09-039 March 5, 2009
CEMEX: Globalization “The CEMEX Way”
Donald R. Lessard and Cate Reavis
When one wants to globalize a company, especially when it is from a developing country like Mexico, you really need to apply more advanced management techniques to do things better. We have seen many cement companies that use their capital to acquire other companies but without making the effort to have a common culture or common processes, they get stagnant. 1 —Lorenzo Zambrano, Chairman and CEO CEMEX On June 7, 2007 Mexico-based CEMEX won a majority stake in Australia’s Rinker Group. The $15.3 billion takeover, which came on top of the major acquisition in 2005 of the RMC Corporation – then the world’s largest ready-mix concrete company and the single largest purchaser of cement – made CEMEX one of the world’s largest supplier of building materials. This growth also rewarded CEMEX’s shareholders handsomely through 2007, though its share price had fallen precipitously in 2008 in response to the global downturn and credit crisis coupled with the substantial financial leverage that had accompanied the Rinker acquisition. CEMEX’s success over the 15 years from its first international acquisition in 1992 to the Rinker acquisition in 2007 was not only noteworthy for a company based in an emerging economy, but also in an industry where the emergence of a multinational from an emerging economy (EMNE) as a global leader could not be explained by cost arbitrage; given cement’s low value to weight ratio little product moves across national boundaries. Much of CEMEX’s success could be attributed to how it looked at acquisitions, and the post-merger integration (PMI) process that ensued, as an opportunity to drive change, and as a result, continuously evolve as a corporation. Since it began globalizing its operations in the early 1990s, the 1
John Barham, “An Intercontinental Mix;” Latin Finance, April 1, 2002.
This case was prepared by Cate Reavis from published sources under the supervision of professor Donald R. Lessard. Professor Lessard is the Epoch Foundation Professor of International Management. Copyright © 2009, Donald R. Lessard. This work is licensed under the Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 Unported License. To view a copy of this license visit http://creativecommons.org/licenses/by-nc-nd/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
CEMEX: GLOBALIZATION “THE CEMEX WAY”
Donald R. Lessard and Cate Reavis
company had been praised for its ability to successfully integrate its acquisitions by, at one and the same time, introducing best practices that had been standardized throughout the corporation and making a concerted effort to learn best practices from the acquired company and implement them where appropriate. Known internally as the CEMEX Way, CEMEX standardized business processes, technology, and organizational structure across all countries while simultaneously granting countries certain operational flexibility, enabling them to react more nimbly to local operating environments. In addition, CEMEX was known as an innovator, particularly in operations and marketing, and the CEMEX Way encouraged innovation, particularly if it could be applied throughout the firm. For CEMEX, the resulting innovation and integration process was an ongoing effort as it recognized the value of “continuous improvement.” The development of CEMEX’s growing international footprint and the associated learning process could be divided into four stages: Laying the Groundwork for Internationalization, Stepping Out, Growing Up, and Stepping Up. (See Table 1.) This case details how CEMEX has exploited its core competencies, initially generated at home, and enhanced these with learnings from new countries, to begin the cycle again. Table 1 CEMEX Internationalization Timeline
Stage Laying the Groundwork
Key Steps in...
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