CEMEX Case Essay
1. Explain the benefits that CEMEX and the other global competitors in cement have derived from globalization – how can cross-border activities add value in an industry as apparently localized as cement? CEMEX had just exported cement to the United States in low prices than Mexico. After time goes by, The United States’ producers had banded together to lodge an antidumping petition to protect their industry from Mexico’s dumping prices. After all, the U.S. International Trade Commission (ITC) imposed a countervailing duty on CEMEX’s exports from Mexico to the United States. After that, CEMEX started to focus on globalization especially Foreign Direct Investment (FDI). So they acquired The United States’ cement plant in Texas. This was the start to focus on cross-border activities. And it has given many benefits to them. The one of the reasons was avoiding traffic barriers. On the other side, 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. And another one, 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. The last one is that 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. What recommendations would you make to CEMEX regarding its globalization strategy going forward? In particular, what kinds of countries should it focus its future expansion on? CEMEX has expanded a cement business to the United States, Spain, Latin America, and other regions in the text. They also had its eyes on China, India, and Brazil. The FDI strategy is supposed to be good for CEMEX because of the cement’s specialty that we’ve already told before. And they have acquired RMC which is located on the United Kingdom and third largest cement industry in Europe in 2005, and Rinker group located on Australia which is getting sales of 80% at the United States so far from on the internet. CEMEX has reliable concepts about expansion processes. Most impressive thing is a country had to have a large population and high population growth.
Even without that concept, China, India, and Brazil are supposed to be enormous market as well and so does our team. But They Haven’t invested yet and they have merged English company. So we’ve suspected that it’s supposed to be big concern that language problems about Chinese and Indian. Mexico people use Spanish and CEMEX may also use English internationally. And they’ve merged many company based upon Spanish and English speaking country. We don’t know about inner thought of CEMEX, but it’s supposed that they’re focusing the language as much as population and population growth as the text says, and they’re not focusing political risks because they’ve already invested many countries that have political risks including Mexico. So in those ideas, our team conclusion is that CEMEX’s main target is the company based upon English and Spanish speaking country considering population as well. The specific country is Brazil. Brazil has already mentioned in the text.
That country’s population is nearly 191 millions. And even though Brazil’s mother tongue is local Portugal, many people study Spanish and English nowadays. But it’s too enough. If they’ve satisfied with merging that kinds of company which is mentioned before, they should focus China and India market the next. They should hire Chinese and Indian people who can speak English to get into the China and India market. That can solve the language problem. And they’ve already had a company located in Australia. There’re many Chinese and Indian who can speak English very well in Australia because Australia is famous for multiracial country. By doing it, they can afford to get into Chinese and Indian market. Of course they should consider other concerns.
And the other place is Middle East that many Korean construction companies have already participated in. There have much political risks even though take place some wars but demands for construction is very high. Dubai and United Arab Emirates for instance. So The last suggestion of us is Middle East.
2. What accounts for the sequence in which CEMEX entered foreign markets? How do the markets CEMEX entered more recently compare with the markets it entered early on?
3. What recommendations would you make to CEMEX regarding its globalization strategy going forward? In particular, what kind of countries should it focus its future expansion on and why? CEMEX expansion is a process where the company performs its due diligence and the aim of expanding into a country with a large population and high population growth. I thought CEMEX should continue to focus on Asian and Africa market. These two areas can help CEMEX become stronger than before. Expecially three countries: CHINA, INDIA and brazil
Subject: United Kingdom,
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 31 October 2016
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