Cemex Case Study
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?
- Reduction of tariffs associated with exporting
- Due to internationalization these companies have been able to spread their risk. Therefore, if one market is not performing they can rely on the other (diversification)
- Talent across markets
- Ability to identify new emerging markets and having advantage of an already set up network system
- Proximity to raw materials gives benefits on distribution channel which is already organized by formers. This also gives an added advantage in reducing transportation costs
- Advantage of distribution and delivery process through sophisticated information systems
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***Reduction of standard deviation of quarterly cash flow margins (1994-1997 averaged 7.1% for CEMEX as a whole,compared to 9.5% for Mexico, 12% for Spain, 22% for the U.S., and 30% for Venezuela).***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. Additionally, localized plants should reduce the time it takes to deliver the cement to a customer. This is should be a positive for customers in a pinch with no options. The cement company who is able to provide cement the fastest may win some jobs for this reason alone. Finally, the cement manufacturers should have seen stabilization in revenues due to diversification. GDP is strongly linked to cement sales, so a reduction/expansion in GDP for a given
- Reduction of tariffs associated with exporting
- Due to internationalization these companies have been able to spread their risk. Therefore, if one market is not performing they can rely on the other (diversification)
- Talent across markets
- Ability to identify new emerging markets and having advantage of an already set up network system
- Proximity to raw materials gives benefits on distribution channel which is already organized by formers. This also gives an added advantage in reducing transportation costs
- Advantage of distribution and delivery process through sophisticated information systems
-
***Reduction of standard deviation of quarterly cash flow margins (1994-1997 averaged 7.1% for CEMEX as a whole,compared to 9.5% for Mexico, 12% for Spain, 22% for the U.S., and 30% for Venezuela).***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. Additionally, localized plants should reduce the time it takes to deliver the cement to a customer. This is should be a positive for customers in a pinch with no options. The cement company who is able to provide cement the fastest may win some jobs for this reason alone. Finally, the cement manufacturers should have seen stabilization in revenues due to diversification. GDP is strongly linked to cement sales, so a reduction/expansion in GDP for a given