Abhijith Lakshmi Narasimha - 0501 | BUSI621 | CASE 1
CEMEX: GLOBAL GROWTH THROUGH SUPERIOR INFORMATION
CAPABALITIES
1. Cemex is a cement company. What are the sources of competitive advantage in the cement industry? What is Cemex's position in the global cement industry?
Cement is classified as a commodity and not a product in itself. Cemex worked towards making it a product from a commodity. The cement industry has some advantages that comes with it as it is a commodity – There is always a demand; the industry can almost never run out of business as constructions always take place; there are very limited geographical, cultural or other barriers for cement consumption. Cement business is a cyclical business viz., the business is almost directly proportional to the varying economic conditions (if the economy is good, the investment is good, so is the consumption and the returns and vice versa). In such a scenario, globalization helps in offsetting any negative effects or downward trends in economies. When the distribution is not centralized from a single source, it serves as an advantage – if there is any sort of barrier to growth at one location, there is a good chance of that being compensated in a location whose economy is prosperous. It is also important to bring about a brand value to the “commodity” – since people would recognize it as a unique product (like Cemex). Cement, when produced in bulk quantities, costs less and hence gives the supplier bargaining power and helps make more profits. Cemex was founded in 1906 in Mexico and what was initially a basic small scale company is now a huge multinational. It is now the third largest producer of cement, the largest trader and the largest producer of white cement. It has a strong foothold in emerging markets as well as developed economies and hence has very bright prospects. It operates across 30 countries. It has a commendable IT setup that is compared to the likes of Cisco and Dell.
2. Consider the period prior to 1997 in the case. What are the main IT-related changes that
Cemex has made? What are the primary capabilities that these changes have given to
Cemex? Where do these capabilities influence Cemex's performance?
In 1985, Zambrano became the CEO and with some forethought, introduced strategic planning, human resources and information technology. He wanted to bring in brand equity and customer loyalty through them. He appointed Iniguez to carry forward his IT dream. The first thing Cemex did was to adopt to the new satellite technology telecom system. This helped them since they had
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Abhijith Lakshmi Narasimha - 0501 | BUSI621 | CASE 1
geographically dispersed operations. Then came the CemexNet – for data and voice. Cemex acquired Tolteca and had a domestic monopoly; they integrated the Tolteca HP platform with their
IBM platform. Later, an Executive IS enabled by CemexNet helped in bringing in transparency across the organization. It help reduce the time wasted in search of company information and allowed managers to have more time to do creative innovations. Cemex started to grow internationally with many mergers. Since the cultural and IT setup would be different in different companies (geographies), Cemex formed a Post-Acquisition integration team. This team ironed out chinks in the acquired employees’ armor and fine-tuned them to the Cemex ways (with IT process standards included). Cemex made use of IT in a people and process centric approach.
Cemex improved their IT infrastructure and reorganized its IT team. The dedicated programming team ceased to exist. Later, in 1993, Cemtec was established to act as an individual IT service provider. In 1994 a business-process reengineering program enabled cross team transparency and learning. In 1995 a local digital dispatch system – dynamic synchronization of operations – was setup to check and guarantee cement deliveries in time, which became a unique proposition in the industry. This made trucks more efficient
