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CEMEX - In the opening case the Mexican cement company...

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In the opening case, the Mexican cement company Cemex is pursuing horizontal FDI. Horizontal FDI is FDI in the same industry in which a firm operates at home (Hill, 2007: p. 238). Cemex is directly adding to their value added chain by purchasing other international cement firms. Their purchases at first began with developing nations such as Venezuela , Colombia, Indonesia, the Philippines, and several others however, soon their purchases spread to encompass larger firms such as the European cement giant RMC of Great Britain. The explanation for Cemex’s acquisitions of the other firms is illustrated in the theory of transportation costs. Transportation costs theory states that when transportation costs are added to production costs; it becomes unprofitable to ship some products a long distance (Hill, 2007: p. 247). This is especially true for cement, while cement is essential for many construction sites the price to transport the cement abroad would end up making the firm extremely unprofitable since cement can be made cheaply.
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