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CEMEX: An Emerging Market Multinational, part 2

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World Cement,

This is the second part of a two-part article. To read part one, click here.

Cemex had accomplished all of this while fending off hostile takeover attempts (from one of its global competitors, Lafarge) and maintaining consistently high profitability levels. Those competitive and financial capabilities, along with a major programme of asset sales and cost management, helped it withstand the immense pressures of the Great Recession.

The company’s prowess is closely tied to the capabilities that it has built over time: industry-leading operational effectiveness, sophisticated sharing of knowledge throughout the enterprise, long-term customer and community relationship development, construction-oriented innovation, and the development of sustainability initiatives. How did Cemex develop and manage this prowess? When Lorenzo Zambrano took over as CEO, it was a relatively diversified group of companies. Zambrano deliberately sought to have the entire enterprise create value. He narrowed the horizontal scope of business (the lines of products and services) to focus on broadening geographic scope. Over the years, Cemex’s management has demonstrated continuous commitment to its identity as a high-value, knowledge-intensive solutions provider, even as it shifted to meet changing market demands and conditions. Or, as Zambrano explained in his letter to shareholders in the 2004 annual report: “We do not see volatility as an occasional, random element added to the cost of doing business in an interconnected global marketplace. We plan for volatility. We prepare for it. We have learned how to profit from it.”

Cement is generally considered a commodity business that is supposed to afford little scope for engaging with customers in a distinctive way, but Cemex has focused hard on differentiating itself. It developed a distinctive bagged cement business, for example, offered time-based delivery guarantees, and established Construrama, a network of construction materials outlets that is now the largest such network in the world. None of these was an obvious customer need waiting to be fulfilled. Rather, imagination was required to identify and exploit these opportunities.

There definitely is a ‘Cemex Way.’ The senior leaders of the company dedicate themselves to fostering and maintaining the Cemex culture. As CEO, Lorenzo Zambrano used to check kiln statistics and sales data on a daily basis. This type of direct engagement at the top translated into an intensive, highly motivated, extremely competitive work ethic for the entire company.

One remarkable illustration of this work ethic is Cemex’s noteworthy success with postmerger integration (PMI). Many companies make acquisitions and quite a few are serial acquirers. But very few have the laserlike focus on making acquisitions work — and work quickly — that Cemex has. A PMI manual covering only human resources is as thick as a dictionary — reflecting a level of detailed attention one might expect from an investment banking firm, but not from a cement manufacturer.

Cemex continues to generate a large portion of its profits from its operations in Mexico. But given the company’s high market share there, the expansion possibilities within Mexico are clearly limited. As a result, Cemex has invested heavily in expanding and revamping its foreign-market operations. And it seems poised to benefit from some of the operations that its leading global competitors, Holcim and Lafarge, may have to divest as a condition of the merger that they announced in 2014 and are still moving toward completion.

The narrative in the roundtable explores in detail how the company has evolved during the last 20 years — from a small firm in an emerging market to a dominant global competitor. It also explains the ways in which the leaders of Cemex are planning to use its distinctive capabilities to build an increasingly distinctive company.

This is part two of a two-part article written by Pankaj Ghemawat. This article has been adapted with permission from strategy+business published by PwC Strategy& Inc. © 2015 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details. To learn more, read “CEMEX’s Strategic Mix”

Edited for web by Harleigh Hobbs

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