1.963 globalization of e&c industrydspace.mit.edu/bitstream/handle/1721.1/53709/1-040... · 1....
TRANSCRIPT
Fall 2006
1.040/1.401/ESD.018 (Project Management)
Globalization of E&C Industry
Fred Moavenzadeh
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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.
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Engineering and Construction Industry is Concerned with two sets of issues:
I. How demand for its output is generated and affected by modern societies.
II. How supply system is shaped to cope with changing demand.
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Source: U.S. Department of Commerce Annual Value of ConstructionPut-in-place in current dollars, 2004 Data is preliminary
TOTAL CONSTRUCTION
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1200
1100
1000
900
800
700
6001997 1998 1999 2000 2001 2002 2003 2004 2005
$ B
il.
Figure by MIT OCW.
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Private Constructionin 2004Total $999.76 Billion
Source: Dept. of Commerce. Construction Put-In-Place. Details May NotAdd Total Since All Types of Construction are not Shown Separately.
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14.7
25.8213.02
6.6
8.08
8.57
12.88
25.9561.2132.18
11.74
544.32
ManufacturingPower
Communication
TransportationAmu sement/Rec
Religious
Educational
Health CareCommercial
Office
Lodging
Residential
Figure by MIT OCW.
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A, E&C Firms Differentiation:
Four Thrust Areas
1. Technology of AssemblyDesignConstruct
2. Management of Assembly on SiteProject Management
3. Management of Organizations Specializing in Assembly
4. Interaction of Assembled Systems with Socio-Economic Development and Environmental Protection
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Product DesignProduct DesignProcess DesignProcess Design
Management DesignManagement Design
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OwnersOwners
Product DesignProduct Design Process DesignProcess Design
Management DesignManagement Design
Struct.Arch.
Geotech.Elect.
Mech.
Etc.
Sub. 1Sub. 2
Sub. 3
Supplier 1
Supplier 2Supplier 3
Finance
Bonding Legal BiddingContracting
Control
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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 ofEconomic Competitiveness
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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
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Change
On Demand Side
ClientMarkets
On Supply Side
TechnologyOrganization
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I. TRADE
II. ECONOMIC BLOCS
III. FINANCE
IV. ENVIRONMENT
V. TYPE OF WORK
Changing Nature of Demand
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I. 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.
Changing Nature of Demand
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II. Economic Blocs:1. North American (U.S., Canada, Mexico)2. European Economic Community3. Far East Centered in Japan4. Mercusor
Trends:1. Potential Future Bloc:
Latin AmericaMiddle EastIndian Sub Continent
2. Realignment of Firms Within Each Bloc via:Merger and AcquisitionJoint venturingStrategic Alliances
3. Need to Expand GloballyImplications:Further Erosion of Control over Domestic Market
Changing Nature of Demand
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III. 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
Changing Nature of Demand
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IV. 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
Changing Nature of Demand
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V. Type of Work
A. Energy & Environment
B. Infrastructure
C. Buildings & Housing
D. High-Technology and Industrial Construction
Changing Nature of Demand
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Changing Nature of Supply
I. Globalization
II. Manpower
III. Technological Changes
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I. Globalization• Geographic
• Internal
• External
Trends• Organizational Readjustment
• Development of Brand Name Identity
• Niche Strategy
• Out Sourcing
Implications• Reorganization, Global Perspective
Changing Nature of Supply
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II. 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
Changing Nature of Supply
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III. Technological Changes• Advanced Materials
• Automation and Robotics
• Information Technology
- Sensor Technology, Communication TechnologyTrends
• Transfer from On-Site to Off-Site Production
• Flexible Manufacturing
• Computer Control Production
• Smart Sensors, Smart Agents, Smart BuildingsImplications
• Capital Intensity
• Proprietary Technology
Changing Nature of Supply
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• Vertical Integration
• Horizontal Networking
• Franchising
Management of Organization
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• Niche Strategy
• Brand Name Identification
• Market Aggregation
• Market Making
Technological Stratification
Vertical Integration
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Market Aggregation Bargaining with
• Suppliers• Clients
Horizontal Networking
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• Marketing
• Technological Know-how
• Suppliers
• Flattened Organizations
Franchising
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Large Firms• Global
• Vertical Integration
• Proprietary Knowledge
Medium Firms• Regional Independence
• Networking
• Proprietary Knowledge of Markets and Suppliers
Small Firms
• Franchising
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Project
Computer Based
• Control: Time and Cost• Inventory• Knowledge Based Systems• Interactive System• Intelligent Databases
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Firms
• Decision Support Systems• Intelligent Database• Strategic Management Information Systems• Embodiment of Knowledge in
Institution and Organization• Proprietary Knowledge• R&D
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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
Historically a Similar Situation Existed in the 1920’s
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Surfacing
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100%
100%
100%
90%
80%
70%
60%
50%
40%
30%
20%
20%15%
21%10%5% 3% 6%0%
1920 1950 1970 1980
Labor
Capital
Figure by MIT OCW.
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Market Stability Infrastructure
Similar Opportunities Exist Today
Technology
• Information & Communication• Robotics• Engineered Materials
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