Marble

1
Marble cluster
Competitiveness Unit Ministry of Planning
2
Attractiveness of the Industry
Cluster Impediments
Key Issues
Strategy
Overview
3
Overview

• 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 1990s 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.

Industry Indicators
The Process
4
Overview

• 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 1990s 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.

Industry Indicators
The Process
In 2002, the number of marble establishments
reached 220 enterprises employing about 1686
employees.
5
Overview
Structure of Marble Manufacturers in Jordan
lt JD 250,000
gt JD1000,000
JD 250,000 - 1000,000
Industry Indicators
Small Enterprises
Large Enterprises
Medium Enterprises

• 211 enterprises
• 1029 workers

• 7 enterprises
• 480 workers

• 2 enterprises
• 177 workers

The Process
The Marble Industry is dominated by the small
sized enterprises that constitute 96 of the
sector, employing about 61 of the total industry
workforce.
6
Overview
Gross Output (1998-2000)
The marble industry showed continuous growth
during the period 1998 till 2000, in which the
gross output increased by 23.
Industry Indicators
The Process
7
Overview
Value added (1998-2000)
The value added growth during (1998-2000)
exceeded that of gross output amounting to 26
indicating more sophisticated production
processes.
Industry Indicators
The Process
8
Overview
Exports and Imports of Marble (1997-2001)
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.
Industry Indicators
The Process
9
Overview
Market Size (2000)
Raw Material JD 6.6 Million
Marble Products JD 11.1 Million
Imported Raw Material 67
Imported Processed Marble 16
Local Raw Material 33
Local Production 84
Industry Indicators
The Process
In conclusion, this small industry is
experiencing gradual growth.
10
Overview
Stone Block
Block Cutting
Marble Slabs
Industry Indicators
Slabs Cutting
Standardized Slabs
The Process
Color Selection
Polishing
Finished Products
11
Cluster Impediments
Pre- 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
• 1990s JD 750/ year/ dunum
• Present JD 1200/year/dunum
• Obtaining quarry permits involves time consuming
  and complicated governmental procedures.

Processing
Post- Processing
Cluster Map
12
Cluster Impediments
Pre- Processing
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 shouldnt 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

Processing
Post- Processing
Cluster Map
13
Cluster Impediments
Pre- Processing
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 shouldnt 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

Processing
Post- Processing
Although in 2001 about 60 quarry permits were
issued, still the supply is insufficient.
Cluster Map
14
Cluster Impediments
Pre- Processing
Raw Materials
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.
Processing
Carrara, Italy
Post- Processing
High sophisticated demand cant be met depending
on local raw materials due to current quarry
practices (i.e. traditional extraction methods
such as explosives).
Cluster Map
15
Cluster Impediments
Pre- Processing
Raw Material (2000)
Raw Material Market SizeJD 6.6 Million
Local Quarries Output JD 3.0 Million
Imported Raw Material 67
Local Raw Material 33
Local Consumption 73
Exports 27
Processing
Post- Processing
Local quarries output is considered low, whereby
the output directed for local consumption covers
only 33 of the raw material local market size.
Cluster Map
16
Cluster Impediments
Pre- Processing
Raw Material (2000)
Raw Material Market SizeJD 6.6 Million
Local Quarries Output JD 3.0 Million
Imported Raw Material 67
Local Raw Material 33
Local Consumption 73
Exports 27
Processing
Post- Processing
Local quarries output is considered low, whereby
the output directed for local consumption covers
only 33 of the raw material local market size.
Local market share for raw materials is being
lost to imports.
Cluster Map
17
Cluster Impediments
Pre- Processing
Raw Materials
Jordans Marble Imports According to Form
(1997-2001)
Distribution of Jordans Marble Imports (1997-
2001)
Processing
Post- Processing
Cluster Map
18
Cluster Impediments
Pre- Processing
Raw Materials
Jordans Marble Imports According to Form
(1997-2001)
Distribution of Jordans Marble Imports (1997-
2001)
Processing
Post- Processing
The raw material impediments impose costs on
Jordan in the form of bulk imports mainly from
Italy and the Palestinian Authority.
Cluster Map
19
Cluster Impediments
Pre- Processing
Cost Structure (1997-2000)
Processing
Post- Processing
Cluster Map
20
Cluster Impediments
Pre- Processing
Cost Structure (1997-2000)

• Raw Material
• Raw materials constitute 65 of the industrys
  cost structure due to
• The need to import raw materials.
• High impurities in local materials require
  product treatment to be undergone.
• High waste output.

Processing
Post- Processing
Cluster Map
21
Cluster Impediments
Pre- Processing
Cost Structure (1997-2000)

• 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.

Processing
Post- Processing
Cluster Map
22
Cluster Impediments
Pre- Processing
Cost Structure (1997-2000)

• 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.

Processing
Post- Processing
Cluster Map
23
Cluster Impediments
Pre- Processing
Cost Structure (1997-2000)

• Machinery
• Old machinery which leads to high maintenance
  costs.
• Moderate flexibility in the existing processes.

Processing
Post- Processing
Cluster Map
24
Cluster Impediments
Pre- Processing
Lack of Accredited Labs that perform all
necessary tests to qualify in some international
markets (such as the ASTM measures).

• Export fees
• Marble 2.5 JD/ Ton
• Travertine 3 JD / Ton

Processing

• 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
Post- Processing
Insufficient exposure to foreign markets, in
addition to the lack of existing mechanisms for
proactive marketing efforts that anticipate the
clients needs.
Cluster Map
25
Cluster Impediments
Pre- Processing
Business Supporting Agencies (JIB, JEDCO, JUSBP,
EJADA, UNIDO/IPU)
Specialized Geological Studies
Accredited labs
Local suppliers for Machinery
Natural Resources Authority
Processing
Marble Processing Plants
Land sea transportation
Quarrying Machinery
Quarries
Packing Companies
Land Survey Department
Post- Processing
Spare Parts Polish stones suppliers
Maintenance Services
Educational Training Agencies
Land Transportation
Unavailable
Needs Improvement
Satisfactory
Cluster Map
26
Attractiveness of the Industry
Five Forces Analysis for Small Enterprises
Threat of Substitutes

• The Five Competitive Forces analysis shapes
• Prices firms can charge
• Costs they have to bear
• Investment required to compete in the industry

Bargaining Power of Buyers
Bargaining Power of Suppliers
Degree of Rivalry
Threat of New Entrants
27
Attractiveness of the Industry
Five Forces Analysis for Small Enterprises

• Few buyers (Contracting Construction Companies)
  
• Low product differentiation products are more or
  less standardized.

Threat of Substitutes
Bargaining Power of Buyers
Bargaining Power of Suppliers
Degree of Rivalry
Bargaining power of buyers is HIGH
Threat of New Entrants
28
Attractiveness of the Industry
Five Forces Analysis for Small Enterprises

• 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.

Threat of Substitutes
Bargaining Power of Buyers
Bargaining Power of Suppliers
Degree of Rivalry
Threat of New Entrants is HIGH
Threat of New Entrants
29
Attractiveness of the Industry
Five Forces Analysis for Small Enterprises

• High forward integration threat by suppliers.
• Low number of quarries.
• Low backward integration threat by producing
  firms.

Threat of Substitutes
Bargaining Power of Buyers
Bargaining Power of Suppliers
Degree of Rivalry
Bargaining power of Suppliers is HIGH
Threat of New Entrants
30
Attractiveness of the Industry
Five Forces Analysis for Small Enterprises

• Moderate Demand elasticity.
• Low/ moderate buyer propensity to switch to
  substitutes due to high switching costs.

Threat of Substitutes
Bargaining Power of Buyers
Bargaining Power of Suppliers
Degree of Rivalry
Threat of Substitutes is LOW
Threat of New Entrants
31
Attractiveness of the Industry
Five Forces Analysis for Small Enterprises

• 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.

Threat of Substitutes
Bargaining Power of Buyers
Bargaining Power of Suppliers
Degree of Rivalry
Degree of Rivalry is HIGH
Threat of New Entrants
32
Attractiveness of the Industry
Five Forces Analysis for Small Enterprises
LOW
The current industry structure of the Jordanian
marble cluster for small enterprises is
unfavorable to profitability supporting limited
returns on investment.
Threat of Substitutes
HIGH
HIGH
Bargaining Power of Buyers
Bargaining Power of Suppliers
Degree of Rivalry
HIGH
Threat of New Entrants
HIGH
33
Strategy
Vicious Cycle for Small Enterprises
This vicious cycle prevents small enterprises
from upgrading their operations as well as from
creating sophisticated local market demand for
local marble products.
Local Market Strategy
Export Market Strategy
34
Strategy
Distribution Channels for Processed Marble
Local Manufacturers
Contractors
Local Market Strategy
Small Processors
Retailer
Export Market Strategy
Imported Finished Products
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.
35
Strategy
Market Growth of the Marble Cluster (1997-2000)
20.7 Growth in Marble Products market size
8.7 Growth in Local Production Output
Local Market Strategy
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.
Export Market Strategy
4.4 Decline in Local Raw Material output
8.2 Growth in the Raw Material market size
The market for raw materials is increasing while
local raw material output is decreasing
indicating a loss of market share to imported raw
materials.
36
Strategy
Market Growth of the Marble Cluster (1997-2000)
20.7 Growth in Marble Products market size
8.7 Growth in Local Production Output
Local Market Strategy
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.
Export Market Strategy
4.4 Decline in Local Raw Material output
8.2 Growth in the Raw Material market size
In 2000, 73 of locally processed marble was
based on imported raw materials.
The market for raw materials is increasing while
local raw material output is decreasing
indicating a loss of market share to imported raw
materials.
37
Strategy
Processed Marble (2000)
Processing Plants Production JD 10.0 Million
Marble Products Market Size JD 11.1 Million
Local Market Strategy
Imported Processed Marble 16
Local Consumption 93
Local Production 84
Export Market Strategy
Local producers are local market focused rather
than export oriented.
38
Strategy
Exports
Jordan Exports of Marble According to Form

• Jordanian marble companies dont focus on
  exporting high value added products.

Local Market Strategy
Export Market Strategy
39
Strategy
Exports
Jordan Exports of Marble According to Form

• Jordanian marble companies dont focus on
  exporting high value added products.
• In 2000, only 1.8 of Jordanian marble was
  exported as cut-to-size marble.

Local Market Strategy
Export Market Strategy
40
Strategy
Value Chain
Special Works Decorative Products
Cut-to-Size
Even Slabs
Uneven Slabs
Local Market Strategy
Even Blocks
Uneven Blocks
Export Market Strategy
41
Strategy
Value Chain
Special Works Decorative Products
Cut-to-Size
Even Slabs
Uneven Slabs
Local Market Strategy
Even Blocks
Uneven Blocks
Export Market Strategy
42
Strategy
Value Chain
Special Works Decorative Products
Cut-to-Size
Even Slabs
Uneven Slabs
Local Market Strategy
Even Blocks
Uneven Blocks
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.
43
Strategy
Missed Opportunity
One Ton Even and Uneven Blocks
Local Market Strategy
JD 114.5
One Ton Cut-to-Size Marble
JD 353.2
Export Market Strategy
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.
44
Strategy
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.

Local Market Strategy
Export Market Strategy
45
Strategy
Distribution of Jordanian Exports (1997-2001)
Saudi Arabia and USA markets are the high
potential markets for the Jordanian high value
added products.
Local Market Strategy
Export Market Strategy
46
Strategy
Distribution of Jordanian Exports (1997-2001)
Saudi Arabia and USA markets are the high
potential markets for the Jordanian high value
added products.
Local Market Strategy
Export Market Strategy
47
Strategy
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.
Local Market Strategy
Export Market Strategy
48
Strategy
USA Market The Future Opportunity
US Imports of Marble (1999-2002)

• The USA imports of the different marble products
  increased by 42 during the four years period
  (1999-2002).

Local Market Strategy
Export Market Strategy
49
Strategy
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.

Local Market Strategy
Export Market Strategy
50
Strategy
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.

Local Market Strategy
Export Market Strategy
51
Strategy
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).
Local Market Strategy
Export Market Strategy
52
Key Issues

• Low labor productivity.

General
Local Market
Export Market
53
Key Issues

• 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 industrys cost structure.
• Distribution channels leading to the creation of
  additional competitors.
• Price-based competition as a result of low
  product differentiation.

General
Local Market
Export Market
54
Key Issues

• 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.

General
Local Market
Export Market
55
Key Issues

• 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.

General
Local Market
What Jordan needs is a competitive Marble cluster
structure, with a strong market focus,
strengthened inter-firm and inter-industry
linkages, and a more responsive economic
infrastructure.
Export Market
56
Next StepClustering
The term Cluster does not refer to an
agglomeration of producers, but rather it is.
57
Next StepClustering

• 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