CEMEX

Case
Analysis
Group
CEMEXS STRATEGY IN EGYPT
Transforming Assiut Cement into a market
leader

Need for a
good product
DECOMMODIZATION and a good
STRATEGY marketing
strategy
1. Positioning as a producer to avoid
of premium product price based
2. Distribution strategy competition
Investment of
based on a partnership
$125M:
with a network of small improvement of
retailers
production
facilities
increase of
capacity
development of
logistics network
infrastructure to
distribute ready
DECOMMODIZATION STRATEGY
1. Positioning as a producer of a premium
product
Characteristics: Dark, smooth, and fresh
Specialty needs: resistant to salt water, customized for sulfate
rich soils, low-price line
Marketing stressed on quality, commitment to customers, and
Egyptian roots

2. Distribution strategy: network of small

retailers
Avoid brutal price negotiations, sell directly to retailers
New logistics: agreement with Banque Misr so that the retailer
does not need to come to the plant
Retailer selection: legally established, 500 tons of cement
sold/month, sells to end customers, has storage and sales
area, willing to forge a partnership
Need for retailers to know how to sell the product, and
teach end users how to use the cement need for them to be
loyal (loyalty & reward programs)
 How does the Reward Program fit in this strategy?
Network & Locus of Power

Motivating retailers to sell our products

while ensuring good returns

Reward Program allowed higher

emphasis on Premium products through
points allocation

Cemex products were reaching the

end customer without cutting off the
prices
Setting fixed monthly targets & assuring
reliable estimates of monthly production
 Why did Llotop choose the Reward Program and not
another incentive programs for retailers?

Retailers margins and loyalty discounts were not

strong enough incentives to achieve the target
growth rate
Moving away from usual incentives being
given by competitors
Pushing premium products
A minimum sales volume was assured as
opposed to Discounts and rebates
Reward Program helped in targetting the
competition loving nature of Egyptians
Did the Reward Program motivate
retailers to sell more CEMEX products?
 Reward Program 2002
Not Participant Still In Tournament Dropped
400.00

300.00

200.00

100.00

0.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Participant Numbe Avg

Sales
Average Sales Type r Sales
325.00 Not
317.18 960 230196 239.79
250.00 Participant
175.00 239.79
205.44
100.00
SIT
2020 479200 237.23
(Till May02)
Dropped 2231 458335 205.44

5211 1167731 224.09 41.51

%
SIT
(After 1809 573785 317.18
 Reward Program 2003
Still In Tournament Dropped
400.00

300.00

200.00

100.00

0.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Participant Numbe Avg

Average Sales Type r
Sales
Sales
225.00
222.10
200.00 SIT (Jan03) 505 175665 300.29
175.00
150.00 Dropped 4443 659960 148.54
148.54
125.00 49.52
100.00 SIT %
1992 442407 222.10
Still In Tournament Dropped (Feb03)
Comparison 2002 V/s 2003
Exhibit
2
Consumption (MMT)
-
2003 25 10.71
%
2002 28

23 24 25 26 27 28 29

Exhibit
12
Sales
-
2003 182.06 26.61
%
2002 248.08

150.00 175.00 200.00 225.00 250.00

Comparison 2002 V/s 2003

Still In Tournament 2002

400.00
300.00
200.00
100.00
0.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Dropped 2002
300.00

200.00

100.00

0.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2002 2003 % Drop

Still In Tournament (Avg 317.18 222.09 29.98%
Sales)
Dropped (Avg Sales) 205.44 148.54 27.69%
Ques 4 :What characteristics of the Reward
Program do you like the most? And the least?
Why?
Positives
Encouraged loyalty and retained retailers
Sales representatives detailed the retailers about the program
Did not just focus on sales numbers but also on product portfolio: variable point system
Monthly targets :
Reduced forward buying
Easy for production scheduling
Clearly quantified goals e.g. 70% of target per month to be ordered, buy at least 150
tons of Assiut cement
Diversity of retailers considered: Small and big retailers had different parameters of
evaluation
Regional grouping gave fair chance to all the retailers as the economic development of
regions was different
Monthly feedbacks to retailers
Voluntary participation- no pressure on retailers
Consideration shown towards those who remained till the end TV given as reward but
was not an appropriate reward
Negative
Keeping a part of the bonus would affect the initial decision of
participation
Reward system was too complex
High rate of elimination of participants
Should have had a quarterly / semi annual rewarding system to
encourage the participants and reduce drop out rate
No disclosure about the parameters on the basis of which the
number of prizes per region was decided
E.g. West Delta has appx. ratio of 8:1
East Delta also had ratio of appx. 8:1
But Qena had 17:1, Qena had average performance is greater
than West Delta
The number of winners remained same for the regions in 2003
despite of increase in number of retailers for all the regions
What are the advantages and disadvantages of specifying quantities of each type of
product in retailer targets? Would you think a generic target of dollar sales, or dollar
contribution margin, could have been more effective in supporting CEMEX strategy?
Advantage and Disadvantage of specifying
quantities of each type

Advantages:
Indirectlydrive and monitor the sales
Ensure minimum purchase in different categories
Push Sales strategy

Disadvantage:
Quantities fixed need not reflect local demand of the
region

Need for the reward system

Grow in a stagnant market
Supply side exceeds demand in local cement industry
Push sales for premium products
Retailer score computation

Existing Proposed Points

Basic 1
Sales Quota Sales Quota
PRM 5
Basic 250 70% 200 0% SRC 9
PRM 50 70% 80 70%
SRC 0- 20 50%

Point Calculation
Basic 175 175 0 0
PRM 35 175 56 280
SRC 0 0 10 90
Total Points 350 370

Retailer should fulfill minimum quantity of 120 tons

Or
He should fulfill the quota for premium products
Loyalty Cash-back

Quantity Range and Loyalty

Products Rewards
Existing Proposed Quant Existing Propsed
(LE/Tn) (LE/Tn) ity System System
First 0-400 Basic 200 800 600
tons 4 3 400 1600 1200
From 401-
600 2200 1800
800 tons 3 3
800 2800 2400
From 801-
1200 tons 2 2 1000 3200 2800
Over 1201 1200 3600 3200
tons 1 2 1400 3800 3600
PB 4 4 1600 4000 4000
SRC 4 4

This will help in promoting premium products

as retailers will have greater incentive
Reward System performance in 2002 and 2003

Per Retailer Sales

350

300

250

200

150

100

50

0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Per Retailer Sales (2002) Non Participants Per Retailer Sales (2002) Participants
Per Retailer Sales (2002) Dropped Per Retailer Sales (2003) Participants
Per Retailer Sales (2003) Dropped
 Per Retailer Sales (2002) Per Retailer Sales (2003)
Non
Participa Participant
nts s Dropped Participants Dropped
Jan 194 192 0 221 0
Feb 155 154 0 165 112
Mar 212 220 0 168 114
Apr 234 239 0 147 101
May 228 280 0 159 104
Jun 235 297 0 171 110
Jul 181 225 159 185 123
Aug 182 238 163 172 120
Sep 194 246 169 164 108
Oct 232 310 211 149 102
Nov 201 240 174 179 91
Dec 191 229 162 172 120

Assump
tion
2002 2003
% of Sales Points % of Sales Points
Basic 96% 0.96 92% 0.92
PB 3.5% 0.175 7% 0.35
SRC 0.5% 0.045 1% 0.09
1.18 1.36
The Suggested Rewards system
The rewards should be evaluated on a half-
yearly basis, this will incentivize the smaller
retailers, while also ensuring lesser dropouts.
The loyalty cashbacks should be reduced for
basic cement to promote premium products.
The target of 150 tons along with individual
quotas should be reduced
Egyptians, and Arabs in general, like
competing with each other. Hence we would
suggest continuing with a reward program
rather than target of dollar sales