CEMEX Harvard Case Solution & Analysis

CEMEX Case Study Solution

Alternative: 1- Cemex should diversify into new markets by entering into different sectors.E: g Cement Service Sector.

Pros:

  • This will allow the company to expand its market share into different market.
  • It will allow CEMEXto enter into new markets that will enable it to hedge the risk due to high market competition.
  • Entering into Serviceindustrywill extend the portfolio of the company and will allow it to develop sustainableoperations in the market even in the low economic cycle.
  • It will create additional value for the companybrandimage and will raise the value of the brand.In addition, it will also cover the market from both ends, hence will mitigate the risk of competition cutting the target market share.

Cons:

  • It may createconfusedbrand image in the market and might hurt the positioning of the brand in the mind of the customer.
  • It may require aggressivefinancial investment in the sector with no certain results, hence may risk the shareholders equity.

Alternative: 2Cemex should continue to pursue the acquisition and merge strategy in order to sustain the global presence. In doing so, it should start targeting the Asian markets more aggressively so to capture the potential market share from emerging markets.

Pros

  • It will allow the company to capitalize the market share in Asian market before the competition, making it set the market according to itself.
  • It will increase its profitability and shareholder equity since the Asian markets are the new emerging markets with high potential and sales margin.

Cons

  • Culture and religion may posits hindrance in pursing the uniform strategy through out the organization.
  • The market behavior of the Asian market is different from Western and European market; hence a different business strategy has to be developed in order to plunge deep into the market, which may require heavy investments.

Recommendation

The company should pursue the mix of both alternatives. In doing so, it should enter into Asian markets and target the new market segment. This on one hand, will diversify the company’s operations and develop the market, while on the other hand, it will expand the market share through aggressive market penetration in Asian market, leading to high sales, sustainability and profitability in long term.

Recommended Course of Action

Short-term (1- Year)

While pursuing the mix of two alternatives, in the first year, the company will analyze he different market segment and weigh them in terms of potentiality and sustainability in long run.The company in the same year will outline the specific markets it will enter in Asian region, along with the decision to diversify in one or two service sectors. Also, in the same year, the company will develop an additional team to implant in Asian markets. Majority of the team will be the locals of the region, this will allow to dissolve the cultural and religious barriers easily, enabling to develop and maintain a uniform culture throughout the organization.

Also, in the same years, the company will identify the prospective companies for further acquisition. Mostly, the consideration will be placed to acquire such organizations which add to the skills and expertise of the company in terms of human resources and technology.

Long-term Plan (2-10years)

Under the long term plan, the company will develop strong, market penetration strategy by acquiring more market share in the market. In doing so, it will offer comparative brand positioning in the market, that will flank the other competitors.Also, in doing so, the company will create value for the existing customers by adding more products in the existing product line with competitive pricing. It is also pertinent, that the company may switch to cost leadership strategy in the long term, in the existing and new market and develop the sustainability plan on the economies of scale. It is because, since the economic stability of west and Asian market is on stakes after the great depression and financial crisis, only businesses with cost leadership strategy will able to sustain the business model.

Also, in the long term the company will add more service sectors into its operational strategy.In doing so, the company will select slowly the high potential market in Asian regions for example construction, infrastructure to expand its market hold and develop a strong network of services.Also, along with this, the company will also consolidate its resources in order to create a competitive advantage in the market. The consolidation of Resources will allow the company to streamline its procurement and hence will allow the access to cheap raw material. Leading to high sales margins in export markets.

Conclusion

All in all, globalization is an eminent strategy for all the businesses. Since the economies are converging and joining hands to procure better products, resources,and organizations needs to frame its global strategies accordingly.This allows the companies to hedge the risk of economic downturn and also allows them to sustain their position and market share.In addition, it also allows the company to retain its cash flow stream by entering fragmented markets in Asian regions and leaving saturated markets in other region.

Taking it back to Cemex, globalization is important for CEMEX to pursue as the future business and corporate strategy.Since the markets are getting saturated and that the competition as risen above the level, it is important for CEMEX to enter into emerging markets which have potential and growth both and the demand for cement as well for the development of infrastructure and other services.This expansion in Asian and other emerging markets will allow the company to hedge risk of low returns and profits due to low economic cycle and will also allow in developing sustainable growth strategies by consolidating the resources to gain competitive advantage on the basis of cost leadership or effective, management of the supply

Lastly, through globalization, Cemex would b able to acquire more potential businesses in the other apart of the globe other than Mexico and US, which will allow it to develop strong skilled base human resource throughout the chain, lever gig the expertise to gain the extensive market share.Though, under standing the cultural difference is also important for the CEMEX global strategy. However, the effective management of the existing culture with the new emerging culture is the key for CEMEX to maintain and sustain the brand image and brand positioning globally in all markets uniformly....................

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