Executive Summary: Based on analysis of the latest People's Republic of China Five Year Guideline (2011-15) and CEMEX's current operations, two western Special Economic Zones were identified as presenting significant business opportunities for CEMEX, one of the world's largest cement producers. 3P (people, planet, and profit) criteria and a CAGE distance framework (culture, administrative, geographic, and economic differences) were applied during the market research and analysis stages in order to identify lucrative market opportunities for CEMEX to enter and gain competitive advantage in the western Chinese market. Based on these findings a strategy was recommended for a market entry into western China. Uncertainty analysis was used to determine likely failure points, recommendations were made on mitigating those risk factors, including the identification of several regional markets that were over-served.

1. CEMEX
China Market Entry Strategy
Team 3z
Alexandra Brooks, Steve Chaky, Ruben Pedroza,
Sharon Singleton, Scott Wilbur
September 7, 2012

2. Introduction - Cemex
I. Global Cement Firm Operating in 50+ Countries
II. Entered China Market in 2007
III. Operating 6 Plants as of 2010
IV. Primary Business Segments
 Cement
 Ready Mix
 Aggregate
I. Global Brand – High End Specialty Products
 EXTRA - bagged cement
 Impercem - waterproof cement,
 Promptis and Hidratium - ready-mix
 Insularis - 100% lightweight structural
concrete with superior thermal insulation

3. Situational Analysis
I. Fragmented Market - 3,000 SMBs
II. Market Size $335.5Bn by 2015
III. 2 Markets identified
 Ongoing maintenance of Roads and Infrastructure (East)
 State-Sponsored Investment in Infrastructure (West)
o Thousands of km of Road
o Portion of 36M housing units scheduled by 2015

4. Market Entry Strategy
I. Review Five Year Plan (FYP) to determine which provincial
markets to enter
 Construction growth in western tier 3, 4, 5 cities
 Need long term plans
o Target west and future FYPs
I. Joint venture with controlling interest
I. Triple Bottom Line - Use 3-P Strategy
ii. People
iii. Planet
iv. Profit
I. Use western provincial bases to move farther west, and into
other central Asian markets

5. Targeted New Markets
#1 Market Entry
#2 Market Entry
Contingency
Market Entry
 Massive size of China and they need infrastructure

6. 5 Year-Plan determines provincial markets
I. Guanzhong- Tianshui& Kashgar-Xinjiang SEZs
• Less market saturation of cement
• Few to no multinationals
II. Guanzhong- Tianshui
• Proximity to 3 other zones in 200m radius
II. Kashgar- Xinjiang
• Future manufacturing hub
• Western most railway head
• Central China / Asian expansion hub
• $1.5 billion in infrastructure next 3 years
IV. Not a level playing field
V. Relationships will be more critical then
initially anticipated
 Guanxi and interpersonal relations
 Government and contractors
 Ex-pats network

7. Joint Venture
I. Be modest and deliberate with western investment
II. Understanding the motivations of working with a Chinese
partner (in a JV) be it SOE or Private.
 SOE priorities are full employment, fairness and stability
 Profit
III. JV contract written with a buyout clause
I. CEMEX becomes a “Chinese firm for China”
 CEMEX for Every China
 Co-branded

8. Use 3 P Strategy to gain market
dominance
I. People
• Job creation
• Retaining top talent
• Developing new talent
• High caliber company that supports local values
• Labor rewarded
I. Planet
• Low pollution plants
• Energy efficient plants
• High quality cement made locally
I. Profit
• Brand high profile projects that grow awareness
• Brand quality perception is imperative

9. Use “bases” to control neighbor markets
I. Use 200 mile radius to compete in other developmental
zones
II. 3 P Strategy expandable as market concentricity increases
III. Use local relationships to link communities, manage
rivalries and make successful bids
IV. Marketing interchangeable, past success in China is future
opportunity

10. Western China production exported into
other Asian markets
I. Central Asia’s new silk road
II. New markets
III. Lower transportation costs
IV. Interchange of ideas
V. 3 P across borders and new arbitrage

11. China Takeaways
I. A Changing Society
I. Guanxi and Relationships
II. Sheer Size and Scale
III. The Sky is High, the Emperor is Far Away
IV. The Importance of Government