The Globalization of cemex

Topics: Due diligence, International trade, Capacity utilization Pages: 4 (1320 words) Published: October 31, 2013
The term global industry refers to an industry where a firm’s competitive position in one country is affected by its position in other and vice versa.

Limestone, clay and other raw materials needed for the production of cement are present in many regions of the world and therefore cement used to be produced locally. Cement companies often owned raw material quarries and located their production facilities close by to minimize materials handling. Furthermore the high transportation costs of cement causes firm to operate in a domestic industry, without international cooperation. However the cement industry started to evolve in an international industry during the 1970s. At this time European cement firms began to enter the United Stated as the U.S cement industry had fallen into a crises as profitability dropped with the collapse in prices, and domestic firms responded by lowering investment in cement and diversifying into other lines of business. This resulted in shortages in some regional markets and provided an opening for European cement firms that had remained strong and were looking to expand.

The internalization of the cement industry continued in 1997 and after the summer of 1998 the largest and most concentrated wave of cross-border investment ever began in South East Asia. International players had their eye on this market for many years, but had been unable to justify the entry premium—some companies in the region had been valued at up to $300 per ton of capacity on an enterprise value basis. The Asian crisis that began in 1997 changed the situation dramatically and gave the international players the opportunity they were waiting for.

By 1999 the cement industry had emerged six major international competitors: Holderbank, Lafarge, CEMEX, Heidelberger, Italcementi, and Blue Circle. These six majors owned 500 million tons of capacity, representing slightly over one-quarter of the world total, or over one-third of the total excluding...

Citations: • This report is compiled out of citations from The Globalization of Cemex case, Harvard Business School, November 29, 200
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