cemex strategy analysis

During 2008 and 2009, the company staved off bankruptcy through a series of major cuts and refinancing efforts. An acquisition is inherently very motivating. These 10 steps help counter it. The success to which this was achieved has helped a model platform over which other distribution channels were built in similar environments. In the light of the current economic recession, Cemex Company ought to consider the likely impact of the recession on its expansionary strategy and the possible mitigation measures available to contain the effects. We would identify people in their field operations who had exceptionally smart approaches to doing things. The middle one, which is people, is the most difficult. They are ancient (dating back to at least 3,000 B.C., they form the literal foundation of civilization), energy-efficient, durable, versatile, and inexpensive. For example, we introduced Insularis in 2012: It is a ready-mix brand that improves the energy efficiency of buildings. Sometimes marketing can trigger combative competition in the market-leading to the business rivalry which can seriously harm the business. As a result of long experience of developing its own Information Technology systems, its IT experts developed competency in integrating IT platforms. Why does Teslas Zero Dollar Budget Marketing Strategy work? Internal analysis. CEMEX was hit hard during the financial crisis. Watson: For now, the environmental regulations are far more advanced in the U.S. and Europe than they are in, say, South America. Worth mentioning is that the gap in cultural proximity which Cemex has heavily relied on for a long time could pose a huge challenge in penetration into these markets. Step 5 - Sustaining Value through Post Purchase Services. This will require a lot of cement. Yahoos story or case study is full of strategic mistakes. Sophisticated knowledge sharing and tracking across a well-established, well-used information technology network. Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This article, through a qualitative and quantitative analysis, focuses on strategies that CEMEX has carried out to determine how they influence their dominance index or . For more about Strategy&, see www.strategyand.pwc.com. Cemex was created in 1931 through the merger of Cementos Hidalgo, founded in 1906, and Cementos Monterrey, founded in 1920. Three key areas of improvement were identified; It is a known fact that the low-income segments lack financial discipline and hence, not considered to be creditworthy. (In 2014, the company reported US$2.7 billion EBITDA on revenues of $15.7 billion.) And ironically, the people who need it the most, have never been the target customers for cement companies. And we never will. We arent selling a product to you; were working with you on a solution. We set up Construrama as a franchise, and then helped the distributors with their business practices. When the real problem isnt the obvious one, Why businesses need to help employees build friendships, Clocking out: Millennials and the workforce. Long-term customerand community relationshipdevelopment through in-depth consultation, giving CEMEX unique insights into customer needs andthe capacity to erect entry barriers for competitors. The first three months are key. The social contract of the private sector was later formulated and incorporated by the then Secretary-General of the United Nations, Mr. Kofi Annan. Saving money is not standard practice for most low-income families, and Mexicans are no exception. How? About us, 2008. CEMEX, unlike its top competitors, was also an early example of a multinational from an emerging market. These calls for urgent mitigating measures to arrest the drastic fall in revenue which if not checked might lead to the closure of some factories reversing the gains that have been made so far. The aggressive integration of information technology into the system and rapid technological inventions have ensured the company remains ahead in global competitiveness besides assuring it affirm place in standardization of quality in products and services. This will ensure that Cemex stamps its authority and reclaims its niche in the market as a market leader. CEMEX's Coherence Profile. This will amount to increased sales volumes and customer loyalty through establishing the center for quality service with a difference. Aggressive advertising and sales promotion using billboards, banners, and media houses will come in handy to complement the companys re-branding efforts and also to boost the sales volumes and enhance brand awareness. We had a lot of experience transporting materials over long distances in trucks, railroads, and ships, so we knew the problems of having poor infrastructure, and we had years of experience helping to build ready-mix concrete roads. You just send out an email that says, Joe, you now report to Regina, and here are the new guidelines on decision rights. Likewise, incentives are relatively easy to deal with. We wont dictate how you do it, but we require that you recapture all your freight somehow. Firms are now spending fortunes in these campaigns as they try to outdo each other and endear themselves to the consumers (Hau & David, 2005 para.6). The millennium development goals were originally developed without recognition of the role that the private sector could play. During these periods of biting recession and stiff completion from Lafarge and Enron among others, part of the marketing efforts should be dedicated to improving the customer care centers. And the third one is incentives: what you measure, what you pay, and so forth. One of the most challenging tasks for Cemex was its entry into the Philippines market due to a lack of control of distribution channels by distributors. San Agustin: Knowledge sharing also helped us with another alternative-fuel innovation that came to us through the RMC acquisition: the use of fuel derived from household waste as a substitute for fossil fuels in our cement manufacturing facilities. Farias: In a lot of ways, capabilities development follows a natural evolution. The increased level of competition in the international market has necessitated the company to embark on aggressive marketing promotions to enhance its brand name and increase brand awareness. In this roundtable discussion, six CEMEX leaders, all interviewed at company headquarters in Monterrey, Mexico, talk about the companys capabilities system, how it developed, and the value that it has provided. As it considers its a strategic alternative, Cemex will have to bear in mind its marked success in the integration of IT in its management possesses which gave it a head start in business information. (2022, December 13). Sales staff should be trained in public relations to treat customers professionally. Madridejos: By the end of 2004, we were an $8 billion company. But Why? << /Length 5 0 R /Filter /FlateDecode >> The major threat to the company lies in the current recession which has hurt the global aggregate demand. 4 0 obj Farias: Fifty years from now, the world will be low-carbon. It was all about finding what worked best and then enforcing those standards. If volumes pick up, how do you extract value? A new book questions the growing power and influence of central banks. You could do all that stuff manually, with an email to a colleague. Cemex has had a huge highly skilled workforce in IT whose capacity was not fully utilized that is now being harnessed to earn additional revenue and to support the companys infrastructure. var today = new Date() Mr. Zambrano recognized NAFTA for the huge strategic threat it was. So they have to be tailor-made for each specific market. Porter's 5 Forces, Competitive Forces & Industry Analysis. Strategy+business is a trademark of PwC. 2.Regulatory framework is very unpredictable. It is all evident in its integration of information technology in its ready mix and cement business. The core aim was to document the best business practices to share them across the organization globally. Despite the experience with pet coke, CEMEX was far behind. de C.V. Before the early 21st Century, the perceived role of private enterprises in addressing poverty and inadequacies in deprived markets was largely nonfigurative. At the same time, to evolve into a more premium business, CEMEX began providing guidance in construction methods not just to individuals and private-sector customers such as building companies, but also to municipalities and national governments. Our subjective dominant logic, shaped by our own ideologies, experiences, interactions, and source of knowledge, has partially restricted our idea of poverty to the rural world. PwC. That was the beginning of recognition on CEMEXs part of the importance of global collaboration and knowledge sharing. Although the initial goal of Construrama was to hold on to the loyalty of our distributors, in the end it became a vehicle for providing them with solutions to their problems. Cemex has been able to implement a production to distribution chain which has been supplemented by cross-border scale economies in the fields of IT, trading, and technological advancement as Ghemawat (2003 para. During the pandemic, people have become more sensitive to the environmental impact of their shopping decisionsand companies are responding. Balanced Scorecard strategic analysis can help Cement Cemex managers in understanding the relationship between activites . The company began with the establishment of Cementos Hidalgo in 1906. Cemex case analysis.It could be risky for any outside player to directly enter into these markets. This means that the company is yet to fully shed its cultural proximity orientation to system proximity which casts doubt on the effectiveness of the implementation of the system proximity approach. This has forced industries to reduce their output meaning a reduction in revenue. Retrieved from https://business-essay.com/cemex-companys-strategic-analysis/, BusinessEssay. My experience of internship with one of the largest cement companies in India twenty years back had provided me an opportunity to understand the business of cement in a closer way. Resource-based strategic analysis is based on the assumption that strategic resources can provide Cemex Superior an opportunity to build a sustainable competitive advantage over its rivals in the industry. Beginning with a brief history of Cemex. Save my name, email, and website in this browser for the next time I comment. But that would require generating a separate internal campaign for each new product. These are large multinationals with several holdings across the globe hence posing serious competition to Cemex. It is present across America, Africa, Europe, Middle East, and Asia. By contrast, ready-mix and aggregates are hyperlocal businesses, and a best practice in one place might not be a best practice in another. Our analysis shows that pursuing digitization and sustainability levers are key to significantly boosting productivity and efficiency of a typical cement plant (Exhibit 1). Thats your window to make them realize they should change how they think. CEMEX released its 2020 Integrated Report: "Safe. Thats when you have your best chance and I mean this in the most positive sense of getting into peoples heads. A solution, by contrast, cannot be that easily replaced. You can reach us out at [emailprotected] .Disclaimer: The views and opinions expressed in any article on the website are solely those of the authors and do not necessarily reflect the official policy or position of companies in context. As I said earlier, these efforts will have to be guided by cost-minimizing framework that will be ensuring that the accruing benefits are optimized. Over time, together, those things build a culture that produces the behaviors that reinforce the capabilities that will make you successful. Over time, CEMEXs leaders developed a capability for promoting environmental sustainability: decreasing the companys own fuel use, removing or mitigating pollutants in materials, and looking for ways its products and services could lead to sustainable practices for all the industries CEMEX serves. Where did we fail? That helped us figure out what to replicate and what not to replicate. Currently, he is working as an Associate Professor in the area of Marketing with Alliance School of Business under Alliance University, Bangalore. That took some doing. Once a week, one of the members bids for the pool by deep discounting or lottery. Strategic Analysis Of Cemex Cemex is one of the largest commercial market in the world. Figure 1 VRIO Analysis. If we can help orchestrate all this, then we can also provide value beyond supplying any of the main products. For . We acquired a Spanish cement company that had begun to use petroleum coke (or pet coke), a by-product of refining petroleum that ordinarily emits a lot of carbon dioxide. Patrimonio Hoy consisted of socios or partners, who get together to form a group, restricted to a maximum of three members. Luis Farias: We had been thinking about the potential of alternative energy sources since 1990 or so. To become a learning organization and to implement an effective learning strategy, CEMEX managers should develop . Leveraging our expertise, we strive to foster transformational change and contribute directly to our company's purpose of building a better future through sustainable initiatives. The Globalization of CEMEX also makes use of the VRIN/VRIO analysis frequently for developing competitive strategies that are based on the company's core strengths and resources to help it gain a competitive advantage over other players in the market. In other words, we are building the capability of sharing knowledge. When we treat sustainability as a capability, it changes what we do about it. We knew from our experience with pet coke that it was only a matter of time before waste-recycling companies would start to peg the price of this energy source to the price of oil, eroding our advantage. Joann (2009 para.1, 2), points out that innovation in packaging can transform a product from a commodity-driven product to a premium product category. It lends itself to recipes like the CEMEX Way, which can be disseminated by a corporate center. With a wealth of accumulated experience from long years of service in various positions in the company, he has steered on the business to become a global cement manufacturing giant to reckon with. 9) observes. Capabilities System The result was enormous savings in IT cost and a significant drop in the cost of administration. CEMEXs global expansion represented a 180-degree turn for a company whose very name is an abbreviation of Cementos Mexicanos. It is a company focused on creating sustainable value by providing industry-leading products and solutions to satisfy customers construction needs across the world. Mexico, like many other developing economies, still hadn't generated much outbound foreign . Analyze the Cemex Superior external competitive environment to identify opportunities and threats. However, any marketing strategy ought to be informed by aggressive market research to attain the intended results. They can also lead to the wastefulness of resources when they fail to succeed or when the right training is not administered to sales personnel. Another example is Fortium ICF, a concrete product that is especially useful in putting up vertical walls. Thus, in 2005, we bought the RMC Group [a British company; RMC originally stood for ready-mix concrete]. For example, within ready-mix, Shift has a track for value-added products. The potential of this colossal low income relatively unserved market was also accompanied by its own set of challenges. This threatens to cripple the companys operations while causing a huge slump in revenue. 5 Hypothesis A growth strategy based on the acquisition and generating debt to a company, in this case CEMEX, must integrate a rigorous control of costs and expenses as well as an analysis of the first was to make credit accessible for the poor before selling cement; the second was to improve brand perception of CEMEX among these customers through building trust; and the third was to change or improve distribution methods and construction practices so that they deliver more efficiency and cost-effectiveness to low-income customers. Step 1 - Defining relevant industry for Cement Cemex in casestudy. Partly its a matter of how we talk about these things with customers. The government infrastructural demand continues to buoy the demand though. The spiraling fuel prices combined with escalating global demand have conspired to push the prices upwards increasing the operation cost of companies. Jaime Elizondo: I joined CEMEX in 1985, shortly before Lorenzo Zambrano became our chief executive officer. The system turned out to be way more efficient than other money transfer agencies. Johnnie Walker is a 200 years old brand but it is still going strong with its marketing strategies and bold attitude to challenge the conventional norms. In addition, the program was necessitated by the desire to leverage the companys knowledge of business processes across the diverse business locations around the world. "Cemex Company's Strategic Analysis." We would all agree on the fact that any form of innovation is fundamentally meant to address a state of deprivation. Headquartered in Monterrey, Mexico, CEMEX is a global leader in the building materials industry. Finally, we wanted to move quickly to structure long-term contracts for the energy sources. The approach however presents a potential risk as unchecked expansion could dilute the capital of the company weakening its financial position. and some important characteristics of the industry, analysis will be conducted on the. New name, lets move on. Today, one of the major differences is all the time and effort we dedicate to change management. . If CEMEX stood still, it would be up against competitors with greater scale and more access to capital markets. Although competition is stiff in these markets Cemex could use its financial clout in the market to launch an attack in these markets as a result of its higher leverage. The system not only created a trust-based platform to save money but also provided access to credit based on their savings and payment discipline. Product diversification of the firm especially with the launch of Cemtec Company and the new venture to the manufacturing of construction machinery has helped the company to spread its risks besides broadening its new revenue base. We could then transfer people without their having to learn entirely new systems. Apple A Unique Take on Social Media Strategy. To serve them profitably, innovative and contextual business models have been developed. Urban poverty is as daunting an issue as rural poverty, which Professor C K Prahalad distinctly highlighted in his book, the fortune at the bottom of the pyramid, decades ago. Despite the expansionary moves undertaken, Cemex continues to rely heavily on the Latin market with about 68% of its global sales coming from the Latin market. If volumes level off, how do you gain share? Customer care is one of the most powerful tools of customer retention and also attracting new ones, Cemex ought to embark on enhancing customer service to ensure quick response to customers requests and inquiries. environmental analysis regarding the debt acquired with each acquisition does not includes a possible economic crisis. This is because the different market is unique in terms of cultural diversity, management practices, and regulatory framework. This has continued to draw down revenue as firms have been forced to cut down the output too much the dwindling consumers demand. This report applies key concepts in strategy and strategy analysis to evaluate and. With its presence in 50 countries and recording a $2.11 billion profit in 2006, the company strategies seem to have largely succeeded. There were not many companies that could use pet coke. Karl Watson Jr.: Cement is a powder made from limestone and other ingredients, used in the production of concrete and masonry. The segment was relatively virgin and could become an engine for growth in the future. This is to means that not all marketing techniques can be replicated in all nations. We provided them with access to building materials such as cement, concrete blocks, and steel; we also provided access to credit through microfinance; and we offered technical and architectural guidance. I remember that trucks used to line up outside our plants to get cement, and it wasnt unusual for them to wait for several days to pick up an order. This was not subject to negotiation. (See CEMEX: An Emerging Market Multinational, by Pankaj Ghemawat, s+b, Apr. We would create innovative solutions for the construction industry that improve the well-being of the people. The company has almost 200 employees with an international presence. CEMEX realized that women are the key drivers of savings in families, an economic crisis during 1994 and 95 in Mexico, Style Theory business model: revolutionizing the clothes rental industry. We would do an acquisition, optimize it, take value out of it, and then go do another one. Competitor Analysis. The core objective of strategists and leaders in an organization is to help the organization to build a sustainable competitive advantage and thwart competitive challenges. It was also necessary to take a cut in commission to serve this segment, which would be compensated by volume of business. It is produced in enormous, capital-intensive plants involving sophisticated technology. Participants were Jaime Elizondo, Luis Farias, Luis Hernandez, Ignacio Madridejos, Juan Pablo San Agustin, Karl Watson Jr.; moderated by Thomas A. Stewart. Is Michelin Star by the same Michelin that sells tires, yes, it is! How does Vinted make money by selling Pre-Owned clothes? December 13, 2022. https://business-essay.com/cemex-companys-strategic-analysis/. CEMEX: Transforming a Basic Industry Company case study (referred as "Cement Cemex" for purpose of this article) is a Harvard Business School (HBR) case study covering topics such as Strategy & Execution and strategic management. It did this while maintaining, as New York University and IESE professor Pankaj Ghemawat has noted, consistently high profitability levels. CEMEX is a Mexican multinational building materials company, founded in 1906 and has a revenue of around $20 bn. Watson: Were shifting now from global standards to global principles. The new system demanded distributors to have excellent delivery capabilities, the high storage capacity of raw materials and inventory, and a good understanding and appreciation for this new low-income segment. This has had the effect of precipitating the revenues of companies. So we have said each business must recapture transport dollars. Vargas Hern. The emerging markets of India, Russia, Brazil, and China present a renewed opportunity for the company to expand. BusinessEssay. Its international business strategy enabled CEMEX to grow rapidly during the 1990s and early 2000s, when it became one of the biggest cement companies in the world. After each transaction, we would ask ourselves, What was successful? In value-based pricing, products are price based on the perceived value instead of cost. Most, or rather, all innovative ideas were conceived to circumvent challenges when they are confronted with. We began to say we want a country with the kind of infrastructure that makes it competitive: highways, ports, airports, anything that reduces the costs of transport and production. Incoming companies were inducted into the CEMEX Way (the company's name for its distinctive practices), and in parallel CEMEX took unusual pains to capture and make use of acquired companies knowledge. Change your questioning habits. Peer coaching nurtures connections that make employees want to stay with the company. A lot of managers initially wondered why it was so important to do this. CEMEX delivers its way to playby excelling at five differentiating capabilities: Industry-leading operational effectiveness, continuously improving its manufacturing, logistics, and financial effectiveness a critical capability in managing and moving building materials. You dont see it, but offshore windmills have huge cement pilings underneath. And the practice had a very high-level overseer: Mr. Zambrano himself, into whose email inbox all of these reports flowed. How do you interact with customers? The result was an annual saving of a whopping $120 million in addition to expeditious integration of acquired firms and increased efficiency in operations. Why? That gave us some big advantages. One of its latest acquisitions was Southdown of the USA which helped it boost its image in the market. CEMEX provides cement, aggregates, ready-mix concrete, specialty concrete products, and building and infrastructure solutions to individual customers, institutions, governments, and communities worldwide. CEMEX also developed a sophisticated trading arm that has protected it against much of the volatility that threatens cyclical commodity businesses. Questions from the media and fans alike on social media wondered about the strategy of selecting a running back in Tulane's Tyjae Spears when the team still needs help at receiver. Great leaders are invariably intent listeners, but they still need to make the practice a priority. At the time, we were burning fuel oil and natural gas two of the most volatile commodities in terms of price. It is not just a license to operate in countries where regulations are becoming stricter, or just a way to reduce cost. As part of this evolution, CEMEX rebounded from a near bankruptcy during the 2008 economic crisis to regain its position as a leading company in the global construction materials industry. So we started to develop offerings that more closely resembled solutions. Current expansionary strategies ought to be backed with aggressive marketing to optimize their benefits. Essential. They decoupled charging freight from charging for the product. CEMEX is a global solutions provider, drawing on strengths in customer knowledge and innovation and on resources generated by its industry-leading efficiency.

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