Strategic Plan 2012- 2014 Fianancial Statements: 64

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HOLCIM Strategic Plan 2012- 2014 Ciment du maroc! 70

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