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“THE CEMEX WAY” OF GLOBALIZATION

Makhanu W. Gellus

Information Technology

Dr. Kiarie

24th May, 2018

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The CEMEX Way of Globalization

Introduction

Synopsis of relevant concept of the assignment

Globalization has become a necessary as well as a critical step in the success of

corporations in the world. The word became a common name in the 1980s when corporations

from developed countries made efforts to develop new markets in developing nations. However,

CEMEX is an exception as the company rose from a developing nation to become one of the

leading companies dealing in building materials. The company has had numerous successful

acquisitions that have seen it expand globally despite not have the cost advances enjoyed by

companies from developed countries. Like the United States. It is true that success in the

international market is dependent on a company’s capability to take care of the varied needs of

diverse groups of consumers from different countries. Product and process innovation is a

prerequisite in globalization as it plays a critical role in the profits from the whole process. The

first part of this paper focuses on a brief overview of CEMEX since its incorporation in 1931 and

objectives of the paper. The second part provides a more in-depth analysis of CEMEX

concerning its vision, mission, organizational objectives and strategic capabilities. The last part is

the conclusion that will summarize the all the important points of the whole paper.

Brief Profile of the Case

CEMEX is a leading global company specializing in building materials with its

headquarters in San Pedro, Mexico. CEMEX was founded in 1906 as Cementos Hidalgo and

merged with Cementos Portland in 1931 to be called Cementos Mexicanos which is now

CEMEX. The company is currently present in more than 50 countries around the world with 66
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cement plants in these countries. It deals with manufacture and distribution of cement,

aggregates and ready-mix concrete in the over fifty countries globally. It is currently the second

largest company dealing in building materials in the world. Approximately a third of the

company’s sales are made in Mexico, a quarter from its plants in the United States, around 15

percent from Spain and the rest from its other plants around the world. The company went public

on the Mexican stock exchange in 1976 after which it became the largest cement company in

Mexico after the acquisition of Cementos Guadalajara’s three plants (Vargas et al. 2015). Over

the years the company6 has continued to pursue its internationalization policies which have seen

it become the second largest cement company in the world today. Most of the acquisitions by the

company were made between 1990 and today.

Objectives of the assignment

In the current world, globalization happens to be one of the most critical challenges a

company can face even for large corporations from developed countries such as Europe, North

America, and Europe. It is always difficult for companies to identify the best and most efficient

internationalization strategies and even in deciding which countries to venture. The former CEO

of CEMEX says, there is a need for more advanced management techniques that when combined

with adequate capital and efforts to have common processes and culture make the whole exercise

successful. Despite CEMEX being based in a developing country that is Mexico, the company

has had very successful acquisitions one after the other over the years that have enabled it to

venture into the international market. Despite lacking cost advantages and the low value to

weight nature of cement, the company has overcome all the challenges in the global market to

emerge as one of the leading companies in the world today. This is proof that the company has

the best strategies when it comes to internationalization. The has been able to make its
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acquisitions successful since the 1990s due to its ability to introduce some of the best practices

that were once standardized in the company combined with an effort to pick and implement the

best practices from the acquired companies. This strategy is internally known as the CEMEX

way. It involves standardized business processes, technology as well as an organizational

structure across all, the countries it operates while at the same time ranting countries some level

of operational flexibility that enables them to respond to local environments more easily. This

paper analyzes the main competences of CEMEX relating to organizational vision, mission,

objectives, and strategic capabilities.

Analysis and content

Critical Analysis of organizational vision

The company seeks to contribute greatly to regional development through the provision

of building solutions that generate welfare for people. Through its global expansion policy, the

company aims at the development of regions through its quality materials. Through its plant

production and technical centers, it continues to provide its customers with creative and reliable

construction materials.

Critical analysis of organizational mission

CEMEX strives to serve global building needs of all its customers and build value for its

stakeholders by becoming the world’s most efficient and profitable cement company. The

company has in the past and continues to do business in markets that can only add value to

shareholders, customers, and its employees. All of these markets offer long-term profitability for

the company. The company has a global presence that apart from getting closer to customers also

helps in growing its business.

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Organizational objectives

The company’s objectives are divided into business and sustainability objectives. In its

business objectives, the company strives to achieve its mission that is their strategy to create

value through building and managing an international portfolio of aggregates, cement, ready-mix

concrete and other related businesses. For the company to achieve this, it attaches a lot of value

to its employees, helps customers in their success process and ensures it ventures its markets that

offer long-term profitability. Its sustainability objectives are focused on building a better future

for its stakeholders and ensure sustainability is fully embedded in its business through its four

pillars, that is, why the company exist, where it plays, how it succeeds, who benefits and how it

relates to value for all stakeholders.

Strategic Capabilities

Critical evaluation of strategic management implications in terms of:

a) International market expansion

CEMEX’s strategic capabilities have long been dependent on its ability to perform at a

higher level and in a more differentiated way. It focuses on not only identifying but also

developing new capabilities that made possible to respond to the changing demands of customers

while at the same time being able to beat most of the competitive threats. Before making any

acquisitions, the company enjoyed a number of competencies among which were the strong

operational capabilities that were based on engineering and IT as well as a culture of

transparency. It later also mastered the art of acquisition as well as integration that have seen it

grow to be an international leader. One of the major steps towards internationalization was the

establishment of an efficient communication system for its 11 factories, called CEMEXNET in

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Mexico. This was a significant step that helped integrate all the operations of the company in

Mexico as the communication was more coordinated and the managers could easily input

manufacturing data related, to inventory, production, administration, sales and delivery (Hoyt &

Lee 2005, p. 351). This also made it possible for the then CEO Zambrano to inspect the

operations of the company in Mexico virtually. After the company laying groundwork for

internationalization, its next move was stepping out. It acquired Mexican’s Tolteca that enabled it

to be the second largest cement producer in Mexico while one of the top biggest producers of

cement in the whole world.

The company made its first international expansion move in 1992 after acquiring a

majority stake in two cement production companies, Valenciana and Sanson in Spain. This was

to cater for the lost market share at home by Holcin. It also considered the fact that Spain was an

investment grade nation since it had joined the European Monetary Union. Its companies in

Spain flourished at a faster rate as it employed it Post Merger Integration (PMI) and it was able

to learn from Spain which enhanced its capabilities directly. The company after this acquisition

accelerated its internationalization process. For instance, in the mid-1990s it made acquisitions in

Colombia, Venezuela and Caribbean, and Indonesia and the Philippines in the late 1990s. The

company was also able to make changes to its PMI process since it realized it I had to make

some effort to learn some of the best practices from its acquired companies in other countries and

only implement them when appropriate. As a result, it developed the CEMEX internal

benchmarking system that was driven by five forces: efficient management of knowledge base;

identification and dissemination of best practices; standardization of business practices;

implementation of key information and internet-based technologies; and fostering innovation.

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This made the PMI process different acquired companies could only retain 20 percent of their

practices while the 80 percent was cataloged and stored in a central database by CEMEX teams.

The company formed teams every time it made an acquisition. These were experts in

production, finance, logistics and other major functions and were responsible teaching managers

of newly acquired firms in other countries (Whitaker & Catalano 2001). They also were

responsible for identifying the best practices to retain in those firms and the ones to get rid of.

CEMEX stepped up its game through the redefinition of its large markets into regions according

to their growth rates. The company became North America’s largest producer of cement after the

acquisition of the Texas-based Southdown. After a shift of performance measurement from the

emphasis on margins to return on investment of its products the company identified a new

opportunity as ready-mix concrete was then more attractive than cement. It led the company to

make its first diversified acquisition after acquiring a UK-based ready-mix concrete international

leader, RMC. The most phenomenal acquisitions of CEMEX happened in 2007 when it acquired

Rinker saw the company become one of the world’s largest cement suppliers.

b) Risk management process

Explanation of competitive capabilities in improving trade margin and focus

From the growth of the company since its incorporation in 1931, it is easier to identify

CEMEX’s competitive capabilities through four stages of learning. These are laying the

groundwork for globalization, stepping up, growing up and finally stepping up. There is no doubt

that the company has strong operational capabilities based on engineering and IT as well as a

culture of transparency. Its mastery of the art of acquisition has the company grow to be a global

leader in cement production. First, for the company to beat the competition at the local level in
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Mexico, it started exploring foreign markets and made imports to the United States. This was the

first step of the Mexican company into the global market. Secondly, the company invested in

satellite communication system, CEMEXNET, that helped avoid the erratic Mexican service

which was also expensive and insufficient. This changed the operations of the company ads the

managers would enter most of the production details like such as sales, production,

administration, delivery, and inventory. It integrated the 11 factories in Mexico meaning the

company would even operate at a lower cost compared to other companies that depended on the

Mexican telephone service (Spulber 2009). CEMEX in 1989 acquired Tolteca, which was a

major step aimed at increasing its market share in Mexico. As a result, it became the largest

cement producer in the whole nation and entered the list of the top ten cement producers in the

whole world. The company could also thrive more easily in Spain due to the cultural and

linguistic ties between the two countries and it also had affordable opportunities that the

company could exploit for growth.

To increase its competitive capability and market power the company introduced its

Mexican based best practices to its operations in Spain which helped increase efficiency of plants

through reduced costs with increased operation margins. CEMEX entered the Spanish market as

a counter strategy to the entry of European company into its home market. Considering the size

and the fact that these companies were in a foreign country, CEMEX formalized and codified its

PMI process to enhance its leaning capabilities in this new country through direct learning. It

later discovered from two of its factories that coke was efficient as the main fuel source and as a

result the company began using coke in a vast majority of its plants (Haberberg & Rieple 2008,

p. 273). CEMEX after moving into Spain made other subsequent acquisitions in the Caribbean,
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Colombia and Venezuela in the mid-1990s and Indonesia and the Philippines in the late 1990s

that helped the company exploit its core competitive capabilities.

Conclusion

For any company to compete at an international level, it has to employ the best of

management approaches to growth. CEMEX rose from a developing country to become a world

leader in the cement industry. It was possible through the leadership and management approaches

it had to growth and its response to the business environment. It embraced modern growth

industries that have seen it penetrate markets in over 50 countries around the world. Anytime the

company faces threats regarding competition it expands its operations to new locations through

acquisition that both work to increase its market share. It also invests in the improvement of its

competitive capabilities through acquisitions, merger, and diversification that all improve its

trade margins. CEMEX proves that with advanced management techniques, capital and the

ability to integrate culture and common processes, any company can succeed in the global

market to become an international leader.

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Reference List

Haberberg, A., & Rieple, A. (2008). Strategic management: Theory and application (p. 273).

Oxford: Oxford University Press.

Hoyt, D., & Lee, H. L. (2005). End-to-End Transformation in the Cemex Supply

Chain. Building Supply Chain Excellence in Emerging Economies, 345-366.

doi:10.1007/978-0-387-38429-0_14

Spulber, D. F. (2009). Global competitive strategy. Cambridge: Cambridge University Press.

Vargas-Hernnndez, J. G., LLpez-Morales, J. S., & Pavvn Villegas, C. Z. (2015). Analysis of

CEMEX's Strategies as Determinants for Market Power. Journal of Global

Economics, 3(133). doi:10.2139/ssrn.2550069

Whitaker, J., & Catalano, R. (2001). “Growth Across Borders,”. Corporate Strategy Board.