The globalization of CEMEX Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

The globalization of CEMEX Case Study Solution

Introduction:

The Cementos Hidalgo was formed in 1906, which later merged with Cementos Portland Monterrey and named as CEMEX, the initial production capacity of the company was almost 5,000 tons per year, the capacity of the company in the late 1980’s reached to 15 million tons per year which makes the company one of the biggest company in the world operating in this sector and the biggest company in the Mexico. Since its incorporation, the company undertakes various strategies to expand the operations, the company begins to export the cement to other parts of the world which mainly includes U.S. On the other hand, the management also acquired various companies operating in the same sector in order to sustain the competitive advantage for long-term.

In addition to this the management was also keen to reduce the risk and reliance of the company from the cement industry and acquired various companies operating in the petrochemical, tourism and mining industry. However, the senior management was not satisfied from this diversification and turned to the cement sector shortly.After the under performance of the diversified portfolio, the management exploit the international cement market and acquire many companies in the cement sector in various countries. This strategy also enabled the CEMEX to successfully face the economic recession in the Mexican market, CEMEX was one of those companies in the Mexico which were profitable during that financial crises.

The local and international cement industry both are affected by the intense competition, although the number of players in both the market are high but the rivalry among the competitors can be regarded as low. The biggest player in the market sets the prices of cement and all the remaining players adjust the prices set by the biggest company to make product profitable. Furthermore, the demand of the cement appears to be low in the developed countries while the demand is forecasted to grow at a good rate in the developing countries. The demand of cement in the international market is also affected due to the increased production levels of domestic producers. The supply of the raw materials is also affected due to the policies of the government which also results in lower demand for the cements from the international suppliers.

The globalization of CEMEX Harvard Case Solution & Analysis

How global is cement industry:

It can be said that cement industry is highly global, all the large players in the industry have presence in many countries. Apart from the big players, various small producers of cement operates in more than one destination which again increases the globalization of the cement industry. The top three players in the cement manufacturing industry are Holderbank Lafarge and CEMEX operating in many parts of the world, Holderbank operates in more than 50 countries while Lafarge and CEMEX operates in 38 and 15 countries respectively, this geographic expansion depicts the high globalization of the industry. Almost 40% of the total global demand for the cement is fulfilled by the top six manufacturers of cement which depicts the extent of the globalization of the cement industry.

Factors that drives the globalization of cement industry:

The demand of cement is also very high in almost all parts of the world because of the fact that it is one of the main material used in the manufacturing industry except for the developed countries which also increased the extent of globalization of the cement industry. The profitability of the industry is also very high along with the demand which makes this industry attractive for many large companies which are currently not operating in this industry. On the other hand the high profitability and demand also forces companies which are currently operating in this sector to increase and expand their operations. (Nitisha)

It can be said that the main reason for the globalization in any industry is that the industry have very positive growth prospects which pushes the existing companies to exploit these opportunities. Another factor which makes the industry more globalized is the availability of the financial resources to the existing companies, almost all the cement producing companies have large amount of cash reserves and access to the new finance is also relatively easy. Management of those countries wants to capitalize the surplus resources and for this purpose they exploit the geographically dispersed market, thus making the cement industry global.(Pettinger, 2013)

Although the competition in the industry is high but the nature of the competition is very polite and smooth and almost all the players respect each other and design pricing strategies based on the price set by the industry leader, this factor also increases the charm of the industry which makes the globalization even more higher. (hub.globalccsinstitute.com)

Factors that impede the globalization of cement industry:

As there are many factors that increase the globalization of the industry but, there are many factors as well that impede the further globalization of the cement industry which mainly includes the uncertain political condition, the limited reserves of various natural materials used in the production of cement, the condition of climate and the less reliance on the cement. In modern days almost all the businesses and industries are globalizing but there are many factors which makes the pace of globalization very slow................

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