Question Case Cemex
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. Additionally, localized plants should reduce the time it takes to deliver the cement to a customer. This is should be a positive for customer’s 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 see a stabilization in revenues due to diversification. GDP is strongly linked to cement sales, so a reduction/expansion in GDP for a given country will lead to volatile sales revenues. Globalization should balance out fluctuations assuming there isn’t a global recession. It would not matter where cement manufacturers set up shop in the event of a global recession. Reduced GDP would result in a reduction in sales volumes.
2. How specifically has CEMEX managed to outperform its leading global competitors in the cement industry? Please focus on comparing it with Holderbank, which is the other large competitor principally focused on cement. What do this comparison and the other data in Exhibits # 4-8 suggest about the competitive game being played out among the major international competitors?
One major factor for CEMX’s success over their competitors was CEMEX’s heavy focus on growth in emerging markets. CEMEX
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 customer’s 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 see a stabilization in revenues due to diversification. GDP is strongly linked to cement sales, so a reduction/expansion in GDP for a given country will lead to volatile sales revenues. Globalization should balance out fluctuations assuming there isn’t a global recession. It would not matter where cement manufacturers set up shop in the event of a global recession. Reduced GDP would result in a reduction in sales volumes.
2. How specifically has CEMEX managed to outperform its leading global competitors in the cement industry? Please focus on comparing it with Holderbank, which is the other large competitor principally focused on cement. What do this comparison and the other data in Exhibits # 4-8 suggest about the competitive game being played out among the major international competitors?
One major factor for CEMX’s success over their competitors was CEMEX’s heavy focus on growth in emerging markets. CEMEX