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More broadly, how can cross-border activities add value in an industry as apparently localized as cement? ***Reduction of standard deviation of quarterly cash flow margins (1994-1997 averaged 7.1% for CEMEX as a whole, compared to 9.5% for Mexico, 12% for Spain, 22% for the U.S., and 30% for Venezuela). ***CEMEX and their competitors have realized many benefits from globalization. The first of these was a reduction on tariffs associated with exporting their product. If the manufacturer has a localized facility, they do not have to pay export tariffs on the delivery of cement. Next, transportation costs are very expensive for cement. Tariffs aside, shipping or trucking cement long distances will erode margins or demand higher prices for a given manufacturers product. Both eat at the profitability of the business. Additionally, localized plants should reduce the time it takes to deliver the cement to a customer. This is should be a positive for customer s in a pinch with no options. The cement company who is able to provide cement the fastest may win some jobs for this reason alone. Finally, the cement manufacturers should have see a stabilization in revenues due to diversification. GDP is strongly linked to cement sales, so a reduction/expansion in GDP for a given country will lead to volatile sales revenues. Globalization should balance out fluctuations assuming there isn t a global recession. It would not matter where cement manufacturers set up shop in the event of a global recession. Reduced GDP would result in a reduction in sales volumes. ***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
the company founded Cemtec that was supposed to develop CEMEX s software and hardware installation. In the 1970 s. The Malaysian electronic industry started under the country s import-substitution based policy in the 1960 s. Hobday uses the definition by which the product or process is new to the firm rather than to the world (Nelson and Rosenberg. serve and control its operations very efficiently (Bartlett.channel which is already organized by formers. 1987). Cemtec had huge success and a diversified customer base so it spun off from CEMEX (Helft Miami. product manufacturing. Most of the R & D. How has CEMEX managed to outperform its leading global competitors in the cement industry? Please focus on comparing CEMEX with Holderbank. technological innovation occur in those countries. CEMEX also provided its employees with a lot of training programs and even developed a virtual MBA program. TNC entered the market and took benefit from the low labor costs and the special tax-free Pioneer Status (Hobday. 2000). 2010). That promoted a healthy competition between plants and managers. CEMEX net was the company s private network that transferred data about production and sales on daily basis. Nevertheless. By 2000. The development patterns of electronic TNC s as described by Hobday follow the innovation process. The information flows were up and downwards but also sideways. During the 1980 s. 1993). What do this comparison and the other data in Exhibits 4-8 suggest about the competitive game being played out among the major international competitors? ***CEMEX s growth was obtain thanks to successful acquisitions. Ghoshal and Beamish. product design. new export-led policies helped with the development of the country. There were mainly based on production process improvements and extensive process engineering in order to achieve efficiency gains. From the moment Zambrano became CEO. The heavy investments in IT ( 1% of it sales in 1999) gave CEMEX the opportunity to plan. The main reason for the slow transfer of capabilities was that the local plants did not have the capabilities to absorb them (Hobday. 2000). 2008). 2000). but also good in the production of ready-mix concrete and aggregates. which is the other large competitor focused principally on cement. We consider that TNC s should have send more staff locally and introduced training programs for the local managers to achieve quicker efficiency gains ***CEMEX has always been a first mover in technological innovation. . CEMEX invested in a satellite system to connect the different plants. In 1992. sales and marketing were still done in the TNCs home countries because of their higher skilled labor and the majority of their customers being there. The electronic industry grew very quickly over the following years and electronics represented the majority of exports (Hobday. Production of cement is its core competency. He was convinced that a good information system could increase productivity. the Mexican economy was also based on ISI. The TNC s established in South-East Asian countries focused mainly on the manufacturing part of the production (assembly. That helped CEMEX to acquire competitors on its home market and export its product (mainly to the US) in the early stages of its development. The underlying success factors must be compared to the growth strategy of TNC s established in South and South-East Asia. Although the strict definition of innovation is the successful introduction of a new or improved product (or process) to the marketplace (Dorfman. Because Mexico had very poor telecommunication systems. he invested a lot in Information Technology (IT). ).
Sevilla. This permitted it to export surplus production to places such as the Caribbean islands and the southern United States. Highest EBITDA per ton than any other country. Old. $60 per ton.Began trade. Vencemos was able to keep capacity utilization high even when domestic demand was low because it was located near a major port facility. from $1 million tons to $4 million tons.Attractiveness profile and transaction feasibility (Exhibit 12). The exception is Venezuela. and a 94% interest in Inversiones Samper.Colombia accounted for 3-4% of CEMEX s revenues and EBITDA . Venezuela Strategy to access Caribbean Basin. This translated to higher production in Indonesia. ***To conclude. the company s CEO for more than 20 years now. we could say that CEMEX developed thanks to efficient integration of acquisitions. What accounts for the sequence in which CEMEX entered foreign markets? Entered one market in each region to serve as a hub for expansion into that region. 1998 . whereas the main growth factors of TNC s in South and South-East Asia were low labour costs that attracted FDI. for $400 million. which had a negative trend % but was a strategic move to enter the Caribbean Basin. Gave CEMEX significant capacity in a major market for Holderbank and Lafarge. 1999 . high production costs. for $300 million. Despite having negative growth. They held 40% of the market.Acquired two factories Valenciana and Sanson. We also tend to think that CEMEX s growth is also largely the work of Mr. How do the markets it has entered recently compare with the markets that it entered early on? . the third-largest producer. Although the Venezuelan economy had continued to disappoint. Raised its international profile. Panama Texas Colombia 54% interest subsequently increased in Cementos Diamante. profitability was very high.Helped CEMEX weather the Mexican peso crisis. More potential targets. Spain 1991 . Colombia s second-largest cement producer. 1994-1995 . Lowered dependence on the Mexican market. .The trend growth percentage is increasingly high in the markets it chose to enter. Zambrano. 1992 . Study the European market.Its ability to brand these products is a valuable asset and a sustained competitive advantage.Sold one of their factories.
India.77% stake in Assiut Cement Company. especially since they speak Spanish. Significant long run potential due to larger population. CEMEX should keep its eye on China even though the cement was produced via obsolete kilns by authorities.14% in Semen Gresik. CEMEX should look at other emerging Latin American markets with growing with growing populations. Egypt 1999 . 3 times that of the Philippines. Indonesia s largest cement company 2000. They also had its eyes on China. Even though there are some barriers to entry CEMEX should keep its eye on Brazil as well. Export commitments fulfilled through Bangladesh. the Caribbean and Sub-Saharan Africa. and Brazil. Spain. Brazil How do the markets it entered recently compare with the markets it entered early on? What recommendations would you make to CEMEX management for their global strategy for the next 3-5 years? In particular. Spanish is a major language which is also taught in the schools as this will help entry into the country. Lastly the Middle East. India is another tremendous area of growth and many competitors also recognize this. Went from 1 million metric tons in Spain for 4 million metric tons in Indonesia. India. The FDI strategy is supposed to be good for CEMEX because of the cement s specialty that we ve already told before. Brazil s population is nearly 191 million and even though the main language is Portuguese. especially Dubai and the Arab Emirates should be on CEMEX s radar due to the growth of these areas due to its oil riches and recent growth. and other regions in the text. the largest cement producer in Egypt Demand growth 11%. what kinds of countries they should focus on? ***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. However. Central America. but Assiut was only had 17% of the market share. As the text stated CEMEX should continue to focus on developing Asian economies. Latin America. ***CEMEX has expanded a cement business to the United States. However these areas should be carefully studied due to the political environment. . CEMEX had increased its stake to 25% Strategic for higher long-term growth.Philippines 1997-1999 Indonesia 1998 . Chile Costa Rica Expansion into China. China s had tremendous growth and ever changing political environment. CEMEX should aim to get a foothold in this market as it will continue to grow and its restructuring process was more advanced than China s. Strategic for expansion into Asian region.
India. The estimated cost of acquisition for a cement multinational is much lower than building a new plant. but it s supposed that they re focusing the language as much as population and population growth as the text says. and Brazil are supposed to be enormous market as well and so does our team. That can solve the language problem. they should focus China and India market the next. The specific country is Brazil. If they ve satisfied with merging that kinds of company which is mentioned before. And the other place is Middle East that many Korean construction companies have already participated in. they can afford to get into Chinese and Indian market. many people study Spanish and English nowadays. But it s too enough. our team conclusion is that CEMEX s main target is the company based upon English and Spanish speaking country considering population as well. But They Haven t invested yet and they have merged English company. And they ve already had a company located in Australia. They should hire Chinese and Indian people who can speak English to get into the China and India market. There have much political risks even though take place some wars but demands for construction is very high. The rationale behind this was that this strategy is cost effective and time saving. By doing it. Even without that concept. and Rinker group located on Australia which is getting sales of 80% at the United States so far from on the internet. Dubai and United Arab Emirates for instance. And they ve merged many company based upon Spanish and English speaking country. Of course they should consider other concerns. Competitive Profile: how does the company match up against its competitors. We don t know about inner thought of CEMEX. Brazil has already mentioned in the text. Greenfield Cemex chose to enter foreign markets through acquisition rather than starting up Greenfield operation. So The last suggestion of us is Middle East. So in those ideas. and they re not focusing political risks because they ve already invested many countries that have political risks including Mexico. CEMEX has reliable concepts about expansion processes. There re many Chinese and Indian who can speak English very well in Australia because Australia is famous for multiracial country.And they have acquired RMC which is located on the United Kingdom and third largest cement industry in Europe in 2005. . Aquisition vs. And even though Brazil s mother tongue is local Portugal. So we ve suspected that it s supposed to be big concern that language problems about Chinese and Indian. That country s population is nearly 191 millions. Most impressive thing is a country had to have a large population and high population growth. Production and distribution systems are already in place and they are also acquiring the local management know-how which is both time efficient and cost effective way of entering a new market. China. Mexico people use Spanish and CEMEX may also use English internationally.
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