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1.040/1.401/ESD.018 (Project Management) Globalization of E&C Industry. Fred Moavenzadeh. Spring 2007. The Construction Industry is currently in a transition state.

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Presentation Transcript
slide2

The Construction Industry is currently in a transition state.

Forces from both the demand as well as the supply side have made it necessary to re-examine the strategies for growth and competitiveness.

Spring 2007

engineering and construction industry is concerned with two sets of issues
Engineering and Construction Industry is Concerned with two sets of issues:
  • How demand for its output is generated and affected by modern societies.
  • How supply system is shaped to cope with changing demand.

Spring 2007

slide4

TOTAL CONSTRUCTION

$ Bil.

Source: U.S. Department of Commerce Annual Value of Construction

Put-in-place in current dollars, 2004 Data is preliminary

Spring 2007

slide5

Private Constructionin 2004Total $999.76 Billion

Source: Dept. of Commerce. Construction Put-In-Place. Details May Not

Add Total Since All Types of Construction are not Shown Separately.

Spring 2007

a e c firms differentiation
A, E&C Firms Differentiation:

Four Thrust Areas

1. Technology of Assembly

  • Design
  • Construct

2. Management of Assembly on Site

  • Project Management

3. Management of Organizations Specializing in Assembly

4. Interaction of Assembled Systems with Socio-Economic Development and Environmental Protection

Spring 2007

slide7

Product Design

Process Design

ManagementDesign

Spring 2007

slide8

Owners

Arch.

Sub. 1

Struct.

Sub. 2

Geotech.

Product Design

Process Design

Sub. 3

Elect.

Supplier 1

Mech.

Supplier 2

Etc.

Supplier 3

Management Design

Finance

Control

Contracting

Bonding

Legal

Bidding

Spring 2007

slide9

Major Developments of the 1990’s

  • Globalization and Market Economy
  • World Trade Organization
  • Financial Markets and Privatization
  • Information Technology and Telecommunications
  • World Wide Web and E-Commerce
  • Environment and Sustainability
  • Science and Technology as an Instrument of

Economic Competitiveness

Spring 2007

slide10

Consequences:

  • Increased demand for movement of goods and information
  • Increased demand for Human Resource Development
  • Need for Increased Transparency in Government’s Regulatory Systems
  • Importance of a Robust Science and Technology Infrastructure

Spring 2007

slide11

Change

On Demand Side

  • Client
  • Markets

On Supply Side

  • Technology
  • Organization

Spring 2007

slide12

Changing Nature of Demand

  • TRADE
  • ECONOMIC BLOCS
  • FINANCE
  • ENVIRONMENT
  • TYPE OF WORK

Spring 2007

slide13

Changing Nature of Demand

  • TRADE

- International trade in services.

- International trade in construction services and products.

- International trade in construction labor.

TREND

- Is toward further relaxation of barriers to entry into large construction markets.

IMPLICATIONS

- Increasing need to remain competitive on global basis.

Spring 2007

slide14

Changing Nature of Demand

  • Economic Blocs:
    • North American(U.S., Canada, Mexico)
    • European Economic Community
    • Far East Centered in Japan
    • Mercusor
    • Trends:
    • 1. Potential Future Bloc:
        • Latin America
        • Middle East
        • Indian Sub Continent
  • 2. Realignment of Firms Within Each Bloc via:
  • Merger and Acquisition
      • Joint venturing
      • Strategic Alliances
  • 3. Need to Expand Globally
  • Implications:
    • Further Erosion of Control over Domestic Market

Spring 2007

slide15

Changing Nature of Demand

  • Finance

• Financial market is fully global

• New financial packaging and instruments

• Increased risk due to fluctuation in exchange rate

  • Trends

• Greater involvement by construction in financial packaging

• Greater equity participation

• Greater involvement in operation and management

Implications

• A close relationship between financial firms and construction firms

• Financial engineering and financial packaging services

Spring 2007

slide16

Changing Nature of Demand

  • Environment

• Prevention of further damage to environment

• Correction of damaged environment

• Infrastructure

  • Trends
    • • New specialization
    • • Increased construction opportunity
    • • Substantial sensitivity to sociopolitical concerns
  • Implications
  • • Niche market strategy
  • • New technological development
  • • New risk mitigation and allocation

Spring 2007

slide17

Changing Nature of Demand

  • Type of Work
      • Energy & Environment
      • Infrastructure
      • Buildings & Housing
      • High-Technology and Industrial Construction

Spring 2007

slide18

Changing Nature of Supply

  • Globalization
  • Manpower
  • Technological Changes

Spring 2007

slide19

Changing Nature of Supply

  • Globalization

• Geographic

• Internal

• External

  • Trends

• Organizational Readjustment

• Development of Brand Name Identity

• Niche Strategy

• Out Sourcing

  • Implications

• Reorganization, Global Perspective

Spring 2007

slide20

Changing Nature of Supply

  • Manpower
    • Demographic Characteristics
    • Mature Labor Force
    • Less Tolerant of Physical and Manual Chores
    • Better Educated
    • More Mobility
  • Trends
    • Teamwork, Labor-Management Cooperation
    • Commitment to Skill Development
  • Implication
    • More Reliance on Technology

Spring 2007

slide21

Changing Nature of Supply

  • Technological Changes
  • • Advanced Materials
  • • Automation and Robotics
  • • Information Technology
    • - Sensor Technology, Communication Technology
  • Trends
  • • Transfer from On-Site to Off-Site Production
  • • Flexible Manufacturing
  • • Computer Control Production
  • • Smart Sensors, Smart Agents, Smart Buildings
  • Implications
  • • Capital Intensity
  • • Proprietary Technology

Spring 2007

slide22

Management of Organization

  • Vertical Integration
  • Horizontal Networking
  • Franchising

Spring 2007

slide23

Vertical Integration

Technological Stratification

  • Niche Strategy
  • Brand Name Identification
  • Market Aggregation
  • Market Making

Spring 2007

slide24

Horizontal Networking

  • Market Aggregation Bargaining with
    • Suppliers
    • Clients

Spring 2007

slide25

Franchising

  • Marketing
  • Technological Know-how
  • Suppliers
  • Flattened Organizations

Spring 2007

slide26

Large Firms

    • Global
    • Vertical Integration
    • Proprietary Knowledge
  • Medium Firms
    • Regional Independence
    • Networking
    • Proprietary Knowledge of Markets and Suppliers
  • Small Firms
    • Franchising

Spring 2007

slide27

Project

Computer Based

  • Control: Time and Cost
  • Inventory
  • Knowledge Based Systems
  • Interactive System
  • Intelligent Databases

Spring 2007

slide28

Firms

  • Decision Support Systems
  • Intelligent Database
  • Strategic Management Information Systems
  • Embodiment of Knowledge in

Institution and Organization

  • Proprietary Knowledge
  • R&D

Spring 2007

slide29

Historically a Similar Situation Existed in the 1920’s

WHEN THE INDUSTRY’S PRODUCTIVITY INCREASED BY ALMOST AN ORDER OF MAGNITUDE DUE TO THE CONFLUENCE OF TECHNOLOGY AND MAKRET

Highway Construction

Market

Technology

Mechanization

Spring 2007

slide30

Surfacing

Spring 2007

slide31

Similar Opportunities Exist Today

Market Stability

Infrastructure

  • Technology
    • • Information & Communication
    • • Robotics
    • • Engineered Materials

Spring 2007