Competitive Analysis: CEMEX - Essay Example

CEMEX Case Study Table of Contents Table of Contents 2 Key Learning Points 3 2. External Analysis Tools 3 2 STEEP Analysis 4 3. Internal Analysis 5 3.1. Value Chain Analysis 6 4. Key Financial Ratio 7 5. Ansoff Product-Growth Matrix 7 References 8 1. Key Learning Points CEMEX will be able to take the advantage of its targeted marketplace through proper assessment of its political, economic, social, legal as well as competitive environment The internal factors that will increase the efficiency of CEMEX in taking appropriate decisions when penetrating a target market will be its human resources and its technological advancements CEMEX should focus on enhancing its internal structure to take the advantage from its targeted market and effectively contribute to its development CEMEX should also continuously assess its internal processes to achieve optimum business performance Identifying government intervention and legal, regulatory factors, tariff as well as trade system of the target country will help to add more incentives to the business by reducing restrictions Improving technological factors and R&D activities will also be important in order to create innovative opportunities for CEMEX 2. External Analysis Tools General Environment – Currently use of cement and concrete are increasing rapidly. Simultaneously, demand from quality-based cement is increasing, opening up huge scope for cement industries to establish its business activities globally (Casanova & Hoeber, 2008). Industry Environment – Procurement and production processes of making cement is quite expensive. Thus, in order to take entry in potential emerging markets, the cement industry must have to create a unique brand image to sustain in the long run (Casanova & Hoeber, 2008). Competitive Environment – In proportion to other construction raw materials, cement has gradually lost its value, wherein competing firms are focusing more on producing concrete materials to suffice the requirements of the people. Thus, new entrants, advanced technologies and innovative production process have increased toughness of the competitive environment, in which only quality based products can survive in the long run (Casanova & Hoeber, 2008). 2.1. STEEP Analysis Social Demographic- Cement is the basic ingredient in construction projects, which also reflects the development of the society in terms of infrastructure. Contextually, CEMEX has a strong brand recognition has along with the capability to supply cement, as consumer goods in developing or other countries (Fleisher & Bensoussan, 2015). Technological- From production to packaging, the internal processes of CEMEX are carried out with the help of advanced and effective technologies. Additionally, quality and productivity of the cement also depend on the production technology and storing process followed by the company to a certain extent. Therefore, the presence of highly advanced technology is very important for CEMEX to carry out the intended business activities and ensure product reliability (Bensoussan & Fleisher, 2012). Economical- Economic conditions of a country tend to influence its success potentials to explore the cement industry, as it requires moderate financial flow. Availability of productive trade infrastructure is equally important for establishing cement industry. The emerging cement market herewith offers a huge opportunity for CEMEX through increased demands in developed as well as developing countries for cement (Fleisher & Bensoussan, 2015). Environment- Cement industries must obey some environmental laws, as it creates air pollution and has to install adequate control systems to perform its business activities. In this context, CEMEX might face sustainability problems when conducting its functions (Bensoussan & Fleisher, 2012). Political- Cement industry companies have to execute its legal and political responsibilities by adhering Cement Sustainability Initiatives (CSI) to reduce carbon emission and install health and safety measures among others for a sustainable growth in the global market (Fleisher & Bensoussan, 2015). 3. Internal Analysis Capabilities- The given case study reveals that CEMEX has strategically significant insights about market dynamics and customer preferences. Additionally, with more than 110 years of experiences, flexible market strategies and ability to adapt changes quickly, the company is quite likely to deal with the characteristics of volatile market situations as well as turn challenging situations into favourable ones. Moreover, strong brand recognition will help the company to acquire market shares and take the advantage of emerging markets substantially (Casanova & Hoeber, 2008). 3.1. Value Chain Analysis CEMEX works closely with its suppliers, distributors and its consumers to preserve a valuable relationship and ensure mutual benefits on the value chain. Procurement- By providing equal opportunities and encouraging them to improve raw materials’ quality, CEMEX executes a ‘centralized global procurement process’ and ‘Strategic Sourcing Methodology’, which helps it to improve business efficacy to a substantial extent (Sustainable Development Report, 2006). Product Development- Implementation of effective as well as innovative science and technology further ensures the validity of cement or concrete composition by the company. R&D unit of CEMEX also introduced a sustainable process that helps in reducing costs and creating sustainable products, which can meet the requirements of the customers (Sustainable Development Report, 2006). Managing Human Resources- By promoting diversity within the workplace, protecting human rights and taking initiatives for providing a safe and secured environment, CEMEX has effectively managed its human resources. Additionally, its effective training process has helped the company to perform each activity in alignment with its organisational goal (Sustainable Development Report, 2006). Distribution- CEMEX emphasises at enhancing the relationship with its distributors to maximize their interests, so that customers receive better services and products. Moreover, it intensifies the distribution channels in order to speed up the delivery process (Sustainable Development Report, 2006). 4. Key Financial Ratio Gross margin ratio of CEMEX, for the year 2014 was 32%, with its base year 2012. Accordingly, its Earnings Before Tax (EBT) margin was -0.79%, inventory turnover ratio was 8.14%, current ratio was 0.88% and Return on Invested Capital was measured at 2.4% (Morningstar, 2015). 5. Ansoff Product-Growth Matrix In order to enter in a new market and for developing internal efficiency, the company can enhance its efficiency in the R&D unit, so that it can increase the quality and productivity of the products by diversifying its innovative strategies through highly advanced technologies. CEMEX offered innovative products, such as ‘Rapid-setting cement’, ‘Self-compacting concrete’, ‘Porous concrete’ and ‘Safe Energy Concrete’ to its customers through diversification and intended to develop products further, as per the customers’ requirements (Sustainable Development Report, 2006). References Bensoussan, B. E & Fleisher, C. S., 2012. Analysis without Paralysis: 12 Tools to Make Better Strategic Decisions. FT Press. Casanova, L. & Hoeber, H., 2008. CEMEX: Building a Global Latina. INSEAD, pp. 84-97. Fleisher, C. S. & Bensoussan, B. E., 2015. Business and Competitive Analysis: Effective Application of New and Classic Methods. FT Press. Morningstar., 2015. Cemex SAB de CV ADR. Key Ratios. [Online] Available at: http://financials.morningstar.com/ratios/r.html?t=CX [Accessed October 04, 2015]. Sustainable Development Report., 2006. CEMEX. About This Report, pp. 1-20. Read More