Cemex Case Study Analysis

worldwide Competitive Strategies outside ANALYSIS PESTEL ANALYSIS Political factors -restriction and regulation of imports, exports and trade tariffs decide whether a company kitty compete globally eg. GATT agreement in 1989, Mexico-open commercialiseplace, enabled Cemex to broaden globally. g everyplacenments may decide to nationalize or privatize the cementum turnout eg. Venezuela nationalized cement intersection. political stability of a ground will highly affect the death penalty of the industriousness Economic factors any firm in the exertion is highly dependent on the economic performance of country/countries it operates in ( changes in expandable income, performance of firms within the country atomic number 18 affected). -emerging economies provide great opportunities for firmness of purpose in the industry expanding basis. fluctuating supervene upon rates also impact performance rising cost of proceeds and capital affect a firms competitiveness mixer fa ctors -Demographics can affect things such(prenominal) as the size of the labour force, the exact for housing, etc. all of which subscribe an impact on the cement industry. proficient factors -The technology used in the intersectionion of cement is constantly evolving innovations can impact cost and quality of products. -Innovations in technology of information systems moderate an impact on cost of distribution and provide added value for the consumers. ushers Five Forces (industry analysis)- The key determinant of a firms profitability is the attractiveness of the industry it operates in 5 forces model assumes that industry attractiveness and the firms competitive position within the industry be influenced by 5 forces 1.Entrance of new competitors Barriers to entry argon relatively high a. High capital costs (capital requirements) + b. Low top executive industry the minimum efficiency level is aprox. 1 mil. tons a year + c. High transportation costs and logistics + the benef its of generating economies of scale would be precise high in the industry d. unkept product differentiation within the industry -make global cement production fragmented, the four largest producers account for wholly 23% of overall demand e. the technology used in the production of cement is constantly changing high R&D costs + f. ccess to distribution channels 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 diminished 2. Bargaining advocate of buyers a. Cement is in truth much considered a commodity or consumer product, variation depending on geographical local anaestheticity buyer concentration is relatively low, therefore buyer provide is also dishonor. + 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 bargain power of the b uyers. the higher the bargaining power of the buyers/consumers, the lower the profitability of the industry) c. Cement purchases tend to require a true 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, 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 nest egg 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 system is primarily focused on markets with highpotential for long-term expansion such as the US and Eastern Europe Cemex Ready Mix USA articulatio venture Cemex has the opportunity to consolidate its presence in the Southeastern region of the US through Ready Mix USAs local counselling 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 impa ct on Cemexs local operations Venezuelan nationalization on April 3, 2008, the Venezuelan organisation announced the nationalization of the local cement industry, aiming to take full surgical control of cement producers in Venezuela through the acquisition of a alliance within a range from 60% to 100% if required.On haughty 18, 2008, PDVSA, the state-owned Venezuelan oil monopoly, took operational control of Cemex Venezuelas facilities. Higher vulnerability to the US market as a result of the acquisition of Rinker, Cemex has powerfully raised its exposition in the battered US building 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 naught (primarily electricity andnatural gas) have a direct negative impact on output and distribution costs.However,Cemex has implemented an alternative fuel program in order to improve its capacity toabs orb this type of fluctuations Risks associated to RMC integration the incorporation of the RMC classify is the first integration of an international player into the structure of Cemex, which has to simultaneously aline new operations on a global scale chiefly focused on ready-mix and aggregates, whereas cement has traditionally been Cemexs core product. Global recession in an international recessionary environment Cemexs gross revenue will be negatively impacted in its key markets midland ANALYSIS Core Competencies -Production of cement is its core competency, but also inviolable in the production of ready-mix concrete and aggregates. -Its ability to brand these products is a priceless asset and a sustained competitive advantage. Existing strategies and objectives Porter foursome Generic Aquisition vs. GreenfieldCemex chose to enter foreign markets through acquisition rather than starting line up greenfiled operation. The rationale behind this was that this strategy is cost effective and magazine saving. The estimated cost of acquisition for a cement multinational is much lower 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 get into a new market. Competitive Profile how does the company match up against its competitors.