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CEMEX Globalization The CEMEX Way Case Solution
CEMEX S.A.B de C.V happens to be the world's second-largest building materials company. Founded in 1906 (Cemex, 2019), the Mexico based company is a multinational corporation with a presence in over 50 countries. The company produces and sells cement, ready-mix concrete and aggregates all over the globe and hires over 42,000 employees (Forbes, 2019). Originating from a developing country, Cemex has grown to become a giant in the world of building materials through strategic planning, efficient utilization of its resources, as well as timely and well-executed acquisitions. Cemex is a story of success in terms of breaking into the global market place and dealing with challenges head-on while playing on ones' strengths.
Following questions are answered in this case study solution
Selecting the target
The Cemex Way
Use of technology and innovation
Culture and Cemex
Case Analysis for CEMEX Globalization The CEMEX Way
Despite being in the business for over a century, the firm’s globalization efforts a more recent phenomenon. Its first major move out of the domestic market was back in 1992, the year it acquired a majority share in two Spanish companies (Lessard & Reavis, 2016). Yet, the organization’s moves into the global market have been calculated and premediated. This is part of the reason why Cemex has been triumphant time and again at merging companies from all around the world and bringing them under its wing.
2. Pre-emptive planning
Cemex is an exception in that it proves that entering into foreign markets and establishing a strong multinational presence is not reserved to companies belonging to developed countries. Cemex is an emerging-market multinational (EMNE), one that has been able to translate domestic accomplishments onto a global scale (Lessard & Lucea, Mexican multinationals: Insights from Cemex, 2009). Even though many firms start with a strong position at home they are not able to achieve the same results in a foreign country. There are many reasons as to why that might happen. In Cemex's case, the plans to go global were well thought out. The company, before starting the process of acquisition, went and took the opposite route and divested some of its business interests. Divesture sounds counter-intuitive for a company looking to expand, but it is the perfect way to bring the focus back to an organization's core business and competencies (Mankins, Harding, & Weddigen, 2008). That is exactly what the management at Cemex did. It did reduce diversification in terms of the products the company had to offer, in favour of the geographical diversification it achieved when it completed the take-over of two Spanish cement producing companies in 1992.
Reducing diversification could have hurt the company, especially if the economies it had been operating in had experienced an economic down-turn, as demand for cement is highly correlated to economic growth (since the demand for housing is so sensitive to economic conditions), but that was not the case. Spain was experiencing favourable economic conditions due to its entry into the EU (European Union).
3. Selecting the target
Cemex’s take-over bids have also been well-selected. The initial takeover of the Spanish companies proved to be extremely fruitful. The economy was just taking -off, which meant demand for cement was going to go up. The company was also able to receive favourable credit terms. Finally, the move meant that the company had broken into Europe and it could compete with Holcim, its Swiss rival, more effectively. Having no language barriers and a similar cultural also assisted the integration effort.
This move could have backfired as the Spanish economy peaked in the first quarter of 1992 and entered a recession in the third quarter ( Díaz, 2002). Cemex. However, persevered.
4. The Cemex Way
The most unique feature of the acquisitions that Cemex followed through with has been the implementation of the Post Merger Implementation (PMI) in a way that has been beneficial for Cemex. The company learned many important lessons with its first acquisition. Cemex already had a winning formula at home and when that was replicated in the Spanish companies the results were extraordinary. Having streamlined its operations had made Cemex extremely efficient. The most telling part of the merger was that the implementation was not one-sided. Not only were the best practices in the Mexico plant copied in the Spanish plants, but many important improvements were made in Mexico based on the strong points present in the Spanish companies. This way Cemex has not only been able to acquire physical assets, but also the knowledge and intellect that comes with observing the business practices in another company.
Management at Cemex was very conscious of these efforts and formalized the entire process of acquisition (Stewart, 2015). Teams consisting of middle-level managers from different facilities are selected to work upon PMI once a new acquisition is completed. This is done not only to bring the new company into the Cemex fold and ease the transition but also ensure that the process of learning does not stop. The organization culture is flexible enough and driven by the motivation to learn and evolve. Once managers identify practices that need to be changed and become in line with the Cemex’s operations all around the world, the appropriate changes are made. Similarly, practices which are identified as being much better in the acquired company are introduced within the organization’s structure. Be it related to the production, human resources, distribution, marketing, basically any area where the company can improve upon further.
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