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1.040/1.401/ESD.018 (Project Management) Globalization of E&C Industry

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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1.040/1.401/ESD.018 (Project Management) Globalization of E&C Industry

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  1. 1.040/1.401/ESD.018 (Project Management)Globalization of E&C Industry Fred Moavenzadeh Spring 2007

  2. 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

  3. 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

  4. 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

  5. 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

  6. 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

  7. Product Design Process Design ManagementDesign Spring 2007

  8. 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

  9. 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

  10. 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

  11. Change On Demand Side • Client • Markets On Supply Side • Technology • Organization Spring 2007

  12. Changing Nature of Demand • TRADE • ECONOMIC BLOCS • FINANCE • ENVIRONMENT • TYPE OF WORK Spring 2007

  13. 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

  14. 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

  15. 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

  16. 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

  17. Changing Nature of Demand • Type of Work • Energy & Environment • Infrastructure • Buildings & Housing • High-Technology and Industrial Construction Spring 2007

  18. Changing Nature of Supply • Globalization • Manpower • Technological Changes Spring 2007

  19. 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

  20. 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

  21. 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

  22. Management of Organization • Vertical Integration • Horizontal Networking • Franchising Spring 2007

  23. Vertical Integration Technological Stratification • Niche Strategy • Brand Name Identification • Market Aggregation • Market Making Spring 2007

  24. Horizontal Networking • Market Aggregation Bargaining with • Suppliers • Clients Spring 2007

  25. Franchising • Marketing • Technological Know-how • Suppliers • Flattened Organizations Spring 2007

  26. Large Firms • Global • Vertical Integration • Proprietary Knowledge • Medium Firms • Regional Independence • Networking • Proprietary Knowledge of Markets and Suppliers • Small Firms • Franchising Spring 2007

  27. Project Computer Based • Control: Time and Cost • Inventory • Knowledge Based Systems • Interactive System • Intelligent Databases Spring 2007

  28. Firms • Decision Support Systems • Intelligent Database • Strategic Management Information Systems • Embodiment of Knowledge in Institution and Organization • Proprietary Knowledge • R&D Spring 2007

  29. 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

  30. Surfacing Spring 2007

  31. Similar Opportunities Exist Today Market Stability Infrastructure • Technology • • Information & Communication • • Robotics • • Engineered Materials Spring 2007

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