Cemex Case Study Analysis

Global Competitive Strategies EXTERNAL ANALYSIS PESTEL ANALYSIS Political factors -restriction and dominion of imports, exports and trade tariffs decide whether a company can compete glob eithery eg. GATT agreement in 1989, Mexico-open marketplace, enabled Cemex to expand orbiculately. governments may decide to nationalize or denationalise the cement production eg. Venezuela nationalized cement production. political stability of a country will highly affect the performance of the constancy Economic factors any soused in the industry is highly dependent on the economic performance of country/countries it operates in ( changes in expandable income, performance of firms within the country ar affected). -emerging economies provide great opportunities for growth in the industry expanding infrastructure. fluctuating exchange rates also impact performance rising costs of production and detonating device affect a firms competitiveness Social factors -Demographics can affect things such as the size of the labour force, the demand for housing, etc. all of which have an impact on the cement industry.Technological factors -The technology used in the production of cement is constantly evolving innovations can impact cost and bore of products. -Innovations in technology of information systems have an impact on costs of distribution and provide added value for the consumers. Porters Five Forces (industry analysis)- The key deciding(prenominal) of a firms profitability is the beautifulness of the industry it operates in 5 forces model assumes that industry attractiveness and the firms competitive rig within the industry are influenced by 5 forces 1.Entrance of new competitors Barriers to entry are comparatively high a. High capital costs (capital requirements) + b. gloomy efficiency industry the minimum efficiency level is aprox. 1 mil. tons a year + c. High transportation costs and logistics + the benefits of generating economies of scale would be rattling (prenominal) high in the industry d. low product differentiation within the industry -make global cement production fragmented, the four largest producers account for only 23% of overall demand e. the technology used in the production of cement is constantly changing high R&D costs + f. ccess to distribution bring depends highly on the location of plants and resources plants need to have competitive location + if plants are near water distribution channels, the costs are significantly attenuate 2. Bargaining fountain of buyers a. Cement is very much considered a commodity or consumer product, variation depending on geographical parting buyer concentration is relatively low, therefore buyer actor is also lower. + b. Due to low supplier concentration and low product differentiation, buyer switching costs are relatively low and consumers are more price sensitive, which adds to the bargaining power of the buyers. the higher the bargaining power of the buyers/consumers, the lower the profitability of the industry) c. Cement purchases tend to require a substantial amount of buyers income, therefore the performance of the industry is highly dependent on the economic welfare of the buyers and the performance of the economy in general. 3. Bargaining power of the supplier a. Low concentration of suppliers means that suppliers have relatively low bargaining power b. Low concentration of buyers means that buyer bargaining power is relatively low + 4. Rivalry a.Generally, supplier concentration in the industry is low however, if you look at integrated cement production, suppliers are concentrated (aprox. 1500, come out of which 4 are main global players). In terms of global players, rivalry is high. 5. Threat of substitutes a. Given the fact that cement is necessary for the construction industry and the development of infrastructure all over the world, it is unlikely that it will be substituted in the near future. Opportunities huge growth potential in Mexico, due to demographics, attractive market characteristics and expected infrastructure development.Growth potential in all developing countries. significant savings and less cash flow volatility as a result of cost synergies resulted from acquisitions such as RMC, Valenciana, Sanson and Southdown. Long-term growth markets Cemexs strategy is primarily focused on markets with highpotential for long-term expansion such as the US and Eastern Europe Cemex Ready Mix USA joint venture Cemex has the opportunity to consolidate its presence in the Southeastern region of the US done Ready Mix USAs local management team and focus on customers Threats cement production is a very cyclical industry highly depends on the economic performance of the country increased competition from global players both on a national and global level. Political instability political instability in certain countries could have a negative impact on Cemexs local operations Venezuelan nationalization on April 3, 200 8, the Venezuelan Government announced the nationalization of the local cement industry, aiming to take full operative control of cement producers in Venezuela through the acquisition of a participation within a range from 60% to 100% if required.On August 18, 2008, PDVSA, the state-owned Venezuelan oil monopoly, took operational control of Cemex Venezuelas facilities. Higher exposure to the US market as a result of the acquisition of Rinker, Cemex has strongly raised its exposition in the battered US expression market Competition against major players Cemex competes in its main markets with other world-class players such as Holcim and Lafarge Rising costs of basic inputs increments in the price of verve (primarily electricity andnatural gas) have a direct negative impact on output and distribution costs.However,Cemex has implemented an alternative fuel program in severalize to improve its capacity toabsorb this type of fluctuations Risks associated to RMC integration the inc orporation of the RMC Group is the first integration of an internationalist player into the structure of Cemex, which has to simultaneously coordinate new operations on a global scale mainly focused on ready-mix and aggregates, whereas cement has traditionally been Cemexs pith product. Global recession in an international recessionary environment Cemexs sales will be negatively impacted in its key markets INTERNAL ANALYSIS Core Competencies -Production of cement is its core competency, but also good in the production of ready-mix concrete and aggregates. -Its ability to brand these products is a valuable asset and a sustained competitive advantage. animated strategies and objectives Porter Four Generic Aquisition vs. GreenfieldCemex chose to enter foreign markets through acquisition rather than starting up greenfiled operation. The rationale behind this was that this strategy is cost powerful and time saving. The estimated cost of acquisition for a cement multinational is much l ower than building a new plant. Production and distribution systems are already in place and they are also acquiring the local management know-how which is both time efficient and cost effective way of entering a new market. Competitive Profile how does the company match up against its competitors.