Cemex Case Study

1417 Words Mar 22nd, 2010 6 Pages
Running head: Cemex’s Foreign Direct Investment

Cemex Foreign Direct Investment

Jeff Panian

Davenport University

Abstract

Cemex is one of the fastest growing cement manufacturers in the world. Starting out more than a decade ago Cemex, “has transformed itself from a primarily Mexican operation into the third-largest cement company in the world” (Hill, 2008). The success of Cemex has been attributed to its skills in customer service, marketing, information technology, and production management. Its idea to originally enter into the global market, was to acquire inefficient cement manufactures and turn them around by implementing its proven strategies. This global introduction has worked well for the most
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The benefits of FDI in Cemex’s global strategy have proven successful. Their ability to “create significant value by acquiring inefficient cement companies in other markets” (Hill, 2008) proved to be a very valid assumption. Although Cemex proved for the majority of its acquisitions successful, there are still some fundamental root problems with FDI. Host-Country governments and local perception can be very negative. Three issues faces Cemex with its decision to utilize FDI. Adverse effects on competition can be a major hurdle to overcome, even just at the perception of such. Cemex has already had to deal with this issue with its Indonesia operations. “Host governments sometimes worry that the subsidiaries of foreign MNE’s may have greater economic power than indigenous competitors. If it is part of a larger international organization, the foreign MNE may be able to draw on funds generated elsewhere to subsidize its costs in the host market, which could drive indigenous companies out of business and allow the firm to monopolize the market” (Hill, 2008) This worry is very real, especially in some of the newly developing host-countries Cemex has targeted. As with the Indonesia operation, the host government ultimately refused to allow Cemex the ability to buy a majority share of its cement company. A second and sometimes more

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