CEMEX Case Study Seminar Q&A PDF

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CEMEX Case Study Seminar Q&A...

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Week 1 Q&A: Cemex’s Cost of ‘Globalised’ Growth – The Cash Crunch?

1. How does CEMEX refine its strategic business focus? •

Focus on cement and development of expertise in its distribution, marketing and sale;

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Innovative use of IT to improve efficiency and engage with customers and stakeholders;

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Marketing programs that created an emotional attachment to the brand and its products;

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Local and international programs that elevated the mere commodity (cement) to product with high-level customer care service, innovative financing and construction expertise;

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Globalization strategy through acquisition: standardization of the investments and practices, with exploitation of effective local practices (80-20);

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People are viewed as the most valuable resource.

2. To whom CEMEX turn when it researches the development of its digital business infrastructure? Why? •

Cyber-visionary Gelacio Iiguez, capable of creating an information network system through satellite technology;

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Visit to FedEx, Exxon and 9-1-1 centre to develop an integrated dispatching system, centralizing dispersed operation by a satellite;

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Launch of one of the first wide-ranged corporate websites, featuring up-to-date financial information for investors and analysts, as well as catalogues of products for clients;

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Creation of an e-business management subsidiary and creation of an online marketplace in partnership with leading companies in Mexico and Brazil.

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The main motives were efficiency, cost reduction, technological competitive advantage and effective engagement with customers and stakeholders.

3. What business marketing strategies does CEMEX use to develop its home market? •

Patrimonio Hoy: marketing program used to change the Mexican’s view on cement and building rooms/houses. Linking with a community savings scheme, creating a contest and providing classes and technical advisory were some of the additional services that CEMEX provided.

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Construmex: targeting Mexican immigrants to the US, the program solved a construction and money transfer problem for Mexican families, focusing gaining their trust and establishing long term relationship with its customers. Celebrations whenever the construction of a room was finished were organized, creating an emotional positioning of cement. Innovative financing and construction expertise were some of the additional services that CEMEX provided.

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These programs created an emotional attachment to the brand and its products, customer engagement and satisfaction, and an increasing of the demand of cement;

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Critical role of location-specificity.

4. From the late 1980s/early 1990s CEMEX decides to go international. What motivated CEMEX to expand beyond its home market? Why and how does it become international? Is it all to do with effective use of IT? Or something more? •

Why? The international competition of multinational companies in the cement industry was decimating the independent players, CEMEX had to start to become international to avoid being bought by bigger players.

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How? Campaign of acquisitions characterized by rigorous standardized investment discipline (return driven criteria), industry-leading post-merger integration capabilities (standardization, identification and retention of the most effective local practices – 80-20), attraction, investment and retention of the best people (identification and retention of acquired companies’ management and engineering talents). The effective use of IT was more of a general background of CEMEX’s strategy, it was useful to understand the local best practices and people to retain.

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Exploitation of both aggregation (def.: exploiting the similarities across countries, while somehow side-stepping the differences among them, so as to tap increasing returns to scale) and arbitrage (def.: involves exploiting differences among countries by taking

advantage of variations in absolute costs or will- ingness-to-pay) through the 80-20 rule of standardization and retention of local best practices → Glocalization (def.: The creation of products or services for the global market by adapting them to local cultures.).

5. What do you find interesting about how CEMEX works toward the strategic alignment of business and information systems strategies? •

CEMEX is a clear example of a company that uses technology specifically to achieve its pre-established strategic goals. Its drive is not the hype for digital and technological innovation, CEMEX extracts value and leverages these advancements with a clear view on how these technologies are assisting the growth of its core business. “Focus on business process improvement rather than just IT improvement”.

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In CEMEX we can identify a strategic use of Information Technology, in particular for cost-reduction (delivery efficiency), service-based differentiation (e.g. internet website with financial and commercial information for both stakeholders and customers), transfer of experience (transfer and evaluation of standard and local best practices), new levels of partnerships (creation of an e-commerce in partnership with Mexican and Brazilian companies). We can position CEMEX in the ‘Strategic Mode’ quadrant of the IT Strategic Impact Grid.

6. Why does CEMEX have problems from 2007? Critically evaluate what it did to address these problems. •

In 2007 Cemex made its biggest acquisition by acquiring Rinker for 15B, a deal that analyst thought was overvalued, in addition to this US market slowed down due to the 2008 crisis (where Rinker made most of its operations), hence the availability of free cash flow decreased intensively and the ratio of net debt to EBITDA increased (in 2007 free cash flow decreased 4%, in 2008 the cash flows reduced to 17% of debt, well below its historic average of 30%). This economic crisis was the first of many factors that negatively affected Cemex results, after the crisis they also lost their operations in Venezuela due to government expropriation.

7. What current issues should senior managers be concerned about? •

Repaying debt

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Making profitable their current operations

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Sell non strategical operations

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Implement digital solutions to decrease costs

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Prepare for future liminalities

8. What are the lessons from the case for global digital business strategy? In particular, what insights are gained about the strategic role that information systems can play? •

Information Systems are an important and essential tool for to achieve business goals, but it isn't a silver bullet;

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IT and Buisness must constantly look to achieve strategic alignment;

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If you adapt quickly to the new trends (searching for strategical trends not IT hype) could help to greatly differentiate from competitors;

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It’s important to achieve the intersection between business system thinking and architecture planning and design in order to adapt quickly to new trends and to strengthen relationships with the core business....