Succeeding in the Global Market

Industrial construction and engineering companies have to position themselves to capitalize on growth opportunities in emerging markets to succeed in today’s expanding international marketplace.

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Though developed countries are set to remain a major marketplace for construction business, the surge in growth will be in emerging markets such as China and India. This growth spike is based on plans by developing countries to invest in infrastructure projects, such as new roads and railways, and non-residential construction such as high-rise buildings.

Demand for new housing in China, India, Russia and Eastern and Central Europe, arising from increasing personal wealth and current housing shortages, also is expected to spur growth. But with these opportunities will come challenges. The challenges include:

• Rising raw material costs
• Global competition for talent
• Environmental regulations compliance
• Increased international competition
• Global margin monitoring

The current economic boom in China and India is creating an imbalance in supply and demand, while increased fuel costs are raising energy and transportation costs. These are among the factors leading to sharply rising prices for basic construction materials such as cement, steel reinforcement bars and copper.

As price increases impact construction costs, contract values are being kept down, putting pressure on margins. Companies will need to address the challenge of soaring construction material prices by becoming more efficient in their procurement efforts.

Talent is becoming a global commodity, fought over by multiple competitors. Developed markets are experiencing a loss of skilled employees as the workforce ages, while emerging technologies are requiring new skills. Moreover, developing countries are having problems attracting talented individuals. These labor shortages are leading to problems, including project delays, and challenges in developing and managing skilled workforces. One way to attract and hold talented people, who want to be associated with success, is to develop a strong corporate identity.

Climate change concerns continue to grow worldwide, increasing interest in the environmental impact of construction and the operation of buildings and structures. As major participants in urban development, engineering and construction companies will be required to adapt to more complex environmental regulations.

The construction industry is becoming international as new markets open. But with new opportunities comes added competition. India, for example, is creating tremendous opportunities for Indian companies to develop within the home market, as well as strengthening their ability to expand globally. At the same time, overseas companies will view India as a potential expansion opportunity—intensifying competition for projects.

To meet increased competitive challenges, companies should consider pursuing joint ventures that can help them more
easily enter new markets. Moreover, Indian construction companies should be viewed as promising partners by overseas players seeking to enter the Indian market.

Finally, as construction opportunities expand globally, so will revenues. Monitoring global margins will become crucial for companies seeking to improve operational efficiency. Accomplishing this will require executing effective corporate programs supported by performance measurement and risk management policies.

Positioned for the future

There is no one successful way to manage the balance between the transitions that the evolving market will demand. But companies can succeed by finding the combination that best aligns with their anatomy, and then—critically—continuously renew their positions as market conditions change.

James Robbins, james.a.robbins@accenture.com, is North American Automotive and Industrial Equipment Industry Lead for Accenture, a global management consulting, technology services and outsourcing company in New York City.
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