Surviving in a Fractured Cement Market
N. Srinivasan's First Rule:
Keeping Debt and Costs Low
Helps Smooth Rough Spots
When N. Srinivasan took over as vice chairman and managing director of India Cements Ltd. in 1989, the company had an annual production capacity of 1.6 million metric tons and sales of 1.30 billion rupees ($28.3 million). Today it has a production capacity of nine million tons and annual sales of 18 billion rupees.
And as India's construction boom catches on in the south of the country, bringing demand in line with industry capacity, prices for India Cements products have risen. India Cements has also cut debt by selling assets, opened new markets, including abroad, and trimmed its production costs, leading to a return to profit after several years of losses. Profit in the fiscal year ended March 31, 2006, at 453.1 million rupees, was 10 times that of the previous fiscal year, following losses in the three previous fiscal years. The company also has interests in sugar and power.
Mr. Srinivasan, 61 years old, is the son of the late T.S. Narayanaswami, the founder of India Cements, and has a postgraduate degree in chemical engineering from the Illinois Institute of Technology in the U.S. Mr. Srinivasan finds time to manage the finances of the Board of Control for Cricket in India. He is also an avid golfer, where his handicap is an impressive nine. He spoke to Ven Ram in Singapore by telephone from India Cements headquarters in Chennai.
WSJ: What was your first job and the biggest lesson you learned from it?
THIS WEEK'S QUESTION
Mr. Srinivasan said his favorite business book is Michael E. Porter's "Competitive Strategy: Techniques for Analyzing Industries and Competitors." What's yours?
Please visit:
www.wsj.com/question. Or email:
Leadership@wsj.com. Please include your name and country.Mr. Srinivasan: My first job was as a teaching assistant during my days as a graduate student in the U.S. It made me realize the extent to which one has to be prepared in class. That job taught me the virtues of perfection and preparation.
WSJ: What principle of management do you wish you knew when you were first starting out?
Mr. Srinivasan: It would have been nice to have my experience of today when I started. Management schools teach you the fundamental precepts, but only experience can teach you how to apply those principles. There's no real substitute for experience.
WSJ: In your industry, is there a difference between India and the rest of the world?
Mr. Srinivasan: India is the second largest consumer of cement after China. But unlike in the rest of the world, where cement is sold in bulk, it is still sold by the bag in India. And except in China, most of the other markets are ruled by four or five big companies. But in India the big players account for 50%-60% of the market, and the rest is fragmented and fractured. The industry is growing by 8%-10% a year, but it is still not a mature market. And the concept of selling cement in the form of ready-mix concrete hasn't yet taken off. But I would say the skills, technology, efficiency available here are equal to, if not better than, the rest of the world.
WSJ: What advice would you give to an entrepreneur starting out in your field today?
Mr. Srinivasan: I would say tread with caution. The cement industry in India is cyclical and not yet completely consolidated. There are some 50 companies in the fray and some 120 plants. So it is important to enter the field during a boom cycle.
WSJ: Would you recommend someone starting out in your field attend business school, or learn on the job?
Mr. Srinivasan: I would definitely recommend attending a business school. Learning along the way is fine, but basic management principles are no different from learning, say, the laws of physics and chemistry. But one has got to assimilate and accept the principles that one learns, and apply them to the situation on the ground.
WSJ: What are the special management challenges in a cyclical business?
Mr. Srinivasan: The cement industry in India is cyclical not because demand growth is cyclical, but because capacity-creation takes place in bunches. When all new capacity comes on stream, it can have an impact on prices. Our philosophy is that, so long as you have a low level of debt, you can ride out a particularly weak phase. The last time we were caught in a weak phase, two years ago, we opened exports and started exporting. We looked for new markets and cut costs. In a nutshell, a low level of production costs and a low level of debt works.
One other ongoing challenge is the retention of people in the lower and middle levels. We often see that young engineers take on manufacturing jobs, gain experience for a couple of years and move on to other industries, particularly information technology, simply because those jobs pay more. But what gives me great satisfaction is that there is very little turnover at the senior management level in our company.
WSJ: What is your favorite business book?
Mr. Srinivasan: Michael E. Porter's "Competitive Strategy: Techniques for Analyzing Industries and Competitors." It is not a new book, but is still relevant. Increasing market share with debt doesn't always work in a fractured industry, Porter says. He couldn't have said something truer about the cement industry.
如何在分散的市场中生存
N?斯里尼瓦桑(N. Srinivasan)1989年接任India Cements Ltd.副总裁兼董事总经理一职时，公司的年产能是160万□，年销售额13亿卢比（相当于2830万美元）。如今，India Cements的年产能已经达到900万□，年销售额达180亿卢比。
随著印度南部建筑热的升温，市场对水泥的需求几乎接近了企业的产能，从而也推动India Cements产品价格的上涨。该公司通过资产出售减少债务，同时开拓国内外的新市场，降低生产成本，因此在经历几年的亏损后又重新获得盈利。在截至2006年3月31日的财政年度，该公司利润达到4.531亿卢比，是前一个财政年度的10倍，而之前的三年一直处于亏损状态。这家公司还致力于开拓糖业和能源领域的业务。
双语阅读
? Surviving In A Fractured Cement Market 今年61岁的斯里尼瓦桑先生是已故的公司创始人T.S.纳拉亚纳斯瓦米(T.S. Narayanaswami)的儿子，他曾在美国伊利诺斯州技术学院(Illinois Institute of Technology)获得化学工程研究生学历。斯里尼瓦桑业余间帮助印度板球管理委员会(Board of Control for Cricket)理理财。他还热衷打高尔夫，他的差点达到了9。他是从India Cements位于钦奈(Chennai)的总部通过电话接受《华尔街日报》记者文?拉姆（Ven Ram）采访的。
华尔街日报(WSJ)：你的第一份工作是什么？你从中得到的最大收获是什么？
斯里尼瓦桑：我的第一份工作是在美国读研究生时担任助教。这份工作让我意识到上一堂课前该做多少准备工作，也让我明白追求完美和提前准备的好处。
WSJ：当年初出茅庐的时候，你希望自己能掌握什么样的管理原则？
斯里尼瓦桑：当初起步时要是有今天的管理经验就好了。商学院能教给你一些基本原理，但只有实践经验才能教你怎样运用这些原理。没有什么能代替经验。
WSJ：印度的水泥行业和其他国家有什么不同？
斯里尼瓦桑：印度目前是仅次于中国的第二大水泥消费国。在其他国家，水泥都是成批销售的，而在印度，水泥还是一袋一袋地卖。除了中国，其他大部分国家的水泥市场都掌握在四到五家公司的手中，而在印度，实力雄厚的竞争者只占到市场的50%至60%，其余市场被众多小企业瓜分掉了。这个行业按每年8%至10%的速度在增长，但仍然不是一个成熟的市场。用销售预拌混凝土方式来销售水泥的构想还没有变成现实。但我认为，印度目前所达到的技能、技术和效率如果说不比其他国家强的话，至少也不逊色。
WSJ：如果现在有人想进入水泥行业，你会给他什么建议？
斯里尼瓦桑：我会跟他说：小心行事。印度的水泥行业波动起伏较大，还没有完全稳定下来，竞争的企业大约有50家，水泥制造厂大约有120个。因此，在行业上升时期进入是很重要的。
WSJ：对于想在这个行业起家的人，你会建议他们上商学院还是在工作中学习？
斯里尼瓦桑：我当然会建议他上商学院。在工作过程中学习当然很好，但学习基础管理原理的重要性无异于掌握物理化学规律。不过，学到的管理原理要很好地吸收和接受，并把它们应用到实际情况中。
WSJ：对于一个周期波动的行业，管理上有哪些特别的挑战？
斯里尼瓦桑：印度的水泥行业周期起伏，不是因为需求的增长有周期性，而是因为产能的集中增加。当所有新产能都启用后，会对价格带来很大的影响。我们的理念就是，只要负债水平低，就能安全渡过低谷时期。两年前，当公司被困在低谷期时，我们便开始做出口业务，寻找新的市场，并降低成本。简而言之就是，低生产水平费钱、低债务水平提效。
另一个持续的挑战是如何留住中低层的人才。我们经常看到年轻的工程师先从事一些生产性的工作，积累一两年经验后就跳槽到其他行业，特别是IT行业，原因很简单，这些行业收入高。但在我们公司，高级管理层的流动率很低，这让我倍感欣慰。
WSJ：你最喜欢的商务书是哪本？
斯里尼瓦桑：迈克尔?E?波特的《竞争策略：产业及竞争者分析技术》(Competitive Strategy: Techniques for Analyzing Industries and Competitors)。它不是一本新书，但仍对现在的工作有用。波特指出，在一个市场分散的行业，以负债来换取市场份额的增长并非总能奏效。对于水泥行业，这句话是再正确不过的了。
VEN RAM
