Introduction
Strategic management is the central pillar of the success of business organizations (Rothaermel, 2015). The performance, as well as competitive capacities of national and international business organizations, hinge on the role of management (Rothaermel, 2015, p. 128). The needs for strategic approaches to business operations and management have become increasingly important due to increased global competition. Multinational corporations adopt various strategies such as national consolidation of firms and functions. Also, multinational companies engage in international joint business ventures through international mergers and acquisition to enhance their operations. Effective management strategies promote the capacities of business organizations to achieve their objective of global expansion by improving their performance in international markets as well as overcoming the challenges of operating in foreign countries (Luo & Tung, 2007).
CEMEX is one of the leading multinational companies in cement manufacturing whose mother country is Mexico (Lessard and Reavis, 2009). The company uses various strategies to enhance its global market share and competitive position. In the face of global competition, CEMEX implements a number of international operations and management strategies such as consolidation of its domestic markets and functions. The company also internationalizes its operations through the establishment of branches in different countries, which enables it to remain at the top position in manufacturing and marketing of cement across the world (Lessard and Reavis, 2009). Another strategy that has boosted the success of CEMEX in international markets is foreign acquisitions and mergers. Additionally, the concentration of its business in cement manufacturing contributes significantly to its efficiency and quality of products. This paper will use the concepts such as missions, visions, objectives of the organization, and strategic capabilities to analyze critically the desired future of the organization. Secondly, the paper will evaluate critically the implications of CEMEX‘s strategic management in terms of international market expansion and risk management processes in the competitive market. Additionally, the paper will explain the competitive capabilities appropriate to CEMEX’S intense purpose of improving its trade margins and focus. Finally, the paper will design an alternative strategic plan for CEMEX to face challenges and sustain its growth in the marketplace of Oman, and draw a conclusion on the main observations in international business management.
Analysis of the desired future state of the organization using the concept of vision, mission, organizational objectives, and strategic approaches
The primary objective of both national and global organizations is to grow in terms of market and profitability (Tihanyi, Devinney, and Banalieva, 2015). International business organizations seek to enlarge their share of global market. As such, they set visions, missions, and strategic objectives, and devote efforts towards achieving them. The central vision of CEMEX is to achieve global expansion and to make significant contributions towards regional development through production of superior products and services that promote the welfare of global the society (Lessard and Reavis, 2009). Thus, the company adopts different business and corporate level strategies to facilitate the realization of its vision. Additionally, the company seeks to transform into a focused corporation with international coverage, according to its vice president Mr. Ricardo (Lessard and Reavis, 2009). Strategically, the company integrates its market as well as demand risks in its plans to develop strong management capacity (Lessard and Lucea, 2009). The mission of the organization is to meet the building needs of the global community and to be the leading company in building materials (Lessard and Lucea, 2009).
The strategies adopted by CEMEX towards the realization of its main vision and objectives suggest its future success. Business and corporate level strategies facilitate the realization of the goals of stakeholders as well as the vision of the entire organization (Kenneth, 1971). The strategic capabilities enable the company to manage its risks efficiently and to integrate the acquired firms such as RMC, which provide an assurance of the future success of the company. Achieving global expansion requires critical analysis of the strategies of an organization as well as those of competitors to determine their effectiveness (Khanna & Palepu, 2010). The expansion of CEMEX’S operations beyond its national boundaries proves its capability to penetrate international markets. The company seeks to attain competitive power and penetrate markets with stiff competition such as China (Lessard and Lucea, 2009). Based on its capability to acquire other international corporations, CEMEX is likely to attain a significant market share which will enable it to dominate the global market in terms of supply. The establishment of a strong relationship with its global stakeholders is crucial for the success of multinational companies (Khanna & Palepu, 2010). Greater cooperation with stakeholders is one of the key objectives of CEMEX. As such, the company is likely to grow its markets through increased customer loyalty and confidence, a move that will see it at the top of the global market (Lessard and Reavis, 2009).
The majority of international organizations aim at increasing their productive capacities as a growth strategy (Tihanyi, Devinney, and Banalieva, 2015). The approximate production volume of CEMEX is 930 million metric tons annually (Key Company, 2015). According to Lessard and Lucea (2009), the company aims at expanding its productive capacity and the number of subsidiaries to promote its growth vision. Based on its success in acquiring companies in various countries such as America and the United Kingdom, as well as its strategic approaches to company acquisitions, CEMEX is most likely to have surpassed the top companies such as Lafarge and Holcim in the 21st century (Lessard and Lucea, 2009).
The management of CEMEX has recorded remarkable improvement since the appointment of Lorenzo Zambrano as the head of the company in 1985 (Lessard and Lucea, 2009). The desire of the company is to realize more improvement in all aspects which will enable it to achieve its global vision. The adoption of corporate level strategies enables the company to concentrate on cement as its core business (Lessard and Lucea, 2009). The concentration of business activities has a significant contribution to the quality of products. Thus, CEMEX is likely to be the leading company in the manufacture of quality cement which is in line with its objectives.
Critical evaluation of the implications of CEMEX’s strategic management in terms of risk management and international market expansion
Strategic business management entails step by step approaches to all stages of management (Rothaermel, 2015). Execution of some stages such as goal setting and formulation of strategies and their implementation require critical considerations of outcomes and possible risks. Also, competitive markets require an organization to undertake careful business planning and adopt appropriate measures to enhance its market position (Rothaermel, 2015).
CEMEX adopts various strategies to improve its performance as well as the expansion of its market. The establishment of franchises in various countries is one of the approaches that the company uses to enhance its market growth. Holding franchises in different countries facilitate the marketing of company’s products as well as the collection of relevant information needed for company development (Lessard and Lucea, 2009). This enables the management to undertake continuous adjustment of its policies which promotes its competitive advantage.
The acquisition of other companies to undertake joint business has significant contributions to the market power of an organization (Madhok & Keyhani, 2012). CEMEX uses its management strategies to acquire other companies in various countries. This acquisition is significant for reducing market competition. Moreover, the efficiency of CEMEX in risk management enables it to survive in markets with high competition through the development of capabilities as well as processes that transform the risk of volatility of demand into advantages (Lessard and Lucea, 2009). Additionally, undertaking joint business helps to reduce operational costs, which in turn reduces the cost of products. Thus, the company is able to offer its products at low cost which contributes to its competitive advantage. According to Gammeltoft (2012), cost reduction through various strategies enables businesses to operate at low financial risks. The company approaches risks as part of its organizational and cultural structure, thereby improving its efficiency in risk management (Lessard and Lucea, 2009).
The consolidation of domestic markets in Mexico is significant for reducing competition at the national level as well as improving the efficiency of production through efficient utilization of resources and reduction of costs (Lessard and Lucea, 2009). Additionally, internationalization of business activities contributes to market expansion. Moreover, the establishment of franchise holders in different countries helps to spread the risk of operations, which reduces the chances of business failure (Khanna & Palepu, 2010).
Inefficiencies of management strategies contribute significantly to the poor performance of business organizations (Michael, 1980). In competitive markets, the failure to adopt effective strategies results in low competitive power which may lead to business failure (Michael, 1980). The management strategies used by CEMEX such as internationalization of its business activities contributes to the growth of customer base, resulting in a wider market. Large market contributes to the profitability of the company which enables it to restore operations after the financial crisis and low market activities. For example, the crisis of 1994 in Mexico resulted in currency devaluation, but CEMEX was able to restore its operations using the accumulated profits (Lessard and Lucea, 2009). Therefore, the adoption of effective management strategies is crucial to maintaining business in competitive markets.
Competitive capabilities of COMEX appropriate to its intense purpose of improving trade margin and focus
The competitive capability of a business entails its relative performance compared to the performance of the competitors (Rugman, 2010, p. 314). According to Khanna and Palepu (2010), business organizations can enhance their competitive capabilities through various strategies such as quality improvement, cost reduction, improved customer service, and flexibility. Additionally, the efficiency of the supply chain has significant contributions to the competitive capacities of a business organization (Khanna & Palepu, 2010). Thus, to enhance competitive capabilities, business organizations need to critically the available strategies to determine the effectiveness of each.
CEMEX adopts various management strategies that place it at a more competitive position (Lessard and Lucea, 2009). The company embraced modern technology after the appointment of Lorenzo Zambrano in 1985. The use of advanced technology in production has enabled the company to cut on production costs, resulting in low market prices of its products (Lessard and Lucea, 2009). Additionally, CEMEX is highly responsive to its customers. Also, it has efficient supply chains which facilitate the delivery of products. As such, the company has been able to win customer loyalty ahead of its competitors (Lessard and Lucea, 2009).
The leaders of CEMEX adopt measures to promote environmental sustainability. Also, the efficiency of production helps to reduce the use of fuel as well as pollution (Lessard and Reavis, 2009). Production efficiency helps to reduce costs, thereby promoting the trade margin of the company. Furthermore, CEMEX concentrates its market on developing countries where cement is bought in small quantities (Lessard and Lucea, 2009). The sale of cement in bags yields higher profits which facilitate the global expansion of the company.
The embracement of the “CEMEX Way” helps the company to engage in superior production through the use of modern technology (Lessard and Reavis, 2009). Also, the company standardizes its business processes, resulting in the production of superior products that promotes customer loyalty. Moreover, the company applies common principles of management to whole organization, which promotes its performance, placing it at an advantageous position relative to its competitors (Lessard and Reavis, 2009).
The capacity of CEMEX’S leaders to manage the global market contributes to the expansion of its market. Additionally, the company concentrates on cement manufacturing as its core business. The concentration of business activities promotes the production of quality products at relatively low cost, resulting in improved trade margin (Gullen & Garcia-Canal, 2009). In addition, the company divests most of its unprofitable business and re invests the revenues generated in its main business. Thus, it becomes more efficient in production and expands beyond its national boundaries (Lessard and Reavis, 2009).
The integration of CEMEX international operations resulted in the formation of a network. This was achieved through a strong corporate culture, well-organized structure, and technological platform. This network facilitates trading activities of the company, enabling it to improve its trade margin (Lessard and Reavis, 2009). Also, the system helps the company in maintaining a strong relationship with its stakeholders such as customer, resulting in a high trading efficiency.
An alternative strategic plan for CEMEX to face the challenges and to sustain its growth in the marketplace of Oman
Benefits and challenges exist in any market (Fostering Competition, n.d). Therefore, the management of CEMEX must adopt specific strategies to enhance its market growth and sustainability in Oman market where business organizations must maintain high loyalty level (Referendum EU, n.d). Additionally, long-term strategies are required for business success in Oman market. CEMEX should consider exporting its products to Oman since all major cities of Oman are connected with efficient airline systems (Referendum EU. n.d). Besides, the Oman market involves long procedures to obtain trade license or to start a local business operation.
Holding a franchise in Oman would be another strategy to enhance market growth. CEMEX is very successful in self-establishment in other countries. Therefore, setting up an operation in Oman would reduce export costs as well as risks involved in transportation. Alternatively, the company may acquire major Oman producers and undertake joint business. This will reduce competition with locals, thereby promoting market expansion.
Conclusion
CEMEX has clearly defined its future state through the statement of its vision, mission, and objectives. The approaches to the realization of CEMEX’S future suggest its success. The company’s strategic management has strong implications for its capacity to achieve global expansion and competitive advantage. The ideal competitive position of the company in the international market coupled with high competitive capabilities such as the ability to successfully acquire rival companies contribute significantly to the improvement of the company’s trade margin as well as focus.
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