The Globalization of

CEMEX
Case Analysis – International Business

Submitted by:
Group 4
Pooja Sharma (PGP/16/036)
Preetinder Verma
(PGP/16/066)
Palak Bansal (PGP/16/097)
Umakanta Sahu
(PGP/16/294)
Shagun (PGP/16/344)
Alban JOST (IE/16/001)
PGP/16/036 POOJA SHARMA

PGP/16/036 POOJA SHARMA

What benefits CEMEX and other global competitors in cement have derived from globalization?
How can cross-border activities add value in an industry as localized as cement?

Following are the benefits that a Cement manufacturer can derive as part of its globalization
strategy:-
 Mitigation of risk: - The adverse impact of business cycles in one country can be
compensated by the globalization strategy. As mentioned in the case that CEMEX was
able to counter anti-dumping duties in US and peso crisis in home country due to its
international expansion efforts.
 Access to local resources and capital accumulation: - Globalization provides access to
cheap raw materials, labour and also opportunities for capital accumulation. From the
case its clear that after CEMEX used Sevilla plant to its maximum capacity which
resulted in its depreciation beyond repair, it could sell the same and accumulate relevant
capital for further investments.
 No Local Adaptation: - Cement is a product that doesn’t require local adaptations. So
CEMEX and its competitors could rely on their manufacturing, operations and
management expertise in this field around the globe in the business.
 Market Share: - The major six competitors expanded into new markets. Individually
each of them had major share in one or two countries e.g. Holderbank had major share
Phillipines (37.5%), Argentina (37.6%) and South Africa (36.3%) whereas CEMEX had
in Venezuela and Indonesia.
 Plant operational efficiency: - Globalization provides the route to export of surplus
production. Also the underutilized capacity can be explored when there is a market for
sale. Because of international expansion CEMEX has been able to have EBITDA to sales
ratio higher by 10-15% as compared to its competitors.
 Better Management and Organizational Practices: - Given the exposure to diverse
markets and the need to adapt to the local management environment, organizations with
international strategy develop better and globally accepted management practices and
business models. This enhances the management experience and skills.
Cross border activities will add value to an industry like Cement on following grounds:-
 Economies of Scale: - Given the access to local supplies, local markets and increased
MES as a result of global expansion CEMEX and its competitors have been able to
become world’s largest cement producers. As from case facts, its clear that CEMEX was
able to get 12% of its sales and 7% of its EBITDA from its US plants and increased share
of capacity in Asia from less than 20% to 60% when Asian crisis was over in 1997.
 New Customer Segments: - Because of proliferation in markets with diversified needs it
is possible that new customer segments would emerge as a result of political or economic
fluctuations. As it happened during Peso crisis which led to discovery of distinct
customer segments involved informal construction that demanded bagged cement. Also t
 for developing SE Asian markets it was not only big enterprises but also the SMBs and
home construction market that provided for different customer segments.
 Research and Development: - The cheaper raw materials, labor resources and
challenges to leverage the opportunities in new markets push companies for investments
in R&D efforts. It also opens the doors for price arbitrage due to information availability
about local markets situation in multiple countries. Also it provides for the way to divert
away the low priced imports from home market.

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?

1) CEMEX should establish a globalized culture. Currently, they are facing issues with
communication across regions, as language and cultural barriers exist. E.g. there have
been concerns CEMEX entering into Egypt and Indonesia. They should decide upon an
official language of communication, mostly English so that that would be easier for
global cultural expansion.
2) Global presence of CEMEX is very low in comparison to its competitors. They should
continue their strategy of expansion through global mergers and acquisitions. This is
due to the fact that the cement industry is gaining momentum in terms of industry
consolidation. Lafarge had tried to acquire Blue Circle which has presence in 14
countries.
3) CEMEX has presence only in 15 countries. So to avoid the possibility of hostile takeover,
its focus should be on entering new markets that will help the company expanding its
global presence and increase market share. This will also help in building a global
brand image.
4) Invest in R & D and quality initiatives for product differentiation, improving processes,
and reducing costs.
5) Continue to use IT to leverage sales and operations capabilities, to reduce cost and make
efficient supply chain management.
6) BRICS countries have a higher market potential for CEMEX, as it has almost zero
presence in these countries; but the EBITDA pattern is not very good in these countries
for cement industry. This may be due to the reason that the quality of cement production
in China is not up to the mark. As no data is given for other developing countries we can
assume the same scenario in other developing countries. So CEMEX can invest in
technological advancements for developing higher quality cements that may increase the
EBITDA ratio.
7) Before entering a country, CEMEX should consider the following parameters.
 a. EBITDA
b. Cultural barriers
c. Geographical factors such as length of coastline
d. Climatic conditions such as amount of rainfall received
e. Stability: in terms of political
f. Macroeconomic environment
g. Existing Competitors

Countries and Regions to focus on

1) Target China as 75% of Chinese production is done in small, technologically obsolete
kilns
2) They should focus on emerging markets particularly BRICS nations and countries with
higher GDP because cement demand is correlated with high GDPs.
3) Focus on countries with high growth Korea(5%), India (7.5%) Thailand (8%) Phillipines
(7.8%), Malaysia (7.5%), Poland (5%), Turkey (6.5%), Brazil (5%)