Case study

Back Ground Information

Brief History Kuwait Cement Company is a Kuwait Based company established in November 1968. The establishment of the company was done by experienced economists, due to the need of such company in mist of the rising of modern construction of buildings and houses at that time. Since then the company has been a major supplier in the construction industry. The State of Kuwait has definitely supported and encouraged this type of investment and establishment and any establishment that would have an impact of reducing the crucial reliance on oil.

Objectives Their objectives since establishment as stated by the chairman Rashed Abdulaziz AlRashed on their website are as follows:

1- “Preserve the quality of its products.” 2- “Stabilize the cement prices in the local market.” 3- “Implement its ambitious plans of building an advanced and integrated industry that would serve

the country and its citizens.”

Organizational Structure (The company follows a hierarchy structure, which is a traditional organizational structure. Creating many levels of management and authority, lacking flexibility in decision making and increasing time and duration of any decisions and information to travel from entry level up to senior management.) The Corporation major shareholders are three large investors in Kuwait, the first one is Kuwait Investment Authority owning 29.363% of the shares. Kuwait investment authority or KIA is a very successful and powerful company is the finance and investment industry in Kuwait. it currently amongst its many investment activities, manage the General Reserve Fund and the Future Generations Fund. The second major shareholder is the National Industries Group (NIG) owning 26.121% shares, “NIG manages several and manifold activities in investment and shares, in Building Materials, Petrochemicals, Oil & Gas Services, Mechanical Industries, Utilities, Real estate Infrastructure, and Financial Services. Through the asset management expertise in managing financial portfolios, equity shares, and direct investment has brought home creditable and laudable profits to its shareholders…” (About, National Industries Group). The third major shareholder is Al- Rashid Trading Contracting Company with 7.459% Shares. Al-Rashid Trading has representatives on the board of directors.

Board Of Directors

The Executive Management

Chairman: Rashid Abdulaziz Al-Rashid

Dr. abdulaziz Rashid alrashid

Basil saad alrashid

Tamadir ahmad alhouti

Jamal yousef albabtain

Khalid Abdullah alrabiah

Rasha abdulrahman al mulhim

Abdullah mohammad saad

Yacoub mohammad alsagir

Yousef bader alkharafi

CEO- Abdulmutalib

esmael behbehani

Debuty CEO - Mishaal abdul

muhsin alrashid

COO- Rajesh kumar sinj

Debuty COO- Saad yousif alsuwaidan.

Subsidiaries KCC did expand and build or create three subsidiaries, all operate in the construction industry.

1- Kuwait Cement Ready-Mix Company (KCRM).

This subsidiary is fully owned by KCC, it was launched in 2010 due to increasing demand in ready-mix cement. It main objective is to update the cement ready mix quality as well as offer high quality services to accompany the products.

2- Shuwaikh Cement Company.

This Subsidiary provides clinker, limestone, gravel, sand and cement. This company is KCC’s way of expanding their offerings and targeting larger variety of customers.

3- (Amwaj International Real Estate Company.)

Financial Analysis The follow data was extracted from investing.com, It shows the Annual financial performance for Kuwait Cement Company for the years starting 2015 up to 2018. Kuwait Cement Company (KCEM) summarized income statement

As shown above the company’s financial performance got slightly better in 2016, but it dropped significantly in 2017 and kept on falling ever since. Looking at the revenues it is clear some losses occurred, but that does not explain the slump in both net income and the operating income therefore we can say with some confidence that there are some major costs and expenses that did not contribute to the revenue, in other words there are some expenses wasted and not used to add any cash flow into the company. Looking at the below data, the balance sheet shows the company carrying a quite large percentage of debt in its equity especially for a company this old. Moreover, the company did in fact pay back some of this debt in 2018 which may explain part of the low financial performance. If we look at the amount of assets, it appears they had lost another big amount of assets worth almost 4 million KWD, and looking at the total equity which have dropped we can only say these lost assets were not sold

for cash.

The below data shows the summarized cash flow statement of Kuwait Cement Company, the data supports our analysis and findings extracted from the income statement and the balance sheet. Since they have lost assets it is normal to observe an equivalent drop in the operating activity in 2018. In addition we do see an increase in operating activity in 2017, while there was a huge loss in the operating income, this is due to couple of projects the company worked on during 2017 and 2018 which we will mention later on in this report. The drop in both investing and financial activity means that the company in 2017 and 2018 was paying larger amount of debt than amounts invested or generated in general.

5 forces of porter Rivalry The cement industry of Kuwait is growing. Kuwait cement company is the largest company as well as the oldest. The company has the government support in away that creates some assurance in the form of a certain revenue security. The company is the only supplier for cement the government deals with and that obviously makes sense since they own shares of the company. In regards of how competition and rivalry is with individual customers or private sector companies, it is increasing. There are many players in the marketing who are providing competing quality as well. Kuwait cement company used to have the best quality that no other player in the market can provide but they lost that card now. Quality is not and should not be used as a competitive advantage anymore. The price of the same quality cement offered by competitors is a lot cheaper than the price KCEM asks for. Competing companies Barrier of entry We do not observe huge barrier to enter the cement market, and retaliation is not likely to happen. The largest company (KCEM) as we have seen by analyzing and researching does not care what competitors are doing. It seems like they follow very outdated management systems and operations. We did not find any reaction towards their many small in size competitors with their competing quality and very challenging prices. Retaliation from the other participants is likely but it will not be strong enough to create a barrier. Threats of new entrants Since the barrier of entry is not high, threats of new entrants is relatively high. This is due to high investment a cement company needs to be established and operated. If the investment is available, a company can successfully operate. In fact, since the largest player seems to be losing good financial performance, we predict that they will soon be losing market share is no change to fix the problems they are having which we will discuss in another section of this report. Given this loss of market share, an opportunity arises for a new leader.

Threats of substitutes Bargaining power of Suppliers Bargaining power of customers capabilities / core competencies / competitive advantage, Strategic business units,

Offerings (goods & services)