Strategic Management Case Study
Introduction
This paper aims to analyze a case study of the CEMEX organization to determine the implications of the impact of strategic planning on the long-term business growth. For a business to plan strategically there should be future aspirations that contain the mission, vision, objectives, and capabilities. Then, there should be strategic management implications that criticize the business decisions to get the best out of them, and then the competitive capabilities should be recognized. The case study should be used to model a new strategy for another market.
The case study gives an insight into CEMEX organization which under the visionary management, globalized and emerged as a national and international leader in Cement production. The organization strategically enters new international markets and finally globalizes through the acquisition of major industry players in the selected countries all over the world. The implication of strategic planning is shown when the firm plans in using three steps of consolidating its presence in the local Mexican market, Internationalizing, and Globalizing. The objective of this paper is to enable other strategic managers to plan effectively drawing from the lessons systematically learnt to grow their businesses based on their aspirations and expectations.
Future State and Aspirations of CEMEX
The future state and aspirations of CEMEX have to be modeled around a vision, mission, objectives and strategic capabilities. Birkinshaw (2004) allude that all this aspects or plans, guide the progressive path of the organization into the future and serves as a blueprint for essential planning and organization. The facets of the business strategies of the organization, as it is evident from the case study, involves strengthening the business foothold on the home market of Mexico, expanding to an international scale through acquisition, merging and acquiring shares and finally to globalize through creating a strong network of Cement industry in the world with a Non-Mexican tag attached.
Vision As suggested by the Vice President for the strategic business development in Asia and Africa, Ricardo Castro, the vision is to create a strong Mexican Cement producer that would ultimately go global. The vision captures the essence of who CEMEX organization is and every activity has to align itself to the vision of the organization. Selling cement is not enough, and the core vision has to have something to do with meeting consumers' needs and making housing an easier, affordable and fast a process.
Mission
CEMEX exists to produce affordable cement for consumers in a global perspective so as to develop housing as a basic human want and to reward its employees appropriately to sustain the global economic need of employment. The mission statement introduces CEMEX as an organization that aims to develop proper and decent housing for humanity by engaging manpower in pursuit of a goal of solving unemployment problem worldwide.
Organizational objectives
These are the expected outcomes of the strategic planning the organization aspires to achieve in the course of their lifeline cycles. Jeyarathnam (2008) suggests that all the operations have to at least meet the expectations so that the business can affirm to a prognosis of moving on the right path.
Specializing in Cement production.
Growth on the international and global scale especially to China’s and India’s market.
Harmonization of business decisions globally.
Adapting global technologies to create technological market leverage.
Strategic Capabilities
CEMEX growth is driven by the acquisition of international cement manufacturers. Therefore, expansion into China and India, the largest emerging markets in the world, can be realized through the acquisition of any local private firm and then studying the local marketing dynamics, and once a market niche is evident, the CEMEX organization can then serve the niche. Though the capability of growth and expansion into the new markets is pegged on historical success, the strategy of the facets of the "CEMEX ways" can in no doubt propel the market to heights of success to the new markets.
In addition to that, the CEMEX network that the ‘CEMEX ways’ hope to strengthen, is held together by the corporate culture management under the guidance of Lorenzo Zambrano. This harmony will automatically create a globally recognizable brand that most consumers will trust and inclined to purchase due to the human nature of trusting global brands owing to the worldwide social media (Parker, 2007).
Strategic management implications
This process involves criticizing the business decisions that are made before their implementation. According to Hunger& Wheelen (1996), the process has the following functions:
Analysis of internal and external strengths and weaknesses.
Formulation and execution of action plans.
Evaluation of the success of the action plans and making changes when expected outcomes are not forthcoming.
This means that for all the aforementioned goals, actions must be taken to achieve them and continuous monitoring is key to ensuring that their intended purpose is served.
International market expansion
Daniels& Radebaugh (1989) found out that this strategy is actualized through acquisition and merging. So far, the organization has registered success stories in many nations like Spain, Philippines, The UK, USA and most Caribbean and Latin American markets. It should be noted that the organization being the 3RD largest Cement producer in the world and its global nature consolidated by the ever expanding construction market has enabled the organization to be quite resourceful with Trillions of Pesos at its disposal. The organization can hence acquire more Cement producers and curve for itself a greater market share. Daniels& Radebaugh (1989) further inform that the new markets can have potential barriers to entry where the acquisition can be limited or greatly controlled like in the Indonesian market. Though India has no such barriers and is ever a positive ground for investment, the Market has lower per capita cement consumption because of poverty and low cement uptake.
On the other hand, China with its huge appetite for cement has a controlled market and any acquisition might not be fully undertaken but partial due to the Chinese way of ensuring local ownership of all organizations in business in mainland China. Apart from the acquisition drawback, CEMEX can hardly gain a market lead in China due to the high market participation rate and the government policy of ensuring there is no market leader in any industry.
The acquisition plan is, however, the first step into acquisition from where if it is successful. CEMEX can manage the acquired firm in line with the standardized management and develop its brand to the new market. Ferrell (2015) postulates that the sales turnover is the clear indication of whether the business is on a success path from where further action or modification can take place.
Risk management processes
In light of the risks management, the greatest risk that CEMEX endures in its mission of globalization is attaining customers in the new international market the organization ventures in. However, the firm uses a good strategy of acquiring powerful brands with a bigger market share which necessarily means that the CEMEX acquires new markets as well. For instance, in the USA, the organization that is acquired by CEMEX has a market lead in 27 states of the USA comprising more than half the market size, therefore, the organization has already mitigated the risk of a missing a market. In Spain, Indonesia, Philippines and Panama, the scenario is the same. CEMEX acquires a market share in a well-orchestrated action plan.
The basis of the action plan is to acquire the major market players. It can, therefore, be deduced that the implications for the strategic management action plans are paying off, and the major reason for this success is the fact that the construction industry is on a major growth trajectory path of a long run growth due to the global need for construction. And the fact that cement is a basic input into construction automatically factors in the growth. Furthermore, we can't underestimate the fact that the management had to dispel the globalization action plan of exporting due to its high costs that were incurred during shipment and payment of duty. This was an efficient and sufficient strategy of mitigating risks in the management process.
Competitive capabilities in improving trade margin and focus
Globally, competitive capabilities are driven by the ability of an organization to incorporate technology into production to meet consumer product requirements of affordability, accessibility and efficiency in production. In assessing the levels of capabilities of CEMEX, the following were the obvious competitive capabilities: Incorporation of technological leverage in cement delivery schedules, Post Merger Integration that is undertaken after the acquisition and the common management of the entire network of the business.
First and foremost, it should be noted that the capabilities are competitive in themselves due to their ability to inspire focus and trade margin improvement. The CEMEX organization is in no doubt a very capable entity going by the CEMEX ways from where the three competitive capabilities are drawn from. The technological leverage in itself is a strong capability as Jeffs (2008) mentions. It ensures that the organization employs the use of technology in delivering the products to the customers on time given the hardships and the inconveniences experienced in the process in many emerging markets in South East Asia and Africa. The PMI ensures that the global CEMEX network runs on a unitary principle of management to standardize operations and eliminate uncertainties. This capability beats the competitors whose strategy can be at times not piloted in other markets and therefore doomed to fail or yield to less than optimum results. In addition to the two capabilities, Saloner, Shepard, and Podolny (2001) add that the common management practice is competitive in ensuring that the corporate practice of the organization is put to use across all markets. Jeffs (2008) further alludes that this capability unifies the market in common practice for efficiency in transactions.
CEMEX in the Sultanate of Oman
`I. M. F. S. (2015) point out that the Sultanate of Oman has three Cement producers that are Raysut, Oman Portuguese and Pioneer. Raysut is concerned with mining limestone and supplying it to the two firms which either manufacture concrete slabs or sell Cement in its raw form. All these firms operate in an Oligopoly market where there is no definite market leader although Raysut has a bigger market share regarding regional base. It should also be noted that Oman is a Middle Eastern country rich in resources, and her construction industry is one of the most vibrant in the world. Although the market is relatively smaller, comprising of about 5million people, the per capita consumption of cement is about three times that of China due to the massive infrastructure development and the high flow of Oil wealth. There are no barriers to entry in the market due to the Sultan's policy of attracting foreign investors, and the country ranks high on ease of doing business index.
CEMEX should strategize by acquiring the Raysut Cement Company that has been grappling with management woes, and its shares are at an all-time low in the Muscat Stock market. From there, the business will acquire the mining rights and enter into Cement manufacturing business shortchanging the two businesses which will, therefore, seek a merger. This will create a big Omani cement company. However, the biggest threat will be the Omani authoritative Sultan whose powers can lead to jeopardizing the process, and this, therefore, calls for discreteness of the managers so as not to draw the Sultan's attention on the objective. The gains however far outweigh the risks in this market.
Conclusion
For any business in a vision of global expansion, systematic decision making in management should be the key point of concern. The firm should weigh its strategic capabilities and ensure that they are all achievable in the long run. The strategic capabilities management implications should be critical in the strengths and weaknesses of the organization and any action plan that is not yielding favorable results should be rethought. The organization should finally focus on their competitive capabilities to carve out a market niche for themselves. Acquisition is outstandingly the best strategy for global expansion based on the success rate of CEMETEX. Additionally, specialization in one line of production is good for businesses aspiring to have a bigger market share.
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