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Five Considerations When Evaluating Global Construction

May 23, 2014

CEOs see new geographic markets as the main opportunity to grow their business but what are the important things to consider when making the decision to build new structures globally? Reaching the right conclusion and finding the right partners is so important! Discover how quality structures built on sound decision-making enable global companies and multinational corporations to provide the right products in the right place and at the right time.

Craig Mohr, director, corporate accounts & global operations, Butler Manufacturing discusses the considerations to build globally

Leaders of global companies and multinational corporations face many challenges, such as directing budgets, managing employees and executing overall strategy. It can be difficult to allocate time and energy to facility management decisions, especially when buildings are located thousands of miles away.

But the reality is it makes good business sense to consider the investment in high-quality manufacturing facilities overseas and partnering with a construction provider to simplify the complexities of global construction.

More global construction

Where is the global construction industry headed? Up. Global economic growth is stabilizing, driven by the expansion of U.S. and Asian economies, as concluded in the 2014 IHS Global Construction Outlook report. As the economy rebounds, construction spending is poised to accelerate after slowdown.

The same report also states that all industry sectors are likely to grow in the next five years, with nonresidential construction leading the way. In recent years, excess capacity and high unemployment dampened growth in this segment.
More than 50 percent of global construction is concentrated in emerging markets, such as China and India, according to the Global Construction 2025 study from Global Construction Perspectives and Oxford Economics. This study also predicted that by 2025, these emerging markets will account for 63 percent of global construction.

The decision to invest overseas

Global companies and multinational corporations view global expansion as a way to increase revenue. In fact, more than 25 percent of engineering and construction CEOs see new geographic markets as the main opportunity to grow their business, according to PricewaterhouseCoopers’ 17th Annual Global CEO Survey.

These companies also may choose to invest overseas for the same reasons they decide to expand in their home countries. Rationales include:

  •  Identifying new buyers for their products and services
  •  Building strategic assets, such as distribution networks and new technology
  •  Cost efficiencies, including labor, lower taxes and less costly access to inputs of production

The primary driver for most investment decisions is the customer. Global companies and multinational corporations find the most success when distribution centers are located close to their consumers — minimizing the cost of providing products whenever and wherever the demand exists.

High-quality facilities matter

For long-term success, global companies and multinational corporations cannot compromise on the quality of their manufacturing facilities, or they will put building inhabitants and companies at risk. When global companies and multinational corporations build overseas, the No. 1 concern should be safety. But, as these companies may find, standards of safety and quality are not consistent from country to country.

Building codes offer architects, engineers and constructors baseline standards for the acceptable level of safety for structures. Although many countries having national building codes with mandatory nationwide applications, other countries vest regulatory power with local authorities where codes do not exist or are not enforced. To ensure quality working conditions at these facilities and their safe construction, the best practice for global companies and multinational corporations is applying the same safety and quality control standards used in the U.S.

Think global when choosing a construction provider

There are risks inherent in global construction. Failure to identify them at initial stages of construction can be a primary cause of underperforming projects, according to the KPMG International Global Construction Survey 2013.

Access to skilled labor — including uninterrupted supply-chain resources — is the single greatest risk factor in global projects, the survey says. Other factors include cross-border financing, variability of political systems, and understanding and adapting to cultural differences.

Selecting a construction provider with global capabilities ensures facility construction meets worldwide standards of quality, safety and consistency. Other benefits of selecting a company that can deliver global building solutions include:

  • Awareness of potential communications barriers, such as language and time zone
  • Ability to navigate complex building and energy codes
  • Relationships with key building entities — such as architects, contractors and design institutes — to focus on the critical components of making a facility operational on time and on budget

Risks that occur in the planning stage of a construction project — including design, permitting and code-compliance problems — are exacerbated when building in emerging markets. Forming a partnership with a construction provider early in the project timeline provides the greatest opportunity to mitigate these risks. It also allows for value engineering and design optimization before a company makes significant capital investments.

When global companies and multinational corporations choose to work with the same construction provider for multiple projects, they are also able to gain savings not obtainable in a single project. Through a strategic alliance, the construction provider can leverage past project histories, offer preferred pricing and provide consistencies and continuous improvements — no matter the building location.

The right investment

So what is the alternative to working with a construction partner that has global expertise? Going it alone exposes companies to considerable risk. Companies are often unprepared for the challenges of building in emerging markets. It’s also a question of resources: Does it make sense to send your people into unfamiliar territory? Or is it better to let them do what they do best?

Quality structures built on sound decision-making perform will in the long-term, enabling global companies and multinational corporations to provide the right products in the right place and at the right time.

About Craig Mohr
Craig Mohr is the director of corporate accounts and global operations for Butler Manufacturing. He has more than 20 years of experience in the construction industry. Mohr received a Bachelor of Arts degree from New England College.

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