CEMEX is a global construction-solution organization that delivers product a consistently high quality and reliable service to customer. CEMEX is advance in the well-being of how they provide via their relentless focus on constant improvement and the effort of promoting ecological future.
The company was founded in 1906 at Mexico, and today they have become the world's major building material company. It runs in more than 50 countries and has 60, 000 employees worldwide. CEMEX takeover RMC in 2005 where their procedure starts from extracting recycleables to produce concrete, distribute and market segments cement to customer over 50 countries which they also uphold business romantic relationships with more than 100 countries.
Using vertical integration strategy, examine the impact of the procedure used by CEMEX's business procedures towards its progress.
"Vertical integration is the level to which a business owns the network which it is a part. At a strategic level it will involve an organization assessing the wisdom of acquiring suppliers and customer. " (Slack N et al, 2002) It really is where an organization decides whether to produce a particular component or to perform a specific service itself, or alternatively buy it in from a dealer based on the average person product or services this means to the procedure. Furthermore, "it can have a substantial impact on a business unit's position in its industry with respect to cost, differentiation, and other strategic issues, the vertical opportunity of the company is an important thought in commercial strategy". (Anonymous, 2010)
To be the most preferred and effective building materials company worldwide, CEMEX must ensure they have a good financial performance for the business. Thus, they started to pursue its extreme expansion strategy trough vertical integration strategy, which is often defined in conditions of:
CEMEX followed both forward and backward integration. For example, in the tertiary sector where CEMEX apply the forward integration that expand on the demand area by distributing its uncooked material and finished goods to customers for construction of structures, bridges and transportation links; where they put their customer first.
"Their Construrama distributor network has grown into the largest construction materials chain in Latin America, where it offers their customer standard product quality, reliable customer service, and convenience". (Charles nd) Hence, providing services to business and consumers will "brings the business closer to its markets and allows more liberty for this to make contact straight with its customers". (Slack N et al, 2002)
CEMEX's backward integration can be seen in the primary activity that involves extracting recycleables from land and sea. Where it expands its strategy on the supply aspect of the network that "allowing the organization to manage its suppliers, often to get cost advantage and prevent competitors increasing control of important suppliers" (Slack N et al, 2002)
Not all corporation chooses to assimilate far away using their company original part of network. However based on the research study, some large group like CEMEX is very vertically integrated. For example, CEMEX is associated with extraction, processing and use of organic material from the earth as well as manufacture done goods and development activities. It also operates to disperse and its goods and offer service to business and consumers, e. g. retail, finance and transport. This has made their journey fully operate from fresh material until the end network of process, which is all owned by CEMEX.
CEMEX have a complete balanced network romance, which one level produce for another stage in the network is totally satisfied the requirements. It includes full balanced sites which include the virtue of ease and it allows every level to focus on the necessity for the next stage. For example, extracting process of raw material has to participate in the government's Regional Nutrients Plan, where variety needed is given to ensure a fair balance across the country. On top of that, "dredged aggregates are essential for future years development and can help to replenish Britain's shorelines and protect the coastline from erosion. " (Anonymous, 2009)
Diagram 1: Advantages recognized by CEMEX (Self-made, 2010)
Fundamental reason behind CEMEX to received RMC through backwards integration, because "RMC'S strong position in cement, aggregates and ready-mixed concrete will increase CEMEX existing operation in these areas and, combined with their global presence in concrete products, improve their leading position in the global building-materials market". (Markley, 2004) Additionally, it helps CEMEX to make opportunities in new markets for concrete product; which it also provides additional geographic earnings diversity and improve market position in developed marketplaces.
Engaging a process in-house is preferable to outsource, since it helps secure dependable delivery of suggestions materials. For instance, CEMEX involved in extracting fresh materials, is to ensure to acquire long-term supply somewhat than having an insufficient source market which cannot satisfy the organization.
The acquiring of RMC by CEMEX, help the business to lessen cost via less cost is needed to purchase organic material from distributor because they can extract the raw material by themselves. For example, if CEMEX didn't takeover RMC and RMC raise the price according to the market price, thus CEMEX need to pay more for the natural material they want. When CEMEX takeover RMC, it can control the costs for the material, therefore the bargaining for the distributor is low and allowing CEMEX to have more capital to put on the Research and Development.
Moreover, it can help them to secure their specialist and scientific advantage to avoid the competition getting the data of product and service. Moreover, they have full authority over the product quality control in the production procedure for making cement which will keep their product quality to be reliable. Thus, it can help the business to provide better product and service to customers that will lead to increase of market share.
Diagram 2: Cons encountered by CEMEX (Self-made, 2010)
Heavily integrated organization like CEMEX draw out raw materials themselves to make cements, means it has a higher proportion of these cost are fixed cost. When CEMEX intensely invested to have a in-house operation which they can do everything themselves, CEMEX will loss of volume flexibility. This means, when they have got a high degree of preset cost, any reduction in produce of product or activity can easily cause the organization operation's economics either close to or below the break-even point. Thus, if CEMEX cannot maintain the volume produce it will affect the success and maintenance cost of the procedure.
CEMEX will be sidetracked from their main business which is provide cement, ready-mix product and aggregates to consumer. However, after they purchased RMC they tend to focus more on extracting the recycleables such as gravel and fine sand. Hence, it has a tendency that will lead them to distract from concentrating of provide cement more to the extracting process. Additionally, when they are sidetracked from central business it will also affect success of the organization's sales earnings.
CEMEX has vertically integrated, means they have invested in the functions and technology that is required to produce its product. Hence, this may lead CEMEX's industry to a trend to lag of adoption of new technology from opponents. However, "there's a extensive body of information to suggest that customers and suppliers are a significant way to obtain innovation". (Slack et al, 2010) Therefore, when CEMEX received their company it prevents those to have new information on new innovation of technology.
Critically evaluate CEMEX's location decision, which provide a balance between its competitiveness in building materials industry against its dedication towards environmental, legal and communal concerns.
To run a successful, competitive business that collaborates with issues like environmental, legal and public concern to make a positive impact to the globe. Company like CEMEX UK should have taken these issues very seriously because it will influence the organizations way towards what they are trying to achieve. These factors will be further reviewed below.
For example, in the primary activities where CEMEX decides to extract recycleables from land and sea; its ideas must have an effective way to extract, bring back and after-care of sites. While, the extracting of fine sand and gravel form sea foundation by dredging; dredged aggregates are essential for future years development. Hence, CEMEX UK helps to replenish Britain's beach locations and protect the coastline from erosion.
CEMEX as a building materials industry not only satisfied the fundamental needs of shelter and infrastructure, CEMEX also designed its global environmental strategy where is enables them to manage their influences biodiversity across the sites; its help the organization to become more competitive among the list of competitors.
Due to these environmental factor, CEMEX need to choose a location which is near to the raw materials and ensure that it will not near the metropolitan area where it will affect the surroundings of the town. Thus, the majority of its ready-mixed concrete plants are located near quarries to ensure fast source to save time and cost. CEMEX is focused on use the rail to move their material in order to lessen the emission compare the journey by highway. Despite global recessionary conditions, CEMEX also have made a concerted work to maintain their environmental investment and there are aware of the choice of location which includes an impact on the neighborhood environment. This can be seen in the desk 1 below:
Sustainable approach implemented by CEMEX
Effect from action
Committed to make use of rail to transport aggregates compare to road
Produce 5 times reduced of carbon emissions
Uses water carry via sea, streams, conveyors & underground pipelines.
Help minimize carbon footprint
Committed to the use of substitute fuels such as chipped tyres and cared for household waste to warm up the kilns.
Helps to reduce emissions of CO2.
Table 1: Ecological approach to environmental issues by CEMEX (Self-made, 2010)
Hence, by implementing and having dependable on the effects that will impact the local environment, in '09 2009"the number of major environmental situations lowered by 68%". (CEMEX, 2009) therefore, this makes CEMEX to become more competitive running a business as it offers commitment towards the surroundings.
Legal factor is related to the legal environment where an organization manages in a country. Different country has their own legal concern factors, thus it'll have an impact on CEMEX's location decision to operate their business in a particular country. For example, UK federal regulates the marine dredging to minimize the effect on environment. Thus, CEMEX have a selection of not operate in UK but, CEMEX choose operates in UK, so they have got help replenish Britain's shorelines and protect the coastline from erosion in order to comply with the guideline of UK federal government.
Moreover, CEMEX UK locates its plants near to the location where the raw materials are, as CEMEX located its nationwide source network more than 500 location. CEMEX aim to identify quarrying and developing felicities in most appropriate location not and then meet the market needs. In addition, it complied with the united kingdom Government's objective to lessen the trucks applied to road wherever possible to reduce the carbon emission. Hence, CEMEX UK determined this by using sea, waterways, conveyers and underground pipelines to move their products.
Social concern for the city is taken very seriously by CEMEX. Whatever procedure site CEMEX will will affect the city around them. A concrete company like CEMEX it will discover its industry which is less people, so it can minimize the impact of environmental air pollution which will straight have an effect on human's health. Hence, CEMEX have to consider every factor that will influence the health's of the community before it locates its plants.
For example, CEMEX should locates its vegetation close to it raw material as well as ensure the place it less in people; therefore the people around the town will never be affected by the noises pollution and air pollution triggered by the industry. In addition, CEMEX also committed to use of different fuels from chipped tyres. This may benefit CEMEX by having a low cost energy efficient fuel and reduce emission; as well as benefiting the city by less waste that will would go to landfill, give a safe way of disposing household waste products and save fossil fuels for future technology.
Compare and comparison the effectiveness of CEMEX's sustainable way of functioning its business against an electric product processing industry of your decision.
Samsung is an electronic business which creates ground breaking products and cutting-edge technology for people to see it worldwide. Samsung has vertically integrated its operation that includes components and completed product. "Eight years after start procedure in Mexico, the Samsung Group inaugurated Samsung Tijuana Recreation area, a vertically included production site that signifies total investment funds for US$ 200 million". (Anonymous, 1996) Thus, Samsung has implemented a backwards vertical integration making them different from CEMEX as CEMEX used both onward and backward integration. The comparability of Samsung's and CEMEX's vertical integration can be seen in Stand below:
Only followed backwards integration
Adopted both forward and backward integration
Produce its component and completed products of electronic digital goods
Extract its raw material for cement making process as well as ready-mix cement product.
Hence, the similarity of both organizations is that they intentionally choose to integrate backwards to the degree of relating themselves in the handling, producing and developing their own product.
They do not have an equilibrium of built in strategy, because they concentrate more on backwards integration.
They have a balance of built in strategy of forward and backward integration
Table 1: Compare the potency of Samsung and CEMEX. (Self-made, 2010)
Both Samsung and CEMEX have different sustainable way to operate its business. As Samsung can be an electronic product make industry, whereas CEMEX is cement product manufacture industry. Thus, they approach business in different ways but both also try to adhere to few issues below to reduce the negative impact toward both company and the entire world.
Samsung and CEMEX ensure that during their manufacturing process it'll minimize the impacts towards environment. Desk 1 below will illustrate how both companies has approached and complied with the environmental issues.
Global Green Management System
Complied with security regulation
Control inner maintenance standards
Committed to make use of rail to move aggregates compare to road
Produce 5 times smaller of carbon emissions
Product Stewardship throughout the lifecycle
Ensure product are safe and less burden to environment
E. g. : utilization and removal of product
Uses water transfer via sea, waterways, conveyors & underground pipelines.
Help minimize carbon footprint
Clean and Green Process - utilize best eco-friendly production technologies
Helps minimize the use of energy and natural recourses
Reduce greenhouse gas emission
Committed to the utilization of alternative fuels such as chipped tyres and cured household waste to heating the kilns.
Helps to reduce emissions of CO2.
Table 1: (Self-made, 2010)
Information Source: http://www. samsung. com/us/aboutsamsung/sustainability/environment/environment. html
Different country has their own legal matter factors, thus it will affect an organization's location decision to operate their business in a particular country. However, Samsung and CEMEX both comply with the rules that is needed to follow in a different way to be able to kept businesses to be sustainable enough to compete with competitors. The table 1 below shows how both organizations comply with the rules in a different way.
Compete quite, abiding by fair-trade legislation regarding to international standards and national laws.
CEMEX in UK helps to replenish Britain's shorelines and protect the coastline from erosion to comply with the UK federal government rules.
Organization will not permit the approval of money, goods, entertainment or show offers from external parties concerned to violate fair trade.
Complied with UK Government's purpose to reduce the trucks applied to road to lessen carbon emission
Table 1: different way of how Samsung and CEMEX complied to legalities.
Information Source: http://www. samsungsmd. com/CyberAudit/eng/conduct02. html
Most company will really have concern on sociable to bring maximum benefit to the city. Hence, CEMEX have used other ways such as cutting down the produce of bad for reduce the impact towards human's health through sea transport somewhat than vehicle that will produceC02. CEMEX also gain the community by lessens the wastes to landfill, which give a safe way of disposing home waste.
Diagram 3: Public issues concern by Samsung
Source:http://www. samsung. com/us/aboutsamsung/sustainability/socialcontribution/socialcontribution. html
In contrast, based on diagram above Samsung 3 goal is to aid the young students by supporting these to have wished for education such as motive them to join essay contest on the subject of digital technology's impact. Samsung also help children from low-income family members giving "Young ones Education program Sponsorship" and funding to help young technology in countries like Kenya, Egypt and Republic of South Africa. Moreover, they enhance healthy families such as having Anti-obesity program in partnership with Western european Olympic committees.
As a summary, CEMEX is a vertically integrated in both forward and backward integration. Thus, being vertically included sometimes might bring an edge but also downside towards the organization; which based on how they approaches it. In addition, to be ecological enough in such competitive business world, organization should not only being vertically included they should also take a serious matter on environmental issues, legal and interpersonal issues before locating the industry. This is observed in Samsung and CEMEX where they have got the matter for conditions that will affect the business and community. Hence, if these issues are taken seriously it has a win-win situation for both business and the city. References
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Samsung, 1996, "Samsung: Latest News - Samsung Opens Integrated Plant in Tijuana", online 10th August from http://www. samsung. com/us/news/newsRead. do?news_seq=18&page=1
Tatum M. , 2010, "Wise Geek: What is Vertical Integration", online, retrieved 28th July 2010, from http://www. wisegeek. com/what-is-vertical-integration. htm
Thetimes100, 2010, "The Times 100: Sectors of Industry", online, retrieved 30th July 2010, from http://www. thetimes100. co. uk/downloads/cemex/cemex_14_full. pdf
Slack N. and Lewis M. , 2002, "Operation Strategy: Resource Network Romance - Vertical Integration", Gosport, Prentice-Hall, pg. 187