Case 2-2 The Globalization of CEMEX
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THE GLOBALIZATION OF CEMEX
1
Case 2-2 The Globalization of CEMEX
Jordan Sime
School of Business, California Baptist University
Author Note
Jordan Sime
I have no known conflict of interest to disclose.
Correspondence regarding this article should be addressed to
Jordan Sime
Email: astridjordan.simetage@calbaptist.edu
THE GLOBALIZATION OF CEMEX
2
Case 2-2: The Globalization of CEMEX
Executive Summary
This paper is an individual analysis of a multinational company from an emerging market. The focus of this paper is CEMEX, a cement company with its organizational headquarters located in Mexico. Topics of discussion include CEMEX’s performance, both home and abroad, as well as its first attempt at global business, and the purpose behind the company’s decision to internationalize. Further discussed are the geographic markets in which CEMEX operates, the core businesses within those regions, and some of the strategic reasons for
CEMEX’s choice of location. CEMEX’s foreign entry strategy is discussed, as well as the frustrations and opportunities that the firm has faced in operating internationally. Analysis
CEMEX is a leading global producer and engaged in the production, distribution, marketing and sale of cement, ready-mix concrete products, aggregates and clinker. CEMEX helps to meet this demand by providing quality products and reliable service to their customers and communities across four continents. Founded in Mexico in 1906, they have grown from a small regional player to one of the world’s top cement companies. Today, they operate cement and related assets in more than 30 countries and employ more than 25,500 people (Bartlett, 2014). Its current CEO, 61-year-old Lorenzo Zambrano, worked for the company for 18 years before being appointed as CEO in 1985. He is the grandson of one of the founders. Under Mr. Zambrano, CEMEX has developed from a firm that was principally based in Mexico to one that is global, both in its geographic scale and its product characteristics. This has been achieved through a combination of innovation in logistics, fuel supply and IT, and acquisitions. CEMEX’s
THE GLOBALIZATION OF CEMEX
3
mission is to serve the global building needs of its customers and also build value for its stakeholders by becoming the world’s most efficient and profitable cement company. CEMEX started to be involved seriously in merger and acquisition in 1982, when an economic crisis in Mexico forced the government to realize the economy in order to attract foreign investment. From that, Lorenzo Zambrano put CEMEX on course towards becoming a Global Latina. According to him, either CEMEX became large and international or CEMEX would end up being purchased by a bigger player (Bartlett & Beamish, 2014). It is important that
Zambrano made that connection, especially since having a competitive attitude will lead to success. The second problem that the company encountered, is when CEMEX entered into a joint venture with Houston based producer Southdown, Inc. in the United States. From that, some disagreements over prices and profits occurred and Southdown brought an anti dumping suit against CEMEX. Therefore, CEMEX tried to broaden their company’s geographic reach to Spain (Bartlett, 2014). Besides that, the peso crisis in 1994-1995 made the Mexican companies go into liquidation, but not for CEMEX because it still managed to survive. The Asian economic crisis in 1997-1998 also made a bad situation towards the construction sector, however, fortunately for CEMEX they still retained stability. In other developed countries, CEMEX did not feel at the top of the ranks, due to big name companies, yet, CEMEX was still able to strengthen its position (Bartlett, 2014). All of the crisis and issues CEMEX was able to overcome, was due to their strong survival strategies towards globalization. For CEMEX, problems are closely related to all kinds of companies in the world, however, what can set them apart from the rest is how the company plans to solve the problems itself. A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed. It
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