Cemex Y El Modelo Delta

CEMEX – A Leading Company. A Study Through the Delta Model

Arnoldo C. Hax Rafel Lucea
Sloan School of Management Massachusetts Institute of Technology

INTRODUCTION A sound business model should be able to explain why some companies succeed and why some others fail. We join the celebration of the one-hundredth anniversary of Cemex by contributing this chapter that we hope will help toexplain the great success of this new legendary firm. We do so by applying the Delta Model, a new business framework that one of us developed at MIT, to Cemex – in order to understand the nature of its remarkable strategy. We will first review the most influential frameworks of strategy and, within that background, describe the major features of the Delta Model. Subsequently, we will examine how thisframework can be used to gain an insight into Cemex success.

THE DELTA MODEL – A NEW FRAMEWORK OF STRATEGY In spite of the enormous proliferation of competing schemes in the business strategy literature, there are two fundamental paradigms that have emerged as the most influential in the last two decades. First, Competitive Positioning, as proposed by Michael Porter1 from the Harvard BusinessSchool in the 1980’s, and, second, the Resource-Based View2 of the firm that evolved during the 1990’s. Porter’s arguments are drawn from the work of organizational economists who place the industry as the central focus of strategic attention. According to
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Michael E. Porter’s primary work in Competitive Positioning are in his books, Competitive Strategy (New York: The Free Press, 1980) andCompetitive Advantage (New York: The Free Press, 1985). 2 The seeds for this view originated in the work by E. Penrose, The Theory of the Growth of the Firm, Basil Blackwell, 1959. This approach was substantially developed among others by B. Wernerfelt, A ResourceBased View of the Firm, Strategic Management Journal, Vol. 5, pg. 171-180, 1984; J.B. Barney, Firm Resources and Sustained CompetitiveAdvantage, Journal of Management, Vol. 17. Pg. 99-120, 1991; M. Peteraf, The Cornerstones of Competitive Advantage: A Resource-Based View, Strategic Management Journal, Vol. 14, No. 3, pg. 179-192, March 1993. C.K. Prahalad and Gary Hamel popularized the approach in their now classic paper, “The Core Competence of the Corporation”, Harvard Business Review, MayJune, 1990, pg. 71-91.

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Porter’sframework, structural characteristics of a firm’s industry best explain variations in firm performance. In other words, Porter sees good industries, such as pharmaceuticals, where most players enjoy high margins; he also sees bad industries, such as trucking, where most participants suffer from low profitability. Using the language of economics, a successful firm is one that appropriatesmonopolistic rents. In other words, in the industry as a whole or in a segment of the industry, the firm establishes itself as the dominant (or sole) competitor. Porter’s logical conclusion from this perspective is that there are only two ways to compete: through Low Cost or Differentiation. Cost leadership is achieved through the aggressive pursuit of economies of scale, product and processsimplification, and significant product market share that allows companies to exploit experience and learning effects. Differentiation calls for creating a product that the customer perceives as highly valuable and unique. Approaches to Differentiation can take many forms: design of brand image, technology, features, customer service, and dealer networks. The strategic positions of Low Cost and Differentiationare centered on product economics. The resulting mentality of this approach, which is widely apparent in the business world, has enormous implications that we will address later. Instead of looking at the industry as the source of profitability, the Resource-Based View of the firm argues that the attention should turn to the firm. Instead of seeking profitability at the intersection of the...