1. CEMEX Case Submitted To: Shadat Khan (STN) MGT 372 Section - 4
Submitted By:
Group members
1. Farhan Jamil Hossain
2. Rehanur Rahman
3. Khandakar Saadman Saad
4. Sifat Binte Islam
5. Shah M Jakaria
6. Md Rahat Khan

2. 1. What are the global potential of the cement and white goods industries?

3. Global Industry Analysis
Market
Drivers
Similarity of customer needs & tastes
Existence of global customers
Similarity of distribution channels
Transferability of marketing know-how
Differences in cost across countries
Potential for economies of scale/scope
Potential for learning
Transportation costs
Forces favoring global integration/
local responsiveness
Cost
Drivers
Government
Drivers
Existence of trade barriers
Similarity of technical standards
Similarity of regulations
Differences in taxes
Globalization of competitors
Industry concentration
Differences in industry
concentration across countries
Feasibility of protecting intangibles
Competitive
Drivers
Adapted from: G. S. Yip, “Global Strategy… in a World of Nations?” Sloan Management Review 31(1) (Fall 1989), pp

4. Global Industry Concentration (late 1990s, 2000)
Top 5 share of global production
Entertainment
71%
Carbonated Soft Drinks
70%
Light Bulbs
68%
Computer Software
59%
Computer Hardware
Aerospace/ Defense
55%
Automobiles
53%
Semiconductors
40%
Cement
19%
Source: Ghemawat and Ghadar, 2006, p. 600

5. 2. What accounts for Cemex’s success to date?

6. What accounts for Cemex’s success to date?
Ownership: it has succeeded in creating intangibles that are different from the traditional ones (R&D/ marketing), which create a rationale for its global strategy
Location: given high transportation costs, it has to be present in different locations to exploit these advantages; that presence also allows it to arbitrage differences in financing costs across countries
Internalization: almost impossible to exploit its advantages, especially O advantages, through arm’s length contracts
CEMEX and the other global competitors are handling cement which is bulky and heavy. So one of the big concerns is transportation cost. If they export the cement, they should pay enormous transportation costs. And it also should be involved in cost which is paid by customer. Therefore, they will lose their price competitiveness or margin by reducing the cost. So reducing the transportation costs is the one of the reasons to do FDI.
They could also save the time to deliver by placing the plants in each country. Especially in case of the CEMEX, they’re even using satellites to link dispatchers, truckers, and customers in a system so that utilizing delivery system. So they guarantee delivery within 20 minutes as well. This is also the reason they do FDI.
Cement industry is very sensitive to GDP growth, interest rates, and other macroeconomic factors, and etcetera. They’re not only concentrating on their home country, but also doing FDI to reduce the risks by diversification to get stable revenues as well.
Cement plants have to be closed to areas where there is limestone. And it is difficult to find suitable place for limestone and construct plants especially in foreign country by Greenfield investment which is everything new. So it is easier to find that place by acquiring cement plants. And it also gives benefits on distribution channel which is already organized by formers.

7. Recent Acquisitions by Cemex
2000 acquired Southdown (US), 2nd largest cement manufacturer in US, for $2.9 billion
2001 acquired Saraburi Cement (Thailand), for $73 million
2002 acquired Puerto Rican Cement Company for $281 million
2004 acquired RMC Group (UK), one of Europe’s largest cement producers and world’s largest supplier of ready-mix concrete, for $5.8 billion
2006 sold its 25.5% stake in Semen Gresik (Indonesia)
2006 acquired Rinker Group (Australia), a major seller of construction materials with 85% of its business in the US, for nearly $12 billion (27% premium) in largest deal ever concluded in the cement industry

8. The Evolution of Cemex 1985 2005 Sales (US$ billions) 0.276 15.5
EBITDA
0.084
3.6
Mexico
100%
33%
Total Assets
0.791
26.5
Market Capitalization
0.103
19.0
Installed Capacity (m tons)
10.7 97
Employees
6,358
52,741
Countries 1 50

9. CORE COMPETENCIES OF CEMEX
CONTINUOUS IMPROVEMENT AND INNOVATION
CUSTOMER FOCUS
TECHNOLOGY-BASED SOLUTIONS
LOW-COST PRODUCTION
CORE COMPETENCIES OF CEMEX
The success stems from their distinctive approach to business. For the company, cement is a solution that can make a real difference in people’s lives; it bridges barriers, connects communities, and forms a foundation for national development.
CONTINUOUS IMPROVEMENT AND INNOVATION
One of the attributes that sets them apart is their passion for change; they always keep improving to stay at the forefront of the industry. Through novel initiatives such as our ATM-like, 24-hour cement dispatch system, they capitalize on their market knowledge, resourcefulness, and agility to deliver efficient customer solutions that fundamentally change them from their competitors.
CUSTOMER FOCUS
CEMEX put their customers first. Because proximity, product quality, and availability are important to their customers, they have aligned their commercial networks to serve their needs. Their Construrama distributor network has grown into the largest construction materials chain in Latin America, with more than 2,100 Construrama-brand retail outlets across Mexico. Among other benefits, Construrama offers their customers uniform product quality, reliable client service, and convenience. Their customers have ready access to local Construrama suppliers that carry more than 500 different building products at affordable prices.
TECHNOLOGY-BASED SOLUTIONS
They use technology to leverage the collective knowledge of their people and to operate successfully in widely different markets and economies. Their IT platform and standardized processes enable them to identify and share best practices across our global operations network and to extract value from integrated acquisitions—simply and systematically. Their exchange of knowledge is evident across their U.S. operations network. Taken together, their many initiatives have enabled them to enhance their customer fulfillment; increase their operating productivity, efficiency, and safety; and consolidate their brand nationwide.
LOW-COST PRODUCTION
They have established an exceptional record of low-cost leadership over the last 15 years. Perhaps nothing better exemplifies their unrelenting drive to control costs than their energy management strategy. By taking advantage of the flexibility in the cement manufacturing process to consume different types of energy, they have developed a diversified fuel structure in which almost 80% of their total fuel cost is based on sources with low price volatility. For instance, in Mexico they have converted all 15 of their cement plants to theme at least few sources of energy, including petroleum coke, fuel oil, alternative fuels, and natural gas. As a result, their Mexican operations were able to reduce their fuel cost by 40% over the years.

10. Post Merger Integration (PMI)
Post Merger Integration (PMI) that is put in place after each acquisition.
Extensively leverage on technology (ready-mix concrete trucks became equipped with computers on board. This allowed for central tracking by global-positioning satellite systems, and precise planning of cement delivery schedules. Technology has allowed CEMEX to be one of the lowest cost producers anywhere in the world The technological backbone also allowed CEMEX to specialize in markets that lack highly developed road systems or solid telephone networks, and where competing becomes a matter of showing customers that you can save them from uncertainty. What CEMEX did was adapting global technology to the developing world’s almost limitless range of local problems

11. The Cemex way
Identify and disseminate best practices, standardize our business processes
Common management principles and systems to the entire organization
All managers to “speak the same language” when discussing business issues
Implementation of knowledge and experiences gathered over many years of doing business in various countries
The CEMEX Way specifies everything, down to the maker of computers employees must use
Mutual learning across subsidiaries
Post Merger Integration (PMI) that is put in place after each acquisition

12. 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?
Acquisition of Mexican Cement Company to enter the market and then the acquisition of the second-largest cement producer in Mexico made CEMEX the largest cement producer in Mexico, while Holderbank viewed Mexico as a possible market for expansion.
After imposing duty on importing cements from Mexico by the US government, CEMEX acquired a 1 million cement plant in Texas to reinforce its ready-mix and distribution facilities in the southern US. In addition, CEMEX’s coastal terminals in the US continued to import cement in the US, from third parties as well as the company’s other plants. Whereas Holderbank was concentrating in the European market.
Then CEMEX entered Spain and acquired more than 50% of shares in two largest Spanish cement company. This made an entry to the European market which was previously dominated by Holderbank.
As a result of all this, CEMEX became the largest international cement trader in the world by 2000.

13. Attractiveness profile and transaction feasibility
3)Q. What accounts for the sequence in which CEMEX entered foreign market? How do the markets it has entered recently compare with the market that it entered early on?
Accounts for sequence to enter foreign market:
Cultural
Administrative
Geographic
Economic
Attractiveness profile and transaction feasibility
More potential targets

14. Entered recently compare with the markets that it entered early on
The trend growth percentage is increasingly high in the markets it chose to enter.

15. CEMEX has been very successful in its globalization strategy
Expansion Process of CEMEX
1. Opportunity identification: Potential market
Efficient in production
Political risk
Rule & regulation
Tax benefits
Flexible operation
2. Due diligence: Select the target market & company
Form a team of experts (usually 10 people)
Send the team on the target company for research
Published a standardized report based on analysis
Top executives will take decision
report

16. Post merger integration (PMI): Form PMI team Improving the efficiency of new operation Adapt CEMEX`s standards & culture
Over acquisition can cause problems 1. Corporate indigestion 2. Over-leveraging 3. Integration difficulties 4. Cultural misfits Recommendation : They should continue with this globalization process, they are analyzing the market properly, rather than planting the flag. They are getting successful & they have got strong management system to overcome the problem factors.

17. Countries they should focus in the future are:
Japan
Taiwan
India
Portugal
Brazil

18. THANK YOU