Recently, Conch Cement said, "Later, the company will continue to focus on market construction, take measures according to the situation, and strive to improve operating efficiency on the basis of stabilizing market share." Market share is like "fish" and operating efficiency is like "bear's paw". It is said in Mencius Gaozi I: Fish is what I desire, and bear's paw is also what I desire. You cannot have both. Conch Cement should pursue a stable market share and improve its operating efficiency at the same time. Can it achieve both? Under the overall shrinkage of
demand, benefit maximization and share maximization must not be achieved at the same time
. Unlike the market with demand growth, under the market background of overall shrinkage of demand, without incremental demand, the pursuit of market share maximization by enterprises means "grabbing food" from other people's mouths, which will lead to a cruel price war. Until the competitor is forced to give up the market. Once the market falls into price war, it is impossible to maximize the benefits. Therefore, the author believes that under the background of overall shrinking demand, enterprises can not maximize both operating efficiency and market share. Enterprises maintain a relatively stable and reasonable market share, while optimizing the cost side through internal management (reducing costs, improving production efficiency, optimizing the supply chain) to achieve better operational efficiency or the best way.
In response to this question, ChatGpt, which is popular in the whole network this year, gives the answer that " in the market with shrinking demand, enterprises need to pay more attention to maximizing operating efficiency to ensure that they can maintain profitability in a competitive environment.". At the same time, it also provides strategies such as optimizing products and services, adjusting pricing strategies, finding new market opportunities, controlling costs and improving efficiency to achieve a balance between operational efficiency and market share.
According to the statistics of China Cement Network Cement Big Data Research Institute, in 2022, the cement market share of Conch Cement reached 11.7% (excluding clinker , self-produced products). Compared with 2021, it increased by 0.45 percentage points, ending the "three consecutive declines", and there is still a gap of 0.69 percentage points compared with the high level in 2018. According to the target of "annual net sales volume of cement and clinker (excluding trade volume) of 307 million tons" set by Conch Cement in 2022 and the author's forecast of domestic cement demand this year, if Conch Cement achieves this target, the market share of Conch Cement is expected to reach 13%, a significant increase of 1.3 percentage points over 2022, which is the highest in history. If this goal is achieved, the capacity utilization rate of Conch Cement is expected to be around 70%, regaining lost ground at one stroke. Due to the differences in peak staggering policy, overcapacity and capacity concentration in different regions, the reasonable level of capacity utilization varies from region to region, but it may become more and more difficult to maintain 70% capacity utilization in the future.
Figure 1: Conch Cement Market Share Change
from 2015 to 2022 Data Source: Cement Big Data (https://data.ccement.com/)
Before 2021, The capacity utilization rate of Conch Cement is significantly higher than that of the whole country. Since 2021, the gap between the two has narrowed. The main reason for the narrowing of the gap is that the demand growth in the region where Conch Cement is located is weak or even shrinking, which is also closely related to the business strategy of enterprises. At present, most provinces in the southern market except the Yangtze River Basin have stopped kilns for more than 100 days, while the Yangtze River Basin has stopped kilns for less than 100 days (without overproduction, the corresponding kiln capacity utilization rate is about 70%). If Conch Cement wants to achieve 70% or higher capacity utilization rate, it must produce at full capacity in the non-peak season of the Yangtze River Basin or other regions.
Figure 2: Comparison between Conch Cement and national cement capacity utilization rate from 2015 to 2022 (%)
Data source: Cement big data (https://data.ccement.com/)
Based on stable market share Under the background of the decline of the overall capacity utilization rate
in the whole country, it is difficult for Conch Cement to escape the fate of decline. Therefore, the author believes that it is the best strategy for Conch Cement to realize the optimal solution of benefit on the basis of stable market share. However, in order to re-open the gap with the national capacity utilization rate and maintain a stable market share in this process, we can only improve our own capacity utilization rate or reduce the capacity utilization rate of other enterprises.
(1) Improving its own capacity utilization rate
means increasing sales volume and further increasing market share. As mentioned before, in the context of shrinking demand, to increase market share, it is necessary to sacrifice operating efficiency. Because other enterprises will not unconditionally hand over the market.
(2) Reduce the capacity utilization rate
of other enterprises To reduce the capacity utilization rate of enterprises means to reduce the output, and also means to increase the intensity of shutdown and kiln shutdown, which is an important measure of supply-side reform in the cement industry (reducing excess capacity, off-peak production, merger and reorganization..). However, the decline of capacity utilization rate of other enterprises focuses on the policy efforts (raising the threshold of elimination, incorporating into the carbon trading market, strictly controlling overproduction, etc.) And the leadership of large cement enterprises.
Therefore, the author believes that Conch Cement can pursue a stable market share and improve its operating efficiency at the same time. The key lies in whether Conch Cement can lead the industry, further promote the supply-side reform of the industry, and help the industry to further improve the supply-side reform measures. Any large enterprise, in the context of market demand farewell to growth and platform period into the downward period, if it simply pursues the maximization of market share, it will sacrifice its own operating efficiency, and even make the profits of the whole industry decline sharply, and the transformation and upgrading will be constrained. As a result, China's cement industry (technology level, innovation ability, etc.) lags behind foreign countries for several years.
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