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 / Spring 2008 / Issue 50(originally published by Booz & Company)


Pankaj Ghemawat: The Thought Leader Interview

One case in point is Cemex. Many studies of Cemex have em­phasized that it is a model company in postmerger integration, the use of information technology, and the transfer of knowledge from one location to another. And these accolades do have some basis.

But having said that, no one — apart from one article in the Wall Street Journal — bothered to go back and look at price per ton versus costs per ton for Cemex and its competition. It turns out that, although Cemex’s costs per ton are similar to those of its largest global competitor, Holcim, the Cemex price per ton is much higher. This suggests a different interpretation of Cemex’s success: that its deliberate approach to picking structurally attractive markets, or restructuring them — an explanation based on market power rather than efficiency — accounts for most of its superior performance. Such data are often underplayed in analyzing businesses, even though without them, it’s hard to get real about performance.

In a way, that’s a symptom of the same issue that affects writing about globalization in general. Jean de La Fontaine’s aphorism “Everyone believes very easily whatever they fear or desire” captures much of the utopian/dystopian quality of publications about the flat world, the death of distance, the end of history, and so forth. But a reality-based perspective on global strategy leads to different prescriptions. To which I should add, of course, that realism is not a recommendation to stay at home. Columbus managed to believe that the world was round but still took a pretty interesting trip — and discovered some unexpected things on the way!

Reprint No. 08110

Author Profile:

Art Kleiner (kleiner_art@ is editor-in-chief of strategy+ business and author of Who Really Matters: The Core Group Theory of Power, Privilege, and Success (Doubleday, 2003).
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