What kind of global giant do you think Lorenzo Zambrano wanted the firm to

become? Critically evaluate his chances of success with CEMEX.

Company overview:

CEMEX previously was known as Cementos Mexicanos by its founder Lorenzo

Zambrano.
Its traced its originals to 1906 when Cementos Hildalgo cement plant was opened in
northern Mexico near Monterrey with less than 5,000 tons per year. In 1931 it was
merged with Cementos Portland Monterrey by Lorenzo to form CEMEX.

• By the year 2000 it became the third largest cement company in the world
with approximately 65 million tons in terms of capacity, as well as the largest
international trader.

• CEMEX sales revenues had increased from less than 1$ billion in 1989 to
nearly 5$ billion in 1999.

• CEMEX operated cement plants in 15 countries, owned production or

distribution facilities in a total of 30, and traded cements in more than 60.

• Growth had been achieved without compromising profitability. In addition the

company was celebrated as one of the few multinationals from Latin America,
as a model user of information technology in an otherwise low tech setting.

The Giant they want to be:

• 1985 Lorenzo Zambrano , scion of the Zambrano family that still controlled
CEMEX and a grandson as well as namesake of the company’s founder, took
over as CEO.
• CEMEX continued to grow in his first years by constructing additional cement
capacity.
• It also began as petrochemical, mining and tourism in order to reduce the risks
of depending on a highly cyclical core business (cement).
• Lorenzo decided to focus on cement despite of his initial ways of thinking and
started switching to a strategy of growth through acquisitions.
• First through Mexico by unifying its Mexican operations as large threats from
Holderbank and Lafarge companies were present.
• CEMEX became Mexico’s largest cement producer in late 1980s by acquiring
Cementos Anahuac and Cementos Tolteca.
• CEMEX was able to withstand the peso crisis in Mexico in 1994/1995 by a
plan of revamping its Mexican operations from 18 months to 3 months and
managed despite the recession that followed to maintain margins at reasonable
levels.
• That time CEMEX managed to begin expanding into foreign market and by
2000 it was the leader in the Maxican market with a capacity of 28 million
tons, or about 60% of the country’s total and the largest international cement
 trader in the world with projected trading volumes of 13 million tons of
cement.
• Internationalization began with exports, principally to US in the early 1970s.
• Late 1980s it managed to establish distribution facilities in southern united
states, but it was challenged by low suit from other US competitors which led
to imposing countervailing duty on CEMEX’s exports from Mexico to US, the
duty was initially 58% and then later was reduced to 31%.
• CEMEX acquired a 1 million ton cement plant in Texas to reinforce its ready
– mix and distribution facilities in southern US.
• In addition CEMEX continued to import Chinese cement to the west coast of
the US as third party by doubling the profits of its activities in US leading to
12% of CEMEX total sales.
• By early 1990s it moved to Spain to trade its Maxican cement and also to
study the European market.
• Through acquiring two large Spanish cement companies , Valenciana and
Sanson it yielded a market leading 28% share in one of the Europe’s largest
cement markets.
• This gave them the chance to lower dependence on Maxican market and by
competing with Holderbank and Lafarge it raised its international profile.
• The next majo international move was Latin America : Venezuela .
• Through integration and improving its efficiency there CEMEX was able to
export surplus production to places such as Caribbean islands and southern
US.
• Colombia was another market which CEMEX’s revenues was 3-4% during
1999.
• CEMEX managed to acquire controlling stakes in Chile, panama, Dominican
Republic and Costa Rica.
• The move to Asia followed by late 1997 and early 1999, Filipino cement was
start target, when they controlled about 22% of its capacity and by 1999
Philippines accounted for 2.5% of CEMEX’s revenues.
• They moved to Indonesia and were able to tackle the political and
economical environment there.
• Grinding mill in Bangladesh was established to receive and process shipments
of clinker from Indonesia.
• Assiut Cement Company the largest cement producer in Egypt was also a
target for acquisition and CEMEX got 77% stake for a total of about $370
million.
• Future plans are set with a budget of $ 1.175 billion to spend on global
acquisition according to May 2000.
• China was a target but with many technical difficulties.
• India was farther advanced before China and so CEMEX was thought likely to
enter it.
• Brazil also was one of its targets keeping eye on its market and through
negotiating with the government to buy 10% stake of Cimpor ( the country’s
largest cement maker).
Success rate:

Through its expansion process to international markets and improving its

policies.
Various stages in the expansion process were followed and they are:
• Opportunity identification: by studying the market and where the
opportunities are placed for a market control.
• When CEMEX identifies a possible acquisition target, it also examined the
potential for restructuring both the target company and the market as a whole.
• Due Diligence: it lasts one to two weeks and involved about ten people per
team, half with prior experience.
• The negotiation and meetings with local competitors and industry
associations are part of their job.
• Post- Merger Integration (PMI) process: this team is formed once the
acquisition was made.
• The purpose to improve the efficiency of the newly obtained operation and
helps to adapt to CEMEX’s standards and culture values.
• The PMI works at three levels: improvement, sharing and harmonization.
• Every two to three years a PMI process was performed on CEMEX’s
Mexican operation.
• Financial figures for CEMEX as a whole was high due to lack oversight in
regards to assets value and debts.