Cemex

Milestone 1

Where are the company’s production facilities located? 

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Cemex is a global player in the cement industry with more than 67 operational plants in over 50 countries. The company runs 1,505 ready mix facilities and sources for raw materials in 285 aggregate quarries and 67 marine terminals (Cemex, 2017). The company operates in the following regions Mexico, the United States, Europe, the Mediterranean; South and Central American and the Caribbean, Asia, Middle East, and Africa (Vargas-Hernandez, Lopez-Morales, Pavon Villegas & 2015). 

What is Cemex’s annual turnover in dollars and what is its annual production in tons?

The geographical distribution of the company reduces its reliance on one market. The company, as of 2017, produced an aggregate annual production of 147 million tons. Out of these, 52 million cubic meters was ready-mix concrete. 

How does Cemex differentiate its offering in a market where cement is a commodity?

Cemex is able to achieve high levels of differentiation using various strategies. The first strategy is through the use of information systems. The company is able to adapt to customer convenience through the use of its products and services. The other strategy is branding. Cemex is able to appear unique in a market that is characterized by little branding owing to the notion that cement is a product that requires little or no special branding. The Cemex Research Center in Switzerland is a key element in the company’s differentiation strategy. Through the center, Cemex is able to develop diverse products that set it apart from the competition. Innovative products, services, technologies, and commercial models, result in making the company different from its competitors. One such product is the ready-mix concrete that is a popular product in Spain, which differentiates it in that market (Cemex, 2017). The production technology in Cemex lays emphasis on environmental conservation since the company uses sustainable models that reduce CO2 footprint and a general environmental impact. 

Are there differences in product quality?

Cemex has notable differences in product quality. The cement and other products that the company produces are of high quality. Cemex has nine laboratories that support its research and development efforts (Cemex, 2017). The laboratories enhance the quality phenomenon in all its subsidiaries through the provision of “troubleshooting, optimization techniques, and quality assurance methods” capabilities (Cemex, 2017). In highly competitive markets, it competes through the use of quality and value proposition it offers its clients. This means that in such markets, the company offers the highest quality products rather than competing on the basis of prices. To control quality, the company carefully monitors its manufacturing processes using state of the art technologies, which are highly sensitive to the delicate chemical process that is cement production. 

Who are the major global and US customers? and What benefits does Cemex offer to its customers?

Cemex has different types of customers. The major types of consumers are individual consumers who often buy in small quantities and large consumers. Large consumers are institutional or project-based buyers. CEMEX has successfully utilized the customer needs segmentation as a means of increasing profitability (MacMillan & Selden, 2008). In the United States, the company supplies large-scale projects with cement or ready-mix concrete.  For instance, the company provided ready-mix concrete that was customized for the Caldecott Tunnel in the San Francisco Bay area. For the project, the company injected over 50,000 cubic meters of concrete. With the already recovered mortgage market from the 2008/2009 economic turmoil, the company has exposure to more clientele in the U.S. due to the uptake of more mortgages, which in turn increases the demand for cement (an important input in housing development) as indicated by the graph in Appendix 1. In the European market, the company provided ready-mix concrete during the construction of the deep shaft of the Thames Water Lee Tunnel in England. Other projects include housing projects such as the New Homes in Colombia, Altos del Higuamo in the Dominican Republic, and the Tetris Affordable Housing in Mexico. 

Who are the major global and US competitors?

The major competitors of Cemex include; Lafarge North America Inc., Holcim Inc., and the Ash Grove Cement Company. Others include Buzzu Unicem, Heidelberg Cement, and CRH. Cemex had an annual turnover of $6.58 billion in 2017 in North America, against Heidelberg with $5.21 billion and CRH with $14.74 Billion in the same market. Globally, LarfageHolcim took the bigger share with revenues of $31.3 billion, followed by CRH, which netted $30.21 billion. Heidelberg Cement AG of Germany came in second with $20.69 billion whole CNBM of China took the fourth position with revenues of $19.61. Cemex took the fourth position followed by Anhui Conch Cement of India and Ultra Tech Cement of India respectively as indicated by Appendix 2 and 3.  

Value proposition

Cemex approaches and retains new and existing customers using effective customers’ management strategies. One of its strongest value propositions is quality. The company provides continued and unrivaled consistency in quality through research and development. Second is customization. Cemex is always ready to get out of its comfort zone and meet its customers at their moment of value. No client’s needs are similar to each other and as such, the need to provide custom-made solutions remains an important way of creating value for customers as explained by Van Rensburg and Van Niekerk (2010). This has been demonstrated above in markets such as U.S. and England where the company provided custom-made ready-mix concrete to humongous projects to their satisfaction. Third, the company ensures that it provides competitive prices. As such, customers are left within budget and with considerable margins for their businesses. The use of information technology in the company should be evaluated to ensure that IT helps to minimize costs and improve revenue generation capabilities as enumerated by Walker et al. (2017)

Milestone 7

Financial Analysis

The information provided in the table below has been sourced from Cemex’s 2017 Financial Report. Exchange rates on December 31, 2017, were Ps19.64 to U.S. $1.00. This analysis has further assumed that the ratio of variable costs to fixed costs is 6:4 since the financial report does not give these specifics, which are essential in the calculation of the Break-even point. 

 All units are in Millions 
 2017Forecasted 2018 (10% increase in Sales)
Total sales in $$$$ 13,700.00 $    15,070.00 
Total Number of Units Sold147161.7
Average Unit Price$        93.20 $           93.20 
Average Unit Variable Cost $        11.64 $           12.81 
Fixed Costs$   1,141.06 $      1,141.06 
Total Costs$   2,852.65 $      3,212.08 
Contribution$        81.55 $           80.39 
Breakeven point (units)13.991485314.19413537
Breakeven point ($$$)$   1,303.97 $      1,322.85 

From the analysis above, the company must sell more than 14.19 million tons of products in the next financial year netting $1.323 billion. To achieve this, the global sales manager must sell more than 10% more than he did last fiscal year. 

Implementation

To ensure that these targets are met, there should be a quarterly analysis of sales performance. The sales targets must be scaled down and interpreted in terms of quarters. If sales in a given quarter do not meet the sales target, there should be an evaluation of why the sales records are not up to the target. Remedial action should be suggested based on the reasons given and previous experience. The company should aim to learn and dissect the methodologies employed or planned by other companies so that it can keep up with the competition. Ponssard and Walker (2008) explained that to make forays into markets such as the EU, the CO2 footprint of the company is critical. As such, the company needs to employ technology that reduces CO2 emissions to ensure that it penetrates this market and others through reputation and adherence to the law. Through the adoption of such technologies, the company will appear responsible even to other markets and it will be far much easier to convince other unexploited markets to accept its forays. Miller and Osborne (2014) opine that creating localized market power by working out capacity constraints is an effective way of achieving sales dominance. In this case, the company needs to ensure that its capacity in each local market is enhanced to ensure that it cements its localized market power in a bid to achieve its forecasted growth ambitions.  

Tourki (2010) examined how the implementation of lean philosophy can be explored to enhance productivity and efficiency; an element that Cemex is pursuing. For Cemex to achieve lean manufacturing and market operations, the company, according to Womack and Jones (2003) must observe the following five principles. First, the company should prioritize customer value. The production process should be designed and upgraded often to meet customer needs and wants. The second element is the value stream. The company should identify current methods of meeting customer needs and compare it with the future of the company. A value stream is then created by conducting an analysis of what value processes should be introduced to meet the future vision of the company. The third element is the flow process. The flow processes should eliminate all types of wastes and obstacles that are a hindrance to the flow of materials and processes. The fourth element is perfection. The company should perfect its processes that serve customer needs and wants as well as the flow processes. With all these factors combined, Cemex will achieve a high reputation in the market.  

References

Cemex. (2017). Annual Report. Retrieved from https://www.cemex.com/documents/20143/21624997/CEMEX2017_20F.pdf/211771ae-8bdf-733b-c764-cb913976cdb6

Cemex. (2017). Company Profile. Retrieved from https://www.cemex.com/about-us/company-profile

MacMillan, I.C., and Selden, L., 2008. The incumbent’s advantage. Harvard business review86(10).

Miller, N. H., & Osborne, M. (2014). Spatial differentiation and price discrimination in the cement industry: evidence from a structural model. The RAND Journal of Economics, 45(2), 221-247.

Ponssard, J. P., & Walker, N. (2008). EU emissions trading and the cement sector: a spatial competition analysis. Climate Policy, 8(5), 467-493.

Tourki, T. (2010). Implementation of lean within the cement industry. (Ph.D. Thesis) De Montfort University, Leicester. U. K. 

Van Rensburg, M. J., & Van Niekerk, J. (2010). Value differentiation: Creating customized value propositions in the South African cement industry. Management Dynamics: Journal of the Southern African Institute for Management Scientists, 19(4), 2-16.

Vargas-Hernández, J., López-Morales, J.S. and Pavón Villegas, C.Z., 2015. Analysis of CEMEX’s Strategies as Determinants for Market Power.

Walker. R, Feuerberg. I, Garcia. L.S, & Villasenor S.T. (2017). CEMEX: Information Technology, an Enabler for Building the Future. Harvard Business Review. Retrieved from https://hbr.org/product/cemex-information-technology-an-enabler-for-building-the-future/KEL992-PDF-ENG

Womack, J. P., Jones, D. T., (2003) “Lean thinking: Banish waste and create wealth in your corporation”, 2nd edition, Simon and Schuster Inc, London, UK, pp.15-90. 

Appendices

Appendix 1: Home Sales Index in the US 2013-2018

Source: Erate.com

Appendix 2: Cement Manufacturers Revenues in North America

Source: Statistica.com

Appendix 3: Global Cement Manufacturers Revenues 

Source: Statistica.com

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