CASE STUDY CEMEX (A):BUILDING A GLOBAL LATINA

MASTER IN BUSINESS ADMINISTRATION 2014

MANAGERIAL FINANCE (FIN 745)

ANALYZING CASE STUDY

CEMEX (A) : BUILDING A GLOBAL LATINA

Prepared by:
FARAH NADIAH IBRAHIM
2013812912

Prepared for:
DR NIK NAZIMAN

AN OVERVIEW OF THE CASE STUDY

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CASE STUDY CEMEX (A):BUILDING A GLOBAL LATINA

ABOUT CEMEX
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 worlds top cement companies. Today,
they operate cement and related assets in more than 30 countries and
employ more than 25,500 people. 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 principal 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. CEMEXs
mission is to serve the global building needs of its customers and build
value for its stakeholders by becoming the worlds most efficient and
profitable cement company.

HISTORICAL OF CEMEX
YEAR
1906 - 1920

EXPLANATION
CEMEX was founded in 1906 with the opening of the Cementos
Hidalgo plant in Mexico. In 1920 Lorenzo Zambrano open new

1931

cement plant which is Cementos Portland Monterrey.

Lorenzo Zambrano merged Cementos Hidalgo and Cementos
Portland Monterrey to create CEMEX.

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CASE STUDY CEMEX (A):BUILDING A GLOBAL LATINA

1960

Expand

and

vertically

integrating

cement

and

concreate

1976

production throughout Mexico.

CEMEX lists on the Mexican stock exchange and, with the
acquisition of Cementos Guadalajaras three plants, becomes

1980

Mexicos market leader.

CEMEX became a large scale with assets in engineering, hotels,

1987

mining and petrochemicals.

CEMEX acquires Cementos Anhuac and begins the deployment

1989

of a company-wide satellite communications system, CEMEXNet.

With its acquisition of Cementos Tolteca, Mexicos second-largest
cement producer, CEMEX becomes one of the ten largest cement

1992

companies in the world.

CEMEX acquires and integrates Spains two largest cement

1993

companies.
CEMEX acquires Concern, a distribution subsidiary and it leads

1994

into Carribbean and Central American markets.

CEMEX acquires Venezuelas largest cement company, which is
ideally positioned for exports. CEMEX expands its U.S. operations
by acquiring a cement plant in Texas and enters Panama with the
acquisition of Cemento Bayano.

YEAR
1995

CEMEX

1996

Republic.
CEMEX becomes the worlds third-largest cement company with the

1998

acquisition of Colombias Cementos Diamante and Samper.

CEMEX acquires a 25% interest in Indonesias largest cement

acquires

EXPLANATION
Cementos Nacionales

in

the

Dominican

producer. It also acquires APO Cement in the Philippines and an

1999

additional 40% interest in Rizal.

CEMEX forms CEMEX Asia Holdings, an investment holding
company, to develop new partnerships and cement-related
businesses in Southeast Asia. CEMEX lists on the New York Stock
Exchange

(NYSE)

under

the

ticker

symbol

CX.

CEMEX

consolidates its presence in Central America and the Caribbean

by acquiring Costa Ricas largest cement producer. CEMEX acquires
Assiut Cement Company, one of Egypts leading cement
producers.

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CASE STUDY CEMEX (A):BUILDING A GLOBAL LATINA

2000

CEMEX begins the construction of a new grinding mill in

Bangladesh. Standard & Poors upgrades CEMEXs credit rating to
investment grade. CEMEX becomes North Americas largest cement
producer with the acquisition and integration of U.S. - based Southdown,

2001

Inc.
CEMEX enters the Thai cement market with the acquisition of

2002

Saraburi Cement Company.

CEMEX enhances its position in the Caribbean by acquiring
Puerto Rican Cement Company.

CEMEX BUSINESS PROBLEMS

CEMEX started seriously involved in merger and acquisition in the 1982s
when an economic crisis in Mexico forced the government to realize the
economy in order to attract goreign 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. It is correct what he had
been said because having a competitive attitude will lead to success.
The second problem is happen when CEMEX entered into a joint venture
with Houstan based producer Southdown Inc in the United States. From
that, some disagreements over prices and profits occur and Southdown
brought an anti dumping suit against CEMEX. So, CEMEX tried to broaden
their companys geographic reach to Spain.
Besides that, peso crisis in 1994-1995 make the Mexican companies went
into liquidation but not for CEMEX because it survived. Asian economic
crisis in 1997-1998 also give a bad situation towards construction sector
but fortunately CEMEX still can survive. In developed country, CEMEX feel
not very strong because of the big names of the competitors but it still

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CASE STUDY CEMEX (A):BUILDING A GLOBAL LATINA

strengthened its position. All of this crisis and problems can be handle by
CEMEX comes from their strong survival towards globalization. For CEMEX,
problems are closely related to all kind of companies in the world but what
can make them different is how to solve the problem itself.

THE ISSUE
What can be said is that when CEMEX achieved transformation although
initially a bit modest in northern Mexico in 1906. CEMEX be able to face
the risks and the fact is that they are not afraid of risk but also make it an
opportunity to grow further. From CEMEXs perspective, managing risk is
not uncommon issue but it is about day to day activity. The function of
managing risk is still the same with other organizational activities. From
that, we can say that it can be a trademark to CEMEX because they are
not avoiding the risks but faced it. This will be a greater core competency
to CEMEX compared to other cement producer.
CEMEX integrates market and demand risks in its overall planning for
capacity and sourcing. It mitigates these risks by actively trading cement
across markets. The greatest strategic risk CEMEX has faced and
successfully managed is the threat to its economic viability and the
globalization of the cement industry. What is surprising is CEMEX able to
handle it with aggressively. CEMEX manages to make acquisitions from the
risk that they face it. They are very wise to take advantages from that.
Its worth it and paid off with some dividends, helping it to improve its
national market in the 1960s and 1970s, survive Latin Americas lost
decade of the 1980s, ride the first wave of international sector in the late
1990s and become one of largest building materials companies in the
world at the beginning of the 21st century. Now CEMEX must arrange its

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CASE STUDY CEMEX (A):BUILDING A GLOBAL LATINA

capabilities to meet a new set of challenges that face the cement industry
and CEMEX as an increasingly visible player within the industry, as it
enters the next millennium.
Among these are the increasing concern on the part of citizens and
governments with the potential impact of cement production and use on
the environment and human health, the emergence of more stringent
global standards for transparency and business practices and the
emergence of new technologies that could potentially alter the economics
of the cement business.
CEMEXS SUCCESS FACTORS
Competition from Lafarge and Holcim give a positive signal towards
CEMEX to consolidate its position and upgrade its operations. At the same
time, Lorenzo Zambrano decided that the company needed to expand
internationally or it will be a victim of larger competitors. Economic crises
in Mexico in the early 1980s and mid 1990s forced CEMEX to turn towards
foreign markets to stabilize its cash flow and hedge against domestic
uncertainties. It actually give CEMEX a good motivation to expand
internationally.
CEMEXs unpleasant experience with the U.S anti-dumping suit in 1989
however taught CEMEX that it had to diversify its expansion beyond the
American market. As a result, it focused on acquiring assets in natural
markets south of the Mexican border in Spain. One of the most successful
factor to CEMEX is their strength as an organization that applying a very
sophisticated acquisition strategy. They are brave to take risk and use it to
widen their company ability.

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CASE STUDY CEMEX (A):BUILDING A GLOBAL LATINA

CEMEX is very lucky to has Lorenzo Zambrano as their CEO in 1985. He is
very visionary in his work and has been a driving force behind CEMEXs
innovative approach to technology and acquisition strategy that have
transformed the company into a global player. His strategy is simple when
he focuses on its core cement business although others not. But,
surprisingly he make it when CEMEXs revenues grow.
CEMEX way also play an important role in order to build up the company. It
had three essential features. First, the global standardization of processess
in

production,

alignment

of

administration
organization

and

commercial

through

clear

areas.

role

Second,

definitions,

the
the

implementation of a common knowledge platform and the use of common

language which is English. Third, the harmonization of accounting and
controlling systems. In short, applying CEMEX way will lead to a better
companys condition.
Lorenzo Zambrano also stress on the usage of information technology.
CEMEXs information systems allow it to coordinate production and sales
on a global basis to ensure efficient management and low overheads. It is
intended to boost productively and manage its operations more efficiently.
CEMEX has gained a competitive cost advantage over its competitors by
setting up an excellent distribution infrastructure, computerized delivery
network in which every moment of every truck is monitored in real time,
enabling on-time delivery of cement and ready-mix to customers. For
CEMEX, international expansion will brought international exposure and of
course the new knowledge will be get from that. New things always should
be learn because from that we will get the points and thats CEMEX do.

Nowadays, we have to agreed that people no longer want mere product.

They want more than that. They want a full package and something that
will give them double satisfaction. So, thats why CEMEX do some business
model innovation that build solution to their customers. CEMEXs strategy

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CASE STUDY CEMEX (A):BUILDING A GLOBAL LATINA

emphasized improving profitability through efficient operations. CEMEX
also shifted from selling products to selling complete solutions. By this,
CEMEX has established a very strong brand managed to translate it into
extraordinary profits from a commodity-driven business. CEMEX is able to
capture additional revenues, enhance its profitability and differentiate
itself from the others competition. As a result, it is now more appropriate
to refer to CEMEX as a building materials solution provider instead of a
cement company. By having it as a complete solution provider at low cost,
it will attract the majority of the people in demographics in Mexico, that is,
the low-income market. Customers will also prefer their products more
than other competitors.
CEMEX also build social capital by supporting low-income housing in
Mexico. CEMEX tries to build a good relationship with people because it
knows not only the rich people but also the low income people that want
their products and services. Thats why CEMEX encourage Patrimonio Hoy
which means a microfinance based housing scheme for the low income
customers. The value of Patrimonio Hoy can be as promoter, partner and
distributor. Promoters do it for a social cause to build social capital and to
earn money by making a living out of it. It helps the poor build homes that
might have been their dream. By offering such value-added services, it
has been successful in earning the trust of the socios. It has effectively
created a pull for cement, and CEMEX on the supply side pushes it,
enabling the push-pull strategy for cement sales. Then, Construrama also
conducted which is a building materials retail chain that mainly sold
CEMEX products.
Other than that, CEMEX is seen to have a strong financial system.
Compared to Lafarge and Holcim, CEMEX generates more cash flow than
these two companies. The strong cash flow will gives it considerable
flexibility to make acquisitions, expand current operations, reduce debt
and if necessary to buy back shares or pay dividends. This will bring a lot
of benefits towards CEMEX.

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CASE STUDY CEMEX (A):BUILDING A GLOBAL LATINA

So, from the factors that bring success towards CEMEX, we can say CEMEX
is a model Latin American corporation with world class reputation in
merger and acquisition strategy.
BENEFITS FROM MERGER AND ACQUISITION
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 has become the most important process in
the corporate world. It has variety of advantages from the merger and
acquisition activities. Thats why CEMEX also do it.
The first advantage from merger and acquisition is CEMEX will get a new
synergy from others. This will enhance their performance and cost
efficiency. When two or more companies get together and are supported
by each other, the resulting business is sure to gain a lot of profit in terms
of financial gains and work performance.
The second advantage is about cost efficiency. This is because any kind of
merger actually improves the purchasing power as there is more
negotiation with bulk orders. Apart from that staff reduction also helps a
great deal in cutting cost and increasing profit margins of the company.
Apart from this increase in volume of production results in reduced cost of
production per unit that eventually leads to raised economies of scale.

The third advantage is from a combination of two companies or two

businesses certainly enhances and strengthens the business network by
improving market reach. This offers new sales opportunities and new areas
to explore the possibility of their business.
With all these benefits, a merger and acquisition activities will increases
the market power of the company. This enables the merged firm to take
advantage of high technological advancement against price wars.
RECOMMENDATIONS

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CASE STUDY CEMEX (A):BUILDING A GLOBAL LATINA

SHORT TERM
For the short term strategy, CEMEX should concentrate and focus on their
core business of cement, aggregates and ready-mix concrete. It is because
of the demand of the cement is quite encouraging. Continued efforts in
providing the very best products and services to the regular customers
and new business is essential to CEMEX.
CEMEX

also should provide their customers with

the best value

proposition. In order to be a very valuable company in the eye of

customers, CEMEX have to show their differences among others.
Differences are important because it will give some refreshment towards
customers. CEMEX should knows that they are not always in the top so
they have to get ready to face any possible.
Although CEMEX is quite good in financial, but they also should regain
their financial flexibility. CEMEXs management team should always update
and review their financial statement in order to know their profit or loss,
any increase in sales, expenses and all the things. It is important to take
care of this because one of the success factor is all about financial
strength.

In order to minimum the cost, CEMEX should also maximize operational

efficiency. The flow of the company have to be more effective in order to
boost the performance. For example, in terms of delivery, CEMEX has to be
faster and smooth.
LONG TERM
In the long term strategy, CEMEX should focus wider on lean management
technique to eliminate waste and improve process. It is common in the
industry of cement it will occur waste. So, from that, CEMEX has to be
more creative to avoid waste of products especially in the processing field.

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CASE STUDY CEMEX (A):BUILDING A GLOBAL LATINA

It is essential not only for the good of the company but it can give an
overall effect towards environmental.
As CEMEX become supplier to all types of customers, an innovative way of
delivering cement to the poor who are potential buyers also should be
considered. Delivery is one kind of services that everyone prefer.
Management of CEMEX should work hard to provide special delivery to
poor people. This will be core compentency to CEMEX when they are trying
to approach poor people as well as providing social services.
The other one that should be thinking of is about what next to be done.
After a long time having acquisition, what should CEMEX implement in the
new phase? For me, it is depends on CEMEX itself. From merger and
acquisition, they can get a lot of benefits as before and of course they
have more experiences if let say they want to repeat it again. There is
nothing possible to them as long as they know the way and it usually
successful. If they want to continue without any consolidation anymore, it
is also quite interesting to them because sometimes they should focus
more on what they have now. CEMEX will have time to take care of the
acquisition before this. It will be some advantagous too.
REFERENCES

i.

CEMEX

Annual

Report

2003.

(n.d.).

http://www.cemex.com/InvestorCenter/files/2003/cx03eng.pdf
ii.

orevi,

B.

(n.d.).

The

Content

of

Global

Marketing.

http://www.meste.org/fbim/fbim_srpski/FBIM_najava/III_Djordjevic.pdf
iii.

From Multilatinas to Global Latinas The New Latin American

Multinationals

(A

Compilation

Case

Studies).

(n.d.).

http://www10.iadb.org/intal/intalcdi/PE/2009/03415.pdf

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CASE STUDY CEMEX (A):BUILDING A GLOBAL LATINA

iv.

Lucea, D. R. (n.d.). Embracing Risk as a Core Competence: The Case

of

CEMEX.

http://dlessard.scripts.mit.edu/docs/Lessard,%20Lucea,

%20The%20Case%20of%20CEMEX.pdf
v.

University,

O.

(n.d.).

CEMEX

S.A.B.de

C.V:

Case

Study.

http://www.sharepdf.com/6e84b3e6b5964b8dbf55a1007f1566ff/CEMEX.htm

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