Essay Cemex S.A.                                         30/04/2008

Master degree Business Administration

Innovation and entrepreneurship

BUS 705

Essay

Cemex S.A.

 Prepared for:         Rodd Farr-Wharton

 Prepared by:         N Spykerman

                        


Cemex is one of the largest cement and concrete companies in the world with operations in 50 countries and revenue of US$ 15.2 billion last year. It claims that its continuous growth since 1968 is caused by continuous innovation (case_p1). It can be disputed whether innovation is the only factor that contributes to innovation. The purpose of this essay is to identify the factors that contribute to successful growth in business. Examples of Cemex will be used to illustrate the topics.  

This essay defines what ‘growth’ and ‘innovation’ is before identifying factors and conditions that contribute to successful growth of business. These conditions and factors need to be facilitated by the organisation. The leader of a business ultimately determines how the business will be done by the decisions he makes. Therefore, the role of the leader in relation to growth is further discussed and analysed.

Even though all conditions are met and a suitable leader is in place, it does not necessarily mean that all innovations will be successfully implemented.  The level of success is related to the impact and added value that an innovation has on the organisation and external environment. This essay describes how the impact and value can be measured in order to calculate and reduce the risk. These aspects are illustrated with examples of innovation within Cemex. Finally, a summary of the analysis of the relationship between growth, innovation and its success factors will be provided. 

Based on the findings of Huenk (1996), ‘successful growth’ can be seen as economic profitability due to increasing productivity. Innovation is considered to be the major driver of the economic growth in scholarly literature.

Innovation has been studied in relation to technology, commerce, social systems, economic development, policy construction and other contexts.

Drawing together the definition of West and Farr (1990) and Huenk (1996), iinnovation can be described as the conception of a new idea that is transformed into an invention and technically and economically implemented.  

An innovation can be either tangible or intangible.  Tangible innovations relate to innovations of new products or equipment.  Examples of tangibles products introduced by Cemex are the fibre-reinforced concrete and concrete that withstands the aggressive environment found in a liquid storage or silage facility for use in agricultural environment (Cemex website 2008).

Intangible innovations are improved or new processes or services within an organisation or a new strategy. (Schumpeter 1961). Process innovation is targeting increase of productivity, reduction of costs or materials, better quality or conformations with regulations (e.g. on environment.

Cemex improved its communication between the geographically dispersed operations via use satellite in order to be able avoid dependence on the poor quality mainline phone system of Mexico. Another example of process innovation was the improvement of delivery of cement. Cemex tackled the major traffic flow problems of Mexico City by equipping their cement delivery trucks with dashboard computers that allow tracking by global positioning satellite technology and a radio. A central dispatcher constantly reroutes the trucks as customers cancel, delay or speed up their orders.

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A strategic innovative move was that Cemex integrated horizontally and vertically with new operations to attain economies of scale and to diversify its business. Additionally it increased it market-share through targeting the ‘do-it-yourself’ building market segment.  The introduction of a micro-credit system allowed these people to procure building products that they could otherwise not afford.

Huenk (1996) and many other researchers contend that innovation fosters growth. This statement assumes that learning and innovation are sufficient to create successful growth in business. However, Smallbone, Leig & North (1995) and Clayton and Christensen (2007) contend that high growth firms are distinguished ...

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