Construction industry 2010 – Success factors in Central and Eastern Europe

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CONSTRUCTION INDUSTRY 2010 S UCCESS FACTORS IN CENTRAL AND EASTERN EUROP

WE MIGHT SURVIVE THE CRISIS , BUT HOW DO WE BECOME SUCCESSFUL ?

The construction industry helped triggering the current recession and it is one of its biggest losers so far. As such it isalso one of the most conservative industries. Currently almost all construction companies have undergone multiple rocrisis we expect half of the Hungarian companies to disappear, through bankruptcies and mergers.

In this study we review global systems that impact the construction industry. Global system changes trigger constructespecially on Central and Eastern Europe. Finally we reviewed what construction industry players need to do not justthe end.

1. Changes in global systems

We selected two major systems that drive the future of the construction industry. The first is the changing global econrecession and the center of gravity shifts towards currently emerging markets, predominantly in the East. This triggerconstruction industry.

The other system change we identified relates more closely to the global construction industry. The World finally recorather symbolic steps were taken on global and national levels as well. This was nowhere near the green revolutionthough so more revolutionary steps are expected. The construction industry relevance of global warming is most appWorlds growing energy need and at the same time limiting energy consumption by more efficient new constructionsexpected to come from major water infrastructure projects.

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Shift in the economic center of gravity towards emerging markets is already substantial. Chinas and Indias economior EU from an already substantial base. This will cause emerging markets to significantly overtake developed countri




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Growth attracts construction industry Foreign Direct Investments as well. From this respect the CEE region is less attand Russia. But at the same time the geographic proximity to Western Europe and the CEE regions comparably highconstruction industry FDI.




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Construction companies are typically local. Globalization has started in the construction industry as well, but it is far frsize of top players grow at a robust pace.

Geographic shifts are reflected quite dramatically in the development of the global top ten largest construction compaIn 2004 four of the top ten construction companies were Japanese and none were Chinese. In 2008 all Japanese coconstruction companies.




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The World has finally understood the problem of climate change and started to take more substantial steps to fight it.problems: satisfying energy needs and trying to limit consumption.




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The construction industry is involved with climate change in several ways: building new energy infrastructure, renovatbig global challenge, the water infrastructure.




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2. Construction trends in Central and Eastern Europe

The CEE regions construction industry is neither the the fastest growing, nor the largest region in the World, howevegrowth are positive which invites FDI.




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b) Hectic change in raw material prices is unfavorable for the industry. From 2004 until the second half of 2008 constrCustomers were not ready to accept this in the final output which squeezed margins. From the end of 2008 raw matecontrary, declining raw material prices were a result of falling demand.




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c) The composition of building materials gradually change, historically fast. One main reason is that building materialmaterial prices. The other reason is that regulations related to climate change discourage of even ban the use of cert




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d) Lack of skilled labor is a European issue, not just related to the CEE region.

Lack of construction industry skilled labor is especially relevant in the followin

o Carpenters

o Electricians

o

Roofers

o Plumbers

o Masons

o Painters

o Green collar workforce

65% of respondents expect the workforce situation to worsen, only 30% expe




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Keeping the aging workforce active must be a priority. This is a good opportuvaries by country: better in Germany and the Netherlands, but not so much in the UK where steps were alreadyyears.

Informal/ grey workforce is not enough skilled Improving workplace safety and healthcare is important to make the industry

workforce 800,000 suffer injuries and 1300 die each year. Migration of the blue collar construction workforce of the CEE region to West

The tight workforce of Western Europe is eased somewhat by incoming migrant workforce, but other problems alanguage skills). Informal workforce might reach 20%.

White collar workforce needs training, besides technical knowledge, business

Some options to ease the lack of skilled labor Strengthening ties with industry associations to improve efficiency, better coll Improve image of the construction industry Training Business productivity improvement Long term workforce forecasts: areas where demand will likely surpass workf

Lack of skilled labor affects all companies, but favors the larger ones, which might be able to reallocate workforce intdemand for more prefabrication, or the need to build in the materials with less skills.

e) Innovation in the construction industry largely stems from the need to achieve better business results. Innovation, itechnologies, can be derived from business needs.

Key driver of innovation is to improve business results:

1. Cost reduction2. Efficiency/ productivity improvement3. Quality improvement

Innovation is largely hindered by1. If applicability is not wide enough2. If customers arent willing to pay for it3. Simple fear of change

In light of the above, technology can improve. It is expected that the following1. Environmental technologies2. Improving safety and health of workforce3. New construction methods and processes4. Prefabrication and modularization

3. Construction trends impacting industry players

As apparent from the above, the mere survival of todays crisis is not enough, successful companies need to do morbeginning of 2011, companies with foresight will be in competitive advantage




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Top Tier Consultants offers solutions to the above corporate challenges. Our experts experience ensures that our clistrategies and their management capabilities as well




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Top Tier Consultants August 2009.

www.toptierconsultants.com

[email protected]

T: +36-1-392-0112

Author: Tams Rzsa




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Construction industry 2010 – Success factors in Central and Eastern Europe

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