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“The CEMEX way: Mexican company passing worldwide obstacles”

CEMEX is a global Mexican company of construction materials that offer high-quality products and services to their clients and communities from more than 50 countries. The company is on 3rd place on cement production worldwide and attends markets from America, Europe, Asia, Africa, and the Middle East. But how has it become so successful? What were their strategies to become globally successful throughout the years? Well, they use a strategy that in business it's known as the "CEMEX way."

Their success is credited to how it looked, and the post-merger integration (PMI) process that ensued, as an opportunity to drive change, and as a result, continuously evolve as a corporation. This Mexican company left the region of Monterrey, absorbed opponents, prepared and learned from the best, and grew from its failures.

From a small local operation, CEMEX became the third-largest cement company in the world, with sales in 2013 of 15 thousand 227 million dollars, and with an increasingly growing footprint in the construction materials industry. And with other key events like Lorenzo Zambrano being named CEO, they also standardized business processes, created a huge technology base, and a solid multinational organizational structure. In this case, the mandate is that under a corporate strategy designed in Monterrey, local companies use the best business and industry processes and mix them with the particularities of each region.

Thus, between the 80s and 90s, a difficult time for Mexico between devaluations, financial crises, natural disasters, and the awakening of social sectors that were asking for a change, Zambrano saw the opportunity to grow.

When the current CEO, Lorenzo Zambrano, assumed this post in 1985, Mexico had already begun the process of opening up its economy, culminating with its entry into NAFTA.

The relatively comfortable national competitive environment that CEMEX enjoyed in its beginnings would come to change dramatically towards the end of the '80s. As a requirement to access the GATT7 and in preparation for the constitution of the North American Free Trade Agreement (NAFTA), the Mexican government began to open the country to international trade and FDI. Very quickly CEMEX's dominance in its national market was threatened by large companies in the sector; all of them from developed countries. It is important to note, however, that the capabilities developed by CEMEX during this period - the identification of rivals with untapped growth potential, their acquisition, and their rapid integration into CEMEX's operations - would soon prove very valuable in the international context.

The first step that made Cemex approach the trade of NAFTA was in 1994 with the international acquisition of the Venezuelan market with the company "Vencemos" that forms part of the CEMEX group. Venezuela was an important market for CEMEX's international rivals. And, also as in Spain, the PMI process quickly improved the profitability of new operations.

CEMEX belongs to the concrete and cement clusters in Mexico where it's from the company. The importance of the cement industry lies in the impact on the construction sector, which, it is said, is a true reflection of the general economic evolution.

CEMEX not only owns half of the cement plants installed in Mexico, which generates 63% of the national cement production but also owns one of the largest cement clusters in the world, located in Baja California Norte, Mexico, bringing economic growth to the nation.

One of the most important characteristics of this cluster is that its largest plant is dedicated to the production of Portland cement, which is destined mostly to cover foreign demand, while another part of the production is destined as an input for another cement company from the same cluster.

The plant is 30 years old and belongs to Cementos Guadalajara, a CEMEX subsidiary. It works at 100% of its capacity and employs more than 200 workers.

This cluster carries out all the state's production, which represents 2.36% of the national cement production (about 640,000 tons per year).

Describing CEMEX in the economic sector we can say that they are the principal part of the secondary on the manufacturing of their product, but in some way, they are related to the primary and the tertiary, but how? Well in the primary sector they need to get the raw material to transform their products and right now are pointing to efforts on the sustainability of their resources to promote socially responsible practices with the objective that the economic, social, and environmental actions have a positive impact. And the tertiary they bring assistance as logistics services as can be: Design of effective distribution network, logistic planning of operation and sales, inventory level optimization, optimal rate schemes, and measurement indicators. Other kinds of services that bring CEMEX are engineering and projects, plant optimization, operation and maintenance, internally developed technologies, and customized services. And that's how CEMEX participates in the three economic sectors.

CEMEX has a presence in countries like:

v E.U.A.

v Colombia

v Costa Rica

v Letonia

v Guatemala

v Filipinas

v Panamá

v Polonia

v Perú

v Alemania

v Rep. Dominicana

v Israel

v Haití

v Egipto

v Haití

v Egypt

v Puerto Rico

v Paraguay

v Chile

v Switzerland

v Marruecos

v Turkey

v Nigeria

v Angola

All different continents, different cultures, different ways of thinking that's why CEMEX has to adapt their strategies and ways to do business to each type of market to avoid cultural differences that affect their business and relationships.

In the 25 years leading up to the Rinker deal, CEMEX has evolved from a small, privately-owned, cement-focused Mexican company of 6,500 employees and $275 million in revenue to a publicly-traded, global leader of 65,000 employees with a presence in 50 countries and $21.7 billion in annual revenue in 2007.

This statistic reveals the number of employees at CEMEX from the fiscal year of 2010 through the fiscal year of 2019. In FY 2019, the cement and building materials company had more than 40,640 employees worldwide.

Cementos Mexicanos (Cemex) maintained without finding a floor on the Mexican Stock Exchange. In 2019, it lost 58,581 million pesos in market value.

Their titles have plummeted around 40.78%, sinking to 5.62 pesos per unit, a level similar to those sustained in 2011, when the financial crisis was present.

However, another challenge that still lies ahead is great. The two regions that represent 50% of its sales, Mexico and the United States, have had a disappointing performance, due to hurricanes and earthquakes - which affected their plants - and less investment in infrastructure.

The company compensated for the situation with a rise in cement prices - a strategy it calls 'value over volume' - since they had been falling in real terms for nearly 15 years. The move pitted the company against home builders and developers, but the firm managed to leave losses behind and close in 2017 with a net profit of $806 million.

In the United States, it also sees potential, thanks to commercial construction.

According to several analysts consulted, the future of CEMEX no longer runs greater risks, although it will face greater competition in Mexico from companies such as Elementia and Cementos Moctezuma, which have invested to increase their productive capacity.

In this sense, it launched a new platform for consumers, CEMEX Go, and created a venture capital division, CEMEX Ventures, to finance entrepreneurs in the sector. With this, the company seeks to recover the confidence of investors and partners and return to the strength of more than a decade ago.

In the short term, another risk would be the issue of Brexit, which could affect confidence and the European market for CEMEX, which is very important, especially the market in the United Kingdom, so negotiations that affect the consumer or confidence could also affect the station.

Currently, there are low growth expectations for 2020 in Mexico, due to a scenario of global economic recession and the strengthening of the dollar against emerging currencies.

Finally, another problem in politics that can face CEMEX is the renegotiation of NAFTA. This renegotiation can close doors for CEMEX from EUA. About 35% of the volume of cement sold by the company is sold in the United States.

There is no doubt that all the world is passing economic obstacles and with this, also important companies such as CEMEX face it too, but these companies must learn to formulate strategies to pass the difficulties trying to not lose their resources.

#business #cemexway cemex internationalbusinessenviroment doingbusinessamerica

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