1. What benefits have CEMEX and the other global competitors in cement derived from globalization? More broadly, how can cross-border activities add value in an industry as apparently localized as cement? (Question for Analysis)
The oligopolistic nature of the cement business dictates the limited notion of business strategy, however CEMEX, one of very few cement producers found that through globalization, a variety of benefits can be obtained and utilized to their own. Expanding to the global market was a vision in which Zombrano (CEMEX former CEO) capitalized and was able to add value into the industry in a variety of different practices. CEMEX aggressively took the risk to expand their global exploits from the means of economic speculation during the 1980s-2000 period. Through globalization they were able to build an impressive portfolio and further benefit from each acquisition. More importantly as a homogenous product in cement, the building market during the 1980s and 90s was relevant and needed in developing countries with considerable growth opportunities. This is highlighted in their endeavors with the takeover of Valanciana and Sanson in Spain (1992). Spain, a part of the MEU (Monetary European Union) highlighted investment potential as currency rates along with risk premium were considerably low. The lower cost of capital in the merges posed further potential for funding elsewhere at affordable rates. Investments in any Country apart of the MEU could have been beneficial, however, CEMEX strategically pursued developing countries with potential for economic growth. A core benefit of their globalization practices indulged with reducing costs and increase plant efficiency to a much greater extent. Inducing their very own Mexican based best practice into the Spanish operation CEMEX recorded annual savings/benefits of $120million and increase in operating margins from 7% to 24%. Interestingly enough, their benefits didn’t reside only in increased...
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