Wienerberger Baustoffindustrie Ag

CASE SUMMARY

Company Overview

Founded in 1819 in Vienna and traded since 1869 on the Vienna Stock Exchange, Wienerberger can look back on a great tradition. Only in 1986 the company started its dynamic expansion, which has focused on building materials since the introduction of Value Management in 1997. This transformed Wienerberger from a local Austrian brick-maker into the world's largest producer of bricks within a few years.

Wienerberger encompasses 3 divisions, namely bricks, pipes, and real estate. It operates more than 70 companies and has about 220 plants in some 25 countries. Products include wall systems (hollow and facing brick), concrete surface paving bricks, and roofing systems (clay and concrete tiles). Other Wienerberger operations include its Pipelife plastic pipe business. The company's extensive real estate portfolio (which it is divesting) includes development, landfill, and garage investments.

Wienerberger is the world's largest producer of bricks (as of March 2001) and Number 2 on the roofing market in Europe, and also holds leading positions with pavers in Europe.

Hallow bricks No. 1 worldwide

Facing bricks No. 1 in Continental EuropeNo. 2 in the USA

Roofing systems No. 2 in Central-Eastern Europe

Clay pipe No.1 in Europe

Plastic pipe No. 4 in Europe

Market Analysis

1. Home Country (Austria)

Austria is a highly developed country, located in the centre of Europe.

Positive

1. The opening of Eastern Europe created the opportunity for relocation of the production units to take advantage of very low cost and the development of new markets, bur resulted in new competition in some sectors.

2. Became an EU members in 1995, resulted the country be a favorable location for foreign firms and attractive markets.

3. A tough currency policy

4. Privatize the large state-owned sector, which resulted in further structural markets distortions

Negative

1. High unemployment rate

2. Reducing public investment

2. Industry

Sales in brick industry depend on

1. The general level of economic activity

2. The business of construction and construction-materials industries

3. The development of private residential construction

Home Market

1. Home market is very small

2. Market potential in home market relates only to the adoption/renovation and modernization sectors, rather than new (private or public) building.

3. Private sector elasticity demand is much lower than in the public sector.

Major EU markets and EU Leading Supplier

1. Generally, the building industry in the EU has been a stable sector for many decades

2. Western Europe Ðo the real growth rate is expected to remain below 2%

3. Eastern Europe

* Building industry has increased its volume

* Very low and unstable growth due to varies considerably between the countries

* 'super-normal' growth of market shares explained by rapid demand growth and acquisitions

* Labor productivity increased by 33%, while unit labor cost (+15.8%) and total cost (+17.4%) rose considerably less

Trade and Nature of competition

1. Trade in the brick industry has been minimal as it mainly a local business

2. Market structure in the brick industry is OLIGOPOLY, in which tends to reduce competition between few suppliers, became dominant position of large supplier in home market

3. Competition depend on the share of bricks of total construction materials used, including substitutes such as concrete

* Highly developed countries и highly concentrated in order to stand the pressure of substitutes

* Less developed countries и the role of substitutes is considerable less significant

Main Suppliers

1. Western Europe market's concentration rate very high, i.e. UK seems to dominate the brick markets, but very competitive market

2. Southern Europe the market is characterized by a large number of small suppliers, and a concentration and industrialization process has not yet set-in

3. The larger global competitors are Australian Boral Group, which is the market leader in Australia, US and Asia.

Key Success Factors

Mix of firm size and financial structure.

* The larger the firm, the higher the return on technology, since brick production sites are similar everywhere и ensures efficient supply on the firm level

* Strong financial, easier play a role in "M&A- game" in the industry (high cash flow) и secure market share

FIRM ANALYSIS

1. Divisions and Product

* Bricks are to a certain extent a price-sensitive product, in which results in a quality premium of only approximately 5% of the ordinary pricing

Products Home Market EU

"Wall, ceiling and roofing system" Remain at 40%, remain not growth and no attempt to increase market share

Hollow Brick Dominant position

2. Technology