What Is the Reasoning Behind Cemex’s Expansion into Spain?

2. What is the reasoning behind CEMEX’s expansion into Spain?

CEMEX was faced with growing competition in its home market of Mexico from its main competitors, Holcim and Lafarge. Both companies were thought to be interested in Tolteca which was the number two cement producer in Mexico after CEMEX. CEMEX ended up buying Tolteca to preserve its domestic market share but the message was clear. CEMEX needed to pursue an acquisition strategy to grow or risk being an acquisition target itself. In addition to realizing that becoming a multinational player was a key part to continuing its growth was the desire to avoid being too dependent on one single economy such as Mexico’s which was susceptible to volatility. An expansion into other geographical areas could help balance that economic risk. CEMEX also faced threats due to trade sanctions stemming from export duties placed on them by the United States. It was time to grow internationally.

With those factors as motivation CEMEX decided to grow internationally beginning with Spain. CEMEX acquired Spain’s two largest cement companies Valenciana and LACSA. CEMEX now controlled 28% of the Spanish market. Holcim specifically had begun to attempt to strengthen its position in Mexico so CEMEX naturally decided to go after its competitors on its home turf of Europe. Spain was Europe’s sixth largest cement consumer and was seen as a good entry market for CEMEX with an anticipated growth rate in demand of 1.6% with improving economic conditions. Spain was seen as less economically developed than its European neighbors and therefore had more upside potential in growth which was another reason why it was an attractive entry point for CEMEX. Spain was also a natural fit for expansion for CEMEX culturally speaking as they shared the same language and prior cultural ties between the two nations were thought to make integration of companies an easier path to go down