Analysis of the strategy of the Lafarge company
The cement sector is crucial for the construction industry, is the most important strategic business activity of the company. This sector has shown a decline in growth compared to previous years, but an increase in distribution compared to other sectors. Furthermore, it should be noted that though the results in Western Europe and North America remained satisfactory, more than 50% of turnover is now recorded in emerging high-growth areas.
Aggregates and concrete which represent 32% of sales of Lafarge have been down for some years since then, but sales have helped maintain its position as the leading producer of aggregates and concrete in the Third World since 2006. Lafarge is the third largest global player in the plaster sector, which remains the least important domain of activity of the group (with 8% of sales in 2009).
The director, Mr. Laffont, decided to focus the group on the cement SBA, which has the largest growth potential, primarily in emerging markets and specifically in China and India. The CEO was aware of the importance of product diversification in the aim of becoming the undisputed world leader in building materials, and the need to be a local player in as many geographical areas as possible.
The corporate strategy was grouped on the basis of two priorities: international growth and diversification. Since the launch of the plan "Excellence 2008", Lafarge launched a second strategy called ?Launch of cost reduction' in 2006. The objectives were to achieve a reduction of 340 million Euros in 2008. Lafarge tripled its investment between 2005 and 2006, to 549 million Euros, for the construction of new storage capacity.
The company acquired competitors and shares in Lafarge North America in 2006, as a large group is more easily bought. The purpose of this operation is to reduce the risk of takeover.
- Abandonment of the various SBAs to focus on the heart of business in 2007.
- Differentiation up in concrete
- External growth in the long term by strengthening the strategy of vertical and downstream integration especially in emerging countries, but also by developing a strategy of partnerships with local producers.
- Finally, the challenge of sustainable development: Lafarge has entered into a process of environmental protection, which includes ambitious goals to reduce its CO2 emissions, save water and natural raw materials through the use of alternative products.
The Lafarge Group has 90,000 mobile employees empowered through a culture of results. The new team set up by the executive committee may also appear as a resource for the company.
The group has a large number of plants in the world:
- Cement: 163 manufacturing sites in 50 countries
- Aggregates and concrete: 588 quarries and 1,144 concrete plants in 29 countries
- Gypsum: 77 production sites in 28 countries
With experience, Lafarge has initiated operations in more than 35 new countries over 10 years, which allowed it to expand into emerging markets like Asia, Africa and Eastern Europe.
Tags: Lafarge strategy analysis, Vertical and downstream integration strategy adopted by Lafarge, Construction industry