CEMEX Essay

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One of the largest building supplier companies in the world, Cementos Mexicanos (CEMEX) produces, markets, and distributes cement, ready-mix concrete, and construction aggregates and materials. It is the world’s largest trader of cement and clinker, the leading producer of white cement, and the third biggest cement manufacturer, after Holcim Group from Switzerland and French Lafarge. Headquartered in Monterrey, CEMEX employs over 50,000 people and has established a presence in more than 60 countries, mainly in North and South America and more recently in Europe and East Asia.

The history of CEMEX goes back to 1906 with the foundation and opening of one of Mexico’s first cement companies, Cementos Hidalgo, the joint effort of an American-born entrepreneur, J. F. Brittingham, and the Garcia family of Monterrey. In these first years of operations, business blossomed and production capacity more than doubled. The Mexican Revolution forced the company to suspend production and distribution in 1912, as energy supplies failed and communications infrastructure was destroyed. Full resumption of activities was delayed until 1921. Meanwhile, Cementos Portland Monterrey was founded in 1920 by Lorenzo H. Zambrano and family. Following the economic crisis of the Great Depression and a regional war of prices, the two companies celebrated a historic merger that, on January 4, 1931, gave birth to a new company: Cementos Mexicanos.

The next four decades witnessed the rise and consolidation of CEMEX in the northeast of Mexico and the beginning of the conquest of the national market. Expansion of production was first driven by successive enlargements and the modernization of the Monterrey plant—new, larger, and more efficient kilns—and the opening of cement mills in Torreon and Ciudad Valles. This, accompanied by an aggressive commercial strategy, positioned CEMEX as market leader in the northern states of San Luis Potosi, Durango, Tamaulipas, Coahuila, and Zacatecas in addition to its home stronghold Nuevo Leon. In the 1960s, the strategy was coupled with plant acquisitions in Guadalajara, Leon, Ensenada, and Yucatan in central and southern Mexico. CEMEX had moved from the local to the multiregional, and by 1970 it produced and sold over 1 million tons per year of Portland cement, which represented more than 10 percent of the Mexican market.

Growing company size and markets posed new challenges. According to business historian Mario Cerruti, CEMEX contracted with the American management-consulting firm Cresap, McCormkick and Paget to effect structural administrative reorganization. Realization of scale and scope economies led to vertical-integration strategies that translated into the acquisitions of concrete, aggregates, and ready-mix firms at the national level. The financial requirements of such integration and plans to buy Cementos Guadalajara—an important rival—led CEMEX to go public on the Mexican stock exchange in 1976. By 1985, productive integration and the inauguration of the Huichapan plant in Hidalgo, the most modern in Mexico at the time, made CEMEX a key player in the domestic market, accruing around 33 percent of total production. The next challenge was the global market.

International Expansion

In the aftermath of the 1982 debt crisis and the trade liberalization and inflow of foreign capital and competition that ensued, CEMEX realized the threats and opportunities that globalization brought about. The strategy to face it was twofold. First, there was a need to dominate the national market effectively, to prevent foreigners from entering CEMEX’s historical territory. Second, there was the opportunity to export and to grow in the American and European markets via the acquisition and improvements in the efficiency of foreign plants. To accomplish the former, CEMEX bought Anahuac in 1985 and the other Mexican giant Tolteca in 1989, turning into the sixth largest producer in the world. To achieve the latter, CEMEX increased exports to the United States throughout the 1980s in an effort to meet a surge in demand from the neighboring economy that offered high prices and paid in hard currency. Successful entry into the United States through the construction and purchase of mills and the creation of distribution networks in California, Arizona, Texas, Florida, and New Mexico signaled that CEMEX had competitive prices and supplied good quality products.

In 1992 CEMEX entered the European market, buying Spanish Valenciana de Cementos and Sanson, making it the world leader in white cement production. Two years later it acquired Cementos Bayano in Panama and Vencemos in Venezuela, followed by Diamante and Samper in Colombia in 1996. The buying spree has continued, adding plants in the Philippines, Indonesia, Chile, and Costa Rica. CEMEX maintains high profit margins and operative efficiency levels. It has become one of the most competitive global firms in the industry.

Bibliography:

  1. Boletín del Colegio de Ingenieros de Ingeniería Mecánica, Eléctrica y Profesiones Afines de León AC, “CEMEX,” En Contacto (v.10/117, 2007);
  2. CEMEX, “CEMEX. Our History,” www.cemex.com (cited March 2009);
  3. Mario Cerruti and Juan Ignacio Barragán, CEMEX: Del Mercado Interno a la Empresa Global (Proceedings of the 5th Brazilian Congress of Economic History, 2003);
  4. Datamonitor, “CEMEX, S.A. de C.V. Company Profile” (June 12, 2007).

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