Questions 1. What benefits have CEMEX and the other global competitors in cement derived from globalization? More broadly, how can cross-border activities add value in an industry as apparently localized as cement?
CEMEX and their competitors have realized many benefits from globalization. The first of these was a reduction on tariffs associated with exporting their product. If the manufacturer has a localized facility, they do not have to pay export tariffs on the delivery of cement. Next, transportation costs are very expensive for cement. Tariffs aside, shipping or trucking cement long distances will erode margins or demand higher prices for a given manufacturers product. Both eat at the profitability of the business.
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In the early 90’s CEMEX began exporting cement to Spain with the intent on studying the European market. CEMEX also purchased two factories in Spain in 1992. In the mid 90’s they relocated their business holdings to Spain to weather the Mexican peso crisis. CEMEX studied the acquisitions in Spain to draw key lessons and refine their acquisition strategy. CEMEX proceeded to acquire facilities in Venezuela, Panama, Colombia, the Philippines, and Indonesia, with their eyes on China, India, and Brazil. They were intent on structuring the acquisition process and standardizing it wherever possible. Their initial foreign markets were similar to the Mexican market in culture and geography. As time went on they began to focus on diversifying the economies they were dependent on. They also began to focus more on heavy growth rate markets to grow their global staying power.
4. What recommendations would you make to CEMEX regarding its globalization strategy going forward? In particular, what kinds of countries should it focus its future expansion on?
Since high GDP growth, low rainfall, higher population density, lower coastline, and temperate climates are the best indicators of cement sales, Brazil, China, and India are important market for consideration. Even though Brazil speaks Portuguese, they may be the best initial target due to their knowledge of English and Spanish languages, as well