History of lafarge group

Lafarge

History Lafarge Group integrated in year1833 and is currently the number one in the world in cement and building materials. Lafarge was a local French cement company. The company explored its first business internationally in 1864 by delivering lime for the construction of the Suez Canal. Lafarge set up a research laboratory in 1887 that produced Cement Fondue, speedily hardening and weather defiant cement in 1908. The subsequent decade saw Lafarge focused on horizontal mixture by acquiring lime as well as cement companies all over France.

In Board of Directors meeting, they were heard saying “they needed to have a performance culture that adds value to the business throughout the entire operation”. You have been requested by your manager to make an extensive input on how to evolve this high performance culture suggesting how to achieve this objective that includes practical key indicators.

Answer: For the Lafarge Group, plan implies an aspiration, some demands and a sense of duty. It is only when these mechanism come collectively, that actions become sustainable and long-standing. LAFARGE AMBITION to be an undisputed leader in construction materials be acknowledged as an vital member and shape the prospect of our businesses through our competence to innovate Be a head in a competitive environment follow long-term strategies implement an worldwide approach

All the points below constitute in evolving these high performance culture to achieve the key objectives

To foresee and assemble our clients requirements

- Create a professed distinction and be the trader of preference

- Know the customer better by understanding the customer needs

- Donate to the improvement and development of the construction industry

To augment the value of our shareholders' investments and achieve their trust

- Provide Shareholder competitive returns on their investments.

- Keep shareholders updated with the latest information and developments of the company

- To respect the welfare of our partners and marginal shareholders

To make our employees the center point of our company

- To base justifiable authority on the capability to add to the company's success.

- To develop togetherness with reciprocal value and confidence

- To offer employees with reasonable reimbursement and a rewarding professional surroundings

To achieve from our mounting Diversity

- To make our cultural diversity an advantage.

- To assign responsibility with accountability and control.

- To build up an efficient cross-operational organization approach.

- To formulate use of synergies and contribute to knowledge.

To value the universal interest.

- To contribute inside the existence of the societies everywhere we function.

- To manage sensibly toward the surroundings.

- To be guided by the ethics of honesty, sincerity and value in our commitments

Lafarge's management defined as “participative”. How ever this concept has been misunderstood as “management by consensus” on various occasions'. Half of Lafarge's staff were not in the Group two years prior to - with the aim of it is point of it is point in time to redefine its running style. Generate significance while relating to the Group's guiding values Our “Principles of Action” have not altered, and identify our accountabilities: our superseding objective is to make worth for our shareholders. To attain this purpose, we must first meet the needs and priorities our customers. Lafarge's uniqueness and success is also based on the significance we provide to our employees, and on the force and payback of being a group. Our strategies & our organization to be victorious as a Group, We have to share best practices, values, clear strategies, common and important information and MIS and performance measurement criteria. Today, we are in a process to widen an entire of these systems, such as the cement operations reporting project (CORP), Top 2000 for our ready-mix concrete as well as the EVA (Economic Value Added) project to progress our performance capacity and reward systems. We are at present redefining the Group's organization, by rationalizing the spot of the corporate role and giving the five divisions (Cement, aggregates & Concrete, roofing, gypsum & Specialty product) additional straight. Accountability for planned development and performance development. To allow more decentralized initiative ….with enhanced decision processes our aim is to form a management structure that permits more decentralization and individual empowerment. This requires confidence in people, at the same time as precision in the resolution processes. We need to determine at what point a resolution should be taken, who is responsible and on what basis, in order to evade pushing the resolution upwards, or diluting responsibilities through a slow unproductive process. True contribution, but not essentially a consent Participative management is not decision by harmony. Rather, it means relating each and every one those who can add to a superior judgment, while clearly recognizing who has the final duty to decide. In this regard, our anticipated restructuring is meant to make more efficient our resolution making processes. Manager leading by examples even more essential that this organizational framework is the approach of our employees. We in particular want managers who are spot on leaders, able to take their organizations to the maximum performance level. Individuals who perform what they say, value group disciplines, share information, and who are trained in managing employee assessment, career management and the reward system. Hence the transformed magnitude we want to give to open honest cooperative negotiations in the assessment interviews. pioneering and prepared to add to the Group's achievements. We in addition could do with team members able to innovate, to take inventiveness and to act determinedly within their realm of accountability. Finally we want those who look outside their particular objectives, and who are prepared to donate the accomplishment of Group synergies in addition to great goals. A management “model” In summarizing up, the key parameters of our management principles are:

A planned and consistent Group, by way of shared ethics and clear strategies, well distinct actions, systems and policy Confident in a decentralized and participative managing progression With managers who direct by illustration, take initiatives and who want to add to the by and large success of the Group.

Source: Company Documents

Question 2:

Evaluate the operations Challenges of Lafarge given the modern concerns of such industries today.

Answer:

Lafarge being the worlds number one in building materials have been helping build and shape up everyday surroundings for million of men and women

For Lafarge the challenges for perennial growth go hand in hand with principles of sustainable growth. They need to understand what is good for the organization

Few of the products produced by Lafarge.

Cement:A Universal Modern Material, Cement is used in everyday life, every construction requires cement, developing countries have large projects which require large volume of cement, and Lafarge is developing its production capabilities while respecting the environment and the communities.

A Cement Plant requires a high level of integration into local social and economic climate, installing a plant requires huge investment.

Lafarge has been successful with their installations as they are dependent on listening to their stakeholders, the local authorities, association, residents and local craftsmen.

A Socially and environmentally responsibly approach involving open communication and consultation with local communities. To assure sustainable development, Lafarge implements environmental good practice such as use of alternative fuels which reduces volume of CO2 emissions.

The Concrete and Aggregates:The worlds second most heavily consumed product after water, concrete is made up of a mixture of water, aggregates and cement. The manufacturing of concrete with is precise composition and short shelf life requires irreproachable logistics due to which this has to be installed at the construction site and has to continuously adapt the pace of the production as per the requirements of its customers

In emerging markets Lafarge expertise is a major advantage, market players and local markets favour organization that services for the entire logistics supply chain from the extractation of raw materials right up to the delivery of ready to use concrete. Lafarge applies international standards to the current concerns in many countries about the future of our planet Lafarge works along side architect to design buildings of the future, with global resources depleting in a faster pace than ever, the challenges facing construction are redefining the sectors future With the likes of above challenges in the modern world, Lafarge has combined performance and responsibility. They are keen to fix its industrial growth strategy in the long term and operate in line with humanist values underlining its identity, the group have set itself ambitious goals in terms of

Respect for the environment:for years Lafarge has committed to minimizing its ecological impact saving water and raw materials, limiting waste and greenhouse gas emission. Lafarge has developed over the years to encompass a wide range of initiatives to decrease the impact of its operations on the environment, safeguard natural assets and reduce CO2 emissions, i.e. recycling of industrial waste, the use of waste derived or carbon neutral fuels and materials and improvements to the industrial process. Lafarge has been focusing of reducing its carbon footprint through measuring its impact and entirely implementing actions to reduce carbon emissions through use of rail and waterways instead of road to transport materials. Respect of People: Lafarge strive not only to develop effective policies for protecting the environment and employee health and safety, but also to be the pioneer and among the top in terms of social responsibility towards the local communities affected by its installations. Using Volunteer initiatives to help improve the living conditions of local communities.

Question 3 and Question 4

The companies combined in 1997 and needed to achieve synergy, identify the key elements that could enhance the realization of this objective and shorten the NPD process & Discuss the Dichotomy of operations resources and market requirement of the operations Strategy

Answer:

Strategy of Lafarge The Cement Divisions' strategic aim was to “keep rising and developing profitably”. The 3 core objectives followed by the cement division of Lafarge were:

  1. Replication sales within 10 years (1997 to 2007) by increase and expansion in up-and-coming markets and acquisitions in established markets
  2. Upward rapidly than its competitors with an aim to raise capability of 60-80 mt between 2001 and 2005.
  3. Integrating acquired unit in the shortest time as possible. However Lafarge did not only focus on up and coming markets as some of the other global competitors.

In February 2000, it mounted a nerve-racking bid for Britain's Blue circle, the sixth- largest cement producer and in January 2001, It bought Blue Circle at a price of  Euro 3.8 billion. With their acquirement, Lafarge became the universal leader in construction business, with one-tenth of the world market. Motive of this acquirement included achieving a assured size in order to stay noticeable and attractive to investors, increasing cash flow, geographic existence and, in all probability, dislodging holceim from the top spot in the Global cement industry. The chairman & CEO of the cluster commented on this acquisition "We [Lafarge] want to be the undoubted head in all of out business , and the leader in building materials through operational distinction, expansion and the formation of value. Today the building supplies market characterizes a well-built association towards worldwide consolidation. Lafarge must be able to take benefit of the best acquirement opportunities that arise; there are at this time many on the market. To fund this plan, the Group has preferred to focus its possessions on its major wide-reaching businesses. The opening of economic associates will permit the group to benefit from greater financial elasticity." For the Lafarge Group, approach implies an objective. As an extensive goal the considered intent was not only to defend and sustain profitability of operations by constant progress of performances, but also to attain efficiency and yield for new operations. To do so, Lafarge reorganized its portfolio by divesting 66.67% of its holding in Specialty Materials. It is now a collaborator company called Materis. Materis is composed of five businesses: admixture, aluminates, mortars, paints and refractories. In 2002, Lafarge's its yearly turnover was euro 1.46 billion, more than 50% of which was earned exterior to France. To raise funds to achieve its wider objectives Lafarge sold the road Making Division of Europe. At this time Lafarge is trying to sell Euro 700 million value of assets to reduce its debt. Reorganization for Internationalization. On internationalization Bertrand Collomb, reiterated that: “international expansion can be fostered through variety and innovation. If one wishes to push global expansion lone cannot govern it from the top. Maintaining a decentralized function is very vital. Developing global professionals is the best way to develop into more international". Lafarge initiated an organizational reformation course will the help of McKinsey & Co. The execution process began from 1999. The Group was separated into 4 divisions and a new organizational composition was drawn up to assist the transformation process. The explanation, generalization in addition to formalization of group policy in the areas of Finance, Human Resources, Research & Development, corporate Communication, Environment information system, and Purchasing & Marketing have accompanied this decentralization. In toting up, procedure on the organization method projected of all Lafarge Managers have been set out as “The Lafarge Way” despite criticisms, option and suggestions with reference to the organizational structure, continuous communication and top management's sincerity in the structure has resulted in its triumphant execution. Principles of Restructuring reorganization was based on assured key issues: (a) to recognize and initiate procedures to incorporate its worldwide operations (b) manage isolated, locally receptive mutually dependent business units across the world (c) decrease ambiguity inside the group by introducing mechanisms which would internationally co-ordinate the group's policies and (d) synergizing the learning within the group by jointly escalating understanding, differentiated assistance and distributing it global. Amusingly, the two key competitors of Lafarge had completely different global strategies on the subject of this issue of running their global corporation. Holcim believed in total devolution whereas Cemex believed in total cenralisation and control through its information system network. The Key issues of segregation, amalgamation and ambiguity avoidance involved:

  1. differentiation mechanisms-decentralization, changing of hierarchical organization structure to flatter one, allocation of authority down the line and hiring encouraging and retaining specialized personnel.
  2. Intergration Mechanism - long range planning, evolution of a shared culture within the group, configuration of committees and cross-functional teams, appropriate information expertise and categorize systems and steady in-house and exterior communication within the group.
  3. Uncertainty avoidance - Gathering of market information, forecasting, monitoring of internal actions, actively participating in business activities while easily communicating with politicians, traders, dealers and bureaucrats. Operational Impact of restructuring the New Organizational structure. A global strategy of expansion must be supported by a satisfactory organizational structure. The Cement Division was separated into regions, Business Units (BUs) and entity plants. A BU is the regional executive body particular to a country.

Each unit is in charge for its resources and takings (EVA) and is presided over by a Business Unit Manager. Business Unit Managers by and large come under the administration of a Regional President.

Lafarge separated its global operations into 8 regional areas with 8 regional presidents

The regions are as follows:

Western Europe & Morocco - France, Italy, Spain, UK

Middle East & Trading - Cameroon, Egypt, Greece, Jordan,

Trading/ Shipping Latin America - Brazil, Chile, French Caribbean, Honduras, Mexico, Venezuela.

Asean- Indonesia, Malaysia, Philippines

Asia - Bangladesh, China, India, Japan, South Korea.

Africa - Benin, Kenya, Nigeria, South Africa, southeastern Africa (Malawi, Tanzania, Zambia, Zimbabwe), Uganda

Central Europe, CIS, Turkey - Austria, Czech Republic, Germany, Poland, Romania, Russia - CIS:

North America - Great Lakes region, Northeast region, Northwest region, Northwest Pacific region, River Region, southeast region Cement Units all over the globe formulate up the cement Division.

This division comes under the hierarchical influence of the Group General Management and under the purposeful authority of the Division Executive Vice President: Regarding the Divisional structure one of the managers pointed out. “The Formation of division was to keep to one side the line of goods. It was at a universal level. At the Confined level there have not been various changes. The organizational face up to be a Group and not to work in silos as Divisions. Our Strength was to achieve synergy from Lafarge resources nevertheless at the moment there are too many domestic borders and one has to go through organizational practice to tie together the strong point that the group has .

McKinsey's approach of SBU has very little flexibility. It needs to be clarified within the Group.

With EVA, everybody thinks about ones own baseline as it is linked with individual performance. It kills the perception of Economic Value Added (EVA)

Exhibit 12 and 13 shows the organisationl formation before and after the organizational restructuring process.

Allocation of Authority is practiced at Lafarge. Alost ever verdict is based on a Project Format.

A Project consists of a project leader and he/ she is answerable for the accomplishment of the project. For example, current projects in the Organisation Department are on Total Productivity Management (TPM) safety surroundings and group style.

Similarly in the Integration Department, projects are on integrating companies in Mexico, Honduras, Jordan, Uganda, South Africa, India, Korea, Philippines. Each country-based job is treated like a venture with the association of the unit management committee and members of the Project working group. In Adding together other dynamic contributors to each of these projects are the transition team, relation director, corporate & Cement division department and external consultants (if Any)

Economic Value Added (EVA) = Net Operating profit after Tax - Capital charger

NOPAT = Sales - Operating Expenses - Depreciation - Tax Capital charge = Invested Capital* cost of Capital.

Question 4

Design an order processing system for one of the newly acquired factories for Lafarge in a developing country.

Answer:

The Manufacturing plant should be built in a location where the raw materials are available

This will help reduce logistics cost of transporting the raw resources to the plant to be manufactured

The volume of production should be in line with the requirements in the market and thus not over manufacturing that will increase storage cost.

The scope of the order processing system is to

commence and execute a paperless process of accepting of orders, account receivable and accounts payable

To select and put into operation the workflow software system to accommodate projected significant raise in sales order

Comply with directive from all customers to receive all orders and submit all invoices electronically

Raise customer service levels

Capitalize on effective assessment making information and views to management

Boost supply chain visibility with outside partners from end to end

Add momentum and effectiveness to order -realization process and system

Combine existing distribution management, financial and reporting system.

We will need to connect Lafarge together with the association of distributor and delivery service associates, with in-house operations such as the central processing unit, factories, depots and sales & marketing offices. The first step will be to switch from regional-based order-processing to centralized order process, for orders to be move effectively distributed from Lafarge to various depots and customers. Order processing time will be reduced significantly. Orders will be further efficiently circulated to the variety of depots, taking into account not only the conventional concern of distance to the customers, but also order urgency, stock-levels, depot congestion and transportation availability. Lafarge could also react much quicker to changing market circumstances and disruption such as silo breakdown. The information that will be shared between Lafarge and its network of distributors, transporters will take account of the considerable reduction in hone calls, better than earlier delivery reliability, and greater customer service Distributors will not be able to submit orders by electronic means via the web and receive real - time status updates with regards to the orders. They will receive a know to - the - minute when their order is accepted , assigned to a depot and delivered. This enables them to confirm delivery commitments with assurance to their customers. Transporters should instantaneously see when and at what time their orders are on hand for a pick-up by their lorries and the lorry destinations. This will make possible for them to plan their fleet much more effectively, saving time and money for them. As for Lafarge planners will have unprecedented visibility into their operations. All this greatly improves Lafarge's ability to meet their goal of delivery on-time, every time.

 

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