It lost major revenues overnight when the global construction industry imploded, and it suffered from having paid $14 billion to acquire the Australia-headquartered materials company Rinker Group just before the crisis struck. It takes time for people to become comfortable with the idea. But in the long run, were headed for the same global standards. After charging their share of commission, retail discounts are provided on volume. When youre running a hyperlocal business like ready-mix concrete and aggregates, you cant allow that to happen. The segment was relatively virgin and could become an engine for growth in the future. The potential of this colossal low income relatively unserved market was also accompanied by its own set of challenges. In addition, using refuse-derived fuel is pretty complicated technically because of variations in calorific power and other factors. With a large demand for infrastructure relative to the population in these nations, there can never be better news. After each transaction, we would ask ourselves, What was successful? We also know that concrete pavements, compared with asphalt roads, are far more energy efficient; they reduce vehicle fuel consumption and carbon dioxide emissions. Step 1 - Marketing Research & Analysis. Consider the challenges of selling cement and concrete. This article was developed as part of the Strategy& Capable Company Research Project, aligned with the forthcoming book. It is not just a license to operate in countries where regulations are becoming stricter, or just a way to reduce cost. 2016 saw a modest 0.8% growth with a gradual increase in the following years (Cision, 2016). //--> The emerging markets of Venezuela, Panama, the Dominican Republic, and Colombia present an opportunity for the company to dig deeper into the markets and earn more revenues. 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. If CEMEX stood still, it would be up against competitors with greater scale and more access to capital markets. 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. Building on its long track record in lean operations (ruthless operating efficiency is a catchphrase within the company) and its pride in being one of the most successful companies from an emerging market, CEMEX developed a high level of customer responsiveness. This report applies key concepts in strategy and strategy analysis to evaluate and. And we never will. Type above and press Enter to search. Part of this stemmed from legal barriers that broke down, paving the way for international competition. 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. 3.All major competitors of Cemex are increasing their operations in Mexico, so it might face tough competition in near future. Press Esc to cancel. December 13, 2022. https://business-essay.com/cemex-companys-strategic-analysis/. A solution, by contrast, cannot be that easily replaced. % Due to declining expansion in China and low oil prices, the construction industry has experienced stagnation in 2015. There were not many companies that could use pet coke. It did this while maintaining, as New York University and IESE professor Pankaj Ghemawat has noted, consistently high profitability levels. Elizondo: Construrama, our retail distribution brand, was another solution-oriented approach. Tomorrow were going to start using cash value added as a measure of performance, and if you achieve this level of cash value added, you get this bonus, and that will set you up to be promoted.. BusinessEssay. 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. de C.V. But our operational guys realized that they needed to be able to talk to the media, and to local communities and their leaders. The major threat to the company lies in the current recession which has hurt the global aggregate demand. Beginning with a brief history of Cemex. The company also offers asphalt, concrete blocks, concrete pipes and precast products including rail products, concrete floors, box culverts, bridges, drainage basins . How a tire company evaluations became most coveted in the culinary industry? (2022, December 13). Though profitably serving the deprived markets is a great challenge, the magnitude of this challenge increases multi-fold when the offer is a home.. Left to their own devices, big companies will continue to act big. Retrieved from https://business-essay.com/cemex-companys-strategic-analysis/, BusinessEssay. The German part of RMC was using refuse-derived fuel a fraction of municipal waste which is not widely understood. Ill give you an example involving the ready-mix business. What is it then? 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. The company boasts of unrivaled expertise in branding cement for individual consumers . Product diversification on its part could divert the attention of the company from its core line of production thus damaging the image of the company. This is one of the major limitations of SWOT analysis. Buy-offs at this state might result in the takeover of companies already deep in debts thus increasing the company debts which would place a huge liability on the company. Our pursuit of efficiency is a good example. Farias: In a lot of ways, capabilities development follows a natural evolution. It manufactures and sells cement, ready-mix concrete, aggregates, clinker and related building materials. Currently, he is working as an Associate Professor in the area of Marketing with Alliance School of Business under Alliance University, Bangalore. By 2012, the distinctive capabilities it had been developing in sustainability and in providing services to governments and business customers were inherent to the companys identity. At its debut, the Patrimonio Hoy building materials club that Cemex set up consisted of a group of roughly seventy people contributing on average 120 pesos each week for seventy weeks. We reasoned that we could achieve some balance by being on their home turf. One of its latest acquisitions was Southdown of the USA which helped it boost its image in the market. CEMEX was chosen for a case study, as it is an academically via ble company for . CEMEX recovered only when the economy in its markets began to rebound. But Why? 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. Headed by Francisco Garza Zambrano and a consulting team from Business Design Associates, CEMEX performed in-depth market research, which provided key insights into serving this segment profitably. This has continued to draw down revenue as firms have been forced to cut down the output too much the dwindling consumers demand. For all these reasons, concrete and cement are generally seen as commodities. 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. CEMEX: Building Solutions. The spiraling fuel prices combined with escalating global demand have conspired to push the prices upwards increasing the operation cost of companies. No matter how great the product was!! BusinessEssay, 13 Dec. 2022, business-essay.com/cemex-companys-strategic-analysis/. The company has almost 200 employees with an international presence. Our capabilities can help us orchestrate infrastructural offerings in a way that others cannot. Cemex, S.A.B. Cemex Company's Strategic Analysis. This was especially important because RMC was in 18 countries, and its people didnt talk to each other. Web. Mr. Zambrano recognized NAFTA for the huge strategic threat it was. The development of sustainability initiatives that create new uses for environmentally conscious building materials and lower the costs of producing them. This forced the company to develop its distribution channels to optimize revenue at a minimum cost rate. VRIO analysis of Cemex Superior is a resource oriented analysis using the details provided in the Globalization of CEMEX case study. The company has also demonstrated accumulated experience at the integration of acquired companies across the world in its core business. There was a real chance a larger global company would come into the market and underprice us. That led to weekly updates on issues and problems, and a steady effort to learn from them. In addition, the linguistic and cultural ties between the two countries made it a sensible strategic move. Low: The nature of cement as a key component in construction has eliminated any serious threats of substitutes. Who has decision rights over what, and how is the work done? The threats in the SWOT Analysis of Cemex are as mentioned: 1.Cemex faces strong competition from Regional and National Brands. Many companies are already reeling under the effects of the financial crisis while others are filing for bankruptcy. Ready-mix concrete is a downstream product. Although culture is much more than an enabler of strategy, its no substitute for it. While Cemex concentrated its marketing and expansion in emerging Latin markets due to cultural proximity, these companies had established a solid base in the developed world and were making impressive roads in the emerging markets. You have to train them. 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. So we have said each business must recapture transport dollars. 1. if(year<1000) year+=1900 Then what is Teslas marketing strategy? With an annual savings of $120 million in annual savings, this seems a formidable strategy for the company in its future endeavors. 2. Today, CEMEX is the fifth largest cement company globally, producing 87.09 million tonnes of cement a year, with an estimated cement production capacity of 93 million tonnes across its 56 cement production plants. How? Ghemawat, Pankaj. Apples social media strategy is extremely unusual. Concrete must be used soon after it is mixed, because of the way it hardens. BusinessEssay. As Prof. Prahalad says, the very assumption that the rural population is primarily poor and the urban population is relatively rich is a fallacy. However, any marketing strategy ought to be informed by aggressive market research to attain the intended results. 4 0 obj In the old days, it was: This is it. How one step towards digital transformation completely changed the brand perception of Dominos from a pizza delivery company to a technology company? Hernandez: Capabilities dont exist in a vacuum. Obviously, that doesnt make a lot of business sense. As a result of long experience of developing its own Information Technology systems, its IT experts developed competency in integrating IT platforms. 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. With other competitors coming into the country, we had to do something to strengthen our distribution channel. Dr. Mrinmoy Bhattacharjee has nearly two decades of experience spanning across industry and academia. Well write a 100%plagiarism-free paper this fast! The company is yet to do enough to tap into emerging markets of Brazil, India Russia, and China which indicate higher prospects as a result of their rapid growth. The approach however presents a potential risk as unchecked expansion could dilute the capital of the company weakening its financial position. Over the past fifty years or so, most of the major multinational companies have discovered and realized the colossal potential of deprived markets. In the 2000s, to take full advantage of its emerging global nature, CEMEX entered new businesses in ready-mix concrete and aggregates materials whose supply chain and financial dynamics were very different from those of cement. We knew that, compared with building asphalt roads, the initial investment was almost the same and the cost of maintenance was much lower. In developing markets [such as Mexico, South America, and the Caribbean], we have a bigger opportunity. Once a week, one of the members bids for the pool by deep discounting or lottery. There is often a not in my backyard mentality on the part of government officials. But we believed that having that information readily available would increase the likelihood that managers would make the right decisions. CEMEX is a global solutions provider, drawing on strengths in customer knowledge and innovation and on resources generated by its industry-leading efficiency. "Cemex Company's Strategic Analysis." On the other hand, the management might be forced to go back to the drawing board and assess the viability of any further expansions. Essential. Admittedly, to introduce it in a market unaccustomed to it is difficult because we stand out. The second thing has to do with people individual skills, individual balance, and individual knowledge. However, the potential of growth and prosperity may remain a distant dream with impending challenges of poverty. Headquartered in Monterrey, Mexico, CEMEX is a global leader in the building materials industry. Juan Pablo San Agustin: In 1992, two years before NAFTA went into effect, we made our first international acquisitions, buying two cement companies in Spain. There were many cement manufacturing players which were dominantly captured different regions.. Cemex had acquired 15 companies internationally in different regions. << /Length 5 0 R /Filter /FlateDecode >> The spiraling effects of the global recession are already taking a heavy toll on the total revenue of the company owing to the sharp decline in consumer demand. The flow of transfer of the best management practices has been facilitated by the Cemex way program whose implementation has been quite successful. Nike doesnt sell shoes. It sells an idea!! Since about 40 percent of the direct cost of cement is wrapped up in [energy use], you need to watch the expense of fuel and electricity carefully. Nokia is a perfect case study of a business that once invincible but failed to maintain leadership as it did not innovate as fast as its competitors did! Here are four ways to help employees become more reflective and more productive. Apple A Unique Take on Social Media Strategy. On the same note, undercapitalized companies the world over are either closing shop or being taken over by industrial giants to save them from imminent bankruptcy. So, it is obvious for impoverished with very little money to not get considered a customer ever, for something like cement. Starbucks prices products on value not cost. BusinessEssay. Portfolio of Products and Services Dominos is not a pizza delivery company. It is produced in enormous, capital-intensive plants involving sophisticated technology. Staying ahead of the curve, 2009. The market is also still struggling to recover from the adverse effects of the global recession which has drawn down sales to catastrophic levels. The buying off spree could spark off a wave of loss-making if not carefully approached. Karl Watson Jr.: Cement is a powder made from limestone and other ingredients, used in the production of concrete and masonry. Step 7 - Organizing & Prioritizing the Analysis into Globalization of CEMEX Case Study Solution. Technical consultation pertaining to the right quantity and quality of raw materials required to build a house or a single room was provided free of cost, which optimized the utilization of raw materials and minimized wastage. 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. Starbucks has mastered the art of value-based pricing. For example, you might have a municipality with good tax revenue, but [leaders] dont know how to structure a project, get the permits, or make a good decision about where to put in a road, a bridge, or a public housing project. 13, 2015.). We can make a difference for our customers in terms of green buildings, greener roads, and environmentally friendly housing. San Agustin: When we acquire a company, we listen. You can see how much we sell in value-added products every month, and how much more revenue they generate versus standard products. We call it Concrete Talks.. 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. According to a recent World Bank report, fifty-five percent of the worlds population, which is approximately 4.2 billion inhabitants, live in cities, and by 2050 nearly seven out of ten individuals in the world would live in cities. Thats when you have your best chance and I mean this in the most positive sense of getting into peoples heads. Most, or rather, all innovative ideas were conceived to circumvent challenges when they are confronted with. Over time, together, those things build a culture that produces the behaviors that reinforce the capabilities that will make you successful. In a cost-cutting measure to cut the cost of Information technology, the company developed a global standardization program commonly referred to as the CEMEX Way for $200 million in 2000. New name, lets move on. Today, one of the major differences is all the time and effort we dedicate to change management. (See CEMEX: An Emerging Market Multinational, by Pankaj Ghemawat, s+b, Apr. Madridejos: We didnt buy RMC because of its understanding of alternative fuels and waste-to-energy systems. 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. Though fewer big-ticket customers could generate most of the companys revenues, the situation is just the opposite for low-income customers. 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. Cemex is committed to achieving carbon neutrality through relentless innovation and industry-leading research and development. When we treat sustainability as a capability, it changes what we do about it. Articles published in strategy+business do not necessarily represent the views of the member firms of the PwC network. And ironically, the people who need it the most, have never been the target customers for cement companies. This has given rise to an urgent desire to develop an aggressive promotional campaign through product branding and advertising in various media that is growing to near combatant levels. The company began with the establishment of Cementos Hidalgo in 1906. Cemex operates within a stiff globally competitive arena full of challenges emanating from among others the current global recession and the surging energy prices as a result of escalating fuel prices. We dont just mend holes in your street we can prevent those holes from recurring for the next 30 years.. And our common technology platform would make us more productive. The part of RMC that was in Germany was particularly advanced; approximately 50 percent of its fuel use came from alternative sources. Windmills are a good example. Capabilities System The government infrastructural demand continues to buoy the demand though. Hernandez: At the same time, the CEMEX Way has always been retrofitted to include the best practices of companies we acquired. 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. This has had the effect of precipitating the revenues of companies. The firm may have to cut down production to reduce the piling inventory in its warehouses thus reducing the cost of storage. This was a way for us to grow the pie and create more value for CEMEX at the same time that we were doing something beneficial for society. The resultant effect could be a stream of loss-making giving its competitors a leeway to make their inroads. The Blue Ribbon Commission was organized by the United Nations Development Program on the private sector and poverty, which did most of the pioneering work. 2022. You dont see it, but offshore windmills have huge cement pilings underneath. This future is not far off. It is present across America, Africa, Europe, Middle East, and Asia. Step 3 - Marketing Plan. High: Cemex has established a very comprehensive supply chain that is proving to be quite efficient in supply. "Cemex Company's Strategic Analysis." Web. Web. The leadership team of CEMEX understood that the over-dependency on the formal segment actually made it vulnerable and decided to reevaluate its strategy. BusinessEssay. Nike has built one of the most powerful brands in the world through its benefit based marketing strategy. The current operations strategy seems to have worked perfectly to the advantage of the company. Todays leaders can learn a crucial lesson from Theodore Roosevelts approach to building the Panama Canal.
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