Entry Mode Dynamics 3: Mergers and Acquisitions
CEMEX: Growing and growing stronger?
Student Name: Prateek Arora
Student Number: 4177794
Course Code: 1547
Subject Code: TBS920
Word Count: 2000 + 5% (2100) – Excluding Executive summary and References.
The main purpose of this report is to establish underlying mergers and acquisitions concepts in a broader context and understand how CEMEX became the world’s largest Cement manufacturer with operations in more than 50 countries with the help of practicing mergers and acquisitions key concepts into Cemex’s domestic and international operations. It is becoming increasingly important for businesses to develop understanding and expertise in mergers and acquisitions. Looking at few of the world’s largest mergers and acquisitions, “acquisition of the German company Mannesrmann by the UK based world’s leader in telecommunication industry, Vodafone in 2000 was valued at $ 183 billion. This acquisition created the world’s fourth largest company in the world along with largest company listed on LSE. This shows that there are big investments involved in mergers and acquisitions, and requires thorough investigation of business processes and several other factors which are important to consider for any company if considering introduction of mergers and acquisitions into their business processes.
This report is also concentrated on examining why Cemex was successful in majority of the cases of mergers and acquisitions, which they performed over the period of their existence. The case study of Cemex draws focus on the fact that Cemex started as a local Cement manufacturer in 1906. Cemex mainly concentrated on becoming a market leader in cement industry in Mexican market till 1980, until it realized that it’s time for Cemex to expand their operations when Mexican market became globalized and more concentrated due to increased competition by MNEs in the Mexican market after being globalized. By developing a unique business model, named “the Cemex Way” which will be discussed further in this paper helped Cemex to acquire highly diversified portfolio of markets resulting from it’s 20 acquisitions. Also looking at few of the failures that Cemex encountered during these mergers and acquisitions, we will establish the reasons for those failures in connection with the literature and the strategies that could have been in place to overcome those failures.
Table of Contents
Executive summary 2
Table of contents 3
1. Introduction 4
2. Mergers and Acquisitions – Process Perspective 5
3. Exploring the dubious logic of Global mega-mergers by Ghemawat and Ghadar 6
4. “Cemex Way” – Success and Failure story 8
5. Conclusion and Recommendations 10
6. References 11
This paper is based on the study presented by Ghemawat and Ghadar (2000), carried out from the perspective that if industries and markets become more globalized, then eventually industries and markets tend to become more and more concentrated. Gemawat and Ghadar (2000) also make the note on “the weak theoretical links between the globalization of an industry”. Ghemawat and Ghadar presents Ricardo’s theory of comparative advantage, which they say as the “granddaddy of globalization theories”, predicts the geographical concentration as opposed to industry concentration. As per the authors the main limitation of Ricardo’s theory of comparative advantage is that it does not take into account economies of scale, which perhaps is the main factor to consider in studying industry concentration. Nonetheless, authors modify Ricardo’s theory of comparative advantage in their study and include economies of scale into consideration along with geographical concentration of industries and finds out that this modification in Ricardo’s theory will determine the value chain to customers by mixing