Operating International Business Case Study – Cemex
OPERATING INTERNATIONAL BUSINESS CASE STUDY
Question 3: Cemex has a strong preference for acquisitions over Greenfield ventures as an entry mode. Why?
Case analysis: The form of FDI can be divided into acquisitions and Greenfield investments. It is commonly accepted that the performance of acquisitions is better than Greenfield investments because of quicker execution, valuable strategic assets and efficient acquisitions (Dowling et al. 2009). In this case, Cemex, which is an experienced cement company, mellows itself in Mexico, a developing country. Today, Cemex is the largest cement manufacturer in Mexico and the third-largest cement company in the world. Its seamless system of information technology has enhances itself and bring huge business opportunities due to the success of engaging with customers needs as well as rapid responses from customers demand.
The reasons why Cemex prefers to entry different areas or nations by the means of acquisitions can be divided into four points. First of all, Greenfield investment is an inefficient way as foreign investment strategy. Since a company has to purchase and construct new factory, new production facilities and hire new labours while taking Greenfield investment as its strategy. In addition, it must take a long time to blend local culture and establish customers brand loyalty (Dowling et al. 2009), this strategy is not a suitable way for foreign investment in this rapid changing business world.
Secondly, acquisition might be a shortcut for companies to do foreign investments. Foreign firms can acquire considerable assets through taking over other companies, such as brand loyalty, customer relationships, trademarks, patents, distribution systems and production equipments and systems (Dowling et al. 2009). Besides, Cemex has grown in developing countries because the marketer considered that the demand of cement is much more than developed nations. Cemex as a Mexican company has a similar background while dealing with customers demand in many developing areas and also might be more sensitive to meet the requirements of construction businesses. Owing to this background knowledge, Cemex can respond to customers quicker and has better understanding of the marketing know-how.
Thirdly, Cemex is famous for its remarkable skills of information technology, including truck-mounted global positioning system, radio transmitters, satellites and computer hardware (Dowling et al. 2009). Once Cemex merges firms in other regions or nations, the transfers of its capital, technology, management skills directly improves these firms efficiency. These strengths of Cemex can lower the operation cost but still provide superior customer service than other competitors.
Last but not least, Cemex purchased inefficient companies in other markets as a footstone and bring its skills in customer