Cemex Case Study

Mexicos largest cement manufacturer, Cemex, has become a global powerhouse in the cement and construction application. It currently controls 60 percent of the cement industry in Mexico (Hill 2009). Cemexs success is a result of a combine of efficient technology such as radio transmitters, satellites, and computer computer hardwargon that allow the comp any to anticipate changes in supply and demand and geld waste.Cemexs success is also a result of an attempt to rein the industry by acquiring and buying out competitors worldwide in order to expand. a.Which theoretical explanation, or explanations, of FDI best explains Cemexs FDI? I turn over that internalization theory best explains Cemexs FDI because Cemex has taken the initiative to engrave into many countries and instead of licensing they bought domestic cement businesses and have grown into a worldwide powerhouse.According to the textbook, internalization theory explains why firms often prefer contrary direct investment ove r licensing as a strategy for introduction foreign markets (Hill 2009). With the advanced technology that Cemex uses, so licensing would non be the great avenue for the company to take in order to protect its technological know-how (Hill 2009). b.What is the value that Cemex brings to the host economy? Can you see any potential drawbacks of inward investment by Cemex in an economy? Cemex is the threesome largest cement company in the world, and a powerhouse in Mexico where it controls 60 percent of the market.Cemex is highly focused on efficient manufacturing and customer service. Distributors are rewarded for their sales, as are users. The primary benefit Cemex brings to host countries involves these competitive prefers. Cemex acquires companies and therefore transfers technological, management, and marketing know-how to the new units, improving their performance. The company has brought several acquired companies back to full moon production, increasing employment opportuni ties in the host country as well. c. Cemex has a strong preference for acquisitions over greenfield ventures as an entry mode. Why? Cemex has successfully acquired established cement fall uponrs in many countries.By acquiring companies rather than establishing them from the background up, Cemex can avoid some of the delays that could occur in the start-up phase, while at the same time, capitalize on the benefits of an established market presence. Acquiring former(a) businesses is effective because the host economyalready knows the demographics and the market. Cemex would be competent to make the business better with their technology and research. A Greenfield venture would be untamed and not cost effective. d. Why is majority control so classic to Cemex?Majority control is important to Cemex because of the ability to implement its policy of transferring resources. When it does not have majority control it may not be able to transfer its own managing resources to newly acquired companies. Also, Cemex might want to take advantage of differences in factor costs across countries, so it will be allowed to import parts from other places to reduce costs.