Globalization the CEMEX Way

            One of the most successful Mexican corporations in the world is CEMEX, as of today CEMEX maintains its headquarters in Monterrey, Mexico, and it employs more than 50,000 people worldwide in more than 50 countries across 4 continents and its second in its business only after the LafargeHolcim corporation.

            How did a relatively small Mexican company become the second largest building materials company in the world? The answer can be found in the visionary strategy of its former CEO Lorenzo Zambrano and the process his company developed known as “The CEMEX Way”.

            It all started back in the 1800s when the Zambrano family built a small fortune investing in the textile industry in Monterrey and after the Mexican revolution they founded Cementos Portland Monterrey a very small company that profited from the reconstruction of the country, by 1931 this company merged with Cementos Hidalgo and Cementos de Mexico or CEMEX was born. Lorenzo Zambrano was appointed CEO in 1985 and remained in the position until his sudden death in 2014, under his leadership more than 16 successful merges and acquisitions took place.

Up to the 1980s CEMEX grew by investing heavily in acquisitions of Mexican companies in diverse construction materials businesses by the end of that decade it already held 33% of the Mexican market share and 91% of its sales were domestic, it had strong presence and reputation in the country, but started to feel threatened by the Swiss competitor Holcim.

Most of the 9% sales of CEMEX going outside Mexico were being directed to the United States where the construction industry was shrinking and increasing export duties were making it difficult to compete.

            Also, the 1980s saw Mexico opening to foreign investment and as a reaction to the new international players coming to its domestic playground Zambrano decided that the best strategy would be to also go out and fight them one on one on their own turf and thus began the true internationalization of his company.

            His first global venture was in Spain in 1992, back then it was considered a key European market with excellent economic conditions and very realistic growth opportunities and moreover this maneuver was a strategic response to Holcim, the Swiss were coming to invest in the Mexican market and the Mexican went to Europe to invest there. The acquisition was also considered relatively affordable and Zambrano saw that the linguistic and cultural ties with Mexico would make it easier to do all business activities.

            The integration of the Spanish venture took a little more than 24 months and had very ambitious targets for cost recovery after the substantial investment. CEMEX found that by exporting its best business practices from Mexico it could hit their savings targets and obtain a faster return of investment, this idea of having the practices from a country that in paper was less advanced to another one that was supposed to be more developed was nothing short of groundbreaking at the time, but it promptly demonstrated to be effective.

            The internationalization continued with acquisitions in Venezuela, Panama, Dominican Republic, Colombia, Philippines, Indonesia, Egypt, Chile and Costa Rica. The company developed a robust merger integration process but it was not always easy; when CEMEX tried to deploy its Mexican business practices in Colombia, it found great resistance and an unexpected exodus of local talent followed shortly of the acquisition, as a result Zambrano and his people learned that they needed not only to export their practices but also to learn from the acquired companies and the local culture as well.

            This is how the CEMEX Way was born, as not so much of a defined process, but more as a corporate philosophy that enables them to manage the global knowledge acquired, identify and disseminate the best practices, standardize business processes and foster innovation.

            Through the CEMEX Way the company became a truly global corporation and an expert in the arts of merges and acquisitions being able to deploy the entire process in just under 5 months for its Texas subsidiary in 2000.

            In 2002 Lorenzo Zambrano was quoted saying: “When one wants to globalize a company, especially when it is from a developing country like Mexico, you really need to apply more advance management techniques to do things better. We have seen many cement companies that use their capital to acquire other companies but without making the effort to have a common culture or common processes, they get stagnant.”

            The challenges of global commerce are the same for every corporation, but a business coming out of a developing zone of the world also has to face the false idea that it cannot bring innovation to a partner in the first world. The CEMEX way demonstrated that in the globalized environment the cultural diversity is an important asset.