Cemex is a Mexican company that mainly deals with the manufacturing of cement and other building materials. The company is present in 50 countries. Cemex business strategies have helped during their expansion in the 50 countries. This article analysis will look at the basic reasons why companies choose to expand their business to other countries by employing international strategies, the different types of foreign investments as well as the importance of core values in the expansion process.
Companies like Cemex choose to expand for various reasons. One of the reasons for Cemex’s expansion was resource seeking. For example, their entry in Spain was primarily motivated by the fact that the company could tap into the market with a lower cost of capital as Spain offered extensive opportunities for the company’s growth, and that it was relatively affordable (Lessard & Reavis, 2009) . Secondly, since it was facing massive competition in Mexico, the company branched out to seek other markets for their products. Lastly, the company branched out for strategic asset seeking. Through the acquisitions, Cemex was able to build its strategic assets including new technology and distribution networks. The expansion was successful because Cemex adopted its international strategy which constituted standardization of the business processes, organizational structure and technology while allowing countries the operational flexibility which enabled them to respond more to local environments.
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International investments carried out by companies fall into several categories one being a foreign direct investment (FDI). FDI is an international investment that entails obtaining of lasting interests of another firm in another country. There are three types of FDI namely vertical, conglomerate and horizontal. In horizontal, the company investing establishes a similar business in a foreign country with the central operations in the home country (Helpman, 2006). The vertical type of FDI is one where a company acquires or establishes a different, but related business in a foreign country. Lastly, conglomerate FDI is one where a firm invests in a business that is different from its core business. This type of FDI is usually in the form of joint ventures.
Core values are principles that guide the organization on its internal and external conduct. To succeed in their international expansion, Cemex was guided by the corporation’s core values. In the case of Cemex, the company’s core values showed up during the expansion process. In the acquisitions, Cemex was trying to exploit their core capabilities. The guidelines that Cemex used to conduct their business included standardization of business processes, identifying and distributing best practices, and efficiency in managing the universal knowledge base (Lessard & Reavis, 2009) . This meant that Cemex would work with integrity, ensure safety and focus on customer satisfaction.
Reference
Helpman, E. (2006). Trade, FDI, and the Organization of Firms. Journal of economic literature , 44 (3), 589-630.
Lessard, D. R., & Reavis, C. (2009). CEMEX: Globalization “The CEMEX Way”. In MIT Sloan Management Case Study, 09-039 (pp. 1-21).
