CEMEX’s

Internationalization Strategy
Akshay (315) | Sakshi (472)| Shashi (478) | Suramya (483) | Vatsal (306)| Vishal (308)
 Globalization of CEMEX
International strategy must involve the decision to choose the
type of investment to be made: Greenfield/ Brownfield.
CEMEX foreign investments focused on acquiring existing capacity
instead of building “greenfield” plants.

Risks associated with the Greenfield investments:

- Huge costs involved in constructing new facilities.
- Additional problems that come with building from scratch are local labour, regulations, political scenario, etc.

- Cemex opted for brownfield investments to reduce industrial

Risks involved with opting for Brownfield
investments:
- Locational constraints
- Scalability and expansion issues
concentration in the host countries and thus, increase the market
capacity.
- Acquisitions not only helped Cemex to exercise sufficient control
over the purchased establishments but also allowed to gain
competitive advantage over competitors in the host market.

- Immediate access to foreign markets.

- Processes were streamlined, systems were harmonized for its

foreign operations with the Mexican ones.
 Financing risk & Mitigation measures

• Cost of capital was a major issue for Mexican companies

• To fund operations in other countries, Cemex can now raise
funds at a cheaper rate due to less volatility
• Spain operations is a good example
With ownership, also
Investing in brownfield comes the debt
projects require premium responsibility. Leverage
payment ratios become high
International
Expansion entails
heavy cost Cemex partnered with AIG and a PE firm to set up a fund
Heavy modernisation Cement industry is an to invest in cement asset acquired in Asia
cost to upgrade the asset heavy business.
plants

The EBITDA margins are improving year on
year. Plus, the free cash flows is highest
among competitors. With expansion into
developing & developed economies, cash
flows may stabilize
•The standard deviation of quarterly cash flow margins
averaged when Cemex Internationalized
•Global expansion works as a Portfolio theory where one
can eliminate unsystematic risks

3
 International Trade Laws and Tariffs
Legal Risk
Cemex’s international strategy
consists of identifying countries
and then companies for
acquisitions through
opportunity identification and
due diligence. After acquisitions
Cemex moves very quickly to
transform the country and the
market through post merger
integration. Cemex’s strategy
to thoroughly examine an
opportunity in depth and then
moving quickly for acquisition
and restructuring is a very
sustainable and successful
approach
There can be instances when local
competition colludes and
pressurizes the government to
increase tariffs. Cemex’s FDI
approach circumvents this hurdle
Labor Laws
Existing labor and union laws
might be a roadblock towards
its post merger integration but
Cemex’s in depth study of
acquisitions giving great
attention to detail allows them
to foresee any issue
Political Instability
There might be laws that limit FDI
which would force international orgs
to collude with local players. The
losses due to the sudden change in
such laws will be hedged by its
investment in multiple countries

Political risks
Political risk - probability of disruption
of the operations of CEMEX by political
forces and events in host country or
target country
1. Trade Sanctions – CEMEX began its
internationalization in US and Spain
CEMEX by installed a distribution
channel to trade cement produced in
Mexico . This is subject to trade
sanctions between the target country
and Mexico due to any domestic or
international political upheaval.
2. Political unrest and violence – The
target countries of CEMEX spread
across different continents which will
have different political scenario that
might change over time. Such cases can
hamper the ability to conduct
operations
Entering new countries through
acquisitions
Later on from expanding in
Venezuela and in Asian markets –
it changed its strategy to directly
acquiring companies with
matching synergy to enter a new
country mitigating the risk of
trade sanctions/embargos
Due diligence
Though this risk cannot be entirely
eliminated but it can be mitigated by
due diligence of the target
company’s country. Major
stakeholders like government, other
local players and affiliated industries
are assessed in a standardized
method to ensure a well educated
acquisition/merger

Operational risks
If CEMEX has been operating in one
country, they would generally be aware
of how to operate efficiently. But in
case of opening new firm and operate
in abroad, there are operational risks
associated with expansion in terms of
approval of licenses agreements
(regulatory) and non-compliance.
CEMEX has characterized its
international operations as a “ring of
grey gold” comprising commitments to
only high-growth markets.
The purpose of PMI process was to
improve the efficiency of newly
obtained operation where the regional
director visited every month during a
monthly cadence along with the country
presidents.
Export to US markets in early 1970s
When US ITC started to impose 58%
countervailing duty on CEMEX’s
exports, it started limiting it exports
to US after which the duty was
reduced to 31%. The company tried to
fight these actions of artificial
lowering of price before the relevant
US bodies
Acquisitions in Spain to lower
dependence on the Mexican market
When the Spanish economy plunged
into its deepest recession, CEMEX
began to develop and codify its post
merger integration process.
Processes were streamlined and
Spanish operation systems were
quickly harmonised and integrated
with Mexican ones, which actually
turned out to be critical in Mexican
peso crisis
 Cultural awareness

CEMEX’s PMI team received

Culture Risk training on cultural awareness and

team building workshops for
specific required culture
 Culture plays a very important role
in value creation, hence
companies must focus on culture
during merger and acquisitions Uniformity
 Cultural affects could be visible in
PMI team replicated basic
terms of decision- making style, management principle to bring
leadership style, beliefs, risk taking the uniformity across the
capabilities etc. organization, thus establishing
 CEMEX addressed cultural cultural harmony
aspects during integration through
its diligent and dedicated Post
Quick response, competitive advantage
Merger Integration(PMI) process
 Eg: Estimated 13 billion dollars
 CEMEX sent PMI team
market capitalization loss in HP- immediately after acquisition,
Compaq merger due to cultural which was tasked to identify and
bridge the differences in quickest
differences
possible way
 CEMEX continuously improved
its PMI process by performing it
on existing businesses
THANK YOU