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A Report On The Globalization of the Construction Industry “How has globalization impacted on the construction industry in terms of issues such as: structure, characteristics of the industry and individual firms, building cycles and forecasting the future direction of the overall economy and the construction industry in particular”. TABLE OF CONTENTSPage 1. 0 Executive Summary 2. 0 Introduction 3. 0 Globalization 4. 0 Structure 4. 1 The Global Construction Industry4. 2 Issues Relating to the Globalization Structure 5. 0 Characteristics 5. Characteristics of the Industry 5. 2 Individual Firms 6. 0 Building Cycles 7. 0 Forecasting the Future Direction 7. 1 Future Direction of the Construction Industry 7. 2 Future Direction of the Overall Economy 8. 0 Conclusion 9. 0 Reference List 10. 0 Appendix 10. 1 Tutorial 1 10. 2 Tutorial 2 10. 3 Tutorial 3 10. 4 Tutorial 5 10. 5 Tutorial 6 10. 6 Tutorial 7 10. 7 Tutorial 10 1. Executive Summary I present this report on the impact of globalization on the construction industry in terms of related issues, which affect the overall building market.

The influence of globalization on the construction industry is the transformation of local and regional markets into one global market. Impacting local construction industry in providing open construction trade. The globalization affects the characteristics and structure of international construction activity with issues relating the challenges from the global climate. The aim for the international construction industry is to provide the supply and demand of related goods and services required to undertake the necessary projects.

Local and regional markets are made up of a large amount of relatively small construction firms and small amount of relatively large firms. This report will provide evidence that the influence of the top 225 construction firms have on the international construction industry. These international large individual construction firms play a key role in the global mega projects and developing nations. Globalization relies upon the forecasts and directions of building cycles which are affected by the global economic climate. The forecasts for the future direction of the construction industry are dim.

However, from my understanding the future of the industry is bright with the ability to grow. This report will provide you with an understanding that this construction industry is an international market heavily influenced by globalization. 2. 0 Introduction The construction industry today is considered a global market and the following report has been commissioned by Vernol Vlluwishewa on behalf of the University of Western Sydney to undertake the study for construction economics in terms of the globalization impact on the construction industry.

The limitations encountered in the production of this report were the lack of recourses available. The following report reflected on the globalization impact on the construction industry covering issues including the structure, characteristics of the industry, including individual global firms, building cycles and forecasting the future direction of the overall economy and the construction industry in particular. 3. 0 Globalization

Globalization is the transformation of local and regional markets into one global market. The economic integration of a global uniform market propels opportunities and challenges into a larger market with the allowance of economic trade, increasing a borderless world (Ulluwishewa, 2009). Globalization opens up trade between nations by lifting trade barriers, allowing the import and export of goods and services. The current construction industry is considered a global industry that forms part of the global economy.

The integration of globalization into the construction industry was due to larger construction firms who where inclined to direct their attention to international markets, who appeared to offer greater potential than local markets (Low, 1994). The globalization of the construction industry saw larger construction contractors, construction material suppliers and sub-contractors investing in global markets relative to the volume of work available abroad. Because the growth in developing nations provided a greater margin in profit, the construction industry saw larger construction companies either entering into the local construction markets.

Individual construction firms included Laing O’Rouke, one of England’s largest construction firms, or investing into larger local construction firms such as Hochtief, majority shareholder of Australia’s largest construction firm Leighton’s; they have also purchased the United States America largest builder, Turner corporation. Suppliers, for example Cemex, who have invested in global markets by purchasing business such, as Rinker to become the world’s largest concrete supplier. 4. 0 Structure 4. 1 The Global Construction Industry Global construction community is a $4. trillion industry (, viewed 23 May 2009) comprising of non-residential construction, residential construction, refurbishments, alterations and additions, infrastructure and maintenance. The international construction works are made of either public or private construction activity. The global industry also comprises of a manufacturing suppliers market including bricks, concrete, structural steel, glass, tiles and hardware. International construction markets five major contributors making up 75 % of the global construction activity include: • United States of America • United Arab of Emirates China • India • Eastern Europe The scale of the global construction market aims large amount of the international construction activity around developing countries. The global construction market is quite large with most of the relative contracts being awarded to the top 225 contractors (Langford & Male, 2001). While the world’s top 225 contractors are quite large, they only hold a small portion of the global market. In line of this, the Australian construction industry structure in terms of the global market is relatively small in terms of manufacturing building materials and construction projects. . 2 Issues Relating to the Globalization Structure The overall force on the international construction market determines issues that relate to the globalization in the construction industry. International construction industry structure faces serious challenges from global climate changes during its life cycle. The following issues relating to the international construction industry structure include: • Economic recession is felt globally effecting the international construction industry • Impact of international construction firms operating within developing countries (Ulluwishewa, 2009). The competitive nature of local construction firms creates general difficulty in international firms entering into the regional markets. • Degree of world construction trade flows • Larger construction firms moving there headquarters offshore • Key local construction employees have been outsourced to work internationally. (Example leading Australian project managers where outsourced to work in Dubai). • The classification of construction activity into regional blocks for example Eastern Europe, Britain, Western Europe, Latin America, America, South America and South East Asia (Ulluwishewa, 2009). Outsourcing resources internationally rather than locally • Global down turn is felt by large construction firms internationally can have effect locally. • International construction firms reap the rewards from developing countries growth. • The international construction industry demand for big ticket projects • Economic down-turn Global construction industry is considered a combination of individual national markets. Structure of the global construction industry would relate to the issues faced in the local and regional markets of developing nations in term of the construction activity.

The forces that can emerge around these developments can have effect internationally. As the construction industry is referred to as an assembly industry this effects the import and export nature of international suppliers due the competitive nature of local suppliers. Australian construction industry in relation to globalization faces similar issues faced in terms of structure in relation in the industry. In respect, the Australian industry with its lack of mega projects and highly competitive market force sees large international construction irms not venturing into the local Australian market. 5. 0 Characteristics 5. 1 Characteristics of the Industry Construction industry is a $4. 6 trillion dollar industry with project ranging from all shapes and sizes. The international construction industry is a global entity that contests within the local and regional markets. The venture of large construction firms comprising of the Top 225 international contractors make up 17. 97% of the global construction market with total revenue in 2007 of $826. 96 billion. Of this, the figure generated outside there home respected home countries of $310. 5 billion (Reina & Tulacz, 2008). The construction industry in comprised of contractors, suppliers, trades and engineers, architects and consultants. Construction project are centered on one particular site overseen by a construction contractor. The general characteristics of the construction industry are as follows: – • The construction industry is made up of large amount of small firms and small amount of large firms • Projects are generally won on estimation creating uncertainty of profit • Competitive industry • Works on terms of supply and demand Projects are generally a mixture of different materials, skills and trades • Follow a particular set of standards and quality issues • Concerned with environmental issues • Projects are generally one off designs [pic] Figure 5. 1. 1 Infrastructure to Stay at high levels 5. 2 Individual Firms Construction industry is made up of individual firms which undertake the construction of projects on behalf of investors. The individual firms are subsidies into particular sectors in the industry such as: • Non Residential • Residential • Commercial • Infrastructure • Refurbishment • Maintenance • Alteration and additions Renovations • New Buildings The following Australian individual firms represent the impact of globalization on the construction industry from Australian to international: |Firm |Local Revenue |International |Characteristics |Impact on the Industry | | |(Australia) |Revenue | | | |Leighton Holdings |$12,382 Million |$2,166 Million |37,000 Employees |Australia’s largest construction firm | | | | |$34. Billion worth of |Corporate Structure Consists of: | | | | |work on the books |John Holland | | | | |Key projects: |Thiess | | | | |infrastructure |Leighton Contractors | | | | |Key Regions: Australia, |Leighton International | | | | |Asia and the Gulf |Leighton Properties | | | | |International |Leighton Asia | | | | |Construction Firm |Is one of Top 225 Global Contractors | | | | | |55% of shares are held by Hochtief | | | | | |Australian Company | |Brookfield |$1,652. million|$850 Million |2,000 Employees |Head Contractor on Wembly Stadium | |Multiplex | | |Key Regions: Australia, |Owned by Brookfield Asset management | | | | |New Zealand, England and|One of Australia’s Largest construction | | | | |Dubai |firms | | | | |Key projects: Building |$5. 5 Billion worth of work on the books | | | | |Construction |Australian Company brought by a Canadian | | | | |International |company | | | | |Construction Firm | | |Lend Lease |$6,270. 8 million|$8,011. million |11,737 Employees |One of the largest international property | |Corporation | | |30 Countries worldwide |companies | | | | |Key projects: Building |Is one of Top 225 Global Contractors | | | | |Construction and |Australian Company | | | | |Property |Corporate head quarters situated in | | | | |International |Australia | | | | |Construction Firm |Currently head contractor of the rebuilding | | | | | |the world trade centre memorial | | | | | |Corporate Structure Consists of: | | | | | |Bovis Lend Lease | | | | | |Delfin Lend Lease | | | | |Crosby Lend Lease | | | | | |Actus Lend Lease | |Laing O’Rouke |$450 million |$11,550 million |31,000 Employees |English Based construction firm with offices| | | | |Key Regions: United |in Australia | | | | |Kingdom, Middle East, |Largest Privately owned construction firm in| | | | |Australia, Germany and |the UK | | | | |India |Currently Constructing the main stadium for | | | | |International |the London Olympic Games | | | | |Construction Firm |Head Quarters situated in England | | | | |Key Projects: | | | | | |Construction and | | | | | |Infrastructure | | Table 4. 2. 1 International Construction Firms

Global construction industry relates to Australian individual firms as mentioned above as have an impact on the local construction industry as well as international. Other large construction firms in Australia Abi Group and Baulderstone are only local construction firms, they where acquired by Bilfinger Berger a leading international construction firm. Material suppliers and sub-contractors that contribute to the global construction industry include: • Boral • Cemex • Hansons • Hastie Group • Kirby International 6. 0 Building Cycles International construction industry is highly influenced by the global economic conditions. Building cycles in the construction industry are determined by the impact of the current global economic cycle.

During the periods when the construction industry is growing, the global economy is booming and when the economy falls into a recession, the international construction industry slumps to low and projects can be cancelled or put on hold. The current international building cycle is at low with many projects being mothballed at procurement stages or put on hold as seen in Dubai. The down turn in the construction industry is felt globally due to the impact of globalization in the economy bring about a shortfall investors. Current building cycle shows evidence in down turn generated through economy. International construction firms are also heavily impacted as the growth in developing nations seizes, causing down turn in economic growth. The following are issues relating the building cycles impacted by globalization in the construction such as: Economic crisis has a global effect on international building cycles • Building cycles go through high construction periods and low construction periods • Building cycles generally relate to the global economy • Building cycles determine the global construction industry • Building cycles can last anywhere from 3-10 years [pic] Figure 6. 0. 1 Our Region is expected to Fare Better than Others 7. 0 Forecasting the Future Direction of the Overall Economy 7. 1 Forecasting the Future Direction of the International Construction Industry The current international construction industry is in a low due to economic recession. The decrease in economic growth has an increase in government expenditure into the construction industry. The Australian government has invested $22 billion into the industry with building the education revolution, improving infrastructure and increasing job prosperity (, viewed 25 May 2009).

The forecast for future direction of the international construction industry is one of economic recovery with increase construction growth. With Australia having under supply of housing, industry is predicting a demand is expected to impact positively on the housing industry. In addition the international construction industry forecasts further downfall until the global economy picks up allowing a free flow of construction work commence. The future direction of the international construction industry looks positive with many international governments investing in recovery stimulus packages towards the construction industry creating push towards growth in the industry. Figure 7. 1. 1 Australia Has More Scope to Battle Recession

Trends towards the future direction of the international construction industry foresees potential international growth with the next 5 to 6 years with the expansion of additional construction projects in developing nations. With positive views of long-term growth in the industry. With growth comes competition the future direction of the international construction industry forecasts an increase in large local construction firms entering the international construction industry. Developing nations such as Dubai construction industry is set to dry up with current signs of slowing down (, viewed 25 May 2009). 7. 2 Forecasting the Future Direction of the Overall Economy in terms of the Construction Industry The global economy has large effect on the future direction of the construction industry. With building cycles effected by the direction of the economy.

The forecasts for the future direction of the overall economy in relation to the construction industry see the economy investing in construction into the future boost the global economic situation. The construction industry forecasts over the next three years an increase in government infrastructure development project particularly in Australia. The following is overall economic issues impacting the global construction industry of current and future global concerns includes: • The trend for economic downturn facing recession • Where does the future on the construction industry lie? • Will the construction industry follow the current global economic conditions? • What challenges will the global economy and construction industry face?

The overall global economy has illustrated from current events that the future direction in the next five to ten years will forecast slow downturn in growth with later on during this period rapid growth. With the economy forecasted for rapid growth in next five to ten years the construction industry will foreseen an international building boom as seen before the economic recession. 8. 0 Conclusion The international construction industry has influenced and affected the global economy with the balance of construction work being private or public investments. Globalization has influenced the construction industry in terms of large international construction firms making up a small proportion of the global market.

The construction industry may be considered a truly globalization with large international construction firms particularly in Australia being owned by international corporations. The relationship between the building cycle and the economy forecasts potential future directions of international growth relating to the supply and demand determined by the economy. As a result, the construction industry is a truly global industry affecting the economy and particularly regional and local construction markets. 9. 0 Reference List: 1. About Us, According to Laing O’Rouke Australia, viewed 24 May 2009, 2. Bovis Lend Lease 2008 Annual Report, According to Bovis Lend Lease, viewed 24 May 2009, < www. lendlease. com/LLC_Annualrep/index. shtml> 3.

Budget Building Blocks for Economic Recovery, According to Master Builders Association Australia 12 may 2009, viewed 25 May 2009, 4. International Facility Management Association, 2009, Construction Market Will Continue to Slide in 2009, According to McGraw-Hill Construction Outlook , viewed 23 May 2009, 5. Langford, D & Male, S (2001), Strategic Management in Construction, 2nd edi, Wiley-Blackwell, San Francisco 6. Leighton 2008 Concise Annual Report, According to Leighton Holdings Limited, viewed 24 May 2009, < www. leighton. com. au/verve/_resources /290908_asx. pdf> 7. Low, SP (1994), Marketing Research for the Global Construction Industry, Nus Press, Singapore 8.

The Brookfield Multiplex Group Financial Report For the 6 months ended 31 December 2008, According to Brookfield Multiplex Limited, viewed 24 May 2009, < www. brookfieldmultiplex. com/_uploads/documents/Group%20 Financials %2031%20December%202008. pdf> 9. Thomas, S. NG, Wong, K. K. W. & Wong, J. M. W (2009), Future Directions of Construction Education to Meet the challenges and Opportunities in an Unstable Global Economic Environment, viewed 25 May 2009, < www. fig. net/pub/fig2009/papers/ts06d/ts06d_ng_wong_wong_3413. pdf> 10. Ulluwishewa, V (2009), 200504 Construction Economics Lecture Wk 4 Globalisation, University of Western Sydney School of Engineering, Nirimba Education Precinct, Australia

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