Jail Industry in Nepal
The cement industry is operating with many difficulties in the market like labor union issues, strikes and lockouts. The major strengths of the company are market coverage, quality, market credit, government supports etc. The major weaknesses are union stress in the organization, capital, over staffing, cumulative loss, old technologies and so on. Besides this the company has good opportunities from the market in regard of raw material, government support, availability of clinker, investment opportunity to third party, and the failure of key competitors like Himal cement factory and other private organizations.
The major threats of the organization are external labor unions, government appointment process of top level management, foreign interest on the cement industry of Nepal as a whole etc. The company has short term objectives of better utilization of raw material, wastages management, managing overstaffing, increasing the annual turnover. It has medium term objectives of optimization of plant capacity, maintenance of plants, management of labor unions, and lessen the cumulative loss.
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The long term objectives are capital enhancement, replacement of plants, realizing corporate social responsibility, quality assurance to consumer. The structure of the organization is top to bottom and is supported by vertical chain of command. It has no organizations functions like marketing and human resource. The structure is not appropriate in the context of modern management where its competitors are getting closer to the latest technology. The company has not updated in plant and is operating by using of old plants. It has no customer relation management.
There is neither front desk nor any other unit to deal with customer in the industry. Organization behavior is less understood by the management. Further this, the company has facing a lot of challenges in regard of human resources. The company is running with over staffing problem and it has no recruiting task since last decade because of over staffing. The company has many beneficial schemes to the employee working in the organization for self retirement and normal retirement. The company is providing the life insurance to the employee and a lump sum package to the employee.
Whatever the company is facing the challenges the company has abundance opportunity to succeed over the market if it gives the enough opportunity for the advancement of the company brand image. It is getting a good response from the market in terms of turnover without having any marketing policies. The company needs to be operated in its maximum capacity for which plant replacement and capital enhancement has to be done. Labor unions should be managed properly and employees and line mangers should be provided with training and development opportunity.
The company should be able to generate positive work environment and it should foster the corporate social responsibility over the nation. Parallel concern should be given in the management of wastage so that the company would not be noticed by the environmental issues besides its quality slogan. CHAPTER ONE INDUSTRY PROFILE Human civilization is not the result but it is the step by step process. From the agricultural age to the age of modern digital era, many transformational activities were made for civilization, which have been from many theories, practices and revolution. The motive and stimuli for this is human’s need.
Obviously many decades past, but human needs are getting more and more complex. People always move from hierarchy of need from physical to spiritual. Mental revolution and conflict of people always gives a sound solution for every problem to them. For the mental and spiritual need he runs through virtual production and for the fulfillment of physical need a person runs through physical production. According to Albert Einstein, “Nothing can be destroyed in the world except to make the change in the form of any production. ” Hence we all are surrounded by production process everywhere.
When a people takes birth he needs energy from food, which is the result of production process, further needs shelter and clothing again is the result of production process. Talking about the shelter, home like infrastructure is of great meaning. Previously, soil and stone were in use for such infrastructure but now it is the cement that is used for every structure like bridge, hospital, school, building road and so on. As the need of infrastructure is growing so the need of cement is growing and hence the cement factories are also growing. In today’s world skyscrapers can be seen in every society.
Supply of land is strictly limited but population is increasing continuously. To meet this need many infrastructure is needed. Global Scenario Cement is nothing special but it is a kind of stone that got 1400 degree Celsius heat and that changed with some feature like sticky and durability getting the use of building many kinds of physical infrastructures like bridge, school, house, road, highway, hospitals and so on. Cement is natural element provided to human for its developmental needs. Cement has the quality of durability that joints the bricks to form the structure.
Talking about the history of cement, it was found a long ago with the human civilization but with the limited use. At that time people used to use it only as a stone a soil to color the homes. But today it has a wider use. There are a lot of factories producing cement in the world to address the need of growing demand. Many developed countries are using it to make their infrastructure strong. China used it then to build the Great wall. India has the history of using cement science its origination. America, having its strength in every aspect is using cement science 13th century.
Cement factories are growing in the world. Brazil has enough natural resources and is not only addressing her demand but also exporting to European Zone and Asian market. All the infrastructure of the world is found built by using cement and it is very easy to make the guess of history of cement. China alone is producing 49% of global demand of cement. It is one of the biggest giant to consume cement as well. The following picture will bespeak itself for the globalized scenario of the production of cement. Nepalese Scenario In Nepal, History of cement can be observed from early civilization.
All the infrastructure of Kathmandu, Rana’s palace and king’s palace that were built in 13th century were built by using cement. In daily life, use of cement comes into practice without having a long history. It was then when India was ruled by British and rays of the same were shining to affect in Nepal also, cement was introduces in India and in Nepal also it was used by former kings and Rana’s. At that time there were no any industries to produce cement but people used to get cement as a special soil from big rocks in the mountain and used to collect it for daily use.
Professional use of cement as binding material came into effect in Nepal from the beginning of early 1950’s. As no indigenous cement manufacturing industry existed, early users of cement were dependent on imports from India to meet their needs. Gradually, around 1965, the supply of cement was diversified in the form of foreign aid program. The cement was started to import in commercial scale only in the early 1970’s from China, South Korea, North Korea, Burma, Indonesia, Thailand, Japan, Hong Kong and many other countries.
In 1975, the first cement plant, Himal Cement Company Limited, came into being to provide Nepal’s first state – owned cement manufacturing facility. Its production capacity initially was 160 ton per day and subsequently a new Chinese plant with the production capacity of 200 ton per day was added making total capacity of 360 ton per day. Then two additional plants, one at Hetauda, Hetauda Cement Industries Limited with the production capacity of 750 ton per day and other at Udayapur, Udayapur Cement Industries Limited, with the production capacity of 800 ton per day were added to the state cement manufacturing capability.
Himal Cement Company was dissolved in 2002 due to environmental cause. At present, in addition to two public sector cement industries and three private mini integrated cement industries, company registration book of the Department of Industries shows 27 mini, medium and large scale integrated cement industries and 17 mini and medium scale clinker based industries are registered. Among 27 mini, medium and large scale integrated cement industries in private sector, 12 industries are producing cement. Similarly, out of 17 mini and medium scale clinker based industries, 11 industries are producing cement.
The actual production data of existing cement industries both integrated and clinker based as shown in economic survey report 2006/07 are 613,643 tons in 2005/06 and 644,325 (production data for 8 months only) are low. Production is estimated as per capacity utilization shown the demand of cement in the country is being met through domestic production as well as from imports. The domestic production is predominantly forming the public sector till 2001. After 2001 the private sector is dominantly gaining ground in the share of domestic production of cement and market.
The estimated capacity utilization both for public and private sector industries are shown in table 4. Considering the capacity utilization in the past, the capacity utilization as estimated seems ambiguous. The industries will utilize their capacity to 60% maximum. The capacity utilized is limited due to non – availability of adequate raw materials in time, operational insufficiency, defects in management, over manning, power load shedding etc. Key Players in the Industry In context of Nepal the key players in the cement market can be analyzed in the following way. ) Producer: The producers in the market of cement industry are many private and government agencies like Udayapur cement in government side and in private, the producers are Jagadamba cement, HP cement and so on. They initially identifies the opportunities in the market and further they find the probable client and accordingly they match their opportunities and client’s need and match them, creating the feel to their products. b) Consumer: The clients of the Hetauda Cement Industry ltd are individuals, households, INGOs, NGOs, government contractors, private organizations and so on.
They always get backed by their need and always make the choice to make the best utilization of their resources. c) Competitors: Udayapur Cement Industry Ltd and Jagadamba Cement are the prime and other private cement factories are the most competitors of the Hetauda cement Industry. A competitor always seeks to find the weakness of its rivals and particularly attacks on very fact to get best over the market. All the players in the market need to perform as per their value base principle for the best functioning of the market. Both way supportive environments are essential.
PEST Analysis PEST analysis is the deep study of any industry from the technical aspect of lunching, promoting and maturing of the product. It is the study of Political, Economical, Social and Technological issues. Before entering in to the market, it is very essential to have the best study of above components. It is basically because almost every decision in the market is affected by the factors of PEST. In cement factory of world and especially of Nepal PEST has the vital role. Nepal has come out through many political revolution and they are still incomplete.
Constitution is in the process of drafting and there are many parties having armed material with them and demanding for their rights. Recent movement in politics of Nepal has made some system related changes but they are still unofficial. Economic environment is hanged with the political environment in Nepal and every industry especially the government agencies are facing the same challenges. Hetauda cement industries ltd. is also one of them. In PEST following happenings can be observed: a) Political: Political scenarios of the country best describe the company’s action and smooth operations. ) Political Philosophy: The country’s philosophy may be totalitarian, capitalism or mixed. Cement factory’s Policy, vision and objectives all are directed by the existing philosophy of the country which is mixed till now. ii) Political System: Political system can be democratic, republican, monarchy or federal. Whole industry may have according features as the orientation of political system.
The industry of China may be differing in principle with that of India. In Nepal it was democratic previously but after the revolution of 2005/06 it has moved towards the federal republic system. ii) Political Stability: A country with higher stable politics may have the lighter vision on the industry but the country like Nepal may not be having the clear vision of the future of the industry. In Country like Nepal where there is no stability of government persisting since a decade, Industries are dematerializing accordingly and same happening with cement industry as well. iv) Political trend: If the country is moving with the same political agenda, same development map and with the same strategies within the different political philosophy is the prime concern of any industry to operate.
But Nepal is running with uncertainty of political agendas and growth road map. v) Political Party: How much is the scenario of consensus between the Political party in the country in prime factors to determine the developmental roadmap of a country and the industry within that country as well. In Nepal there are diversified nature and almost opposite nature in political party and still they are unable to follow any consensus within them. b) Economical: Economical Philosophy of the country, economical trends and values that drives an industry to make the operation is always of determining factors.
Economic conditions are backed by economical environment. In Nepal Economic culture is immature since the constitution is drafting. Every company is waiting for its economic system that the government will follow in future and accordingly they are trying to make their decision in industry. i) Economic Scenario: In Nepal Mixed economic system was followed science 1950’s. But after the transformation of federal republic Nepal, it is following three pillar types economic where private, public and cooperative bodies are enforced. Cement factories are also changing their functioning accordingly. i) Investment capacities: As Nepal is having less investment opportunities in spite of its huge natural resources. Capital formation is not geared up and saving ratio apart from earning is also very low. Industrial investments are not promoting. iii) Foreign investment: Cement Industry needs huge investment and national investment alone may not be sufficient in promoting such factories. foreign investment are also not generating c) Social: Nepal has a mixed nature in culture. She has a cultural simplicity in complexity with diversified types in behavior and culture. Social structure of Nepal is very volatile.
Industry has to perform the role of best producer and has to market its product in different form. Social construction of cement industry is following: i) Social norms: They are prevailing attitudes and principle over the market. In Nepal harmony in diversified norms is plasticized. ii) Life style: Nepal is economically poor country. Few populations are economically sound. Hence a company has to take this fact in consideration in its pricing policies. iii) Social class: Higher, Medium and lower class needs to be identified. Nepal is having medium in majority as a class classification.
Pricing and marketing strategies can be varies accordingly. d) Technological: Technology is simply the use of technique to solve the problem. World has changed in digitalized technologies and Nepalese industry particularly cement industry needs to adopt the pace of such changing technology. Hetauda cement factory is using Japanese technology since its establishment. But other industries are lacking latest technology. i) Pace of technology: It is very essential to adjust the changing pace of technology. Nepalese cement factories are lacking the use of modern technologies.
Other foreign competitors are using modest form of technology that result in competitive environment. ii) Research and innovation: Innovation is the ongoing process. Any industries without innovation last sooner or later no matter how better he is playing over the market. Cement industries in Nepal lack innovation in their production process. Applying the same trend in the product may be harmful since other industries are founding of innovation. iii) Type of technology used: Poor management in selection of technology is hampering the production in Nepalese cement industry.
In this era of globalization one has to pass through strong technologies. German, Japanese, American and Chinese technologies are getting importance. PEST Analysis is the backbone of any industry reflecting all the strength and weakness surrounded by all opportunities and threat. Worldwide scenario of cement industry optimistic since there will be more and more infrastructure to be developed. In the country like Nepal where local demands are not addressed, there can be huge potential and opportunities because of its availability of 95% raw material locally. CHAPTER TWO COMPANY PROFILE
Background Nepal is landlocked country. It has a wide range of natural resources. There are all geographical regions that are normally found in the world. There is the high possibility of hydro based industry since there are a lot of water resources and there is similar possibility of producing the rock based industries science there are a lot of mountains and hilly regions. A nation having such natural resources can have the better opportunities to get best in infrastructural development. Since Nepal has many types of Rocks, she has the possibility of accelerating the cement factories.
Although there are many factory operating in Nepal working in producing cement, neither of the industry is running in its optimal strength. There are mainly three government cement factory: Himal, Hetauda and Udayapur cement industries. Himal Cement Industries is not in operation since last decade. Udayapur and Hetauda cement industries are running but they are not able to operate in their 50% of their capacities. Hetauda Cement Industries Ltd. was established in 1976 according to the company act 1964. It is located in Hetauda-9, Lamsure, Makawanpur, Nepal. This company has the contact office at Anamnagar, Kathmandu, Nepal.
It was started with the sole objectives of distributing cement to the general public in affordable price with the best quality. Hetauda Cement Industries is the government owned enterprises. It was the concept of then King Birendra to establish Hetauda as the industrial area. And the act was enacted accordingly. Realizing the need of infrastructural development in the country Hetauda cement industry was established. Hetauda Cement Industry Ltd. Was established from the financial support from Asian Development Bank (ADB). ADB provided the loan to the government of Nepal at the rate of 1% and the government provided loan to Industry at 9%.
The industry has the collaborative share of other government bodies like ministry of industry of Nepal, Hetauda cement factory has the annual capacity of 260000 metric ton (MT) and a daily capacity or 750 MT in an average. It has the import about 90% of its raw material from Nepal itself and remaining from India. This factory is using Japanese technology that was given by Garman government. Hetauda cement industry has been in operation formally from 1986. It was operating in its highest capacity of about 59% in 1992. In 1998–2000 it was operating in 48% of its capacity.
Since then it is operating in an average of 44% of its capacity. In the same locality this factory does not have any competitors. Since this one is the undertaking of government, client and general public have strong interest on its brand. Historical Issues Hetauda Cement Industry Ltd has been from a long history of struggle. It has faced the issue primarily concerned with following aspects. a) Political instability: Although this company was established in 1976, it has started its operation from 1986 only. During the period it was concerning with political issue that were reflected through the political movement of then.
It could not start its operation since it has the provision to appoint the BOD by the consensus of political party. Its top level structure is appointed not by any election but by parties of Nepal. b) Human Resource: It was further dealing with human resource issue of overstaffing. Due to which it has high operating cost. The main reason behind this overstaffing is political appointment. c) Labor Union: Many labor unions are pressuring the executive committee in their own interest rather than the interest of labor. Strikes, lockouts are being the culture of the industry. d) Technology: It was operating with the technology of 20th century.
Modern technology is not adopted by the company. e) Maintenance: Old Machineries are running without proper maintenance. Enough concentration if would be given then it could generate the better outcome as well. Capital Structure: Hetauda Cement Industries ltd. was established from the loan of ADB and fund from the government of Nepal. It has the following capital structure to the date: Authorized capital: Rs. 3,00,00,00,000 Issued capital: Rs. 1,00,00,00,000 Paid up capital: Rs. 90, 06, 85,000 Vision Hetauda cement in every wall of the nation is the vision of Hetauda cement industry Ltd.
Since it is the government undertaking it has vision to become the best model government agency of the country making it free from every destructive angle. Mission Mission of Hetauda cement Industry Ltd. is to lead the cement industry by putting the difference in the mind of consumer throughout the nation. Objectives It has the following objectives to get mission and vision closer to its practice. * Maintaining the quality of cement and cost control mechanism. * Accelerating the delivery mechanism throughout the nation. * Focusing the service aspect. * Managing the labor union and get company out from political influences.
Goals The company has short term, midterm and long term goal as follows. Short term goal: Hetauda cement Industry Ltd. has short sight on: * Managing overstaffing in each department. * Sanitation and safety measures for workers. * Increasing the annual turnover. * Better utilization of raw material. * Wastage management. * Building corporate relations. Midterm goal: They are * Optimization of plant capacity. * Maintenance of plants used in Industry. * Increasing the distribution channels. * Training and development to the staff and management. * Management of labor unions. * Increasing the consumer scope. Lessen the cumulative loss. Long term goal: They are * Capital enhancement. * Replacement of plants and machinery. * Making investment on innovations. * Realizing corporate social responsibility. * Changing policy regarding political appointment in the top level management. * Quality assurance to consumer. SWOT Analysis The Analysis of Strength, Weakness, Opportunities and threat is the crucial task for an organization. Every organization is surrounded by internal and external environment. Strength and weakness is come from internal environment. Similarly opportunity and threat is come from external environment.