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C A S E T E A C H I N G N O T E S
CRH PLC: dimensions of successful corporate
strategy
Mike Moroney
1. Introduction
The focus of this case study is corporate strategy in a global context as the engine for value-
added growth and development. This case deals with CRHs unrivalled success in the
2. Position of the case
The case study is concerned primarily with how corporate strategy can be the engine of value
creation, growth and development for the enterprise (Chapter 7 of Exploring Strategy). There
7.2 Strategic directions
CRHs extensive use of overseas market development (with limited product development)
building in earlier market dominance in Ireland.
7.3 Diversification drivers
To varying degrees, CRH employs all the synergistic drivers of value creation in pursuing its
7.5 Vertical integration
Vertical integration is an important, second-stage part of CRHs strategic direction. Building on
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7.6 Value creation and the corporate parent
CRHs selective, focused and low cost use of the value adding activities of portfolio manager,
synergy manager and parental developer.
8.4 International strategies
8.5 Market selection and entry
CRHs strategy for overseas market selection has evolved over time to a steady state position.
10.3 Mergers and acquisitions
3. Learning objectives
The case is designed chiefly to help students understand how corporate strategy, including a
singular acquisition process, can contribute to strategic success and value creation. Specific
learning objectives are as follows:
To explore the dimensions by which a (small) corporate centre can create value in the multi-
4. Teaching scheme
While the CRH case may be used as a basis for small group work, the issues involved are dealt
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5. Questions for discussions
The following questions can be used:
1. Describe and evaluate the strategy directions pursued by CRH.
6. Case analysis
1. CRHs strategy directions
CRH pursues two primary directions of strategy development in defining its corporate scope.
The first direction involves extensive use of overseas market development. In a little over 40
years, CRHs geographic remit has broadened from almost total reliance on Ireland to 36
countries spanning the globe. This expansion has been underpinned by CRHs unwavering
product focus: heavyside building materials and products (e.g. cement, aggregates, ready-mixed
concrete, asphalt, concrete products and bricks). This is the part of the industry in which the
Instructors Manual on the Web
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important complement to the Groups overseas market expansion strategy development. As the
Polish example in the case demonstrates, once an initial foothold in a region or country has been
established (usually through acquisition) CRH activates its vertical integration strategy up the
value chain.
There is little doubt that CRHs chosen strategy directions are well chosen and serve the Group
well. Overseas market development has been strongly related in nature and, therefore, value-
creating in contribution. CRH has been steadfast in ensuring that its overseas expansion builds
2. CRHs corporate parenting roles
To varying degrees, CRH displays elements of all three main corporate roles. In terms of value-
adding activities, CRH rates very highly on the few dimensions of portfolio management. The
corporate centre displays clear investment capabilities, most notably with regard to acquisitions,
but also involving divestment were necessary in the context of a commercially focused and
balanced portfolio. The Groups federally decentralised organisation of regionally focused
product divisions and small corporate headquarters is a close match for the classic lean structure
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transferring managerial capabilities and leveraging the advantages of scale and market position.
This latter dimension is most evident in the case of post-acquisition integration, where newly
acquired entities are guided by related, sister businesses in the CRH portfolio.
Finally, while CRH is clearly not a major parental developer, its activities in this regard are not
insignificant. This is evident through corporate intervention to develop operating entities and
improve performance, selective investment incorporating new plant, capacity extensions and
3. CRHs acquisition strategy and its contribution
Overall, CRHs proprietary and inimitable acquisition strategy demonstrates both strategic fit
and organisational fit. The Groups purchase process is well attuned to the fragmented nature of
the building materials industry, in which medium-sized, private, often family-run businesses
have traditionally been predominant. In addition, CRH is acquiring in that part of the industry
(heavyside materials and products) in which it has substantial experience and insight, both in a
general sense and more specifically with its 14 development teams on the ground. Furthermore,
the elements of its purchase process (privately held targets, market leaders, careful structuring
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4. How corporate strategy creates value for CRH?
Corporate strategy generates two main types of value for CRH:
The purchase of a constant stream of quality businesses at low cost. CRHs winning
acquisition strategy ensures that acquired entities (15bn by value in aggregate since 2000)
The sources of this substantial value creation are the three levers of corporate strategy discussed
in Sections 6.1 to 6.3 of these notes:
Scope: strategy directions of overseas market development and vertical integration
5. CRHs international strategy
International strategy is not the prime focus of the CRH case study. Nonetheless, there are a
number of dimensions of CRHs international strategy that are worthy of comment. Firstly, in
relation to drivers, CRHs international strategy would appear to derive from cost factors. There
6. Programme of action for CRH in light of the environment
In the short term, CRH faces the continuing challenge of dealing with the fall-out from the
severe sector downturn of 20072012, while simultaneously positioning itself for the cyclical
However, the major near-term challenge to CRH is dealing with the emergence from a
recessionary environment. The curtailing of development spend in recent years has greatly
reduced the acquisition motor of growth going forward. As against this, the Group is well-
placed to exploit low valuations, forced sellers and a general shortage of credit availability in
the acquisition market, as in prior cycles. The critical success factors are judgement and timing.
In the long run, the greatest ongoing challenge to CRH is likely to be increased complexity from
continuing growth, which could threaten to undermine the Groups singular and successful
corporate management style. Received theory posits increasing marginal costs to diversify
growth, with firms constrained to achieve financial rather than synergistic economies. In
addition, external developments could presage larger and more powerful competitors and more
demanding customers. Furthermore, the development of CRH will inevitably increase the influx
of new managers into the Group, leading to an expanded managerial cadre and resulting
organisational complexity. In turn, this could result in a more formal management approach
internally, undermining the critical informal mechanisms and threatening accumulated,
collective managerial knowledge and expertise.