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Globalization of cemex

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					Building
the
future
THIS IS CEMEX




                CEMEX is a leading global producer and marketer of

                cement and ready-mix concrete products. In a world

                facing an ever-growing need for housing and

                infrastructure development, they help 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.
                                GLOBALISATION OF CEMEX
CEMEX as the name states is a cement factory in Mexico. As, the case goes by we traverse the journey of
CEMEX from neo-natal stage to a fully independent, mature and a confident adult. The journey spans
across discovering their gray areas, their core competencies, their strategic in-house and out-house area
of excellence and the hands that have helped them nurture their dreams. CEMEX, a multinational
company the 2nd largest in the US and the 3rd largest in the world is having a capacity to produce 96
million metric tons of cement enough to have transformed CEMEX into a key player in the world cement
business.

Over its journey spanning 102 years a century to go by CEMEX has now being established globally and
has been widely acknowledged in the business circles.

The factors that have made the competitive advantage sustainable:

        continued innovation

        high level of commitment to customer service and satisfaction proven post merger integrating
        expertise

        digital evolution

        efficient production

        distribution and delivery process through sophisticated information systems

        ability to identify high growth marketing opportunities in developing economy
HISTORICAL MILESTONE
         1906 - 20
         CEMEX was founded in 1906 with the opening of the Cementos Hidalgo plant in
         Mexico. In 1920 Cementos Portland Monterrey initiated operations with 20,000
         metric tons of annual production capacity.

         1966 - 67
         CEMEX grows into a regional player by acquiring Cementos Maya’s Merida plant
         and building new plants in Ciudad Valles and Torreon.


         1972 - 73
         CEMEX establishes a national presence with the installation of new kilns at its
         Merida and Monterrey plants and the acquisition of a plant in central Mexico.


         1976
         CEMEX lists on the Mexican stock exchange and, with the acquisition of
         Cementos Guadalajara’s three plants, becomes Mexico’s market leader.


         1987
         CEMEX acquires Cementos Anáhuac and begins the deployment of a company-
         wide satellite communications system, CEMEXNet.



           1989
           With its acquisition of Cementos Tolteca, Mexico’s second-largest cement
           producer, CEMEX becomes one of the ten largest cement companies in the
           world.


           1992
           CEMEX acquires and integrates Spain’s two largest cement companies.
 1994
CEMEX acquires Venezuela’s 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.




1995
CEMEX acquires Cementos Nacionales in the Dominican Republic.




1996
CEMEX becomes the world’s third-largest cement company with the acquisition of
Colombia’s Cementos Diamante and Samper.




1997
CEMEX acquires a 30% interest in the Philippines’ Rizal Cement.




1998 - 99
CEMEX acquires a 25% interest in Indonesia’s largest cement producer. It also
acquires APO Cement in the Philippines and an additional 40% interest in Rizal.




 1999
 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 Rica’s largest cement producer.




 CEMEX acquires Assiut Cement Company, one of Egypt’s leading cement
 producers.




2000
CEMEX begins the construction of a new grinding mill in Bangladesh.




 Standard & Poor’s upgrades CEMEX’s credit rating to investment grade.




CEMEX becomes North America’s largest cement producer with the acquisition
and integration of U.S. - based Southdown, Inc.




2001
CEMEX enters the Thai cement market with the acquisition of Saraburi Cement
Company.




2002
CEMEX enhances its position in the Caribbean by acquiring Puerto Rican Cement
Company.
PRESENT SENARIO
                                                         CEMEX has always had a knack at creatively
                                                         cracking problems. Just look at their solution
                                                         when they were hit hard by the crippling
                                                         Mexican economy in the early 1990s. Out of
                                                         all places, CEMEX saw an opportunity in poor
                                                         Mexican neighborhoods. Through careful
                                                         planning and perfect execution, CEMEX was
                                                         able to rebuild many of Mexico’s poorer
                                                         neighborhoods while vastly improving their
                                                         bottom line because they were, of course,
                                                         using CEMEX products.



  1) In addition to building communities in underprivileged areas, CEMEX has become the number
     one leading manufacturer of cement and the third manufacturer of ready-mix concrete
     worldwide. They are now operating in over 60 countries and currently producing over 97 million
     metric tons of cement each year. CEMEX has been able to acquire leading international cement
     companies, integrating each into the “CEMEX Way.” In fact, CEMEX is currently negotiating to
     acquire Rinker, Australia’s leading cement producer that also has a strong presence in America.
     Last week, the bid rose 22% to 14.2 billion for the company down under. With the American
     industry holding roughly 23% of CEMEX sales, the company’s profitability took a hit when the
     American housing market dropped by 31% last year. Recent reports indicate a decline in CEMEX
     net-profits from the first quarter of 2006. $505 million was reported in net profits in the first
     quarter of last year, as opposed to $400 million in 2007, a 21% decrease. Although the company
     stated that sales in Mexico and foreign markets rose about 9% during the past year, American
     sales have fallen 20% during the same period accounting for the decline in net profits.



  2)   Positive forecasts for the US housing industry expect a return in sales that will hopefully boost
       CEMEX’s revenue and profit. Analysts have already spotted such signs of improvement.
       Brookings Institution, an independent research organization, stated in predicting future building
       plans, “In 2030, about half of the buildings in which Americans live, work, and shop will have
       been built after 2000.”



  3)    Although CEMEX operates in over 60 countries, the building trends, especially in developing
       countries such as India and China that it is targeting, are just as or even more positive than
       Brookings‟ evaluation on America’s. CEMEX has found stiff competition in the both the cement
       and ready mix industries. Their international competitors are the French company Lafarge
     Group and the Swedish Holcim Ltd. But as an executive officer at the American based U.S
     Concrete tells us, “Bigger is not always better.” He further explained how the local “mom and
     pop” shops can easily compete in construction materials industries.



4)    But because of the management’s keen ability to “identify acquisition targets” that give it
     “enviable positions in some of the world’s most attractive markets,”



5)    CEMEX is in a strong position. And with their continuing acquisitions of major companies such
     as RMC and, more recently, Rinker, CEMEX does enjoy important strategic advantages that give
     it a powerful position in the 75 billion dollar cement industry.



6) CEMEX has broken the stereotypical mold in the association between an archaically perceived
   industry and innovative technology. By integrating a well-defined information system built upon
   the latest advancements in tech, CEMEX has become a powerful leader in their industry. The
   man responsible for this redefining business plan is Lorenzo Zambrano. And considering his
   background in advanced engineering from Stanford University, his emphasis on tech is no
   surprise. As an excerpt from Wired Magazine observes, “Cement is a commodity business.
   There’s little difference among competing products, so Zambrano focuses on the manufacturing
   and delivery.” To gain an advantage in these processes, Zambrano looked to technology. His first
   step to introduce the previously separate industries dealt with the company’s widely distributed
   cement plants. He implemented a system called CEMEX net, which now serves as the company’s
   private communications network.

7) The system made it easier for the concrete and ready-mix plants to easily communicate supply
   and demand information to or from a central office. The next stage of Zambrano’s technological
   makeover revolutionized the most daunting stage of the industry, delivery. This leg of the value
   chain is the cause of many problems because concrete is a perishable good (90 minutes).

8) A pain free delivery becomes difficult when this time limit is combined with unpredictable
   weather, traffic jams, and changing customer orders. Zambrano took this industry inefficiency
   and introduced technology called Dynamic Synchronization of Operations and revolutionized the
   process along the way. By equipping each delivery truck with a GPS system and an
   accompanying computer, the central dispatcher can adjust to or guide drivers around obstacles.
   This has shaved hours off the ambiguous industry average, allowing CEMEX to confidently
   guarantee delivery within thirty minutes. The company is not just blowing smoke either. This
   guarantee, as results have shown, is backed by a 97% success rates. While the efficient process
   has won over customers is has also dropped operating costs with CEMEX being able to cut 35%
   of its fleet, saving it $100 million!.
9) Through these previously described technologies, CEMEX has been able to apply a highly
   effective vertical integration supply chain that has helped in its success. CEMEX has recently
   introduced another information system. Building upon CEMEXNet, Zambrano has installed a
   system that allows the customer to become involved in the company’s technological innovation.
   Cement and ready mix purchases, order status, account information, and real-time delivery
   progress is completely accessible to the customer via the CEMEX website.



10) The customer reaction was rapid, and CEMEX now sells more than 20 percent of its product
    online.



11) With ever changing and adapting policies it is no wonder that CEMEX placed in the top 5 of
    Wired’s most cutting edge and innovative companies.



12) That’s not half bad for a cement company, considering the organizations that beat them out
    include Google and Yahoo. CEMEX enjoys an assortment of competitive advantages. For one, it
    possesses an imitation-resistant business model whose strengths bode well for the cement and
    ready mix industries. CEMEX deals with a product that has a shelf life of only a few hours,
    depreciating even faster than computers. This means that, to be successful, a firm cannot have a
    lot of inventory and must distribute its product quickly and accurately. CEMEX, as an industry
    leader, has set the bar high in these categories and has only been pushing it higher ever since.
    CEMEX integrates technology into every level and function of the organization, which is the key
    to their dynamism. This allows information to be shared easily throughout its value chain, and
    creates a standard way of communicating valuable data and information throughout an
    organization that operates in 60 countries. Everything from plant operations to sales to
    accounting is standardized, with all the data being transferred back to corporate headquarters
    via CEMEX’s satellite network. A huge advantage over competitors who are less tech-savvy. A
    pointed example of this is seen by CEMEX’s dominance in Spain, a market it entered in 1992;
    today CEMEX is the top supplier in the country with operating margins over 30%.



13) Information is also shared vertically in the firm’s organizational structure. CEMEX has
    “Innovation Days”; nine days out of every year are devoted to harvesting employee ideas. This
    promotes connections between senior management and lower level employees, fosters
    innovative thinking, and dramatically reduces Research and Development costs by leveraging
    the innovative ideas of CEMEX’s rank and file employees. CEMEX leverages the data that it
    gathers to discover new markets as well.
14) CEMEX developed its model before it started expanding abroad. CEMEX uses Post-Merger-
    Integration (PMI) teams to streamline a newly acquired firm, identify and retain talent, and,
    most importantly, adopt key elements and standards of CEMEX’s business model. Therefore,
    CEMEX’s subsidiaries work in the same, successful way as its Mexican operation. This, along with
    the fact that the company is the world’s leading producer of white cement and the world’s
    largest trader of cement and clinker, give it advantages of scale.



15) CEMEX’s biggest competitors simply can’t copy CEMEX’s model. This is because of the fact that
    CEMEX developed its technology-based model first, and then successfully integrated it when it
    acquired companies overseas. Holderbank and Lafarge both had foreign subsidies long before
    the communication and technology revolution began. This means that their information systems
    developed differently in each of its separate operations, without a centralized organization like
    CEMEX. It would require a huge outlay of capital now by these companies to overcome this
    inefficiency and unify their systems, an investment they are reluctant to make. Thus, CEMEX’s
    use of technology in improving the efficiency of their business model, the amount of
    information shared, and the data collection, along with its ability to expand their distribution
    channels while using their brand provide enough evidence suggesting that CEMEX concentrates
    on their strategic positioning. Michael Porter points to this as a crucial element to having a
    sustainable business.



16) Because of its, now obvious, powerful position, CEMEX enjoys several key opportunities.
    Datamonitor, a leading business information company, recently pointed to a couple of these
    opportunities such as the positive outlook for the US and Mexican construction markets.
    Although American's market can still be described as sluggish with the recent subprime woes
    affecting the critical housing construction market, CEMEX’s strong presence throughout the U.S.
    can still be accounted for as a key opportunity. Datamonitor’s SWOT analysis also points to their
    lack of influence in China and India as threats, but we also see these as opportunities. With the
    most recent financial report coming in positive with a 9% increase in revenue and a 6% increase
    in EBITDA along with their past history in acquisitions, we see very little that will inhibit CEMEX
    from eventually getting in and exploiting those crucial developing countries‟ construction
    markets. That is not to say that there is still a good amount of risk or threats there. With future
    acquisitions in India and China, CEMEX will need to continue their desire for “continuous
    improvement.” The firm will need to maintain their high standards in innovation and customer
    satisfaction in order to be successful in these new markets. Furthermore, with CEMEX’s
    increased power, they are experiencing more and more regulation, which could be seen as an
    obstacle. Even through all the technological advancements that the company might strive for,
    they must still maintain the important customer relationships to be successful, which may be
       easier, said than done with such aggressive expansionism. But CEMEX’s motivation to always
       improve combined with their good track record up to this point inhibit us to believe that CEMEX
       has a concrete future ahead.




Why was cement used so heavily in the construction in the 19th century?
As the population grew people wanted more sturdy homes and only concrete along with steel could give
it a firm shape. Cement had been used as a binding agent that hardens when mixed with water. The
industry basically strived on:

1) Supply

2) Demand and

3) Competition

The minimum efficient scale (MES) for a cement plant approximated 1 million tons of capacity per year.
Cement plants asset were largely dedicated to production of cement and lasted for decades. Earlier
mode of transportation that was chosen was road transport. Road transportation was the most
expensive and limited the effective distribution radius to 150 to 300 miles. Waterborne transportation
was the most economical and the new system of loading and unloading the barges, made it easier and
could ship cement to distribution terminals in distant markets as well as serving local ones. The data
states that in 1990s international seaborne traffic in cement was averaged above 50 million tons per
year. By resorting 2 multi-modal ways of transportation, CEMEX had reduced on their transportation
cost and also have capitalized on their effective distribution.

The long run demand for cement was directly related to the gross domestic product (GDP) with per
capita consumption increasing up to $20,000 plus. Demand tented to be higher in areas where there
was a warm climate. Demand generally decreased with a long coast line, since more sea transport
meant fewer roads and increased share of government expenditure. Retail sales to individual customers
for home construction and like were important in developing countries. CEMEX then had to focus on
B2B (Business to Business) and B2C (Business to Customers) models.

The cement firms had problems with supplying cement due to excessive demand. The basing point price
systems were brought in as a cushion by cement industry. It was a common system in the United Sates
wherein the leading firms set the base price and the other firms calculated their price on the basis of the
base price. As CEMEX was rated as the 3rd largest, the other market leaders fixed the price and CEMEX
had to adjust accordingly as a result it could never get a premium price for its cement.

Another major factor for contributing to the CEMEX’s success was that of its international competitors.

By 1999 there were six major players in the cement industry

    1.   HOLDERBANK
    2.   LAFARGE
    3.   CEMEX
    4.   HEIDELBERGER
    5.   ITALCEMENTI
    6.   BLUECIRCLE

In aggregate, the six major players controlled 5 million tons of capacity representing almost one quarter
of the total world. CEMEX capacity share was major from countries like Mexico (64.6%), Indonesia
(43.7%), Venezuela (40.6%), Spain (26.5%) and Philippines (22%). CEMEX being the 3rd largest cement
producer in the world it had to compete with Holderbank (5 continents and more than 50 countries) and
Lafarge which has a presence in more countries in comparison to CEMEX.

In such a competitive environment cross border investment was the most important aspect. And when
the U.S. cement industry had fallen into crises the prices had also gone down therefore the most
obvious action was the acquisition as that time the market values of the target companies were less
than their underlying values. But by acquiring these companies, estimating their long run growth rate
was a problem. Again, the Asian crises in 1997 gave an opportunity to these 6 major players to enter in
South East Asia at much minimized rates. Opportunities like this only gave open doors to the major
players to expand in the world and the strategies of the companies help them to crack larger deals and
to be on the top.




CORE COMPETENCIES OF CEMEX
The success stems from their distinctive approach to business. For the company, cement is a solution
that can make a real difference in people’s lives; it bridges barriers, connects communities, and forms a
foundation for national development.

         CONTINUOUS IMPROVEMENT AND INNOVATION
One of the attributes that sets them apart is their passion for change; they always keep improving to
stay at the forefront of the industry. Through novel initiatives such as our ATM-like, 24-hour cement
dispatch system, they capitalize on their market knowledge, resourcefulness, and agility to deliver
efficient customer solutions that fundamentally change them from their competitors.

        CUSTOMER FOCUS

CEMEX put their customers first. Because proximity, product quality, and availability are important to
their customers, they have aligned their commercial networks to serve their needs. Their Construrama
distributor network has grown into the largest construction materials chain in Latin America, with more
than 2,100 Construrama-brand retail outlets across Mexico. Among other benefits, Construrama offers
their customers uniform product quality, reliable client service, and convenience. Their customers have
ready access to local Construrama suppliers that carry more than 500 different building products at
affordable prices.

        TECHNOLOGY-BASED SOLUTIONS

They use technology to leverage the collective knowledge of their people and to operate successfully in
widely different markets and economies. Their IT platform and standardized processes enable them to
identify and share best practices across our global operations network and to extract value from
integrated acquisitions—simply and systematically. Their exchange of knowledge is evident across their
U.S. operations network. Taken together, their many initiatives have enabled them to enhance their
customer fulfillment; increase their operating productivity, efficiency, and safety; and consolidate their
brand nationwide.


        LOW-COST PRODUCTION

They have established an exceptional record of low-cost leadership over the last 15 years. Perhaps
nothing better exemplifies their unrelenting drive to control costs than their energy management
strategy. By taking advantage of the flexibility in the cement manufacturing process to consume
different types of energy, they have developed a diversified fuel structure in which almost 80% of their
total fuel cost is based on sources with low price volatility. For instance, in Mexico they have converted
all 15 of their cement plants to theme at least few sources of energy, including petroleum coke, fuel oil,
alternative fuels, and natural gas. As a result, their Mexican operations were able to reduce their fuel
cost by 40% over the years.
        ONGOING COMMITMENT TO SOCIAL RESPONSIBILITY

Their commitment to social responsibility is rooted in their company’s 98-year history of helping their
communities to build their infrastructure. Their philosophy of social responsibility guides and informs r
strategy for sustainable development, which—at its most basic—is to run an efficient and profitable
business while caring for the needs of their environment and their communities. An important element
of their strategy is to create programs that benefit both their society and their company.
         Top: Our 24-hour self-service dispatch
     offers customers a range of benefits,
     including increased loading flexibility,
     shortened loading times, and reduced
      administrative work.




    Bottom left: “e-movil” system reduces
    their customers’ costs and increases their
    flexibility; customers can use their
    cell phones to place orders and obtain
    account status information.
.
    Bottom right: In 2002 they were awarded
    the World Environment Center’s
    Eighteenth Annual WEC Gold Medal
    for International Corporate
    Environmental Achievement.
CONCLUSION
For any company to be successful it is very essential that the company develops its core competencies in
its product or services being delivered. CEMEX in this case earlier had diversified horizontally even
before it could establish its roots in parent country. The company had thought of globalization which
didn’t help them to consolidate in any sector.

The international competitors like Holderbank and Lafarge had taken a first mover advantage in the
cement industry. The pricing they set according to the base point had to be followed by the other
cement industry throughout. As a result, CEMEX never earned a premium on their product.

When CEMEX started focusing on their production in Mexico and became the leading cement producer
in Mexico. Later they started expanding in other countries like United States, Spain, Venezuela, Central
American and the Caribbean, Colombia, Egypt and Asia. The different strategies that they adapted in
different markets also helped them to come to the 3rd position in cement manufacturing all over.

Continuous innovation and social responsibility will help the company to develop a good position in the
market among its customer. Company also need to sustain its existing customers by giving them the
best of the best services as getting the new customer is very expensive in comparison of retaining the
existing customers.

Here, company needs to sustain its position and keep on developing new strategies for expansion which
will even help the company to come on the top position from the 3rd position.


“A traveler travels the world in search of peace and
comes home to find it”
                                                                            By Siege Charles