International Construction (Archived)

RT-030 Topic Summary
RT 030

Overview

Engineering and/or Construction (E/C) customers are becoming increasingly aware that there is an ever-changing global marketplace and that sharp and growing international competition exists in every business field. For sustained competitiveness and growth in the international construction arena, a greater emphasis on global thinking and strategic planning by U.S. firms is required, with one of the most promising strategies being partnering and forming long-term relationships with foreign companies. Awareness of the needs of global customers and an understanding of the key elements determining the success of international alliances was the focus of Research Team 30.

The research team studied two aspects which, it thought, could have immediate impact on the international performance of E/C firms:

  1. Customer Needs
    a. What are the key future needs of the global customer?
    b. What types of E/C services will be demanded and what actions are necessary to respond to these demands?

  2. Alliances
    a. What types of alliances are used throughout the world?
    b. What characteristics would be effective in increasing the international competitiveness of U.S. firms?
    c. What would a model alliance look like that incorporates the observed success factors?
    d. What future needs could be satisfied through international alliances?

Key Findings and Implementation Tools

1 : Two types of E/C Customers

They are (1) the ultimate customer, who use and consume the final products and (2) direct E/C Clients. The needs and expectations of ultimate customers can be grouped in five basic areas.

  • Leadership
  • Social acceptability
  • Cost effectiveness
  • Innovation
  • Organizational effectiveness

The research created a hierarchy of future needs that provides an overview of the many forces that drive global strategies. (RS30-1, p. 5)

Reference: (RS30-1)

2 : What the Direct E/C Client Expects

E/C firms will need to become lean and flexible in providing the diverse services required for concept development, innovation, design, and construction. In order to provide these services, E/C firms will obtain supplemental services through a network of specialty firms working as partners. 

Examples of these expectations include the following, while the complete discussion may be found in the research. (RS30-1, p. 9) 

  • Share the client's vision of the future.
  • Understand the client's products, processes, and markets.
  • Contribute new technologies that add value to the client's products and processes and support the client's environmental objectives.
Reference: (RS30-1)

3 : Reevaluate ‘Business as Usual’

The changing nature of the engineering and construction services due to reallocation of many functions done by client in-house to E/C firm will allow the E/C firm to shape project concepts to a much greater degree in marketing, organization, and project execution areas. (RS30-1, p. 13)
Reference: (RS30-1)

4 : Actions E/C Firms Can Explore

 There are many actions that E/C firms can explore individually to be responsive to the needs of international clients. These include:

  1. Identify compatible values and philosophy
  2. Sustain long term relationship
  3. Become a partner
  4. Prepare to provide additional services
  5. Develop a compatible quality philosophy
  6. Establish global partners and alliances
  7. Develop environmental responsiveness
  8. Develop new technologies
  9. Utilize information technology
  10. Educate to work in a new client-contractor environment
The research provides a summary of many possible responses to satisfy the customer needs, grouped into the 3 key areas of the global E/C business: Market, Organization and Project Execution. (RS30-1, p. 16)
 
Reference: (RS30-1)

5 : Formation of Alliances

Alliances defined as ‘the long-term association with a non-affiliated organization, used to further the common interests of the members.’ This research suggests that alliances are the best strategy to satisfy the increasingly varied needs of global clients when they exceed a firm's own capabilities. (RS30-1, p. 21) 
 
Reference: (RS30-1)

6 : Characteristics of a Well-Structured Alliance

The common objective of any alliance is to strengthen the competitiveness of all parties while remaining independent and unique. General guidelines for an alliance include: (RS30-1, p. 26)

  1. The alliance produces a comfortable atmosphere built on trust.
  2. The purpose for the alliance is clear.
  3. Cooperative spirit exists among alliance partners.
  4. The risks are identified and affordable.
  5. The alliance complements the strengths of each partner.
Reference: (RS30-1)

7 : Forming Alliances

Key evaluation points that will impact forming and maintaining alliance relationships are listed below. In addition the research details selection criteria, challenges/risks and lessons learned in forming alliances. (RS30-1, p. 27)

  • Staffing with qualified personnel
  • Documentation of the agreement
  • Time required to form the alliance
  • Prime movers and initiators of the alliance
  • Strategies and marketing plans
  • Confidentiality of proprietary information
  • Organizational structure
  • Executive-level commitment
  • Proper timing of alliance initiation
  • Selection of participants
Reference: (RS30-1)

8 : Features of International Alliances in Europe

Provides input of key characteristics for forming alliances in this competitive, and fragmented region. A few examples are shown here with the details included in the research. (RS30-1, p. 31)

  • European firms prefer continuity of personnel to maintain and strengthen the level of trust as opposed to US practice of short-term rotating personnel.
  • European firms may be more inclined to form alliances or joint-ventures with several contractors to build relatively small projects as opposed to American construction firms who are used to competing and averse to sharing.
Reference: (RS30-1)

9 : Features of International Alliances in Asia and Pacific Rim

Provides input of key characteristics for forming alliances in this rapidly emerging region. A few examples are shown here with the details included in the research. (RS30-1, p. 33)

  • Asian countries have large variety and profound differences in languages, cultures, and customs.
  • Fundamental cultural differences between East and West have historically been a barrier to the participation in Asian markets.
  • Asian firms use a minimum amount of documentation to define the terms of their alliances.
Reference: (RS30-1)

10 : Implementation Tool #1

RS30-1, Implementing an International Construction Alliance

Includes a 5-step model for implementing an International Construction Alliance. (RS 30-1, Appendix A)
Reference: (RS30-1)
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Key Performance Indicators

Improved international growth, Improved competitiveness

Research Publications

Competing in the Global Market - RS30-1

Publication Date: 11/1993 Type: Research Summary Pages: 54 Status: Archived Tool

Alliances in International Construction - SD-89

Publication Date: 04/1993 Type: Source Document Pages: 153 Status: Archived Reference

The Future Needs of the Construction Industry's Worldwide Customers - SD-90

Publication Date: 04/1993 Type: Source Document Pages: 145 Status: Archived Reference


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