Example how a commodity seller can become a solution provider growing market share.
CEMEX is one of the rare firms executing lean business strategy beyond the merger & acquisition stage.
Article here: https://www.strategy-business.com/article/00325
These are my unedited notes, however I HIGHLY recommended reading the article. Twice.
Also leveraged mergers & acquisitions including entering new businesses in ready-mix concrete and aggregates
Strategy
long track record in lean operations (“ruthless operating efficiency”) evolved to become one of the most successful companies from an emerging market, and developed a high level of customer responsiveness. It delivers cement within 20 minutes of receiving an order in many locales. Its international business strategy enabled CEMEX to grow rapidly during the 1990s and early 2000s, when it became one of the biggest cement companies in the world.
while maintaining consistently high profitability levels. (In 2014, the company reported US$2.7 billion EBITDA on revenues of $15.7 billion.)
developed a capability for environmental sustainability:
decreasing the company’s own fuel use
removing or mitigating pollutants in materials
and looking for ways its products and services could lead to sustainable practices for all the industries CEMEX serves.
get good at postmerger integration, and extract more value out of those assets than the former owners.
“Enforcing is really the right word. A good example is the emphasis we put on closing the books on the 1st or 2nd day of every month. A lot of managers initially wondered why it was so important to do this. They thought nothing would be lost if they did their closings on the seventh or eighth day. But we believed that having that information readily available would increase the likelihood that managers would make the right decisions. And the practice had a very high-level overseer: Mr. Zambrano himself, into whose email inbox all of these reports flowed. This was not subject to negotiation.”
accounting management
[any] product has a disadvantage in that a customer can find a substitute for it. A solution, by contrast, cannot be that easily replaced. So we started to develop offerings that more closely resembled solutions.
“For CEMEX to play that kind of role, the company needed new capabilities. We needed a new kind of executive, connected with the environment, who understood the real needs of any given locality. We changed old habits; for instance, in the past our people were not prepared to interact with our communities or with the media. We had become an efficient company with an inward-looking culture. But our operational guys realized that they needed to be able to talk to the media, and to local communities and their leaders. The operational guys had to recognize that it wasn’t enough to lower costs; they also had to connect with local people and address their concerns — for example, about the dust generated by trucks picking up materials.”
“The sales guys had to learn not to wait for people to come in with orders; if markets were soft, they had to go out and propose solutions to problems that had not yet been brought to public attention. “We don’t just mend holes in your street — we can prevent those holes from recurring for the next 30 years.” selling concrete
Partly it’s a matter of how we talk about these things with customers. We’re not just selling cement or ready-mix; we’re helping you build a street. We’re helping you build a home. We aren’t selling a product to you; we’re working with you on a solution.”
each business must recapture transport dollars. We won’t dictate how you do it, but we require that you recapture all your freight somehow.
Left to their own devices, big companies will continue to act big. They’ll put in more rules, procedures, and standardization. When you’re running a hyperlocal business like ready-mix concrete and aggregates, you can’t allow that to happen. You have to fight all the time to be small
about 40% of the direct cost of cement is wrapped up in [energy use], you need to watch the expense of fuel and electricity carefully.
