Economics of Strategy

  1. Obtain a map of cement plants in Arizona (e.g. www.cement.org) and obtain average freight costs, in $/ton-mile, from the BTS – Bureau of Transportation Statistics(for truck and for class I rail) and assume a manufacturing cost of $35/ton.
    • What should wholesale prices for cement be in Tucson? In Phoenix? In Nogales?

• If CalPortland were to acquire Drake cement, what would wholesale prices be in Tucson? Phoenix? Nogales?

  1. Assume a ready-mix truck costs $150k, is depreciated completely over 200k miles, has a fuel efficiency of 5 miles per gallon, and that a truck operator charges $20/ hr. Also assume a typical truck-load of concrete implies driving 20 miles to the dump-site, takes up 3 hours to execute, and that a cubic-yard of concrete contains 1.6 metric tons of cement. Using your calculations on cement above and assuming the costs of sand, gravel, and water are negligible, what should the price of a cubic yard of concrete be in a competitive market? Compare to numbers you find online for the Tucson, Phoenix, and Nogales markets.