This case was presented in Fall 2010 and revolves around a critical point in the international cement market in 2000. In this presentation, CEMEX's competitive advantage and global acquisition strategy are examined in the cutthroat competitive cement market.
3. StrategicChallenge Strategic Challenge Analysis Alternative Strategies Recommendation Implementation CEMEX must determine whether its current acquisition strategy is sustainable.
5. The traditional international expansion strategy among cement majors is shifting Analysis Strategic Challenge Alternative Strategies Recommendation Implementation Traditionally: Recently: Acquire regional cement firms Attempt to acquire another major
6. Lafarge and Holderbank Pose as Largest Competitive Threats Analysis Strategic Challenge Alternative Strategies Recommendation Implementation
15. Heidelberger, Italcementi and Blue Circle are smaller players and are not threatening in current CEMEX markets Analysis Strategic Challenge Alternative Strategies Recommendation Implementation
22. Allows firm to enter and capture large capacity shares in key markets Builds synergies Gives them greater financing capabilities Consolidation among the cement majors threatens CEMEX’s pool of potential markets Analysis Strategic Challenge Alternative Strategies Recommendation Implementation
27. Attempts to collude and to secure protection from imports
28.
29. CEMEX has grown to become the 3rd largest cement company in the world and the largest international cement trader Analysis Strategic Challenge Alternative Strategies Recommendation Implementation
30. CEMEX has Strong Acquisition Process and Technological Capabilities Analysis Strategic Challenge Alternative Strategies Recommendation Implementation 14
31. CEMEX is well entrenched in several high demand markets, but must expand into key markets to sustain growth Analysis Strategic Challenge Alternative Strategies Recommendation Implementation Asia Caribbean Middle East Sub-Saharan Africa Central America 15
40. CEMEX’s expansion process is a sustainable competitive advantage Analysis Strategic Challenge Alternative Strategies Recommendation Implementation Their expansion process is well codified and standardized to allow for efficient, effective and profitable acquisitions
41. Post-merger integration may be lengthened Target returns may not be achieved or may be delayed Example: Recent acquisitions of Egypt and Indonesia: Prayer breaks English not prevalent in some countries PMI is limited in its ability to address language and cultural barriers in new markets Analysis Strategic Challenge Alternative Strategies Recommendation Implementation
43. CEMEX’s acquisition capability has proven to be a competitive advantage over the other cement majors. Analysis Strategic Challenge Alternative Strategies Recommendation Implementation * This is an approximation since EBIT was used in calculation instead of NI. ** Total franchise value = sum of franchise value in markets of acquisition.
44. CEMEX comparatively high EBITDA is an indication of the firm’s strong competitive advantage Analysis Strategic Challenge Alternative Strategies Recommendation Implementation CEMEX’s operations are more profitable than the other majors
45. CEMEX should not be concerned about their interest coverage Analysis Strategic Challenge Alternative Strategies Recommendation Implementation 3.6 CEMEX’s Net Debt/EBITDA ratio is the highest and equal to Holderbank’s ratio
46. Analysis: Key Takeaways Analysis Strategic Challenge Alternative Strategies Recommendation Implementation CEMEX’s expansion process is a sustainable competitive advantage Lafarge’s pending acquisition of Blue Circle will significantly alter the competitive landscape CEMEX’s debt-to-total capital ratio is high, but will not hinder expansion Current PMI process does not allow CEMEX to easily address cultural and language barriers
57. Might encounter price competition form another major trying to do the same thing1 – Acquisition of a Cement Major Alternative Strategies Strategic Challenge Analysis Recommendation Implementation
58. Pros Opportunity to complement the power of CEMEX’s competitive advantage with that(those) of another Major Opportunity to learn about the other Major’s competitive advantage(s) CEMEX can benefit from the other Major’s ability to adapt to foreign country cultures where they are established Cons Threat of Major “stealing” competitive advantage Takes a long time to implement (legal contracts, resource selection, management structure, etc.) Difficult to implement (legal contracts, resource selection, management structure, etc.) 2 – Strategic Alliance with a Cement Major Alternative Strategies Strategic Challenge Analysis Recommendation Implementation
59. Pros Significant success achieved with current expansion process Can leverage competitive advantage Minimal financial risk Cons Changing industry landscape may leave CEMEX vulnerable to mergers among competitors. Debt problems may recur if acquisitions are made to quickly. Culture and language issues are not directly addressed 3 – Status Quo Alternative Strategies Strategic Challenge Analysis Recommendation Implementation
60. The firm should maintain its current acquisition strategy Alternative Strategies Strategic Challenge Analysis Recommendation Implementation
64. Focus expansion in Asian market to address increasing competition and to secure capacity shares
65. Emphasis on branding in the retail market will help CEMEX gain global exposure and reduce risk from cyclicality
66. Increase marketing efforts in retail market, particularly in developed markets
67. Promote CEMEX brand in newly acquired marketTactical changes to CEMEX’s current strategy Implementation Strategic Challenge Analysis Alternative Strategies Recommendation
68. Rationale for Status Quo Recommendation Strategic Challenge Analysis Alternative Strategies Implementation Ensure timely and successful expansion CEMEX can address increased Asian competition Increases branding and diversifies revenue streams Maximizes returns from each acquisition and allows CEMEX to grow quickly
70. The US, Japan and India are markets with both high capacity and high demand Implementation Strategic Challenge Analysis Alternative Strategies Recommendation
71. Firms in many Asian markets have low valuations compared to firms in North America or Western Europe Implementation Strategic Challenge Analysis Alternative Strategies Recommendation
72. Future acquisitions are strategic and allow CEMEX to target key markets Implementation Strategic Challenge Analysis Alternative Strategies Recommendation Asia JP Africa Latin America and Caribbean SE Asia
88. Conclusion Address cultural and language barriers Current Acquisition Strategy with tactical adjustments Enter retail market and increase brand awareness Leverage and strengthen competitive advantage Long-term growth and profitability
CHECK ANIMATIONCHECK TRENDS OF SOCIOECONOMIC TRENDS Strategic Challenge Analysis Alternative Strategic Directions Recommendation Brief Implementation Plan
- Talk about scope and speed
Should this go after slide on where opportunities lie (key countries) – we could show that CEMEX is somewhat strong in Caribbean and Central America, but is most certainly lacking in sub-sahara and asian markets.
Should this go after slide on where opportunities lie (key countries) – we could show that CEMEX is somewhat strong in Caribbean and Central America, but is most certainly lacking in sub-sahara and asian markets.
Shift momentum in competitive market
Indonesia has long-run potentialEgypt has high demand (11%). However, fragmented and regulatory is cumbersomeWHERE TO TALK ABOUT FUTURE OPPORTUNITIES
PMI Team to facilitate assimilationImpose CEMEX culture and standardsIntegration = reduced manpower, selection of mgmtUp to 50% PMI members remained as expats
PMI Team to facilitate assimilationImpose CEMEX culture and standardsIntegration = reduced manpower, selection of mgmtUp to 50% PMI members remained as expats
Brings value by allowing firm to exploit opportunities and neutralize external threats Integrated expansion process appears to be used by few firms CEMEX’’s integrated expansion process is home grown and cannot be replicated Selection, due diligence and integration are not substitutable in acquisItion process
The higher the EBITDA margin, the less operating expenses eat into a company's bottom line, leading to a more profitable operation.
CEMEX’s debt-to-total capital ratio is high, but will not hinder expansion
Current acquisition strategy has proven success.Current acquisition strategy is a sustainable competitive advantage.Tactical adjustments will allow CEMEX to adapt to the current competitive environment.1) The acquisition of Blue Circle by Lafarge is potential but likely to happen in the coming years2) The biggest threat from them is their finacing capabilities, which will likely allow them to expand more quickly than CEMEX. It will also allow them to get a strong hold in Asia and expand within.3) The acquisition will happen whether CEMEX likes it or not, so the BEST thing CEMEX can do is leverage it's competitive advantage to ensure timely and successful expansion (particularly) PMI, so that they can continue to expand and grow quickly and secure capacity shares in key markets4) The flexibility component (to proactively address cultural/language issues) may add several months to the PMI process in certain countries, but it will not slow CEMEX's expansion. Au contraire, it will ensure that the company can get more returns from each acquisition and actually allow CEMEX to continue to grow quickly.5) As for Lafarge/Blue Circle's strong hold in Asia, it is imperative that CEMEX continue to work with regulatory bodies in Indonesia, and follow through with potential acquisitions in India. It is strongly believed that their strong expansion process (at all levels), will result in more successful Asian acquisitions and allow them to grow and expand quickly.
