Lafarge: Market Entry into Romania (A)

On June 30, 1997, Jean-Louis Touati, Lafarge senior vice president of strategy and development, reviewed the company’s proposal to the Romanian government for the acquisition of Romcim, a cement manufacturing business being privatized through the Romanian State Ownership Fund (SOF). The emerging markets of Eastern Europe were strategically important to the company, which sought to diversify its revenue base away from the mature markets of Western Europe and North America. Romcim represented a unique opportunity, offering valuable assets, but the investment was not without risks. While Lafarge appreciated the benefits of the venture, such as substantial growth prospects and a unique export opportunity to the Mediterranean region, the company remained wary of Romania’s business environment and the numerous operational challenges of integrating the company into Lafarge’s global organization. Furthermore, Touati had many concerns that could not be resolved before making a commitment to invest in the acquisition. Was the opportunity worth the risk? What could the company do to mitigate the risks? Should Lafarge proceed with the acquisition? This case has a video supplement IB32V Lafarge: Market Entry into Romania (A)