Cemex Comparative National Analysis


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Cemex Comparative National Analysis

  1. 1. Comparative National Analysis Mexico - Venezuela (Home – Host)
  2. 2. Political Environment Mexico Venezuela Form of Government Federal Republic Federal Republic, Socialist state Legal System Civil law system with US constitutional law theory influence; judicial review of legislative acts. Civil law system based on the Spanish civil code Role of the Military Consists of the Army, Air Force and Navy Branches. Their role is to protect citizens and enforce laws. Consists of the Army, Air Force and Navy Branches. Their role is to protect citizens and enforce laws. Level of Terrorism Actual terrorist acts in Mexico are very minimal, but they have drug cartels and revolutionaries to be concerned with Actual terrorist acts in Venezuela are also minimal. However, the country is notorious for its sex trafficking and forced labor problems.
  3. 3. Political Stability in Venezuela Mexico vs. Hugo Chavez Venezuela’s former president, Hugo Chavez, has had ups and downs when it comes to his foreign relations with Mexico. He, however, settles his disputes. For instance, he and Mexico’s former president, Vicente Fox (2000-2006), had a dispute in Argentina in late 2005 that strained the diplomatic relationships between the two countries. The two leaders decided to remove their respective ambassadors up until August of 2007. The relationship between these two countries was again strained when Chavez nationalized the assets of the Mexican company, CEMEX. Chavez’s reasoning was, according to WSJ authors Cordoba and Millman, that: Mr. Chávez had blamed the cement companies for shortages he said were hampering government efforts to solve Venezuela's housing crisis. Among other things, Mr. Chávez charged them with exporting cement rather than producing it for local use. At that time, Chavez’s popularity declined due to high inflation, widespread shortages of basic foods, and his inability to control a wave of violent crime. Source: De Cordoba, Jose, and Joel Millman. "Cemex to Fight Venezuela's Nationalization Effort." The Wall Street Journal. The Wall Street Journal, 20 Aug. 2008. Web. 26 Sept. 2013. <http://online.wsj.com/article/SB121912914668252587.html>.
  4. 4. Economic Freedom Two of the most important factors that we have to consider when addressing national differences between countries are the competitive environment and the nature of the government in those areas. The negative attributes of these factors in a repressed economy such as Venezuela, would negate the success of an MNC. Unlike Mexico which has a fairly high level of privatization and democracy, as the graph below shows, the CEMEX plants in Venezuela had to consult the government with regards to all their decision making. Instead of selling cement on the basis of demand and supply as is done in Mexico, the government dictated the quantity of cement that they will produce for both domestic and international markets. It was this that led to CEMEX’s inability to resist the decision that the Venezuelan government made to nationalize their organization. The Venezuelan government saw the competitive advantage that CEMEX was achieving by offshoring its production as a threat to Socialism. With no economic freedom in place, CEMEX could do nothing but surrender one of their most profitable International operations. Source: Economic Freedom Scores of World Countries (http://www.heritage.org/index/visualize). The Heritage Foundation).
  5. 5. Social Environment Indicator Mexico Venezuela Literacy rate, adult total (% of people ages 15 and above)2007 93 95 Poverty headcount ratio at $2 a day (PPP) (% of population) 2006 12.9 4.9 Labor participation rate, female (% of female population ages 15+) 2006 42 51 Labor participation rate, male (% of male population ages 15+) 2006 82 81
  6. 6. National Culture Hofstede’s 5D Model 90 80 70 60 50 40 30 20 10 0 Mexico Venezuela PDI IDV MAS UAI 81 81 30 12 69 73 82 76 Source: The Hofstede Center. (http://geert-hofstede.com/mexico.html) *LTO has not been researched in both countries LTO
  7. 7. National Culture - Analysis Mexico Venezuela • With the score of 81, Mexico is a hierarchical society. This means that everyone in the society has a place and that the power inequalities are accepted. • Low individualism score (30): a collectivist society where family and group setting is more valued. • High masculinity score (69), where competition and success is highly praised. • Mexico scored an 82 in the UAI dimension. This means that its society has a high preference to avoid uncertainty. • Both countries have similar culture and values, allowing CEMEX to operate without much trouble or difficulties. • Venezuela also scored at 81 which means that it is also a hierarchical society. • Low individualism score (12) shows how the country values the group group over individual • The high masculinity score (73) is evident when Hugo Chavez nationalized industries without much criticism from Venezuelan people. High masculinity indicates that the society is driven by competition, achievement, and success. • Like Mexico, Venezuela also prefers to avoid uncertainty with the score of 76. • Citizens are proud of their country and cultural heritage
  8. 8. Technological Environment Mexico Level of Technology As measured by patents and publications, technological performance is low, but is continuing to grow. Mexico saw a 17.2% increase in patent filings between 2010-2011. Venezuela Venezuela’s level of technology is similar to Mexico’s (see infrastructure below). Availability of Technical Skills Low level of human capital. Moreover, emigration reduces the number of graduates that enter the domestic labor force. Just like Mexico, Venezuela also a low level of human capital. Inadequately educated workforce is one of the top 10 business constraints in Venezuela. Transfer of Technology Level is very high. There is a high rate of foreign ownership of domestic inventions (61% in 2001-03) and of international coinventions (45% in 2002-04).. Venezuela welcomes new innovation and technology. The country’s internet users per 100 people is increasing according to data provided by The World Bank (12.6 in 2005 and 25.9 in 2008). Gaps in physical infrastructure inhibit technological innovation.2 Venezuela also lacks physical infrastructure. Source of electricity is the second highest business constraint in the country. Infrastructure
  9. 9. Business Environment Constraints The graph below illustrates the economic conditions that MNC’s are most concerned about when they are considering doing business in Venezuela. When you compare these conditions with those of Mexico, CEMEX should have known that there was a high probability that they would eventually encounter operational difficulties. Factors that are significantly detrimental to MNC’s such as crime, disorder and political instability in Venezuela are higher than Mexico’s. It is evident that CEMEX was enticed by the “opportunity” of maximizing on profits by taking advantage of the low regulations and taxes that existed in Venezuela. The “threat” that the Venezuelan government was always unstable proved to be a determining factor that contributed to the shift towards socialism. CEMEX became a victim to the socialist regime that is now prevalent in the host country of Venezuela while business was still booming at home in Mexico.
  10. 10. References De Cordoba, Jose, and Joel Millman. "Cemex to Fight Venezuela's Nationalization Effort." The Wall Street Journal. The Wall Street Journal, 20 Aug. 2008. Web. 26 Sept. 2013. <http://online.wsj.com/article/SB121912914668252587.html>. Hodges, Nathaniel B., John Ricotta, Eric Wallis, and Shelley Favre. "Mexico: PELT Environment Page." Mexico: PELT Environment Page. N.p., n.d. Web. 01 Oct. 2013. <http://onken.com/classroom/interculturalmanagement/mexico/mexico_pelt.html>. "Internet Users (per 100 People)." Data. N.p., n.d. Web. 01 Oct. 2013. <http://data.worldbank.org/indicator/IT.NET.USER.P2>. "Labor Participation Rate, Female (% of Female Population Ages 15 )." Data. N.p., n.d. Web. 01 Oct. 2013. <http://data.worldbank.org/indicator/SL.TLF.CACT.FE.ZS?page=1>. "Labor Participation Rate, Male (% of Male Population Ages 15 )." Data. N.p., n.d. Web. 01 Oct. 2013. <http://data.worldbank.org/indicator/SL.TLF.CACT.MA.ZS?page=1>. "Literacy Rate, Adult Total (% of People Ages 15 and Above)." Data. N.p., n.d. Web. 01 Oct. 2013. <http://data.worldbank.org/indicator/SE.ADT.LITR.ZS?page=1>. Mexico. N.p.: OECD, n.d. PDF. Web. 01 Oct. 2013. <http://www.oecd.org/sti/inno/41559276.pdf> "Poverty Headcount Ratio at $2 a Day (PPP) (% of Population)." Data. N.p., n.d. Web. 01 Oct. 2013. <http://data.worldbank.org/indicator/SI.POV.2DAY>.