CEMEX: TRANSFORMING A BASIC INDUSTRY COMPANY

Submitted To: Dr. Rameshwar DubeySubmitted By: Nirja Desai(036)

EXECUTIVE SUMMARY

Founded in Mexico in 1906, CEMEX today has developed a highly successful branding program that includes over 2000 independent retailers and expanded its product line to construction materials beyond cement. It is one of theworlds largest ready mix concrete company with its operations spread across the globe(Thailand, Europe, Philippines, Egypt,etc)As CEMEX moved to more distant markets, the various stages in the expansion processopportunity identification, due diligence, and post-merger integrationbecame more formalized and greater attempts were made to standardize them, reflecting past experiences.The case throws open the discussion on how far CEMEXs competitive advantage can travel. It raises questions over changes that have been implemented over the last few years and if more efforts need to be take to enhance the position in the bulk cement commodity sector.

CASE ENVIRONMENT AND ANALYSISThis case begins with a brief overview of the cement industry and international competition within it. It then describes the globalization of CEMEX and how it was managed. It talks about evolution of CEMEX from a small local player in 1906 to one of the leading building solutions company. It talks about the companys strategy to grow through acquisitions. CEMEX was extremely successful in integrating acquired companies by using technological and managerial processes, developed and proved in Mexico, to cut down costs, improve operational efficiency and improve customer service. The company focussed on establishing the companys brand in commodity markets. Strategic and selective external collaborations are the key to CEMEX success.CEMEX initiatives: providing added value to customers1) Construction SolutionsCEMEX developed a method to accelerate construction for low-income housing developments. This initiative helped the companies in tackling labour shortage, cut their costs by about 18percent and reduced constructions time by about half.Marketing opportunities: Casts which could expedite construction projects could be used by self-constructors Collaborating directly with project owner and architect by helping out in design and build process.

2) ConstrucardCEMEX introduced a credit card, Construcard, in partnership with GE Capital.Customers who wished to build or expand homes but could not get any financing were the potential customers.

3) Patrimoniyo HoyThis initiative was aimed at helping the poorest segment of the population. Under this micro lending program loans were issued to groups, which would then be used to purchase construction material

4) ConstrumexMexicans workers in US sent money back home to families, which were later used for purchasing construction material for building homes. This involved large transaction costs and provided no guarantee that money would be used for building homes. To tap this segment CEMEX introduced Construmex. Under this scheme workers were charges minimal $1 service charge and CEMEX provided construction material to families along with technical advice. This scheme was a success and was available to workers in California, Texas and Illinois.

Key strengths utilized by CEMEX in enhancing its market position and profitability

1) Culture of technology and innovationIn response to the lowering of trade barriers in Mexico, CEMEX realized the importance of being efficient in order to compete with large foreign companies. CEO Zambranos commitment and hands-on interest in IT led to the companys being canonized as a master of digital business design.Some of the action plans as listed below: Created a satellite system to link the transferred internal voice and data communications to its own private network Implementing Executive Information System which enabled operational transparency Connectivity via internet to distribution and suppliers Changes in ERP system to handle new product lines Logistics Technology roadmap providing tools that addressed all operational a

2) Improving internal operations Introduction of continuous improvement philosophy Dramatic changes in the way the company addressed its market and supply chain management. Structural change to enable delivery of the products as per the customers wish.An internet based Logistics University was established to ensure that the employees were well acquainted with sophisticated tools. Courses dealt with policies, logistics processes, management and administration, inventory, transportation, systems and organization.CEMEX paid attention to each and every segment of the society, be it end user or retailers. The focus was on helping the customer with any of their problems which would lead to increased sales volume.Following are some of the steps employed: Offering to manage inventory for builders. Helping the retail stores with branding and the physical change to the building Exception handling Administrative system Intelligent Multi Agent Transportation Optimization, Vehicle Visibility System and Delivery Visibility SystemDrivers for change: Bulk CementWith its current positioning the company need not focus on brand marketing. Developing countries provide great opportunities in the form of formal infrastructure development such as roads, schools, water treatment plants or hospitals. Introducing existing initiatives and schemes should help in winning customer support.Greater visibility to ready-mix (bulk) is another driver. Company can take advantage of this opportunity by portraying itself as a company with the ability to deliver products as per customers wish (location and time).Strong logistics hold and standardised processes are an edge which the company has over other competitors. Implementation of changed product line in the information system would enable smoother functioning of the supply chain and adaptability to changing demands.

ConclusionCEMEX needs to strike a balance between the product offerings that satisfy short term market demand and those that are of more importance in the long run. Company needs to be aligned with the sustainable challenges such as energy efficiency and emission reductions faced by the customers.