Finance

    CEMEX is the third largest cement company in the world with approximately 65 million tons of capacity. CEMEX traced its origins back to 1906 when the Cementos Hidalgo was opened, with a capacity of about 5 000 tons per year, in Monterrey, Mexico. A merger was formed with Portland Monterrey (founded by Lorenzo Zambrano) in 1931. Over the next five deacdes, the company expanded its capacity to about 15 million tons  becoming the leading cement company in Mexico.

    In the late 1980s, Mexico suffered from a long-run recession. CEMEX was forced to diversify its product and open subsidiaries in other countries. It opened distribution facilities in Southern United States in order to offset the effects of the Mexican recession. Local cemenet companies in the area filed a complaint to the US International Trade Commission against CEMEX. These companies claimed that they were harmed by low-cost Mexican imports. The ITC imposed a 58 countervailing duty on CEMEX exports (this was later reduced to 31). In Spain, the company acquired 94 of the voting rights in two large Spanish cement companies, with an addition 12 million tons of capacity. With the devaluation of the Spanish peseta (three times in a period of two years), the company adopted post-integration and streamlining policies, aimed at increasing efficiency and capacity. In Latin America, CEMEX acquired 61 ownership of Vencemos, the leading cement company in Venezuela. Although political instability rocked the country for 3 decades, revenues increased steadily. The company then entered Chile, paying  34 million for a 12 stake in Cementos Bio-Bio. Subsidiaries were opened in Panama, Costa Rica, and the Dominican Republic. From 1997 to 1999, the company invested in Filipino cement producers Rizal and APO. The company controlled 22 of Filipino cement capacity. In Indonesia, it acquired a 14 stake in Semen Gresik, with 17 million tons of capacity. The Indonesian market offered potentially high returns because of the growing demand for construction materials.

    The companys relentless acquisition of stakes in local cement producers had cost the company more than  1 billion. There was also the problem of streamlining and formal consolidation. Streamlining of the production process via diversified lines lead to acceptable levels of inefficiency. Formal consolidation was difficult to achieve primarily because of differences in regional work ethics. Culture and language were also major factors which the company considered. The companys entry into Indonesia and Egypt stirred some concerns about the difficulties of working across language barriers and the challenge of adapting to different cultures. The globalization of the company was a step towards higher market proficiency (higher returns), but at the same time a socio-cultural threat. It may be best for the company to give greater autonomy to its subsidiaries, so as to improve general work flexibility. In companies which it has more than 10 stake, it may be best if CEMEX assume a laissez-faire policy  anyway the demand for construction materials in these countries are growing  a measure to offset the effects of a general downturn in the home country. The communication and efficiency reforms which the company are currently pursuing may solve post-integration and consolidation problems.