cemex strategy analysis
CEMEX also developed a sophisticated trading arm that has protected it against much of the volatility that threatens cyclical commodity businesses. Founded in 1906, the company did business nearly exclusively in its home country until the early 1980s; even then, it moved past the national boundaries very tentatively. Our social impact strategy focuses on enhancing . Each of these three members registered groups had to make a commitment of contributing 120 pesos per member per week for 70 weeks. Distribution costs have greatly been reduced in the process boosting the earnings of the company. Today, were at over 28 percent alternative energy use, the highest among our competitors. Joann (2009 para.1, 2), points out that innovation in packaging can transform a product from a commodity-driven product to a premium product category. Our capabilities can help us orchestrate infrastructural offerings in a way that others cannot. We would identify people in their field operations who had exceptionally smart approaches to doing things. In the early 1990s, Mexico had very high inflation. The buying off spree could spark off a wave of loss-making if not carefully approached. The rapid expansionary strategy could also pose a challenge to the financial position of the company and also cause bottlenecks in management. Type above and press Enter to search. CEMEX's Coherence Profile. They thought nothing would be lost if they did their closings on the seventh or eighth day. Under Lorenzo Zambrano who took the helm as CEO in 1985 and remained in office until his death in May 2014 at age 70 CEMEX embraced information technology and inorganic growth. Cost-cutting measures must be integrated into the business operations to avert further loss in revenues. This article was developed as part of the Strategy& Capable Company Research Project, aligned with the forthcoming book. Beginning with a brief history of Cemex. The flow of transfer of the best management practices has been facilitated by the Cemex way program whose implementation has been quite successful. Who has decision rights over what, and how is the work done? PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. There is often a not in my backyard mentality on the part of government officials. The first three months are key. What made it unknown but a massive banker? Change your questioning habits. Its strong presence in the market has also helped in boosting the product image and helped it to rise from the shadows to become the third-largest cement company in the world. How? You have to train them. Step 4 - Designing a Marketing Mix using 4Ps - Product, Price, Place & Promotion. Step 5 - Sustaining Value through Post Purchase Services. The millennium development goals were originally developed without recognition of the role that the private sector could play. Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations. suggest strategic options for Cemex moving forward. In addition, it has enabled the company to achieve a high integration rate of its acquired units along with standardization of managing practices and quality across its holdings. January 2014. This was especially important because RMC was in 18 countries, and its people didnt talk to each other. CEMEX, by far the most profitable of the multinationals in the cement industry, seemed like the ideal case to study to understand this anomaly. When youre running a hyperlocal business like ready-mix concrete and aggregates, you cant allow that to happen. A good example is the emphasis we put on closing the books on the first or second day of every month. We have become experts in using pet coke. Because we had such a high cost of capital, the only way to keep on growing through M&A was to extract a lot of value quickly. The peso crisis had hit, and Mexican companies had a hard time accessing the financial markets. In contrast, the non-trade sales are contributed by large institutional projects, which buy directly from the company, in most cases. Three tons of concrete are poured each year for every person on earth. Its critical that we retain the talent and the way they think. We also know that concrete pavements, compared with asphalt roads, are far more energy efficient; they reduce vehicle fuel consumption and carbon dioxide emissions. CEMEX: Transforming a Basic Industry Company case study (referred as "Cement Cemex" for purpose of this article) is a Harvard Business School (HBR) case study covering topics such as Strategy & Execution and strategic management. Despite the expansionary moves undertaken, Cemex continues to rely heavily on the Latin market with about 68% of its global sales coming from the Latin market. For more details on Cemex Solar PV Park, buy the profile here.. About Cemex SAB de CV Cemex SAB de CV is a manufacturer of building materials.It manufactures and sells cement, ready-mix concrete, aggregates, clinker, and related building materials. Three key areas of improvement were identified; It is a known fact that the low-income segments lack financial discipline and hence, not considered to be creditworthy. Headed by Francisco Garza Zambrano and a consulting team from Business Design Associates, CEMEX performed in-depth market research, which provided key insights into serving this segment profitably. Why? That gave us some big advantages. Low: The nature of cement as a key component in construction has eliminated any serious threats of substitutes. Mentions of Strategy& refer to the global team of practical strategists that is integrated within the PwC network of firms. Part of this stemmed from legal barriers that broke down, paving the way for international competition. And the practice had a very high-level overseer: Mr. Zambrano himself, into whose email inbox all of these reports flowed. The best form of savings that a low-income Mexican family does take the form of tandas a local neighborhood, family, and network of friends who pool money if and when they have to create an informal mini-corpus. Our subjective dominant logic, shaped by our own ideologies, experiences, interactions, and source of knowledge, has partially restricted our idea of poverty to the rural world. 1. As Prof. Prahalad says, the very assumption that the rural population is primarily poor and the urban population is relatively rich is a fallacy. CEMEX realized that women are the key drivers of savings in families, and particularly in Mexico, they are highly entrepreneurial. They are ancient (dating back to at least 3,000 B.C., they form the literal foundation of civilization), energy-efficient, durable, versatile, and inexpensive. Elizondo: Construrama, our retail distribution brand, was another solution-oriented approach. Capabilities System Step 7 - Organizing & Prioritizing the Analysis into Globalization of CEMEX Case Study Solution. As a bold cultural innovation, CEMEX modified the existing tanda system and renamed it Patrimonio Hoy, in 1998. Thanks to our operational efficiency and to the discipline we were starting to drive with the CEMEX Way, we still had some headroom. 9) observes. However the need for branding set in later with the launch of aggressive campaigns to promote the company brand in Mexico through the placement of the Cemex brand on its products and items ranging from cement bags, delivery trucks, and soccer stadiums (Cemex Cement Company, 2008 para.1). But that would require generating a separate internal campaign for each new product. Medium: The current economic crisis has crippled the buyers power of consumers to dangerous levels. A solution, by contrast, cannot be that easily replaced. It was very necessary to analyze the competitors in order to plan more effective marketing strategy. For . Globalization: The Strategy of Differences, 2003. Its just what happens when you have the right people in the right positions. The conventional distribution system in which the distributors primarily cared about prices and discounts and the industry was driven by a price war, seemed to be a misfit. The next step is organizing the solution based on the requirement of the case. But when the financial crisis struck, and our expenses proved too high, it forced us to become much more focused on knowledge sharing to remain effective. High: Increased aggressiveness in marketing has led to an increase in the rivalry between the market players as they seek to protect their traditional domains. Its major competitors are mainly Lafarge from France and Holcim from Switzerland. During 2008 and 2009, the company staved off bankruptcy through a series of major cuts and refinancing efforts. CEMEXs global expansion represented a 180-degree turn for a company whose very name is an abbreviation of Cementos Mexicanos. In value-based pricing, products are price based on the perceived value instead of cost. When the real problem isnt the obvious one, Why businesses need to help employees build friendships, Clocking out: Millennials and the workforce. Then we started buying up cement companies throughout Mexico. Sign up now to get our top insights on business strategy and management trends, delivered straight to your inbox twice a week. Mexico, like many other developing economies, still hadn't generated much outbound foreign . With its presence in 50 countries and recording a $2.11 billion profit in 2006, the company strategies seem to have largely succeeded. By contrast, ready-mix and aggregates are hyperlocal businesses, and a best practice in one place might not be a best practice in another. What is it then? With a wealth of accumulated experience from long years of service in various positions in the company, he has steered on the business to become a global cement manufacturing giant to reckon with. CEMEX: Building Solutions. Were moving out of the realm of a recipe into the realm of a playbook or guide. The new system demanded distributors to have excellent delivery capabilities, the high storage capacity of raw materials and inventory, and a good understanding and appreciation for this new low-income segment. In the context of its CSR strategy, CEMEX builds "a better future, ensuring our society's sustainability, wellbeing, and quality of life" (CEMEX, 2019a: p.57). Well write a 100%plagiarism-free paper this fast! BusinessEssay, 13 Dec. 2022, business-essay.com/cemex-companys-strategic-analysis/. 2.Regulatory framework is very unpredictable. de C.V. Nike doesnt sell shoes. Press Esc to cancel. Were constantly moving, constantly looking to be better. Is Michelin Star by the same Michelin that sells tires, yes, it is! Though fewer big-ticket customers could generate most of the companys revenues, the situation is just the opposite for low-income customers. We say, We want to learn from you. But we also teach. 3.All major competitors of Cemex are increasing their operations in Mexico, so it might face tough competition in near future. The potential of this colossal low income relatively unserved market was also accompanied by its own set of challenges. The company began with the establishment of Cementos Hidalgo in 1906. The French managers didnt talk to the German managers, who didnt talk to the British managers, and so on, down the line. Strategy or Culture: Which Is More Important? Current branding and repackaging exercises have so far shown generous results. Theyll put in more rules, procedures, and standardization. A version of this article appeared in the Summer 2015 issue of strategy+business. Mr. Zambrano recognized NAFTA for the huge strategic threat it was. BusinessEssay. Web. Strategic Analysis of Cemex Case Solution,Strategic Analysis of Cemex Case Analysis, Strategic Analysis of Cemex Case Study Solution, Introduction Cemex was founded by Lorenzo H. Zambrano in 1906. Were not just selling cement or ready-mix; were helping you build a street or a home.. So, it is obvious for impoverished with very little money to not get considered a customer ever, for something like cement. Step 3 - Marketing Plan. It sells an idea!! What is this strategy and how Nike has used it? Luis Hernandez: The CEMEX Way, which we developed to address all this, was a collaborative effort. From 1985 onwards Lorenzo Zambrano took over the family business as the CEO having joined the company in 1968. How does Vinted make money by selling Pre-Owned clothes? It is all evident in its integration of information technology in its ready mix and cement business. 2. For more about Strategy&, see www.strategyand.pwc.com. Limitations of SWOT Analysis for CEMEX, S.A.B. Balanced Scorecard analysis of Cement Cemex is a comprehensive effort to integrate and align strategy and operations. The core aim was to document the best business practices to share them across the organization globally. Early on, for instance, we realized we should use the same team of people, from planning, accounting, IT, and operations, for each acquisition. Ghemawat, Pankaj. Nevertheless, Cementos Portland Monterrey commenced operations in 1920, and the two firms combined in 1931 to form . All rights reserved. The emerging markets of Venezuela, Panama, the Dominican Republic, and Colombia present an opportunity for the company to dig deeper into the markets and earn more revenues. The bullish in these economies has seen a dramatic rise in appetite for cement in the construction industry. It was also necessary to take a cut in commission to serve this segment, which would be compensated by volume of business. On the same note, undercapitalized companies the world over are either closing shop or being taken over by industrial giants to save them from imminent bankruptcy. No matter how great the product was!! Our analysis shows that pursuing digitization and sustainability levers are key to significantly boosting productivity and efficiency of a typical cement plant (Exhibit 1). Huge market expansions also come with an increase in administration costs which dilutes the profit margins of the firm by increasing the operation cost. That will not just create a requirement for CEMEX; it will also create opportunities. Cemex is committed to achieving carbon neutrality through relentless innovation and industry-leading research and development. Cemex operates within a stiff globally competitive arena full of challenges emanating from among others the current global recession and the surging energy prices as a result of escalating fuel prices. Johnnie Walker is a 200 years old brand but it is still going strong with its marketing strategies and bold attitude to challenge the conventional norms. Why does Teslas Zero Dollar Budget Marketing Strategy work? But we quickly saw RMCs energy strategy as a capability we could adopt. Of worth noting is the speed at which they have been able to integrate acquired firms in its system. Product diversification of the firm especially with the launch of Cemtec Company and the new venture to the manufacturing of construction machinery has helped the company to spread its risks besides broadening its new revenue base. environment and situation in which Cemex competes. These included the closing of the books, accounts payable, and most technology-related activities. That was making us less efficient. San Agustin: By 1999, having done acquisitions in Asia, Latin America, Europe, and the U.S., we had become very decentralized. Freedonia Group Inc. (In 2014, the company reported US$2.7 billion EBITDA on revenues of $15.7 billion.) This has forced industries to reduce their output meaning a reduction in revenue. For example, within ready-mix, Shift has a track for value-added products. Hernandez: Capabilities dont exist in a vacuum. Mr. Zambrano talked about going from being an elephant to being a greyhound. We needed a new kind of executive, connected with the environment, who understood the real needs of any given locality. Standardization has a counterproductive effect of discouraging innovations by acting as a disincentive to new initiatives especially in the realm of management. The role of an acquisitions leader included incorporating those practices back into the CEMEX Way. This could hamper the development of new products and in the process inhibit future expansions.