Cemex Case Analysis

There are many benefits CEMEX and the other global competitors can derive from globalization, even in an industry as apparently localized as the cement industry. Firstly, they can spread their investments across several countries. With the diversification of their investments, they can prepare for volatility in foreign markets, including offsetting the effects of risks such as a political sanction of imposed 31% of countervailing duty on its exports. Also, in addition to reducing the impact of a change in foreign markets, they can prepare for the volatility of currency risk. An example would be the 1994-1995 pesos crisis CEMEX faced in its original location, Mexico.

Secondly, they will benefit from the recognition by other countries and increase their international profile as well as their ability to compete with the largest companies. CEMEX and other such global competitors will be able to create awareness in a different area of the world; in these new areas, they will also create more opportunities for themselves to attract additional business partners around the world.

Thirdly, globalization will increase the company’s market share in the world market. A company can either export its product and trade directly with other countries, or acquire existing capacity in these countries and control it. Acquisition is important way to gain market share; many cement industry leaders are using this way to purchase a certain percentage of the top cement companies in their target countries. CEMEX shifted from a pure trade focus to a foreign direct investment strategy after the complications with their trade with the United States, with the questioning of artificially manipulating prices to gain an advantage over the localized companies.

Another benefit to globalization for the key players in the cement industry includes the potential to reduce prices. Required resources can be found abundantly in other parts of the world. Being close to their resources, they can cut costs from the transportation aspect of their businesses. They can also reduce labor costs since many of their target markets tend to be under developed countries where the labor costs are comparatively lower. By reducing these costs, they can increase their competitiveness in the world market.

Lastly, they can benefit from understanding different cultures around the world through doing business in a variety of countries. While visiting or operating in these countries, they have the possibility of attracting talented people they would not have found otherwise. Also, they can adapt to different cultures to operate successfully and determine whether future investments are profitable. The company can determine if it wants to invest time for future opportunities to expand its business.

CEMEX’s CEO came to the conclusion, with the help of the Boston Consulting Group, that it should direct its business toward geographical diversification instead of across