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Cemex Strategy

Essay by   •  November 11, 2011  •  Case Study  •  323 Words (2 Pages)  •  2,004 Views

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CEMEX built a global business of selling cement, ready mix and aggregates. It became a large cement manufacturer with facilities in United States, Europe, Latin America, Australia and Asia. CEMEX's growth began in late 1970's when it decided to modernize its plants and gain a significant market share in Mexico. Lorenzo Zambrano became the CEO of CEMEX in 1985 and started re-engineering its business processes by focusing on its customers and market needs rather than manufacturing. Zambrano made investments to build the most modern cement operations plant and clean technology. Zambrano acquired smaller Mexican companies in an effort to gain further market share.

The initial acquisitions gave Zambrano the impetus to improve operational efficiencies by establishing benchmarks to compare plant operations and to share best practices between plants. Zambrano also concentrated on its core business of cement and divested other businesses such as hotels, mining and petrochemicals.

CEMEX established a global footprint by making acquisitions at bargain basement deals. It cut management positions and increased operating margins of the acquired companies. CEMEX also effectively reacted to problems such as imposition of tariffs in U.S. by mobilizing its sales to locations such as California and Arizona to get high-prices for its cement. Another instance was during the Peso currency crisis when the company grew sales due to its market power and acquired another cement manufacturing company in Mexico.

CEMEX used economies of scale and improved its operational efficiencies by investing heavily in Information Technology (IT). It successfully "Internet-enabled" its businesses and gained a strategic advantage over its competitors. IT helped CEMEX to maintain its operating margins at more than twice the industry average.

CEMEX's global expansion gave it a further advantage as it had access to the cheapest sources of finance. It listed on NYSE to improve its financial liquidity and pay down debt. The liquidity position helped CEMEX fuel its growth and make additional acquisitions by financing via syndicated loans and preferred equity.



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