BUSN 427 WEEK 3 Case study

Topics: Investment, Foreign direct investment, Theory Pages: 2 (506 words) Published: December 19, 2013
Case Study Summary:
Mexico’s largest cement manufacturer, Cemex, has become a global powerhouse in the cement and construction industry. It currently controls 60 percent of the cement industry in Mexico (Hill 2009). Cemex’s success is a result of a combination of efficient technology such as radio transmitters, satellites, and computer hardware that allow the company to anticipate changes in supply and demand and reduce waste. Cemex’s success is also a result of an attempt to dominate the industry by acquiring and buying out competitors worldwide in order to expand. a.Which theoretical explanation, or explanations, of FDI best explains Cemex’s FDI? I believe that internalization theory best explains Cemex’s FDI because Cemex has taken the initiative to enter into many countries and instead of licensing; they bought domestic cement businesses and have grown into a worldwide powerhouse. According to the textbook, internalization theory explains why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets (Hill 2009). With the advanced technology that Cemex uses, so licensing would not be the greatest avenue for the company to take in order to protect it’s “technological know-how” (Hill 2009). b.What is the value that Cemex brings to the host economy? Can you see any potential drawbacks of inward investment by Cemex in an economy? Cemex is the third largest cement company in the world, and a powerhouse in Mexico where it controls 60 percent of the market. Cemex is highly focused on efficient manufacturing and customer service. Distributors are rewarded for their sales, as are users. The primary benefit Cemex brings to host countries involves these competitive advantages. Cemex acquires companies and then transfers technological, management, and marketing know-how to the new units, improving their performance. The company has brought several acquired companies back to full production, increasing employment...

References: Hill, C. W. L., Richardson, T., & McKaig, T. (2009). Global business today. Toronto: McGraw-Hill Ryerson.
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