Does CEMEX have a global advantage?

  If so, what is its source or sources?  Explain how CEMEX, a

competitor in the commodity cement and concrete sector, has created a global advantage across multiple
countries.  Explain the primary sources of advantage.  Begin by analyzing Exhibit 4.  (Hint: standardize the
financial at a per ton level.)  What global competitive advantages has CEMEX been able to build and exploit?
How much of a financial advantage have these global competitive advantages created?

EXPLAIN HOW CEMEX HAS CREATED A GLOBAL ADVANTAGE ACROSS MULTIPLE COUNTRIES. AND EXPLAIN
THE PRIMARY SOURCES OF ADVANTAGE. Does CEMEX have a global advantage?  If so, what is its source
or sources?  Explain how CEMEX, a competitor in the commodity cement and concrete sector, has created
a global advantage across multiple countries. (EXPLICAR LAS PRINCIPALES FUENTES DE VENTAJA)

CEMEX is a global building materials company which was founded in Mexico in the early 1900’s. By
the end of 1999, this company operated cement plants in 15 countries, owned production or
distribution facilities in a total of 30 and trade cement in more than 60. After having secured its
leadership in Mexico, CEMEX began to look for opportunities beyond Mexico borders.
Internationalization began with exports, principally to USA and by 2000 CEMEX become the largest
international cement trader in the world, with projected trading volumes of 13 million tons of
cement. For that reason, its international trade offered opportunities to arbitrage price
differentials across national boundaries.

CEMEX has created a global advantage across multiple countries. An obvious advantage that
CEMEX has achieved is diversification. CEMEX knew that they had a great deal of competition in
the market, and needed to gain competitive advantage, so diversification has brought opportunity
to reduce the risk of relying on one single source of income. In the first year, they began to
diversify horizontally into areas such as petrochemicals, mining and tourism in order to reduce the
risks related to its dependence on a highly cyclical core business. But then geographic
diversification was preferable to horizontal diversification.

For that reason, thanks to its strategy of geographic diversification, CEMEX gained significant
expertise and access to natural resources in global expansion by trading in USA (1970’s), Spain
(1991) and Venezuela (1994). CEMEX achieved sustained competitive advantage by acquiring
existing capacity in various countries, with the global standardization strategy to make a global
product but tailored to customer needs by adopting following steps:

i) Focus on countries with large population growth, low current consumption, enter
similar markets using CAGE framework for better risk management;
ii) Gain access to cheap labor, natural resources, leveraging on advanced technology
and logistics;
iii) CEMEX strategically consolidated its position in Mexican market first (acquiring
the 60% share by 2000), expanded in various geographies developing better tools
to identify opportunities, codified its post-merger integration (PMI) process,
increasing operational efficiency and product differentiation, utilizing its core
capability to speed up these processes(AÑADIR AQUI LO DEL PROCESO ESE);
iv) Acquired new core competencies and invested heavily in IT and satellite system to
enable faster communication
COMPETITIVE ADVANTAGES QUE HA SIDO CAPAZ DE BUILD AND EXPLOIT

The following attributes were also important in proceeding with an analysis of Cemex’s
international strategy development: aggregation, arbitrage, adaptation/responsiveness, and the
spread of learning across divisions and borders.

Aggregation The attribute of aggregation takes advantage of standardizing products across

national operations. This attribute has been critical to the success of Cemex’s internationalization
process. In addition to taking advantage of a standardized product sold and produced worldwide,
Cemex developed an integration process known internally as the “Cemex way”. A constant thread
over the course of this analysis is that acquisition has been the key means of expansion in this
industry, due to a need to be located close to the end consumer. Bearing that in mind, Cemex has
made many acquisitions over the course of its history, and has been praised for the Cemex way,
which is the post merger process that introduces best practices and brings new plants in line with
the standardization of the rest of Cemex’s assets (Lessard & Reavis, 2009). Cemex has 25
successfully utilized the attribute of aggregation in their standardization of products and operating
procedures worldwide.

Arbitrage Arbitrage advantages, or location advantages from sourcing in countries with cost
advantages, has not been a viable method of expansion for Cemex. The low weight to value ratio
of Cemex’s products has not enabled the company to take advantage of the arbitrage effects
usually possible in international corporations.

Adaptation/Responsiveness For the most part, cement, concrete, and aggregates are a
‘standardized’ product, and in that sense the pressures for globalization are fairly high. However,
there are still local preferences and tastes that Cemex needs to incorporate into their product
offering if they are to be successful. For example, “consumers in Egypt preferred darker cement
believing it was of higher quality whereas Mexicans preferred light colored cement” (Lessard &
Reavis, 2009). Cement companies, including Cemex, have had to be prepared to meet local
preferences, even though they compete in a fairly globalized and standardized category.

Spreading Learning Cemex has been effective in transferring best practices and maintaining
standardization of procedures and operations as can be seen in the aggregation section of this
report. In addition to spreading learning through the Cemex Way, the 2013 Annual report states,
“each of our business units continually works to perfect and present new, innovative building
materials for their specific markets (Cemex 2013 Annual Report). The successful results of these
trials are then incorporated throughout the organization and enable customers to achieve better
quality 26 results and to generate savings (Cemex 2013 Annual Report). In an organization the size
of Cemex, spreading learning from headquarters to subsidiaries and vice versa could become very
complex or non-existent. Cemex has developed a manner to allow regions to not only receive best
practices, but also take a part in developing them.

.  Begin by analyzing Exhibit 4.  (Hint: standardize the financial at a per ton level.)  What global competitive
advantages has CEMEX been able to build and exploit? How much of a financial advantage have these global
competitive advantages created?