CEMEX Analysis

Introduction

CEMEX is a multinational cement firm, which originated from Mexico. The company, once a privately owned business with 6,500 employees had expanded to a publicly traded multinational firm (Lessard & Reavis, 2016, p. 3). The firm, through acquisition, entered the global market by establishing its presence in nations like Spain and the USA. The success of CEMEX is hinged on its ability to implement its strategy, the CEMEX Way, into its acquired firm. The CEMEX Way has enabled the organization to not only attain internal growth but survive its stiff competitors. CEMEX is a thriving multinational firm owing to acquisitions and adoption of the CEMEX Way strategy.

The CEMEX Way guided the firm in acquisition prospects and the post-merger integration process (PMI). The CEMEX Way has four steps: laying the groundwork, stepping out, growing up, and stepping out (Lessard & Reavis, 2016, p. 2). In the first step, the firm began exploring opportunities in overseas markets through exports. Correspondingly, CEMEX embarked on rigorous creating a communication system, CEMEXNET, which would enable the firm to communicate effectively with its foreign markets. Concerning stepping out, the firm acquired firms like Tolteca in Mexico, and Valenciana and Sanson in Spain (Lessard & Reavis, 2016, p. 5). CEMEX further entered theCaribbean, Colombia, Venezuela, all the while integrating its CEMEX Way strategy. In growing up, a change in the management structure is witnessed after the death of CFO Gustavo Caballero. Consequently, a shift in the PMI process ensued in Mexico operations and was termed PMI Mexico. In stepping up, CEMEX conducted a firm analysis to gauge its compatibility with its acquired firms. Strategic thinking was employed to ensure optimum performance was realized. The CEMEX way was an efficient guide for CEMEX in its acquisition and integration processes.

Strategic Analysis

Current State

CEMEX has significantly changed since the case study was written and revised. Currently, the firm is in more than 50 countries(“CEMEX,” 2019).Equally, the firm has trade relationships in over 100 countries. However, the employees are over 40,000, which is lower than the 65,000 estimate in the 1990s. The sales have dropped from 21.7 billion dollars to 13.7 billion dollars.CEMEX had dropped in sales and employees but has retained its global presence.

CEMEX has been embroiled in a lot of political controversies. Firstly, the company is under pressure from the Mexicans to boycott its plan to build the US-Mexican border wall, which President Trump’s government plans to contract (Price, 2018). However, CEMEX came out to deny these allegations.Equally, the firm was liked to child sex trafficking.The company’s ties to the Rothschild family have made it a suspect since the Rothschild family is also linked to NXIVM, who was indicted for child trafficking. The firm is still under investigations. CEMEX has been involved in USA-based scandals due to its involvement with influential figures and illicit groups.

External Analysis (Environment Analysis, Galea and Bonicci, 2015)

The political environment has shaped the activities of CEMEX. By joining NAFTA, Mexico increased the prospect of growth in the cement industry (Lessard & Reavis, 2016, p. 3). Other nations like Spain had joined the European Monetary Union and had favorable business rates, making it appealing to investors. Nonetheless, the firm faced a trade sanction, which was accompanied by a 31% contravening duty. The political environment worked in favor of CEMEX, which expanded its operations on various countries, except the USA case.

Economic changes influenced the operations of the firm. Prospective economic growth in Spain and Mexico made the acquisition a lucrative deal for the firm. Conversely, its USA operations slowed due to an economic downturn (Lessard & Reavis, 2016, p.3). Economic growth and recessions have impacted the growth of CEMEX.

CEMEX adopted the social norms of its environment. Through the PMI, the company integrated the working practices of the area, which culminated to 70% of its CEMEX Way strategies (Lessard & Reavis, 2016, p. 6). CEMEX also produced cement in bags to cater to its developed market while mass production is done for its developed nations. CEMEX integrated the needs of its workers and clients in various countries.

CEMEX extensively used technology to its advantage. CEMEXNET was created to facilitate smooth communication in Mexico and its foreign companies due to shortcomings in Mexico (Lessard & Reavis, 2016, p. 3). Internet-based technology is also widely applied in the PMI process to manage operations. Technology is used to ease operations in CEMEX.

Internal Analysis: VRIO(“Cascade,” 2018)

Competitive parity exists for CEMEX regarding the value of its products. Cement has high demands in Asia, the USA, and Mexico, where construction demands had risen (Lessard & Reavis, 2016, p. 8). As a large organization, CEMEX can take advantage of the cement industry.

CEMEX has a temporary competitive advantage concerning rarity. The products, cement, is not a rare commodity. Further, the multinational expansion is also common, although CEMEX is amongst the largest firms (Lessard & Reavis, 2016, p. 14). Just like the other multinationals, CEMEX has the financial, human, and technological resources that its rival has.

CEMEX has an unused competitive advantage as its products are easy to imitate. Cement manufacturing is not unique to the CEMEX. Conversely, it is not even the leader of this industry (Lessard & Reavis, 2016, p. 14). The firm also has a presence in the same market as its rivals, who employ the same tactics in their manufacturing processes. Product imitation makes CEMEX an ordinary industry player.

CEMEX’s organization gives it a long-term competitive edge. The CEMEX Way is unique to the company. Through its four steps, the company uses its resources to make the integration process last less than five months(Lessard & Reavis, 2016, p. 6). Correspondingly, CEMEX incorporates the values of its foreign firms in running the business. Management activities are also disrupted as experts from other firms are used to aid the newly acquired firm to integrate into CEMEX. Through the CEMEX Way, the company has excelled in making global acquisitions.

Recommendation and Justification

CEMEX should increase its acceptance of the values and practices of the acquired firms. Although the CEMEX Way constitutes 70% practices of foreign firms, at an organizational level, drastic changes are made (Lessard & Reavis, 2016, p. 6). CEMEX would excel even further by customizing its PMI to reflect the organizational needs. Consequently, the firm will save on resources. Multiple managers will not have to supervise the diffusion of the practices to these firms. Instead, they will remain in their respective organizations and not disrupt the workflow. Additionally, the money spent to retain these managers for months in the country can be plowed back for production. Comparatively, a lot of time and money will be saved as intense training on the CEMEX Way for other employees will not be necessary. CEMEX should incorporate more needs and values of acquired firms into its CEMEX Way program to save on resources and enhance success.

CEMEX should expand its product range. Although it is the third largest cement producer, there is nothing unique about its products (Lessard & Reavis, 2016, p. 15). Hence, CEMEX should introduce other related materials and services in construction. Materials like ceramics, glasses, foams, and metals, should be introduced in the range to make the frim more competitive. Regarding services, the firm may offer a quantity survey, architectural services to its clients. As a well-funded firm, it would be possible to implement these practices. In effect, it will save the clients time and money to look for experts and other materials as CEMEX can meet all their needs. Equally, it will expand the customer base of CEMEX as it caters to numerous consumer needs. Expanding the product range allows CEMEX to reach numerous clients and have a competitive edge.

 

References

“Cascade.” (2018). Using the VRIO Framework to Create Sustained Competitive Advantage. Cascade. Retrieved from https://www.executestrategy.net/blog/vrio-framework/

“CEMEX.” (2019). Company Profile. CEMEX. Retrieved from https://www.cemex.com/about-us/company-profile

Galea, D. & Bonnici, T. (2015). PEST Analysis. Wiley Encyclopedia of Management. Retrieved from https://www.researchgate.net/publication/257303449_PEST_analysis

Lessard, D. & Reavis, C. (2016). CEMEX Globalization: The CEMEX Way. MIT Management Sloan School.

Price, S. (2018). CEMEX Ties to Child Sex Trafficking. America Out Loud. Retrieved from https://americaoutloud.com/cemex-ties-to-child-sex-trafficking/

 
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