Management Focus on Cemex
c) Cemex has a strong preference for acquisitions over greenfield ventures as an entry mode. Why? Cemex, as many other companies, prefers to acquire existing assets of a firm at the hosted country rather than undertake greenfield investments. This Mexican cement manufacturer, realized there was a huge demand for cement in developing countries such as Colombia, Indonesia, or Egypt. Given their capacity to respond quickly to unanticipated changes in demand and because they came from a county with similar characteristics, Cemex believed it would be able to understand the needs of construction businesses in this developing countries much better than the established multinational cement companies which were from developed countries. They chose acquisition over greenfield investment because they though this way they could create a significant value, by acquiring inefficient and stagnant cement companies in other markets and transferring its skills in customer service, marketing, information technology, and production management to them. This was the main reason why Cemex chose this option, but there many other reasons behind the main one. Basically, a company prefers acquisition rather than greenfield investment for three important reasons: 1. Acquiring an existing company is much quicker and requires less effort than executing greenfield investment, which is a positive factor when competing with other companies than could be interested in acquiring the same firm. 2. Executing acquisitions of existing firms with valuable strategic assets such as brand loyalty, customer relationship, trademarks on patents, etcetera, involves less risk than to build them from scratch. 3. And lastly the season mentioned above: Because companies believe they can increase the efficiency of the acquired unit by transferring them their know-how. d) Why is majority control so important to Cemex?
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