Excerpt via Research Pitch:
1) Cemex is an acquisition specialist. They work most effectively with FDI when they have got control over the company and can associated with changes they need to improve it. Cemex derives value coming from buying companies and improving them. This is actually the internalization theory. Cemex feels that the advantages from taking control are worth the expense. They cannot wish to risk technology copy; they wish to include strict control of manufacturing and marketing, plus they believe that with an undifferentiated product their competitive edge is in their very own managerial experience, something they do not wish to copy to any international company.
2) To the sponsor economy, Cemex brings an even more efficient cement firm. That they improve the building business and its capacity. Therefore lowers the expense of construction and helps create careers. Potential downsides to Cemex’s investment in an economy are that they educate competitors how to better perform. These rivals may be popular over the international Cemex by simply regulators.
3) The cement business requires a high purchase in infrastructure. This includes not only the production features but the distributors as well, since the product is remarkably perishable. Consequently, the infrastructure for a concrete business can be costly and time-consuming. Additionally it is a relationship-oriented business, while demonstrated by the way in which Cemex builds it is relationships with contractors in Mexico. The business cannot spend the time and energy to develop this facilities when investment overseas. Furthermore, many cement companies are ineffective, which means that Cemex can instantly add benefit to any acquisition.
4) Vast majority control is critical to Cemex because they have to be able to apply their devices and expertise in their purchases. The value they derive using their acquisitions relates directly to the operational improvements that they can help to make to the goal company. With out majority control, Cemex might not be able to help to make these improvements. Moreover, they might find that even if management is usually willing to let them make the improvements, they will not take advantage of the results of such improvements – they would enhance the company to get the benefit of almost all shareholders. As a result, when they were not able to receive majority control of Semen Gresik they felt compelled leaving the Indonesian market.
5) Indonesia is a dictatorial government. The power composition is based on politics connections, which will those in opposition to the Cemex takeover of Semen Gresik leveraged. Community protests have been organized resistant to the takeover, which will lead to the federal government balking with the sale on account of the advertising and politics badwill they can gain.
It is not in the Indonesian government’s interests, long-run, to limit Cemex’s FDI in the area. Ultimately, Semen Gresik is still a less efficient firm for not staying under Cemex control. The Mexican firm became a global leader in cement because of the efficiency and ability to increase operations. Because the Rugby example demonstrated, they are prepared to make investments to further improve their facilities. This rewards the nation’s potential with respect to concrete production and its particular efficiency as well. There is no particular reason that cement production should be owned or operated by authorities – as being a perishable product cement creation cannot be offshored. Therefore , the Indonesian authorities loses useful and the cash it would have made
