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Elena Chu

on 6 December 2013

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Transcript of Lafarge

MACC1 Group Presentation

From a French Cement Company to a Global Leader

Group 2: Kartik Aggarwal
Yao Chen
Wei Chu
Chen Shen
Question 1
What are the main characteristics of Lafarge's internationalisation strategy and competitive competence and how do these differ from those of other cement companies such as Cemex and Holcim?
Question 2
What were the assumptions underlying Lafarge's strategy and how justified were these?
Question 3
To what extent is Lafarge a French company with foreign operations, as distinct from a global MNC, and how is it likely to develop as a MNC?
Question 4
What were the implications of Lafarge's growth for internationlisation of other French firms?
Internationalisation Strategies:
1. Acquisition

2. Divestment

3. Restructuring

4. Networking

5. Information collection and Data analysis

6. Diversified Workforce
Competitive competence
1. Expansion

2. Organizational structure

3. Techological expertise

4. Flexibility

5. Corporate social responsibility
Comparisons among Cemex and Holcim

Lafarge started as a cement company and now it has different kinds of building materials such as concrete, gypsum, aggregates.


- Requirement of construction materials in the developing world would be high

- Enhance market share in a particular market

1. Diversification
Lafarge is considered as one of the best French companies and a leader in the internationalisation process, but it is still
a French company with foreign operations

Lafarge has
not yet been fully implicated the process of globalisation

1. Acquisition
2. Divestment
4. Networking
5. Information collection and Data analysis
a. Mature Markets
-Gain surplus cash flows to finance other activities
-Seek to increase production capacity in each market
-Example: Redland, 1997 (concrete & baked clay tiles)

b. Emerging Markets
-Acquire local cement manufacturers at moderate prices of less than $100 per ton.
-Acquisition in emerging markets provides access to local markets at the lowest possible cost.

-Continuous improvements of performances
-Achieve profitability for new operations
-Restructured its portfolio by divesting 66.67% of its holding in speciality materials
-A new partner company called Materis which composed of 5 businesses: admixtures, aluminates, mortars, paints and refractories.
This strategy was to diversify their business into different products.

3. Restructuring
Lafarge initiated an organizational restructuring process with the help of McKinsey & Co., which began in 1999.
-Divided into 4 divisions and the new organisational structure was to drawn up to facilitate the change process
-The clarification, simplification and formalization of group policy in different departments have accompanied this decentralization.
-A professional and dedicated communication department, which integrates all employees through internet services across the world.
-All internal events and happening are mailed individually and the departments integrate all divisions and plants through their network and database.

-Constant interactions with key professionals in the industry or in the ministry in all countries
-Regular meetings are held with the heads of governments and with finance and industry ministers

-A cement strategy department which is in charge of collecting information and is consolidated at the HQ.
-The data is analysed and used for future presentations and monthly reports.
-There is a yearly meeting of the strategy managers to share and learn about different local businesses.
6. Diversified Workforce

Internationalization of its workforce and to develop managers willing to be mobile and able to operate successfully in a wide variety of markets and people with diverse cultural backgrounds.
1. Expansion
Lafarge did not just focus on emerging markets as did some of the other Global players.
For Example: Britain’s Blue Circle in 2001.
a. Became the Global leader in the construction business with 1/10th of the world market.
b. Remain visible and attractive to investors.
c. Expanding cash flow
d. Geographic presence
e. Dislodging Holcim from the top spot.

2. Organizational structure
Lafarge follows the Participative style of management.
4. Flexibility
With the changing environment Lafarge is quick to understand these changes unlike many other French companies. That is one of the critical strengths of Lafarge.
5. Corporate social responsibility
It is the corporate culture of Lafarge to make employees feel at home. This is very important to the strategic development of the enterprise even though it is a challenge to make and keep them happy.
3. Technological expertise
Lafarge is considered a storehouse of best practises and best specialists in the industry.

Lafarge has a dedicated technical centre called the Cement Technical Centre whose performance is monitored by DPC (Cement Performance Department).
2. Expansion

Acquire local manufacturing companies of building materials in emerging markets as well as mature markets


Transportation cost for cement was assumed to be really high which was as high as 25% of the total cement production cost in the US.
3. Acquisition

Acquisition of existing manufacturers in the market it intended to enter.


Set up a new plant involves a huge capital and cost of production is higher.
1. Management style

'Transition team' is responsible for improving and controlling all transverse operations of the division.

a. Cross-functional team
b. Participative management
Participative management is not decision by consensus. It involves all those who can contribute to a better decision.
2. Strategy
a. Expansion
- Provide access to local markets
at the lowest possible cost
- Product diversification
b. Restructuring
- Maintain decentralized operation
- Restructure program to gain more benefits
3. Media power
a. Press release & External communication

b. Open attitude & Participation

4. Culture and Responsibility
a. Culture integration

b. Relationship and Responsibility
Objective data and description of Lafarge
“(Lafarge is) A world leading in construction materials, covering
75 countries

“Lafarge divided its
global operations
eight regional areas

“In 2002, Lafarge’s annual turnover was 1.46bn euro,
more than 50%
of which was earned
outside of France

“Over the last five years, a group of
six multinational companies
Lafarge (France)
, Holcim (Switzerland), Cemex (Mexico), Heidelberger (Germany), Taiheiyo (Japan), Italcementi (Italy) have established a foundation of
a worldwide network of plants
that will eventually dominate the cement industry in most regions of the world”

Therefore, Lafarge is a large multinational corporation from the perspective of
size and scale

However, as a group has large-scale acquisitions among 75 countries globally, Lafarge is more “
French style
” in the areas of
organisational culture and management

For example, when facing cultural diversity and the decision making process through Direction Generale.

Possible development as a MNC
1. Continuing the strengths

a. The growth strategy—expansion on both mature and emerging markets

b. Competitive technical management methods, such as technical expertise which is distributed in a two-tier structure, and the internal communication systems

Possible development as a MNC
2. Improving the weaknesses

b. Realising the benefit from restructuring program
- Delegation of authority to encourage decision making and decentralized operation make it able to take decisions at the lowest possible level

c. Fastening integration and creating synergy
- Reducing the internal borders for synergy: not work in silos as divisions, as a group.

2. Improving the weaknesses

a.Internationalise the work force
- Developing managers willing to be mobile and able to operate in a wide variety of markets and work with diverse cultural background

- Language:
one official
and local working place language

- Currently one yearly meeting of the strategy managers. Should have more chance for HQ and local to interact formally

Possible development as a MNC
Full transcript