Corporate strategy for Nepal Cement Company Limited

• Main Author: Karki, Amit S.
• Format: text
• Language: English
• Published: Animo Repository 1999
• Subjects: Cement industries > Nepal; Nepal Cement Company
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/3990
• Institution: De La Salle University

Cement is a basic building material in the modern world and is required by all countries for their development programs. Cement commonly used fro normal construction work is knows as Ordinary Portland cement (O.P.C.). Due to its inherent characteristics, it has become the most popular bonding material and is used for wide variety of modern construction work. The use of cement in Nepal started noticeably in 1950s. The country used other local material primarily mud mortar, prior to 1950. Ever since the cement was introduced, it has been a seller's market in Nepal. There is a growing demand for this product. There are only three major domestic players in Nepalese cement market. All these are publicly owned companies and do not compete with each other- they serve their own respective markets. The capacity utilization of these cement companies is very low. The country still suffers from an anormous demand-supply gap. Large Indian import is supplied to fill in this gap. Even with this import, the real demand of cement has not been met in the country. Nepal Cement Company was established to realize the demand of cement and the government program for import substitution. It has two lines of production, Chinese line and German line. Both lines produce Portland Cement. The major problem faced by the company is its inability to improve its capacity utilization. The company performed well during its early phase of production. But, in later years, the plant slowly started to deteriorate. This was attributed to the lack of maintenance, wear and tear of machinery parts and equipment and procurement of low quality raw material. These problems have caused NCC to lose profit base. NCC has posted negative profit for three consecutive years. This company, however, can be revived profitably. The revival depends on improving and achieving a higher capacity utilization and improving its management functions. Therefore, it is recommended that the total rehabilitation program be implemented to increase the production capabilities of Nepal Cement Company. If, left alone, without plan to rehabilitate these lines, their efficiency would decrease further and further over the years. The rehabilitation program would not only increase the production capacity but would also increase the total life of the plant. Since NCC is a government owned enterprise, it cannot apply loan through its own initiative. The sourcing of funds for the rehabilitation program has to be fueled by the government. The company will also apply for further corporate tax holiday for its rehabilitation program and negotiate for the re-schedulement of outstanding loans. Aside from rehabilitation, the company's functional strategies would be to: Organization/HRD (1) create a material management division under the operations department, (2) to reorganize internal audit accountability, (3) to lay off redundant employees belonging to both administrative and the technical section, (4) institute in-house training programs for the junior level technicians focusing on the preventive maintenance and (5) evaluation and promotion of employees to their job performance and evaluation Operations (1) strength production capabilities, (2) institute a material management information system, (3) apply inventory management techniques to plan and control spares and raw material requirement, (4) practice preventive maintenance and (5) assign person to oversee quality of raw material and timely delivery of raw material from supplier side Finance (1) institute budget control system. (2) strengthen the audit function, (3) install appropriate costing system and (4) institute system for the production of periodic accounting data. I have taken the position of General Manager of NCC to formulate the strategy for this paper. General Manager of NCC has no power to implement privatization, this is left to the ruling political body of Nepal. As such, I have avoided privatization of NCC and concentrated on the internal resources of the company that General Manager has control of to improve the overall health of the company. The projected income statement shows that the company can take into profitability position is the recommendation procedures are followed.