marble presentation 8 3 03

Carmina

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Presentation Transcript

Slide1:

Marble cluster Competitiveness Unit Ministry of Planning

Slide2:

Attractiveness of the Industry Cluster Impediments Strategy Key Issues Overview

Slide3:

Jordanian Raw Materials consist of: Halabat limestone Karaky limestone Travertine Sahrawi limestone Ajlouni limestone One of the first marble factories in Jordan was established in the early 1960s. This industry was created to meet the growing demand on construction in the 1950s. The 1990’s witnessed substantial growth in the number of marble processing establishments in Jordan. This growth was fueled by the return of Jordanian expatriates in conjunction with the construction boom that resulted from expectations created by the Middle East peace process. Overview The Process Industry Indicators

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Slide5:

Structure of Marble Manufacturers in Jordan The Marble Industry is dominated by the small sized enterprises that constitute 96% of the sector, employing about 61% of the total industry workforce. Small Enterprises Large Enterprises Medium Enterprises 211 enterprises 1029 workers 7 enterprises 480 workers 2 enterprises 177 workers < JD 250,000 > JD1000,000 JD 250,000 - 1000,000 Overview The Process Industry Indicators

Slide6:

Gross Output (1998-2000) The marble industry showed continuous growth during the period 1998 till 2000, in which the gross output increased by 23%. Overview The Process Industry Indicators

Slide7:

Value added (1998-2000) The value added growth during (1998-2000) exceeded that of gross output amounting to 26% indicating more sophisticated production processes. Overview The Process Industry Indicators

Slide8:

Although the value of imports is much higher than exports during (1997-2001), the growth rate for both was almost identical averaging 22.8% for imports and 22.6% for exports. Exports and Imports of Marble (1997-2001) Overview The Process Industry Indicators

Slide9:

Market Size (2000) Overview The Process Industry Indicators Raw Material = JD 6.6 Million Imported Raw Material 67% Local Raw Material 33% Marble Products = JD 11.1 Million Imported Processed Marble 16% Local Production 84% In conclusion, this small industry is experiencing gradual growth.

Slide10:

Stone Block Block Cutting Marble Slabs Slabs Cutting Overview Standardized Slabs Color Selection Polishing Finished Products The Process Industry Indicators

Slide11:

Post- Processing Processing Raw Materials The government controls many potential marble extraction sites. Land purchase: Increase in the prices of land in specified areas allowed for extraction. Land rent: 1990’s= JD 750/ year/ dunum Present= JD 1200/year/dunum Obtaining quarry permits involves time consuming and complicated governmental procedures. Cluster Map Pre- Processing Cluster Impediments

Slide12:

Raw Materials Best quality materials Woodland, therefore the quarries law doesn't apply Special law issued that gives a permit for 6 months to quarry in Ajloun region under specific conditions: The land area shouldn’t exceed 2.5 dunums No more than 5 meters in depth A bank guarantee of 10 thousand JDs for land restoration purposes The land should be empty of trees Cluster Impediments Pre- Processing Post- Processing Processing Cluster Map

Slide13:

Raw Materials Best quality materials Woodland, therefore the quarries law doesn't apply Special law issued that gives a permit for 6 months to quarry in Ajloun region under specific conditions: The land area shouldn’t exceed 2.5 dunums No more than 5 meters in depth A bank guarantee of 10 thousand JDs for land restoration purposes The land should be empty of trees Although in 2001 about 60 quarry permits were issued, still the supply is insufficient. Cluster Impediments Pre- Processing Post- Processing Processing Cluster Map

Slide14:

Raw Materials Cluster Impediments Pre- Processing Post- Processing Processing Cluster Map High sophisticated demand can’t be met depending on local raw materials due to current quarry practices (i.e. traditional extraction methods such as explosives). Carrara, Italy Success stories include Italy, Brazil, Spain, and Ukraine. Modern extraction methods preserve landscape and greenery by digging tunnels to the exact location of raw marble reserves depending on sound geological studies.

Slide15:

Cluster Impediments Pre- Processing Post- Processing Processing Cluster Map Raw Material (2000) Local quarries’ output is considered low, whereby the output directed for local consumption covers only 33% of the raw material local market size. Raw Material Market Size=JD 6.6 Million Local Quarries’ Output= JD 3.0 Million Imported Raw Material 67% Local Raw Material 33% Exports 27% Local Consumption 73%

Slide16:

Cluster Impediments Pre- Processing Post- Processing Processing Cluster Map Raw Material (2000) Local quarries’ output is considered low, whereby the output directed for local consumption covers only 33% of the raw material local market size. Raw Material Market Size=JD 6.6 Million Local Quarries’ Output= JD 3.0 Million Local market share for raw materials is being lost to imports. Imported Raw Material 67% Local Raw Material 33% Exports 27% Local Consumption 73%

Slide17:

Slide18:

Post- Processing Processing Cluster Map Jordan’s Marble Imports According to Form (1997-2001) Distribution of Jordan’s Marble Imports (1997- 2001) Cluster Impediments Pre- Processing The raw material impediments impose costs on Jordan in the form of bulk imports mainly from Italy and the Palestinian Authority. Raw Materials

Slide19:

Cost Structure (1997-2000) Cluster Impediments Post- Processing Processing Cluster Map Pre- Processing

Slide20:

Raw Material Raw materials constitute 65% of the industry’s cost structure due to: The need to import raw materials. High impurities in local materials require product treatment to be undergone. High waste output. Cluster Impediments Post- Processing Processing Cluster Map Pre- Processing Cost Structure (1997-2000)

Slide21:

Labor Low level of skill increases inefficiency; thereby increasing cost. Low labor productivity (JD 5900 per employee in comparison to JD 23,000 per Palestinian employee). High turnover of laborers. Most of the laborers are foreigners for which obtaining work permits is difficult unless they are registered in the Social Security Corporation. Cluster Impediments Post- Processing Processing Cluster Map Pre- Processing Cost Structure (1997-2000)

Slide22:

Utilities Problems with the electricity company in terms of extending electricity cables, forced some producers to have their own generators. The process consumes significant amounts of water. However, current water allocations for industrial purposes are insufficient therefore, some producers are forced to obtain water in tanks. Cluster Impediments Post- Processing Processing Cluster Map Pre- Processing Cost Structure (1997-2000)

Slide23:

Machinery Old machinery which leads to high maintenance costs. Moderate flexibility in the existing processes. Cluster Impediments Post- Processing Processing Cluster Map Pre- Processing Cost Structure (1997-2000)

Slide24:

Lack of Accredited Labs that perform all necessary tests to qualify in some international markets (such as the ASTM measures). Insufficient exposure to foreign markets, in addition to the lack of existing mechanisms for proactive marketing efforts that anticipate the clients needs. Shipping: Unnecessary fees in the port High shipping cost Aqaba - East Coast = $74.4/ Ton Turkey - East Coast = $67.4/ Ton Aqaba - West Coast = $118.6/ Ton Turkey - West Coast = $125.6/ Ton Cluster Impediments Post- Processing Processing Cluster Map Pre- Processing Export fees: Marble= 2.5 JD/ Ton Travertine= 3 JD / Ton

Slide25:

Cluster Impediments Post- Processing Processing Cluster Map Pre- Processing Accredited labs Local suppliers for Machinery Spare Parts & Polish stones suppliers Packing Companies Land & sea transportation Land & Survey Department Quarrying Machinery Natural Resources Authority Educational & Training Agencies Quarries Marble Processing Plants Business Supporting Agencies (JIB, JEDCO, JUSBP, EJADA, UNIDO/IPU) Land Transportation Unavailable Maintenance Services Needs Improvement Satisfactory Specialized Geological Studies

Slide26:

Bargaining Power of Buyers Bargaining Power of Suppliers Threat of Substitutes Threat of New Entrants Degree of Rivalry The Five Competitive Forces analysis shapes: Prices firms can charge Costs they have to bear Investment required to compete in the industry Five Forces Analysis for Small Enterprises Attractiveness of the Industry

Slide27:

Bargaining power of buyers is HIGH Few buyers (Contracting & Construction Companies) Low product differentiation; products are more or less standardized. Attractiveness of the Industry Bargaining Power of Buyers Bargaining Power of Suppliers Threat of Substitutes Threat of New Entrants Degree of Rivalry Five Forces Analysis for Small Enterprises

Slide28:

Threat of New Entrants is HIGH No minimum level of investment capital is required. Low asset specificity. Easy access to distribution channels. Low level of know-how is required. Minimum level of technical qualifications required is remedied through on-the-job training. Attractiveness of the Industry Bargaining Power of Buyers Bargaining Power of Suppliers Threat of Substitutes Threat of New Entrants Degree of Rivalry Five Forces Analysis for Small Enterprises

Slide29:

Bargaining power of Suppliers is HIGH High forward integration threat by suppliers. Low number of quarries. Low backward integration threat by producing firms. Attractiveness of the Industry Bargaining Power of Buyers Bargaining Power of Suppliers Threat of Substitutes Threat of New Entrants Degree of Rivalry Five Forces Analysis for Small Enterprises

Slide30:

Threat of Substitutes is LOW Moderate Demand elasticity. Low/ moderate buyer propensity to switch to substitutes due to high switching costs. Attractiveness of the Industry Bargaining Power of Buyers Bargaining Power of Suppliers Threat of Substitutes Threat of New Entrants Degree of Rivalry Five Forces Analysis for Small Enterprises

Slide31:

Degree of Rivalry is HIGH High number of competing firms. Low market growth. Continuous production to reduce the cost per unit. Low storage costs. Low product differentiation. Price based competition. High exit barriers due to family type businesses. Attractiveness of the Industry Bargaining Power of Buyers Bargaining Power of Suppliers Threat of Substitutes Threat of New Entrants Degree of Rivalry Five Forces Analysis for Small Enterprises

Slide32:

The current industry structure of the Jordanian marble cluster for small enterprises is unfavorable to profitability; supporting limited returns on investment. Attractiveness of the Industry Bargaining Power of Buyers Bargaining Power of Suppliers Threat of Substitutes Threat of New Entrants Degree of Rivalry Five Forces Analysis for Small Enterprises

Slide33:

Export Market Strategy This vicious cycle prevents small enterprises from upgrading their operations as well as from creating sophisticated local market demand for local marble products. Vicious Cycle for Small Enterprises Strategy Local Market Strategy

Slide34:

Distribution Channels for Processed Marble Small Processors Local Manufacturers Imported Finished Products Contractors Retailer End Consumer The fact that the current distribution channels are random, is another reason explaining why local producers are not gaining higher local market share. Strategy Export Market Strategy Local Market Strategy

Slide35:

Market Growth of the Marble Cluster (1997-2000) 20.7% Growth in Marble Products market size 4.4% Decline in Local Raw Material output 8.7% Growth in Local Production Output 8.2% Growth in the Raw Material market size The market for final marble products is increasing at a higher rate than local production indicating a missed opportunity in gaining higher local market share. The market for raw materials is increasing while local raw material output is decreasing indicating a loss of market share to imported raw materials. Strategy Export Market Strategy Local Market Strategy

Slide36:

Slide37:

Strategy Export Market Strategy Local Market Strategy Processing Plants Production= JD 10.0 Million Marble Products Market Size= JD 11.1 Million Processed Marble (2000) Local producers are local market focused rather than export oriented. Local Consumption 93% Imported Processed Marble 16% Local Production 84%

Slide38:

Exports Jordan Exports of Marble According to Form: Strategy Local Market Strategy Export Market Strategy Jordanian marble companies don’t focus on exporting high value added products.

Slide39:

Jordanian marble companies don’t focus on exporting high value added products. In 2000, only 1.8% of Jordanian marble was exported as cut-to-size marble. Strategy Local Market Strategy Export Market Strategy Jordan Exports of Marble According to Form: Exports

Slide40:

Value Chain Uneven Blocks Even Blocks Uneven Slabs Even Slabs Cut-to-Size Special Works & Decorative Products Strategy Local Market Strategy Export Market Strategy

Slide41:

Uneven Blocks Even Blocks Uneven Slabs Even Slabs Cut-to-Size Special Works & Decorative Products Value Chain Strategy Local Market Strategy Export Market Strategy

Slide42:

Uneven Blocks Even Blocks Uneven Slabs Even Slabs Cut-to-Size Special Works & Decorative Products Value Chain Strategy Local Market Strategy Export Market Strategy The prices of marble are largely governed by: Color, pattern, texture, hardness, resistance to environmental conditions and size of the block in addition to the process stage. Jordanian producers are losing significant profit margins due to the fact that they do not export final products.

Slide43:

Missed Opportunity One Ton Even and Uneven Blocks JD 353.2 JD 114.5 One Ton Cut-to-Size Marble If the Marble companies focused their exports on cut-to-size products only, annual exports would jump from JD 1.45 Million ito JD 5.2 Million in 2000. Strategy Local Market Strategy Export Market Strategy

Slide44:

Distribution of Jordanian Exports (1997-2001) Jordan exports almost 15% of its total Marble production; 82% of these exports are directed to five markets, these are: Israel, Lebanon, Saudi Arabia, USA, and Singapore. Strategy Local Market Strategy Export Market Strategy

Slide45:

Distribution of Jordanian Exports (1997-2001) Saudi Arabia and USA markets are the high potential markets for the Jordanian high value added products. Strategy Local Market Strategy Export Market Strategy

Slide46:

Slide47:

World Largest Importers and Exporters of Marble in the Year 2001 “Annual consumption for stone and marble is growing at an annual rate of 9%.” IMM Carrara Potential markets for Jordanian exports are China, USA, Austria, Lebanon, Japan and Germany. Strategy Local Market Strategy Export Market Strategy

Slide48:

USA Market: The Future Opportunity The USA imports of the different marble products increased by 42% during the four years period (1999-2002). US Imports of Marble (1999-2002) Strategy Local Market Strategy Export Market Strategy

Slide49:

USA Market: The Future Opportunity US Average Imports of Marble According to form (1999-2002) USA imports are concentrated in the high value added products, Cut-to-size constituted 87.7% of the average imports during the period (1999-2002). According to a study conducted by a marble expert Beige, yellow and pink rosy colors, Tomb stone and Antique look marble are highly demanded by the US consumer. Strategy Local Market Strategy Export Market Strategy

Slide50:

USA Market: The Future Opportunity US Average Imports of Marble According to Exporting Country (1999-2002) Italy is the largest Marble exporter to the US market attaining a 33% share of the average US imports during the period (1999-2002). Turkey and Israel are the leaders in the region in exporting marble to the US market. Strategy Local Market Strategy Export Market Strategy

Slide51:

USA Market: The Future Opportunity US Average Imports of Marble According to Exporting Country (1999-2002) Jordan however is lagging behind other countries in the region. It exported an average of $97 thousand worth of marble to the US during the period (1999-2002). Strategy Local Market Strategy Export Market Strategy

Slide52:

Low labor productivity. Key Issues Local Market Export Market General

Slide53:

Imports are gaining local market share. Local consumer tendency to prefer imported marble due to the current prevailing image of local marble. Quarries losing market share in the raw material market as a result of a decrease in output. Low quality of quarries output due to the nature of local materials and traditional extraction methods, consequently raw materials constitute a high percentage of the industry’s cost structure. Distribution channels leading to the creation of additional competitors. Price-based competition as a result of low product differentiation. Key Issues Local Market Export Market General

Slide54:

Exports are concentrated on low value added products. Insufficient focus on markets demanding high value added products such as Saudi Arabia and the USA. Random and weak marketing efforts. Uncompetitive transportation costs. Jordan is not capitalizing on existing demand for yellow and pink marble to develop a brand name and market share. The need for accredited labs that perform all necessary tests as specified by international standards. Key Issues Local Market Export Market General

Slide55:

Slide56:

The term ‘Cluster’ does not refer to an agglomeration of producers, but rather it is…. Next Step…Clustering

Slide57:

Some benefits of a dynamic marble cluster include: Increased lobbying power for their interests Cost sharing in terms of: Procurement of raw materials, machinery and equipment. Training and development. Participation in world fairs and exhibitions. Transportation. Increased ability to meet large quantities of demand orders with consistent quality. Facilitates the transfer of Knowledge and technology. (Upgrading) Facilitate brand name development for the Jordanian marble cluster. Enhanced Competitiveness Next Step…Clustering