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Cemex case study AGW662

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parisa minoochehr

on 14 May 2014

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Transcript of Cemex case study AGW662

by: Parisa Minouchehr Cemex (A) : Building a Global Latina Competitors analysis Strategic Implementation Industry Analysis Mergers and Acquistions
Cemex M&A General Environment Focus of Analysis What type of firm and what geographic location should an acquisition be considered? If decides to purse an acquisition.
Should they take the next step in becoming a “global Latina” with a major acquisition in a developed country?
Should they build on its emerging markets expertise and search for a turnaround opportunity in a developing economy? Introduction CEMEX is one of the three largest cement companies in the world, with more than 77 million metric tons of production capacity. Through operating subsidiaries in four continents, CEMEX is engaged in the production, distribution, marketing, and sale of cement, ready-mix concrete, aggregates, and clinker.
It is also the world’s largest trader of cement and the world’s leading producer of white cement. CEMEX’s mission is to serve the global building needs of its customers and build value for its stakeholders by becoming the world’s most efficient and profitable cement company. 3 Major Competitors: Lafarge of France, Holcim of Switzerland, and HeidelbergCement out of Germany Product SWOT ANALYSIS
Global crisis
Competition( strong European competitors
Increase costs of energy
Weather conditions

Developed market
China
More emerging markets
Spanish public fund

Seasonality or dependency on weather
Debt
Lack of presence in more developed market
Minor presence in Asia Global (International diversification)
Focused product line
"Cemex Way"
Balanced sales
E-Business strategy SWOT ANALYSIS GLOBALIZATION “THE CEMEX WAY” Since 1992, when we acquired Valenciana in Spain, we have made 15 significant
acquisitions. We have learned a lot from each of those transactions, as well as from the
transactions we did not do.
• We have learned how to identify potential value and network synergies in an
acquisition opportunity.
• We have learned how to stick to our disciplines during the bidding and
negotiation process.
• We have learned how to integrate new acquisitions, with increasing speed and
efficiency. Situational Analysis
General Environment
Industry Analysis
Competitor Analysis
Internal Analysis
S.W.O.T
Strategy Formulation
Strategic Implementation Threat of New Entrants Barriers to entry:
-Few very large firms (CEMEX +3)
-High degree of product similarity
-Low switching costs
-Existing firms highly integrated
Expected Retaliation:
-Low in developed economies
-More likely in developing economies where demand for product is higher Threat of Substitute Products -Products are very similar in nature
-CEMEX name has strong brand recognition
-CEMEX uses names of acquired firms if the
posses strong brand recognition Bargaining Power of Suppliers All large players in the industry have high levels of vertical integration from extraction of resources to distribution channels Intensity of Rivalry Among Competitors -High degree of similarity among all major firms
-Slow growth in developed markets
-Fixed costs can be great
-Very little differentiation and low switching costs
-Stakes are high in developing countries Bargaining Power of Buyers Low
-Large firms
-Similar Products
-Commodity Product Strategy Formulation Strategic Alternatives
#1 - Diversify into Service Sector
#2 - Continue Acquisition with focus on Potential Geographic Demand Alternative #1
Diversify into Service Sector
(Related Constrained)
moderate diversification
build/extend to create value
cost saving by sharing resources
Grow business in existing locations
Deleverage
Gain what limited market share is available in Developed Countries
Potential to apply diversification to other markets Alternative #2
Continue Targeted Acquisition
By specific growth regions Continue Acquisition
Specifically Asia Pacific Developing Markets Continue Expansion into Developing Markets Asia Eastern Europe
1982 economic crisis forces Mexico to liberalize economy and attract foreign investment
European firms wanted part of the Mexican market
Mexico Peso crisis
Asian economic crisis 1997-98 neg impact on construction
Different market demand between developed and developing country Different countries policy about FDI
Restricted foreign competition
1994 NAFTA
Health and safety work
CSI (Cement Sustainability Initiative) for audit global carbon emissions Political/Legal •Different culture and language
•Community contribution
•Social Media Social Eastern Europe
Currently no locations in the area Apply global standards to local management Market share double in EE and Asia Increased profits in cement and ready-mix Name associated in 50 different countries Major target- NorthAmerica The successful acquisition of Cemex Australia – now Holcim Australia – is a significant achievement. The transaction also included the increase in the shareholding in Cement Australia from 50 to 75 percent. strategy focuses on opportunities in emerging markets. 69% of the 2009 consolidated sales of Lafarge Cement Division came from these markets

Significant acquisitions
acquired several small-to-medium sized businesses (India, Middle East and Greece) One of the leading aggregates companies worldwide and improved its position as a global.
Acquisition of Lowest cost Aggregate producer in the world CEMEX’s internationalization was set off with the arrival of its current

Chairman and CEO Lorenzo Zambrano. When he faced important challenges

such as an imminent threat from foreign competitors and a saturated market at

home, he seized the opportunity to transform CEMEX to become a major global

company. Initially, its expansion was mostly directed towards natural and

emerging markets but later moved on to developed countries, mainly through

acquisitions. One of the most important tools for its quick and successful

adjustment to different market environments has been its unique and highly

efficient operations and management system, the “CEMEX Way”. With a unique

business model that relies on IT solutions CEMEX has strengthen its position

among its competitors and become a leading global producer and marketer of

cement, aggregate and concrete products. CEMEX’s strengths are due to five
primary factors: visionary leadership, operational discipline, innovative technologies, business model
innovation, and strong financials. Internal Analysis Technological Going green
Faster communication
More efficient transportation Economic Mission STRENGTHS Opportunities Threats Weaknesses

Cement’s production process and ingredients have remained largely unchanged

Combine limestone, clay, and minerals at high temperature

Grind the resulting “Clinker” with gypsum and the resulting powder is cement Supply

Production is Capital and Energy intense

Companies are vertically integrated

Base materials are comoditties readily available almost everywhere

Road transportation cost almost 1/3 of delivered cost

Specialized ships and distribution terminals have expanded the market

Minimum Efficient Scales (MES) of 1 millon tons per year Advantages:
Stable market
Increase market share
European Union Increase presence in Europe Short-term
Send in diverse team of specialists to evaluate possible acquisitions.
From strategic alliance with major European bank.
Long- term:
Restructure acquisitions to fit CEMEX needs. Alternative Choice
A combination of the 1&2
Diversify to a building material supplier
Acquire companies offering related products
Ability to offer the entire job
Allows for growth in Developed markets
Focus on Acquisitions in Asia Pacific and Eastern Europe. Alternative Choice Thank you for your attention Tangible Resources More than 40,000 employees world wide
61 cement plants, 1,899 ready- mix concrete facilities, 221 land distribution center , 69 marine terminals
371 aggregates quarries Intangible Assets Brand name
Expertise in acquisitions
Sustainability initiatives After acquisition, Post Merger Integration teams were formed to improve the efficiency of the new operation .
Teams were made to help adapt company to Cemex's standards and culture.
The integration process involved 3 steps: Harmonization of cultural beliefs,, improvement of plant situation, and the sharing of basic managment principles.
Cemex used PMI as a way to have continuous improvement at all its sites, and treated older sites the same way as newly acquired ones Cemex Integration Early on most markets acquired were in Spanish or English speaking countries.Later on they encountered new experiences when they moved to markets with different languages and religions. Social Market Comparison Why Global?
Why acquire?
Overcoming M&A problems
Where do we go from here? CEMEX Competitive Advantage Cemex brand name
Sustanability initative
World largest "Ready Mix" concrete
IT investments
Global positioning satellites to link dispatchers, and customers
Organizational structure
Ability to succeed in developing countries Climate change (rehabilitation, air pollution, waste mgt)
Alternative fuels and renewable energy Envirnment Lorenzo Zambrano The CEMEX Founder What type of firm and what geographic location should an acquisition be considered? If decides to purse an acquisition.
Should they take the next step in becoming a “global Latina” with a major acquisition in a developed country?
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