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Analysis of the Globalization of Cemex Coursework

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Benefits of CEMEX

Globalization enabled CEMEX in a path of expansion, by operating in 15 countries and owing production accounted to 60 percent of assets, with revenue of over 50%. By 1999, six major cement companies Holderbank, Lafarge CEMEX, Heidelberger, Italcementi, and Blue Circle had emerged in the international market, they outperformed local competitors at any given point. The Six major controlled 500 million tons of capacity, which was slightly one – quarter of the world’s total (Ghemawat, 2004).

Globalization made CEMEX the third largest cement company in the world in terms of capacity and the largest in trading internationally. It helped CEMEX entry countries which larger markets, they realized that in the long run, demand for cement was directly related to the Country’s GDP. The higher the population the greater the infrastructure needed, Globalization gave CEMEX its opportunity. It’s no surprise why the CEMEX executives at times think of it’s international operations as a “ring of grey gold” (Ghemawat, 2004).

During the 1970’s the U.S cement industry collapsed and gave the opening for European Cement firms, making them buy existing Cement companies and give them a head start rather than setting up a factory themselves. They concentrated on production volumes for their of shore profitability and by around 2000 European cement companies owed 65% of the U.S market (Prahalad, 2006).

CEMEX managed to outperform competitors

Among its 5 competitors in its Asia Cemex manages to out perform them in terms of production and price, another interesting fact about CEMEX is, its biggest competition Holderbank have holding in five companies which is the extract same amount of holding CEMEX have, however CEMEX manages to out perform Holderbank in terms of price and capacity and with Lafarge, Italcementi and Blue Circle, its operation cost if far more efficient and effective. Example: – Blue Circle has around stake in 8 Asian companies but its production output is 12.6 tons compared to CEMEX capacity of 25.9 with a stake of 5 Asian companies.

CEMEX 12 months stock data showed it had a 114% returns on its stock investments compared to the 20% average competitors. Among the major 5 companies CEMEX is the second largest cement company in turn of global reach, with 38 countries compared to its top competitor with 58 countries (Prahalad, 2006).

Accounts for the sequence

CEMEX became the third largest cement company in the world. However as the Mexico also started to open its market in the late 80’s, it allowed Holderbank and Lafarge to move in for expansion, faced with a possible threat to its business, CEMEX in turn decided to acquire other companies and boost its production capacity. This made CEMEX the second largest producer of cement in Mexico with seven new plants and 6.6 million tons of capacity. CEMEX entered the U.S market in the late 70’s and by the late 80’s CEMEX acquired a 1 million ton plant in Texas and by 1999 it’s accounted a 12% percent of total sales in the U.S market (Prahalad, 2006).

CEMEX in 1992 brought 68% percent in stocks and had 94% percent voting rights in two of the largest Cement companies in Spain. Expanding in other countries like Chile having 12% stake in Chile’s third largest Company Cementos Bio- Bio and its investments in Philippines, Indonesia, China, Egypt and Latin America (Ghemawat, 2004).

Unlike the other markets it entered before, CEMEX became more selective and it focused at high population and high growth for it to venture.CEMEX also wanted to control at least 25% of the market it invested in, having it dominance on the cement market it decided to be more selective in its investments.

Recommendations

CEMEX should look at focusing on its image, like focusing on global issues and trying to look more of an environmental friendly company, the future lies in CEMEX showing it is concerned and will do what it needs in the fighting global warming. However in terms of expansion, it should still look at investing in developing countries, as the scope of infrastructure will boost their sales in cement, staying away from unstable governments and countries would be a good idea. CEMEX should try holding its stakes in Countries like China, India and developing countries with a good amount of multi national company’s presence. CEMEX should also focus on the countries with good transports facilities which would cut down on their production cost drastically.

The world is getting closer together in term of opening their markets to other companies. CEMEX would benefit in having its presence in as many as possible and it would create a stronger base to its over all operations (Prahalad, 2006). Its accusations and holding stakes in other companies are good tactical move and it should continue doing so. Having its stake or acquiring companies rather then setting up a new one, helps them understand the market and its customer more effectively.

References

Ghemawat, P. (2004). The Globalization of CEMEX. NY: McGraw-Hill.

Prahalad, CK. (2006). The fortune at the bottom of the pyramid. LA: Wharton School Publishing.

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