Cemex Case Study Analysis

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Global Competitive Strategies

EXTERNAL ANALYSIS

PESTEL ANALYSIS
Political factors:
-restriction and regulation of imports, exports and trade tariffs decide whether a company can compete globally: eg. GATT agreement in 1989, Mexico-open marketplace, enabled Cemex to expand globally.

- governments may decide to nationalize or privatize the cement production; eg. Venezuela nationalized cement production.
- political stability of a country will highly affect the performance of the industry

Economic factors
-any firm in the industry is highly dependent on the economic performance of country/countries it operates in ( changes in expandable income, performance of firms within the country are affected).

-emerging economies provide great opportunities for growth in the industry; expanding infrastructure.
- fluctuating exchange rates also impact performance
- rising costs of production and capital affect a firm’s competitiveness

Social factors
-Demographics: can affect things such as the size of the labour force, the demand for housing, etc. all of which have an impact on the cement industry.

Technological factors
-The technology used in the production of cement is constantly evolving; innovations can impact cost and quality of products. -Innovations in technology of information systems have an impact on costs of distribution and provide added value for the consumers.

Porter’s Five Forces (industry analysis)- The key determinant of a firm’s profitability is the attractiveness of the industry it operates in; 5 forces model assumes that industry attractiveness and the firm’s competitive position within the industry are influenced by 5 forces: 1.Entrance of new competitors:

Barriers to entry are relatively high:
a.High capital costs (capital requirements) +
b.Low efficiency industry: the minimum efficiency level is aprox. 1 mil. tons a year + c.High transportation costs and logistics +
- the benefits of generating economies of scale would be very high in the industry d. low product differentiation within the industry –
-make global cement production fragmented, the four largest producers account for only 23% of overall demand e. the technology used in the production of cement is constantly changing; high R&D costs + f. access to distribution channels depends highly on the location of plants and resources; plants need to have competitive location + - if plants are near water distribution channels, the costs are significantly diminished

2.Bargaining power of buyers:
a.Cement is very much considered a commodity or consumer product, variation depending on geographical region; buyer concentration is relatively low, therefore buyer power is also lower. + b.Due to low supplier concentration and low product differentiation, buyer switching costs are relatively low and consumers are more price sensitive, which adds to the bargaining power of the buyers.(the higher the bargaining power of the buyers/consumers, the lower the profitability of the industry) – c.Cement purchases tend to require a substantial amount of buyers’ income, therefore the performance of the industry is highly dependent on the economic welfare of the buyers and the performance of the economy in general.

3.Bargaining power of the supplier:
a.Low concentration of suppliers means that suppliers have relatively low bargaining power – b.Low concentration of buyers means that buyer bargaining power is relatively low + 4.Rivalry
a.Generally, supplier concentration in the industry is low; however, if you look at integrated cement production, suppliers are concentrated (aprox. 1500, out of which 4 are main global players). In terms of global players, rivalry is high. 5.Threat of substitutes

a.Given the fact that cement is necessary for the construction industry and the development of infrastructure all over the world, it is unlikely that it will be substituted in the near future.

Opportunities
- huge growth...
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