Foreign Direct Investment by Cemex

¶ … Mexico's largest cement manufacturer, Cemex, has transformed itself from a primarily Mexican operation into the third-largest cement company in the world largely because of its obsession with efficient manufacturing and with providing top customer service. Cemex also provides attention to its distributors as well as to its marketing, but most of all Cemex is reputed for its global expansion. Cemex has its cement offices in Venezuela, Colombia, Indonesia, the Philippines, Egypt, and several other countries that include the U.S.A., Britain, Spain, India, and most recently China. CEMEX's career has been one of constant expansion and it has promised to continue this global expansion of its company in the future.

Which theoretical explanation, or explanations, of FDI best explains CEMEX's FDI?"

Foreign Direct investment (FDI) refers to a company making a direct investment in another country, either by buying a company in that other country or by expanding operations of an existing business in that country.

This question asks which aspect of FDI best accounts for CEMEX's success in their global expansion. The answers are actually complex. The one that is most congruent is that FDI has been promoted to be a positive event for developing countries specifically given the fact that whilst their population is growing at an alarming rate, other aspect such as their GDP and access to the basics of modern life, like education, health care, or even water and sanitary equipment are lacking. Foreign companies (such as from America and the West) that come into these countries offer a boost to these countries by providing them with business, and to a certain extent turn them around. We see this with Cemex where it turned two stagnant companies around in Spain and believes that it can provide developing countries with better quality cement than established companies have provided these countries with. Although Cemex has until now worked with developed countries, it is turning its eye to countries where the economy is improving such as China and India.

2. What is the value that Cemex brings to the host economy? Can you see any potential drawbacks of inward investment by Cemex in an economy?

In this way, the value that Cemex brings to its host countries is (such as in Spain) turning around slumbering companies, bringing tourism and money to the country as well as jobs (by hiring people and suppliers). The company also utilizes the country's resources and sometime assists the government in helping to improve economical or sustainable projects. If the company were philanthropic too and occupied in sustainability, this too would bring a boost to the host country.

On the other hand, potential negative results of CEMEX's involvement in the economy may lead to its politicizing the government, namely to its being such a powerful presence in the country that it may adversely influence the government to adopt its agenda. Cemex may the3rofre become a negative influence in the country's politics.

Cemex has a strong preference for acquisitions over Greenfield ventures as an entry mode. Why?

Cemex prefers buying companies that already exist, merging itself with others, or turning other existent companies around to Greenfield ventures, most likely due to the expenses. Greenfield ventures involve starting a new company from the ground up. In addition to building new facilities, Cemex would a have also had to create new long-term jobs in the foreign country by hiring new employees. They would have had to start with everything from the very beginning. Not only is the expense potentially more enormous, but Cemex, entering a foreign country could have theoretically got itself into more difficulties and even become bankrupt had it gone this way. It is far better for the company to merge with experienced locals who have already started the company and know all the ropes of the country including the relevant laws.