Cemex Firm’s Innovation and Entrepreneurship

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Executive Summary

Cemex is the most profitable multinational enterprise in the cement industry. Cemex has now a free cash flow of more than US$2 billion in a year and it possesses solid, stable investment-grade credit ratings. Cemex’s financial condition and system strengthen its balance sheet, access low-cost capital, and creates an attractive field of investment. The key factors success of Cemex’s success is-

Entrepreneurial team and strong management;
Product and services;
Advanced marketing,
Business ideologies or philosophy

Cemex believes that open and honest interaction with stakeholders will help to develop its business. Thus Cemex regularly communicates with its shareholders to keep the investors informed and provide all information about its activities. Cemex encourages employees to provide information and opinion for improving its operations and evaluate employee satisfaction and make them a world-class employees. Cemex maintains a relationship with global organizations focused on the role of the cement industry in achieving sustainable development.

Cemex conducts many surveys with customers to distinguish their needs in order to identify the process to improve products and services and it follows a well-communicative strategy to help, maintain and create strong relationships with suppliers and understand their concerns. Cemex is also concerned with environmental and social factors. Thus Cemex Co-processes wastes use alternative raw materials and fuels, takes part in Climate change and GHG emission reduction, Eco-efficiency Programs, and Environmental Protection and Environmental Culture

Market share is the factor that ensures the return from the investment. Market means the customers and expanding market means the increase of customers. For the existence, in the long run, multinational companies are always fighting to capture market share and those, who can do so more, become the market leader. Cemex is thinking globally in order to succeed in multinational business. Thus Cemex is trying to capture the market share to ensure its continuous growth and take the best position in the cement industry.

Introduction

Cemex Cement Company was founded in Mexico in 1906. It did this through a combination of internal growth and global acquisitions. Cemex has maintained a higher level of profitability than other cement companies. Cemex has grown from a small, regional cement firm into a top global building solutions company. “Throughout the course of history, Cemex has set up new plants in many parts of the world. Series of acquisitions and increased production of plants have helped the growth of the company. Post-2000, Cemex is the largest cement producer of North America.” (Cemex, 2008). In last year’s TCP100 ranking of the largest producers, Cemex was No. one.

“With the signing of the GATT in 1985 turning Mexico into an open marketplace, Cemex seized its chance, divesting most of its non-core cement related businesses and acquiring the country’s biggest Cement manufacturers. Not only was it now the number one national player, but it was also the tenth largest cement company in the world.” (Lasserre and Picoto, April 2007).

Cemex success or milestones in a short-

1994, Corporate Sustainability Strategy: Technology, EHS Culture, and EMS.
1997, Corporate CO2 Strategy: Energy optimization, Clinker substitution, and Alternative fuels.
2002, Cement Sustainability Initiative. Cement industry CO2 protocol.
2003, WEF Global Greenhouse Register.
2005, Mexico GHG Program.
2005, CSI Agenda for Action Report.
2006, Forge Green Redevelopment.
2007, Cemex and Rinker agreed to terms of a deal that creates a concrete producing behemoth in North America.

The spectrum of factors that play a key role in Cemex’s success and growth are –

Inventing, creating, developing, and implementing new technology,
Innovative production practices and that helps to make new cement plant design;
Selective mining techniques and optimal quarry exploitation to ensure proper use;
Use of alternative raw materials, such as blast-furnace slag and fly ash, byproducts of steel manufacturing and power stations;
Recycling and reuse of materials to minimize cost and proper use of materials;
Thinking of economical and environmental factors Cemex reusing wastes like petcoke, waste oils, used solvents, etc. as alternative fuels.

The innovative thinking and the characteristics of Cemex make it different from other business organizations and possess a good value to its stakeholders. Mapsofworld web site shows the mission of Cemex Cement Company as “is to serve the global building needs of their customers and create value for their stakeholders by becoming the world’s most efficient and profitable building-solutions company” (Cemex, 2008).

Guidance for Development

Cemex’s commitment to social responsibility guides our strategy for sustainable development which is to run an efficient and profitable business while caring for the needs of our environment and our communities. As part of an industry that relies on natural resources and energy our sustainability principles are (Cemex, 2008):

To employ cutting-end technology to ensure energy efficiency and the optimum use of raw materials;
Promote a culture of environmental awareness integral health and safety; and
Use the most effective equipment and systems to protect our people, neighbors, and environment.

Godínez (December 2007) states that the ‘Cemex commitment to development’ is based on the following matter:

Co-processing wastes.
Use of raw materials and alternative fuels.
Climate change and GHG emission reduction.
Ecoefficiency Programs.
Environmental Protection and Environmental Culture.
Environmental Management Systems (ISO).

The basic concept of sustainable development and growth of Cemex

Achieving market share and retain it is the basic concept of successful and sustained double-digit growth of Cemex Cement Company. Market share is the thing that directly measures a company’s position. Multinational companies doing business years after years and their main target is capturing market share. It is the only thing that is directly related to the growth and sustainability of the business.

To achieve this Cemex has used some tools as well as highly adaptive management culture and philosophy. It also distinguished Cemex from its competitors and others. Market share is the factor that directly indicates the market leader and is directly involved with the return and sustainability of an organization. All the organizations the main objective is to gain profit and to get it, organization use all tools and tactics to gain, expanding and retain its market.

Specific Tools

Getting control over the market and gain market share means to get customer and retain them by solving their need and want. To do so, Cemex as well as other organizations must emphasize customer need-want, value, and perception. From the study about Cemex, it is found that Comes has used the following tools.

Find customers need and market.
Use of Technology.
Cost minimization.
Customer service and value.
Highly efficient management.

To find customers’ needs and market

Market means the set of actual and potential buyers of a product or service (Kotler and Armstrong, 2003, p.10). Before producing a product or entering a market, a business enterprise must analyze the market attractiveness. That means the market size (number of customers), competition, market- growth, the purchasing power of the customers, opportunities, and threats, competitors, etc. If there are many markets then companies have to select the small and nearest one to enter. The key factors to market vision, structure, and analysis may point out as below:

Government rules and regulations
Global excess capability of the business enterprise
To assume and forecast global competition
Gaining market share and build a strong position by Merger and acquisition
To observe and take into account the changes in customer expectation
Always trying to keep pace with the new changes in technology
Strategy must be changed with the demographic changes
Products will be changed with the changes in life and work styles.

All of these play a key role to select and target a market. The changes of these motivate the creation of market opportunities or threats.

From the study of Cemex, it is found that it first targeted the US markets without analyzing the market situation properly and it suffered for that. When it understood its fault it turned to Spain, comparatively little market. Analyzing the market it found the weak points of the two largest cement companies. It sent 23 managers there with a distinctive way of business, called ‘Cemex Way’ (Lindquist, 2002). As they analyzed the market well and took the necessary action, they got success. Here their profit increased 24 percent from 7 percent during the first two years (Lindquist, 2002).

Unlike its European competitors, Cemex concentrates on developing nations where growth is stimulating construction activities using cement (Lindquist, 2002). Thus it searched different continents for new markets and established its market position. Now Cemex operates business in more than 50 countries across four continents (Cemex: 100 Years, n.d., p.8). From the above comparison, it can be said that Cemex’s growth has been made for the growth of its market. Besides, this Cemex turns potential customers into actual customers. They identify the need of the customers and transform them into demand. Most people want to own a good quality home, but the per head income of the people of the third world country is too low to construct their own house.

For example, in Mexico, most people earn too low to construct their own house. Through the research, it has been unveiled that the values of maintaining status in the community through participating in festive communal practices were in conflict with getting ahead and improving the living conditions of one’s family. Then Cemex introduced “tanda clubs”, where the members of low-income communities joined with the club that gave them the right to form building material groups that worked much like tandas. In the club tanda instead of a fund, group members received the building materials to build their rooms which helped them build houses as well as increase the sale volume.

Use of Technology

“Cement companies are not known as high-tech innovators, but Mexico’s Cemex has come up with a winning formula for blending concrete and technology. Using the first-rate information system, it has extracted extraordinary profits from a gritty commodity business” (Miami, November 2000). Entering the world market Cemex used the higher technology for its business activities and built up its own network system. Indeed, Cemex uses higher class technology for producing and selling products. It helps communicate among the branches of Cemex and control them.

“Informatica Power Center is the only solution that offered us the unique combination of universal data access, high performance, and data movement flexibility that we needed to implement a global data synchronization system across a heterogeneous infrastructure.” (Enriquez, 2008).

Miami (November 2000) explains the situation of Cx Network of Cemex Company as such,

“The first three fall[s] under Cx Network, the company’s newly formed umbrella unit. Investors would probably look askance at any other cement company that tried to get into the Internet so aggressively. But despite its rough line of business, Cemex, which had sales last year of $4.8 billion, has become noted for its use of information technology. At its headquarters in Monterrey, Mexico, satellites and a space-age control room help Cemex make sure its cement trucks are being used as efficiently as possible.”

“As a result, Cx Network is being taken seriously on Wall Street and in Latin America. ‘Cemex has presented a very comprehensive strategy,’ says Gordon Lee, cement and construction analyst at Goldman Sachs” (Miami, November 2000).

Alternative Raw Materials

In Mexico, Cemex received a ‘Best Practices Award’ from the Mexican Center of the Philanthropy (CEMEFI) for using alternative raw materials (Godínez, December 2007, p.14). Alternative raw materials and fuel that are used by Cemex are as follows:

Cemex invented an efficient solution to industrial waste disposal by using them as alternative raw materials to produce cement.
It invented a technology to lower energy consumption and reduce its reliance on virgin raw materials by using alternative materials such as, fly ash, pozzolana, slag, and synthetic gypsum to produce cement.
In order to reduce its energy costs and environmental impacts including CO2 emissions and solid wastes, alternatives to traditional fossil fuels as oil, coal, and natural gas are sought.
CEMEX has found that substitutes such as used oil and solvents, biomass, used tires and solid waste can be burned in kilns to produce high-quality cement.

Co-processing alternative fuels and raw materials are used in Cemex kilns in the process of a cutting-end technology, hermetic and secure (Godínez, December 2007, p.13). Cemex uses its technology not only to build factory plants and strong communication systems but also uses its technology to recycle and reuse materials to minimize the cost of production and to ensure the proper use of materials. Thus it helps make Eco-balance and the economical use of raw materials.

Cost minimization

Cost minimization is the tool that ensures the maximum profit of an enterprise. Cost minimization means minimizing all kinds of costs that are related to the product. A business organization can minimize the cost in the following ways-

Cost of collecting raw materials: To minimize the cost of production, the sources of raw materials or suppliers can be changed.
Cost of raw materials: The business can minimize the cost of ingredients that are needed to produce the product.
Cost of manufacturing: By changing the way of production or changing the other helping ingredients a business can minimize the cost of production.
Factory cost: A business can reduce the cost of a product by minimizing its factory cost which denotes the maintaining cost.
Packaging cost: A business can minimize the cost of the product by minimizing the packaging cost.
Transportation cost: Transportation costs may increase the cost of the product. To minimize this cost factories or manufacturing plants may be set up in a suitable place between the source and target market.
Warehousing cost: A business has to warehouse the product in a place where the cost is low but safe.
Marketing cost: Marketing cost should be minimized to keep the price of the product reasonable and to maximize the profit.

Effective management always tries to minimize its cost. It gives a competitive advantage to the business enterprise (Smith, 2004). Thus it can sustain and capture the market. Cemex is no exception to this. By analyzing the Cemex, the study finds out that-

To capture market or market share Cemex acquired many cement plants of its target region or set up plants there. It has minimized the cost of production, cost of transportation, and warehousing cost. It also minimized the cost of distribution and ensured the proper distribution.
In order to reduce energy costs and environmental impacts including CO2 emissions and solid wastes, Cemex has sought alternatives to traditional fossil fuels- oil, coal, and natural gas. Besides Cemex has found that substitutes such as used oil and solvents, biomass, used tires and solid waste can be burned in our kilns to produce high-quality cement (Godínez, December 2007).
Cemex has minimized its production cost and the cost of raw materials by applying an efficient solution to industrial waste disposal by using them as alternative raw materials. Cemex has lessened energy consumption and reduce its reliance on virgin raw materials by using alternative materials such as fly ash, pozzolana, slag, and synthetic gypsum to produce cement. (Godínez, December 2007)
Besides this Cemex uses the most modern and strong communication system called the Cx network. It saves both time and money and increases the efficiency of management. This gives it logistical support to management; ensures proper distribution and production.

Cost minimization is one of the basic tools to maximize profit. It not only brings financial benefit but also creates a better and advantageous position in the competitive market.

Customer service and value

In the modern age, business means to earn profit through customer service or satisfaction. It is the most important tool to achieve new customers and retain them. Loyal customers are the assets of a business.

In order to become a market-oriented company like Cemex, a company must be involved in the market and management has to yield full support to the entire work. That means, the Business must monitor and analyze the rapid changes against the customer’s needs and wants. Businesses should determine the impact of the changes to the customer’s satisfaction, improve product quality or add features, and implement a strategy that could develop superiority of the company in order to compete with the changing environment.

Cemex has achieved remarkable customer service in some of the most logistically challenged nations like Venezuela, Mexico, or the Philippines (Lindquist, 2002). Many emerging-economy central cities faced major traffic flow problems, the result of narrow streets and huge volumes of traffic leading to blockages. This delayed the delivery of concrete and caused the slow development of the major building constructions. Cemex provided a solution which is information technology. By providing each truck with a 2-way radio and a map and a central control office, when CEMEX trucks slowed due to traffic problems the central control would direct the trucks around the problem (OLT, 2005).

As a result of this innovation, CEMEX was quickly able to offer customers delivery within one half-hour of the agreed delivery time. CEMEX had so much confidence in this system that they offered compensation for each minute late over the 30 minutes. Customer confidence in CEMEX soared along with CEMEX’s demand (Lindquist, 2002). “A business is market-oriented when its culture is systematically and entirely committed to the continuous creation of superior customer value”(Slater and Narver,1994). “Market orientation involves the use of superior organizational skills in understanding and satisfying customers” (Rangkuti, n.d.).

To better understand the activities through which a firm develops a competitive advantage and creates shareholder value, it is useful to separate the business system into a series of value-generating activities referred to as the value chain (Porter, 2004).

Now from the study of Cemex, it is found that Cemex always tries to add value to its products. It uses technology for the best performance of its product. Cemex invented and used alternate fuel and raw material, which helps maintain ecological balance. Maintaining ecological balance possesses a good value to its shareholders and attracts new customers, retains them, and makes them loyal to its products.

Now, people are very much cautious about the environment. As Cemex has taken the societal marketing policy, it has won the loyalty of the customer and the complement of environmental groups. Cemex is always concerned about market orientation. Market orientation always commences from the information made by virtue of customers, competitors, and the market (Rangkuti, n.d.). Based on such information from them, the business performs coordinated actions in order to create superior customer value. Cemex is always committed to its customer value and the process of creating superior value for its customers.

Cemex also has some distinctive capabilities. “Distinctive capabilities” means a group of skills and accumulated knowledge obtained on the basis of the organizational process. Rangkuti (n.d.)says that

“[t]hus the Company can coordinate its activities based on the resources potential possessed, hence it is different from what the competitor does. Components of capabilities include the skill (cross-functional teams), the accumulated knowledge to the experience against a new product; Organizational process; coordination of various activities (communication); Assets (brand image). All these components of capabilities create a superior customer value.”

Cemex always tries to create superior customer value to hold and retain its customers.

Highly efficient management

Management is a universally necessary function. It is essential for all kinds of organizations, whether they be business organizations or non-business organizations. This is so because every organization requires the making of decisions, the coordinating of activities, the handling of people, and evaluating the performance directed towards its objectives. This task for the organizations performed by that responsible person is called the manager. A manager brings the talent of humans and combines it with the machine, materials, and money. Qualified managers, therefore, are important both in their firms and in the future society. They are so important that high-quality management is a firm’s single most important resource.

Cemex’s “commitment to employee development is multifaceted” (Cemex, 2008). From its global leadership and international management programs to its scholarships and online training courses, it works to foster its employees’ growth at each stage of their careers. Cemex also encourages its employees to take international assignments. Today several hundred managers – at many different levels – are working outside of their home countries. “These assignments not only further the individual participant’s growth, but also facilitate the exchange of best practices and the development of Cemex shared corporate culture.” (Cemex, 2008). The organization of Cemex is controlled by the Management Team which includes (Cemex, n.d.):

Chairman and CEO
Executive Vice President of Planning and Finance
Executive Vice President of Development
Executive Vice President of Administration
President of the North America Region & Trading
President of the European Region
President of Southern Europe, Africa, Middle East & Asia Region
President of the South America & Caribbean Region
Chief Financial Officer.

Basically, the success of a business depends on the effectiveness of the management. Management is the life of an organization. It engenders a relationship with all the components of the business and drives towards achieving the goal. “If there is one thing that distinguishes us from our competitors, it is our highly adaptive management culture and philosophy. This is the driving force behind our ability to provide consistent growth and returns” Lindquist, Diane. (2002). A gain Lorenzo Zambrano says, “It’s like a SWAT team,” explains the leader of one such group. “For the first two months, we look for quick hits that will bring immediate savings. We introduce our system, but we also pick up good practices that we haven’t seen anywhere else” (Lindquist, 2002).

This statement proves the efficiency of Cemex’s management. Now Cemex management members are so much capable that they can do any work. They are highly adaptive and capable to match any changing situation. “The CxNetworks units are steeped in Zambrano’s distinctive practices. Indeed, San Agustin says that ‘the Cemex Way is the major product both units are selling” (Lindquist, 2002). It is a very well-known establishment in the region in the opinion of San Agustin (Lindquist, 2002). “The aim is to confirm the global construction industry. We have to move always very fast. It’s a part of our culture” (Lindquist, 2002).

Cemex supports a wide range of wildlife conservation activities with a variety of organizations, including almost 40 projects in 10 countries designed to protect highly biodiversity ecosystems. These efforts include reforestation, wildlife management, scientific research, reintroduction and preservation of local native species, and the restoration of quarries (Nash, June 2002).

Innovation & Entrepreneurship of Cemex

Cemex is an outstanding example of a successful entrepreneurial organization. It has shown an excellent way to succeed in international business. From the study of Cemex, we may distinguish the key factors of its success as –

Entrepreneurial team and strong management.
Product and services.
Advanced marketing.
Business ideologies or philosophy.

Entrepreneurial team and strong teams management

The key factor of business success is its highly adaptive management. From the beginning to now, CEMEX management has shown an outstanding performance. CEMEX has taken many employee development programs to improve employee skills and efficiency. Thus CEMEX has able to build a superior management icon, which has drawn a borderline to distinguish CEMEX from other business organizations. CEMEX’s strong and highly adaptive team makes every complex and hard task of international business easy and accomplished them successfully.

CEMEX is using a strong communication system, named exmat.wnk, which helps CEMEX to keep nonstop communication and information exchange the groups of different countries which bring the world in CEMEX’S glowed.

Product and services

Another innovative factor of CEMEX’s success is its product and services. CEMEX use higher technology to produce their product and ensure product performance. CEMEX’s research and technology finds a new way to produce product with cheaper in cost but high in quality. CEMEX invented to use alternatives raw materials and fuel to produce their product. Moreover, CEMEX invented an environmentally friendly process to produce a product which is praised by the social activist group and its customer. Thus it helps customers to achieve more profit. Again CEMEX ensures superior service to its customers. CEMEX ensures proper distribution within the given time. It has built

Advanced marketing strategy

Cemex has used advanced marketing strategies to its marketing side. It has the ability to use marketing mix properly in their marketing. Marketing mix refers to 4P’s. The 4P’s are-

Product.
Price.
Place.
Promotion.

Cemex has used higher technology to produce a high-quality product but is cheap in cost. Moreover, Cemex is able to minimize the distribution and other costs to make the price of the product low. Cemex targets developing countries, where their product is highly needed. Cemex acquires and setup manufacturing plants near their target markets. Thus it ensures proper distribution and at the right time and place.

Cemex has achieved remarkable customer service in some of the most logistically challenged nations like Venezuela, Mexico, or the Philippines. Many emerging-economy central cities faced major traffic flow problems, the result of narrow streets and huge volumes of traffic leading to blockages. This delayed the delivery of concrete and caused the slow development of the major building constructions. Cemex provided a solution which is information technology. By providing each truck with a 2-way radio and a map and a central control office, when CEMEX trucks slowed due to traffic problems the central control would direct the trucks around the problem.

As a result of this innovation, CEMEX was quickly able to offer customers delivery within one half-hour of the agreed delivery time. CEMEX had so much confidence in this system that they offered compensation for each minute late over the 30 minutes. Customer confidence in CEMEX soared along with CEMEX’s demand (Lindquist, 2002). Cemex has taken many strategies to attract its customers. It uses environmentally friendly procedures to produce its products and provide superior customer service to attract its customer.

Business Ideology or Philosophy

Business Ideology or Philosophy is the factor that focuses on the mission, objective, and culture of the organization. For the time being Cemex has built up a strong ideology, which distinguishes it from other companies. It also accelerates the team spirit and confidence level of the Cemex management.

Conclusion

Cemex is an outstanding company that creates a role model in the field of international business. It has the experience of hundred years. During this long run, Cemex has changed itself into a giant multinational company. Globalization basically changes the play of business. The Strategic frameworks developed and analyzed for the domestic business cannot be applied to the international business context. Business requires “new approaches to understand and cope with these far-reaching changes of globalization (Spulber, 2007, Preface). Businesses have to think globally in order to succeed in multinational business.

Spulber (2007) states that “how we can do this by providing a unique set of strategic tools for international business” (Preface). These strategic tools include the “Star Analysis” which allows strategy makers to integrate geographic information with market information about the global business environment. Spulber (2007) also introduced the ‘global value connection’, which shows managers how to account for the profit or loss of the business (Preface).

So, the study reveals that Cemex has to go a long way to reach this position. Cemex has involved itself with lots of activities both commercial and social. It has –

developed its technological side as a continuous process and involved new technologies,
built up a dynamic management system,
developed the multinational business from little domestic business,
setup many plants in many countries for production and distribution,
engaged itself in different social and social welfare activities,
minimized production cost and invented alternative fuels,
merged business and acquired new plants and business,
added value to the product,
created a club to help people build houses,
provided outstanding customer delivery and logistic support, etc.

Cemex does all these not only to gain profit but also to capture the market. Market share is the factor that ensures the return from the cells. Market means the customers and expanding market means the increase of customers. For the existence, in the long run, multinational companies are always fighting to capture market share and those, who can do so more, become the market leader. Finally, it can be said that market share is the fact that takes to grow a business at double-digit growth over many years.

References

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