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The Globalization of CEMEX Case Solution

Solution Id Length Case Author Case Publisher
966 1217 Words (4 Pages) Pankaj Ghemawat, Jamie L. Matthews Harvard Business School : 701017
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Globalization helped CEMEX to reduce its operational cost and enhanced the speed at which the company was integrating by acquiring new businesses. It has also facilitated the company in inculcating a commonly shared culture for achieving its goals in organizational facilities around the globe. The strong culture helps to instill an innovative and creative environment into the organization and maintains the company’s competitiveness. The combined effect of innovative technology, culture and employees with various backgrounds facilitates the company in removing hurdles created by globalization. Globalization has provided lucrative opportunities, but has also increased the level of competition. The strategy devised by the company to earn profits, exploit opportunities and remove hurdles created by globalization, is commendable. Globalization has increased the scale of operations for CEMEX, enhancing its mobility and flexibility. The company can use a larger platform to mobilize its human and various kinds of resources to grab opportunities available in other areas.  

Following questions are answered in this case study solution

  1. What benefits have CEMEX and other global competitors in cement derived from globalization? More broadly, how can cross border activities add value in an industry as apparently localized as cement?

  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 other data in Exhibits 4-8 suggest about competitive game being played out among the major international competitors?

  3. What accounts for the sequence in which CEMEX entered foreign markets? How do the markets it has entered recently compare with the markets that it entered early on?

  4. 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?

Case Analysis for The Globalization of CEMEX

Product development enables the company to employ market penetration or market development strategy. A new lucrative market means a new source of revenue, which enables the company to grow rapidly. CEMEX used its existing product line and delivered it to customers around the globe.

CEMEX has increased its production capacity to satisfy the needs of customers present in other areas. Even with increased capacity, CEMEX has to run its production facilities 24/7 to fulfill its customer demands. This suggests that the company is using its resources optimally to exploit opportunities presented by globalization. The phenomenon has contributed to the development of the whole industry including CEMEX, as it has enabled the entire industry to deliver its products in markets, which were previously inaccessible due to trade sanctions.

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 other data in Exhibits 4-8 suggest about competitive game being played out among the major international competitors?

The increased competition nurtured by globalization compels the company to review and evaluate its strategies with an aggressive and practical approach. It is quite obvious from the performance indicators of CEMEX that it is planning and implementing strategies effectively to deal with competition. Performance indicators show that the company has been transforming unpleasant situations into lucrative opportunities by finding the loopholes present in these situations. CEMEX has made this strategy applicable to cross border operations, making them efficient and profitable. The results of this strategy gave higher than expected returns and also attracted other industries to employ this strategy in order to achieve their goals of profitability and stability in foreign markets.

Comparison of the top 3 companies suggests that when it comes to capacity share in various countries, CEMEX always comes in the top two. For instance, in Venezuela, CEMEX’s capacity is 40.6%, whereas that of the other two competitors is 24.5% (Holderbank) and 23.6%. CEMEX has outnumbered its major competitor in terms of capacity and value per ton:

 

Capacity m Ton

Value/Ton ($)

Stake Price ($)

CEMEX

25.9 (12.12% higher)

109 (1.87% higher)

811 (87.30% higher)

Holderbank

23.1

107

433

 

CEMEX has a 12.12 percent higher capacity as compared to Holdebank and has a slightly higher value per ton i.e. 1.87 percent. Its stake price is much higher at $811, which is 87.30 percent higher than Holderbank’s $433.

CEMEX comes third in terms of revenue in the global market, but the production efficiency suggests that while the company’s performance has been excellent, it needs to focus on the marketing aspect.

To improve operations, the company has been employing an effective risk diversification strategy. It has reduced its cost of production by using cheap but acceptable quality resources. The company has saved itself from bearing foreign debt by employing this strategy. It has gained a competitive edge by utilizing and benefiting from economies of scale, supply chain management, technology and creative/innovative culture. Hence, these factors have facilitated CEMEX in diversifying the risk of operating in foreign markets.

What accounts for the sequence in which CEMEX entered foreign markets? How do the markets it has entered recently compare with the markets that it entered early on?

Globalization made the consumers/customers aware that cement can be imported from foreign markets at much cheaper rates. This increased the demand of cement in the foreign markets. CEMEX, which was not a pro-export company back then, started getting orders from foreign customers. This gained the attention of managers. The demand for CEMEX’s cement was so high that it had to increase the scale of production and operations to satisfy foreign demands. Keeping in view that its domestic market should not get affected, the company devised a strategy that would enable it to maintain the current customer base, and at the same time satisfy new foreign customers.

The process of internalization was successfully and quickly completed by CEMEX. The company kept the growth rate of human resource development steady. This enabled its managers to handle risks related to foreign markets. Their managers effectively diversified and mitigated the risk that came along with foreign market opportunities.

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