Internalization theory best explains CEMEX’s FDI Essay
Internalization theory best explains CEMEX’s FDI
1.Which theoretical explanation (or explanations) of FDI best explains CEMEX’s FDI? 1.Internalization theory best explains CEMEX’s FDI because CEMEX entered into many countries and bought domestic cement businesses instead of licensing. CEMEX has a great system and needs to protect it from competitors.
2.What value does CEMEX bring to a host economy? Can you see any potential drawbacks of inward investment by CEMEX in an economy? 1.The value is that CEMEX has a “Midas touch” that transforms a cement business into a thriving business. This brings great stimulation to the host economy and also helps in the construction field, which in turn helps to build cities and civilization. No, CEMEX would do well to invest inwardly, yet, CEMEX is better at acquisitioning businesses.
3.CEMEX has a strong preference for acquisitions over greenfield ventures as an entry mode. Why? 1.Acquisitions are solid because the business in the host economy already knows the demographics and the market. CEMEX just has to make the business better with little research. A greenfield venture would prove risky and not cost effective.
4.Why do you think CEMEX decided to exit Indonesia after failing to gain majority control of Semen Gresik? Why is majority control so important to CEMEX? 1.A licensing is very dangerous. CEMEX only have a 25% push with Semen Gresik. It did not have full control and the methods of CEMEX would be exposed and vulnerable to be stolen. CEMEX has a great system and does not want anyone interfering.
5.Why do you think politicians in Indonesia tried to block CEMEX’s attempt to gain majority control over Semen Gresik? Do you think Indonesia’s best interests were served by limiting CEMEX’s FDI in the country? 1.Indonesian politicians did not like the possibility of CEMEX taking over the cement market. Their interests were in domestic businesses and protecting the “purity” of their economy. No, Indonesia would have benefitted greatly if CEMEX was allowed an in.
6.What is CEMEX doing today? Do they still engage in FDI? 1.“MONTERREY, MEXICO- OCTOBER 8, 2010 – CEMEX (NYSE: CX), announced today that pursuant to the exercise of a put option by Ready Mix USA it will acquire its partner’s interests in the two joint ventures between CEMEX and Ready Mix USA which hav