group 9- DESCON
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Transcript of group 9- DESCON
DESCON Engineering
Management Project: Critical decision Making
DESCON ENGINEERING – IN FOCUS
“To become a world-class engineering, manufacturing and Construction Company operating
internationally .”
VISION
DESCON Engineering
Management Project: Critical decision Making – outline
• POWERDESCON
• ENGINEERINGDESCON
• CHEMICALSDESCON
DESCON Engineering
Management Project: Critical decision Making
Established in 1997
Industry; Engineering, Construction, Manufacturing & EPC
Private Business
Based in Lahore, Pakistan
SERVICES; Engineering, construction and EPC for onshore projects
Developed into a multi-discipline engineering services company
Serving a wide range of industries
Expanded its businesses in GCC Countries, Abu Dhabi, Qatar, Kuwait and Sharjah
Management Project: Critical decision Making
DESCON Engineering
Plan and Analyze
Bid for the Project
Procurement Managemen
t Plan
Construction and
ExecutionMonitor Evaluate
DESCON’S SYSTEMATIC APPROACH
THE CRITICAL DECISIONProject: providing supply to
the construction site of power plantWorth: PKR 50 Million
Project Time: JUNE 2014 - DECEMBER 2014 (6 months)Decision: Choose among two vendors of DG sets
Standard manufacturing time of DG set: 8 monthsCost allocated for DG sets: PKR 20 Million
Vendor A (American based) Vendor B(London based)Manufacturing time: 8 months 4 Months Cost charged: >PKR20 Million 20 MillionMarket foot prints: High LowObjective: Gain maximum returns ( ZERO LDs) and client satisfaction and loyalty
S • Social- Demand in power generation is ever growing, from thermal power plants to windmills.
L • Legal- Contract bindings and Clients might cash the guarantees, legal obligations in GCC countries might differ.
T• Technological- DESCON needs to keep up with new
advancement into technology, it prefers to be technology leader (Competitive edge) like Pakistan's largest Crane
E • Economical- increase in Inflation rate may lead to revision in rates and budgets of products
P• Political- Changes in Government might lead to change in
Civil Construction projects. Governments in GCC countries hold different interests.
DESCON Engineering
Management Project: Critical decision Making
Buyerspower
SUPPLIERSNEW
ENTRANTS
SUBSTITUTES
HIGH TO MEDIUM PRESSURE
LOW PRESSURE
MEDIUM PRESSURE
MEDIUM PRESSURE
HIGH PRESSURE
PORTER’S FIVE FORCES ANALYSISThreat of New Entrants/Potential Competitors: Medium PressureEntry barriers are relatively high for local firms due to the high costs involved in such projects. However, international firms do have the financial capacity to meet these costs, and hence the entry barriers are relatively lower for foreign firms. DESCON, while primarily a construction company, is not a product manufacturer. Recently, a new rival has emerged in the form of ABB (a manufacturer), which is trying to break into the construction industry by quoting high values for the project products, making it difficult for the DESCON to win the bidding process.
Threat of Substitute Products: Low pressure The CCC can pose a threat to DESCON as they integrate innovative techniques with low cost models. However DESCON also invests in latest technology to keep pace with the changing environment.
The Bargaining Power of Buyers: Medium to High pressureThe civil construction clients have high bargaining power because they have access to international EPC firms, whereas the local contracts related to fertilizer and chemical industries possess relatively low bargaining power.
The Bargaining Power of Suppliers: Medium pressureThe suppliers depend on the project type and bidding strategy to complete with product manufacturers. If a product manufacturer is participating for a project, DESCON usually opts for a joint venture with another product manufacturer to be competitive. For most of E&I projects, DESCON’s suppliers are PEL, ABB, GE, Chinese suppliers (if allowed by client), Philips, and Pakistan cables.
Rivalry Among Existing Firms: High Pressure The main competitor for DESCON in this project was Flowtronix, which also has a wide range of engineering and construction services. Both DESCON and Flowtronix are the predominant engineering firms dealing in the Engineering, Procurement and Construction (EPC) segment of the regional market. There are other engineering firms that have achieved a formidable market share, like Simon Engineering and Consulting, Schneider Engineering PLLC, Siemens, Zelcon, and CCC. There are many other local firms which are posing tough competition to DESCON for smaller projects.
DESCON Engineering
Management Project: Critical decision Making
StrengthsTechnically qualifiedBudgets were favorable for the client
WeaknessesLow on fundsE&I lacked experience, new domain and team
SWOT
CONS:8 months manufacturing timeHigh price (although negotiable but being a market leader it enjoyed high supplier power)LDs for first week= 0.1 MillionLDs after first week= 0.5 Million30 Million Penalty(serious delay)
Vendor A
PROS:4 Month manufacturing timeFavorable price Low Defect rate LDs on DESCON would be transferred due to the contract
Vendor B
DESCON Engineering
Management Project: Critical decision Making
BENEFITS OF CHOOSING VENDOR B: GAINED CLIENT’S SATISFACTION INCREASE IN REVENUE OF 35% A NEW PKR 4 BILLION CONTRACT WAS AWARDED ESTABLISHED E&I E&I GAINED MOTIVATION AND EXPERINECE
Tools used to analyze the decision• Budget and variance analysis• Trends of efficiency• Benchmarking against leading firms • Management By Objectives (MBO) approach• Feedback control
DESCON Engineering
Management Project: Critical decision Making
THANK YOU!