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MANAGEMENT INDORE
PGP-UAE
INFRASTRUCTURE ROAD
CONSTRUCTION IN UAE
By
KENDRAJ KUMAR
KRISHNA CHAITANYA GOLLA
MRINMOY PATHAK
PARTHIBAN JAYAPRAKASH
PAVIRALA GOPI
The report gives a background of the UAE Road construction industry, Value chain, Competitor Analysis and
Strategy Diamond Model for the future.
The players in each strategic group share similar competitive characteristics and distinguish
themselves from other groups. The typical relationship between strategic groups is linear: the real
estate developer announces a plan for a project and assigns a project management company to
develop and supervise a project. The contracting companies submit their bids for the project; after a
set of negotiations, the developer awards the contract; and the contractor takes the responsibility for
the accomplishment of the job within the set budget and timeline. The contractor may sub-contract a
job or part of it to a sub-contractor or do the entire job. During the construction period, the contractor
will involve building materials and service suppliers.
This classification presumes that the different strategic groups in the construction industry are not
necessarily in direct competition with every other group, but only with companies active in the same
group. Additionally, because companies of one strategic group depend on players from other groups
for their own success, there is typically cooperation between companies from different groups.
Each construction project involves a particular configuration of four forms of capital: industrial,
commercial, financial, and property. These four types of capital, combined with the six strategic
groups, form the matrix structure of the construction industry in UAE. All companies from any
strategic group have both a commercial and a financial strategy, since they buy and sell (commercial
strategy) and borrow and lend money (financial strategy) in order to accomplish their job. Players that
control the production of some of the commodities they sell must also develop an industrial strategy,
and players that acquire and hold stocks of real estate are involved in property investment (property
strategy).
Competitive market
The two major causes of this large spectrum of players are the emergent nature of the market and the
division into strategic groups, which increases the competition by segmenting the industry into subindustries, where smaller players can easily find a place. The best description for this type of market
structure is a competitive and fragmented market.
Oil-rich country
Political stability
International business and investment from overseas
Growing non-oil sector
Tax free environment
Attractive salaries
Inflation growth
Currency value instability (AED peg to USD)
Oil production spending increase, government saving decrease
Shortage of skilled manpower
Image of the 'Disney World in the desert'
Disparities between Emirates
OPPORTUNITIES
THREATS
Political Trends
With the unrest in Egypt spilling over to Bahrain and owing to the close ties with the other GCC
neighbors, infrastructure spend has been imp acted in 2011 as against the popular expectation of
above average growth that had been foreseen by analysts with the extensive government backing
witnessed in 2010. However, while a number of project s have merely been postponed or staggered to
2012; political unrest is likely to impose a small restraint to growth of the infrastructure sector across
the GCC in the short run, which is likely to be in order in the medium and long run.
Economic Trends
Governments across the GCC have been widely encouraging alternative sources of funding for the
infrastructure projects across the region and the sustained investment in these projects on the back of
the projected demand and rising population have attracted a number of private equity funds into
financing these projects. Islamic financing and Sukuk issues which are a popular means of
international financing projects with long gestation periods have also rapidly found favor in these
markets, thus alleviating the problems associated with liquidity and credit and enabling infrastructure
Impact High
Innovation
and
Technology
growth prompted by population
growth
pressure
fuels
infrastructure growth
PPPs
and
alternative
infrastructure
funding
fuels
growth
Fast Growing Population and
Urbanization spurs demand for
utilities and energy
and sustainability in
Infrastructure sector
unrest
investment
in
Impact High
delays
infrastructure
of
clear,
cohesive
and
uniform legal
and regulatory
framework
deters
development
of
infrastructural links
region
fast
al
Impact Low
Market Leadership
Intelligent Solutions
Continuous
Improvement
Quality
Social Responsibility
Hedley believes that its values are a commitment to EXCELLENCE. Their focus on
excellence allows them to deliver on schedule and with quality while meeting their
client/partner objectives and reducing their costs. While Hedley broadens its business
interests, its ownership, management, and associates remain committed to the company's
core values and heritage. These values dictate Hedleys corporate governance, ensuring
they operate at the highest legal and ethical standards.
Integrity
Act honestly and with integrity
Zero-tolerance to bribery and corruption
Operate with a respect and concern for the environment, community and the
people
Safety
Provide safe and healthy working conditions for employees and subordinates
Make performance in safety a competitive advantage
Success
Provide strong returns to shareholders
Consistently deliver qulaity projects to clients
Develop long term, mutually beneficial relationships
Teamwork
Develop people through training, rewards and create a working environment
Employees feel that they are challenged, motivated, satisfied and accountable for
their work
Hedley International
Habtoor Leighton
Operational Excellence
Growth Quality
Diversification
Quality
Strong Client
Relationships
VRIO Framework
Valuable
Rarity
Costly to
imitate
Organized to
capture value
Hedley
International
Yes
Yes
No
No
Habtoor
Leighton
Yes
Yes
Yes
Yes
From the VRIO framework shown above, it is quite clear that Habtoor Leighton has a
competitive advantage over Hedley International in terms of its resources.
Any project in a construction industry involves all these components. The project has to go
through PRIMARY FUCTIONS mentioned in the following such as:
Inception
Design
Tender
Construct
Operate and Maintain
All these steps are supported by a variety of secondary / support functions which are as
equally important as the primary steps. They are
o
o
o
o
o
o
o
o
Building Materials
Tooling and Equipment
Finance and Insurance
Utilities and Transportation
Human Resources
Information Technology
Regulation Enforcement
Research and Development
The General Contractor is the main stakeholder of the Road Construction industry. He is
responsible for the project who takes it to tender from the Sponsor/Developer/Client.
Supplier, Engineer & Design and Sub-contractors are the other supporting groups involved
in the project inception and execution. These are the most necessary groups and they are
indispensable. The GCC industry operates in such a way only.
The client in general is the Governments of the GCC such as UAE, Saudi Arabia, Kuwait,
Oman, Bahrain etc.
All the governments have been very keen in improving the infrastructure by making huge
investments as various world events are lined up like EXPO 2020 DUBAI UAE and FIFA
World Cup in Qatar 2022.
Financing is not a requirement for all countries in GCC. All the countries are cash rich and
they are in search of projects for investments. Hence the project funding is completely
taken care by the respective government.
The General Contractor can be mainly divided into three categories as:
1. Local companies dealing in the construction industry only
2. International companies dealing in the construction industry only
3. Groups of companies dealing in various industries
Main Customers:
Governments,
Transport
Authorities etc.
Rapid Expansion
by involving in all
government
projects,
Sequencing in
the next 4 years
consecutively
More Construction
Equipment, Joint
Ventures with
Governments, Enter
New projects, Capture
the Government
Investment Proposals