1) What benefits have CEMEX and the other global competitors in cement derived from globalization?

More
broadly, how can cross-border activities add value in an industry as apparently localized as cement?

CEMEX and the other global competitors have benefitted from globalization by creating a hedge to reduce the
uncertainty associated with local production in a particular area. The demand for cement is localized to areas
with a growing urban population, and the demand is subject to change over the long term because of the shifts
in policy and the consequent changes in GDP, which in itself is an imperfect indicator of construction activity.

By creating a global manufacturing ecosystem, global competitors improve their ability to respond to these
changes and better weather the uncertainty in the global economy.

Further, by pursuing acquisitions and entering the market at scale, global firms may circumvent the initial
inertia of starting up manufacturing, especially establishment of a supply chain and transport network, which
accounts for one-third the costs. Because of the heavy capital involved in the industry, new entrants are
discouraged from entry, which they have to do at scale to maintain the Minimal efficient scale.

2) How specifically has CEMEX managed to outperform its leading global competitors in the cement industry?
Please focus on comparing it with Holderbank, which is the other large competitor principally focused on
cement. What do this comparison and the other data in Exhibits 4-8 suggest about the competitive game
being played out among the major international competitors?

While most competitors try to globalize using acquisitions, CEMEX has focused its efforts to developing
markets, with focus on return on investment and creating a measurable market dominance based on
established benchmarks. Because of higher demand for less cyclical, informal construction material through
retail channels in emerging markets, demand was somewhat normalized in emerging markets, which played
to CEMEX’s advantage because of its higher presence as compared to Holderbank. Thus CEMEX is able to
charge a higher price for cement than Holderbank overall (based on balance sheet). Optimization of the
process and standardization within the acquisition targets also allows higher EBITDA for CEMEX.

The financial strategy followed by CEMEX allows it higher tax incentives by moving its transactions to Spain,
thereby leaving CEMEX more cash to take on acquisitions and growth. Operations in Spain also give access to
the high value European market.