What Are The Basic Reasons Firms Choose To Expand Their Oper ✓ Solved

What are the basic reasons firms choose to expand their oper

What are the basic reasons firms choose to expand their operations abroad by employing international strategies? What are the three types of foreign direct investment? What are core values? How would you expect core values to show up in a company’s international expansion? Use the CEMEX case and Lorenzo Zambrano to discuss these questions.

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Introduction

Firms expand abroad for multiple strategic reasons—seeking markets, resources, efficiency gains, and strategic assets (Dunning, 1993; Hill, 2019). Foreign direct investment (FDI) is the primary mechanism for many firms to secure control over foreign operations; common entry forms include greenfield investments, mergers & acquisitions (M&A), and joint ventures/strategic alliances (UNCTAD, 2020). Core values—stable beliefs and priorities that guide decision-making and behavior—shape managerial choices, integration practices, and organizational culture during international expansion (Schein, 2010; Kotter & Heskett, 1992). The CEMEX multinational expansion under Lorenzo Zambrano illustrates how motives for internationalization, choice of FDI mode, and strong core values can interact to create a scalable global strategy (Harvard Business School, 2004; Financial Times, 2014).

Reasons Firms Expand Internationally

Academic and practitioner literature groups motives into four broad categories: market-seeking (access to new customers and growth), resource-seeking (access to raw materials, cheap labor, or specialized inputs), efficiency-seeking (realizing economies of scale, scope, and location advantages), and strategic-asset seeking (acquiring brands, technology, or capabilities) (Dunning, 1993; Hill, 2019). Market-seeking is common when domestic growth opportunities are limited; resource-seeking is important for firms dependent on particular inputs; efficiency-seeking underlies offshoring and regional production networks; strategic-asset seeking explains cross-border M&A aimed at technology or brand acquisition (UNCTAD, 2020).

In CEMEX’s case, the firm pursued all of these motives. Under Lorenzo Zambrano, CEMEX sought geographic markets to offset cyclical demand in Mexico (market-seeking), access to more efficient distribution networks and proximity to construction booms (efficiency-seeking), and strategic assets such as local market knowledge and port/terminal capacity (strategic-asset seeking). CEMEX also pursued resources in the sense of acquiring local cement plants and reserves that ensured stable supply (Harvard Business School, 2004; CEMEX Annual Report, 2006).

Three Types of Foreign Direct Investment

Three commonly referenced modes of FDI as entry strategies are:

  • Greenfield investment: establishing a new wholly owned subsidiary from the ground up in the host country. This gives maximum control and the opportunity to transfer home-country routines, systems, and culture but is time-consuming and capital-intensive (Hill, 2019).
  • Mergers and acquisitions (M&A): acquiring or merging with an existing local firm to gain immediate market access, assets, and capabilities. M&A is faster and can secure strategic assets but raises integration and cultural challenges (Dunning, 1993).
  • Joint ventures and strategic alliances: partnering with local or international firms to share risks, local knowledge, and resources. These are useful where local regulations favor partnerships or when firms need local expertise (UNCTAD, 2020).

CEMEX’s global expansion relied heavily on M&A to achieve rapid scale and enter markets quickly (e.g., Spain, the United States, and Latin America) while also using joint ventures in certain markets where partnerships reduced political or market entry risk. In selected instances CEMEX used greenfield investments to add capacity where no suitable acquisition target existed or where it sought to build operations aligned with its systems (Harvard Business School, 2004; The Economist, 2007).

Core Values: Definition and Role

Core values are the shared principles and prioritized beliefs that form the foundation of organizational culture, guiding decisions, leadership, and employee behavior (Schein, 2010). They are durable, often articulated in mission statements but most powerfully expressed through routines, HR practices, and leadership example (Kotter & Heskett, 1992). Core values affect strategic choices by influencing risk tolerance, emphasis on customer service or innovation, and approaches to stakeholder relations and corporate responsibility.

How Core Values Manifest in International Expansion

Core values can influence international expansion in several concrete ways:

  • Choice of entry mode: A firm that values control and uniform quality may favor wholly owned subsidiaries or greenfield projects; a firm that values local adaptation and collaboration may prefer joint ventures (Hill, 2019).
  • Integration and knowledge transfer: Core values of learning and operational excellence lead firms to develop systems for rapid transfer of best practices across borders (Dunning, 1993).
  • People and leadership practices: Values shape expatriate selection, training, and managerial incentives to ensure cultural fit and consistent ethical standards (Schein, 2010).
  • Reputation and stakeholder management: Values around corporate responsibility and transparency affect how firms engage regulators, local communities, and customers abroad (Kotter & Heskett, 1992).

For CEMEX, core values under Zambrano—including customer focus, entrepreneurialism, operational discipline, and a culture of continuous improvement—were operationalized through standardized processes, aggressive knowledge management, and a centralized set of performance metrics (CEMEX Annual Report, 2006; Harvard Business School, 2004). CEMEX introduced standardized IT systems and logistics practices to transfer best practices across acquired plants, exemplifying how values (efficiency, customer service, and execution) translated into concrete integration mechanisms (Financial Times, 2014).

The CEMEX Example and Lorenzo Zambrano’s Leadership

Lorenzo Zambrano’s leadership emphasized disciplined acquisition, rapid integration, and a values-driven approach to operational excellence. He pursued a clearly articulated globalization strategy: acquire assets where demand and strategic opportunities existed, quickly integrate them into CEMEX’s logistics and operational systems, and use centralized planning and information systems to achieve scale economies (Harvard Business School, 2004). Under his leadership CEMEX used mainly M&A to grow rapidly but combined these with strong post-acquisition integration—reflecting values of speed, standardization, and learning (The Economist, 2007).

Examples of value-driven practice included cross-border training programs, centralized procurement, and the adoption of unified IT platforms—tools for translating core values into repeatable processes that enabled consistent service and efficiency across diverse markets (CEMEX Annual Report, 2006). Zambrano’s commitment to these values helped ensure that acquisitions delivered strategic assets and efficiency gains rather than just geographic presence (Financial Times, 2014).

Conclusion

Firms pursue international strategies for market, resource, efficiency, and strategic-asset reasons, and they typically deploy greenfields, M&A, or joint ventures as FDI modes (Dunning, 1993; UNCTAD, 2020). Core values are central to how firms choose entry modes and how they integrate and manage foreign operations. The CEMEX expansion under Lorenzo Zambrano is a clear example: he used primarily M&A backed by rigorous integration systems and a strong value set emphasizing operational excellence and customer focus to convert cross-border deals into sustainable global advantage (Harvard Business School, 2004; Financial Times, 2014). For managers, the practical lesson is that international strategy choice and execution must be aligned with core values to achieve scalable, coherent global growth.

References

  • Dunning, J. H. (1993). Multinational Enterprises and the Global Economy. Addison-Wesley.
  • UNCTAD. (2020). World Investment Report 2020: International Production Beyond the Pandemic. United Nations Conference on Trade and Development.
  • Hill, C. W. L. (2019). International Business: Competing in the Global Marketplace (12th ed.). McGraw-Hill Education.
  • Schein, E. H. (2010). Organizational Culture and Leadership (4th ed.). Jossey-Bass.
  • Kotter, J. P., & Heskett, J. L. (1992). Corporate Culture and Performance. Free Press.
  • Harvard Business School Publishing. (2004). CEMEX: The Global Strategy of a Mexican Multinational (Case study).
  • CEMEX. (2006). Annual Report 2006. CEMEX Corporate Publications. (See section on strategy and integration.)
  • Financial Times. (2014). Obituary: Lorenzo Zambrano — leader who globalised Cemex. Financial Times.
  • The Economist. (2007). Cemex's concrete strategy. The Economist.
  • Rugman, A. M., & Verbeke, A. (2001). Location, Competitiveness, and the Multinational Enterprise. Oxford University Press.

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