Cement Roadstone Holdings is a multinational public limited corporation dealing in the materials industry offering products for the construction purposes like cement, different types of concrete, agriculture or chemical lime, etc. Due to the merger of two firms, the company was founded in 1970, having its headquarters in Dublin, Ireland. As of 2019, the company generated a strong figure of 23.1 billion tons of reserves and has involved employment figure of almost 80,000 individuals (Crh, 2019). From the opinion of the global building material industry, the evaluation of Porter’s five forces would be a helpful instrument for maintaining prospect strategies to understand better the company standing position.
Competitive Rivalry in the Market
The competitive rivalry in the building material industry is high because of the increasing economic needs and the growth in the construction sector in almost every region. As a result of this increase, several firms and corporations have captured the market to provide the building materials required to construct and maintain the infrastructure of housing and other projects, resulting in fierce competition among established players. The company’s major competitors in terms of growth and number of installed cement plants worldwide are LafargeHolcim, Heidelberg Cement, CEMEX, Votorantim and InterCement with 220, 141, 61, 59 and 42 cement plants respectively. CRH is trying to lead and giving tough competition with 54 cement plants worldwide (Statista, 2017). Therefore, the presence of such big names in the industry makes the competition more fierce among each other.
Threat of Substitutes
The threat of having substitutes in building material sector is considered to be low mainly of the availability of so many firms and the products manufactured by them. The basic need for raw materials and products like cement, concrete, and other building essentials is not easy to substitute. Due to the nature of the industry, these products are the prime need for the construction of any project or building which are being provided already in the industry. Moreover, the use of technology can change the methods of process of manufacturing the materials, but it cannot be termed as a replacement. However, there are alternative building materials other than cement and bricks which can offer comparable or higher value (Windapo and Goulding. 2013). Therefore, the risk of substitutes in the industry is minimal.
The Threat of New Entrants
The threat of new firms in the building material industry is considered low because of the number of operating firms in the market. The barriers to entry are placed high enough that is difficult to meet by new firms. Establishing a construction material firm’s structure and managing supply chain networks takes a lot of money and time, making it extremely difficult for entrants to meet the requirements. Apart from the capital hindrance, new firms have to deal with big brands of building material and the restrictive federal regulations and licensing that regulate the operations. The use of Information technology and high participation costs are other factors creating hurdles in terms of operating and maintaining the firm (Powell et al, 2015). Hence, making less scope for new firms.
Bargaining Power of Buyers
The Bargaining power of consumers in the context of the building material industry is moderate because several firms provide building material for construction purposes. The buyers are usually governmental bodies, firms, and individual persons that require such material for building houses or projects. However, the products are not much different from each other but with the variations in quality and cost. Furthermore, the option of switching cost influence the consumer buying behavior (Ram and Wu, 2016). Keeping in view such a pattern, the bargaining power of consumers is considered moderate in the sector.
Bargaining Power of Suppliers
The Bargaining power of suppliers in the building material sector is moderate. The suppliers in this industry are primarily the organizations producing and extracting the resources of building materials and distributing them. These corporations embrace a significant capability of authority in the industry’s process dynamics and can change the building material prices. Furthermore, the authorities’ dependencies on the places where such materials are produced affect the suppliers’ willingness to negotiate. (Costa et al, 2019). On the other hand, the business environment is reliant on the activities of such firms, enabling them to exert specific influence. Thus, in context to the petroleum industry, the bargaining power of suppliers is moderate.
References
Costa, F., Denis Granja, A., Fregola, A., Picchi, F. and Portioli Staudacher, A., 2019. Understanding relative importance of barriers to improving the customer–supplier relationship within construction supply chains using DEMATEL technique. Journal of Management in Engineering, 35(3), p.04019002.
Crh, 2019. Annual Report. [online] Crh.com. Available at: https://www.crh.com/media/3027/crh-interactive-annual-report-2019.pdf.
Powell, D.M., Fu, R., Horowitz, K., Basore, P.A., Woodhouse, M. and Buonassisi, T., 2015. The capital intensity of photovoltaics manufacturing: barrier to scale and opportunity for innovation. Energy & Environmental Science, 8(12), pp.3395-3408.
Ram, J. and Wu, M.L., 2016. A fresh look at the role of switching cost in influencing customer loyalty. Asia Pacific Journal of Marketing and Logistics.
Statista, 2017. Leading cement producers number of plants 2017 | Statista. [online] Statista. Available at: https://www.statista.com/statistics/298776/cement-producers-number-of-plants/.
Windapo, A.O. and Goulding, J., 2013. Value-based perspectives of stakeholders’ building requirements in low cost and government subsidised housing projects in South Africa. Construction Innovation.