MANAGEMENT OF GLOBAL CONSTRUCTION PROJECTS: ISSUES FACING MALAYSIAN CONTRACTORS
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1 MANAGEMENT OF GLOBAL CONSTRUCTION PROJECTS: ISSUES FACING MALAYSIAN CONTRACTORS Dr. Ali Alashwal Senior Lecturer University of Malaya 4/2/2017 PMI Malaysia Chapter 2017 Lecture Series 1 - Northern Region
2 Content Definition and context Framework of global project management Research studies 2
3 Definition Hostcountry Complex Different politics Law and local practice Different culture Different process Different language Different time zone 3
4 Why to venture overseas? Local market is stagnant Hold ground against competitors Opportunities in other countries Greater profits Spread risk Efficient resource utilization Growth and development 4
5 Challenges Rapid change High competition Economic pressure Dispersed resources Increase quality and reduce cost Instability in the host-country 5
6 Global Project Management These conditions emphasize the need for project management Different set of skills and attitude Talented and self-motivated people Learning and change Cross-cultural leadership intelligence (XLQ) 6
7 Global Project Management Framework IPMs should be able to make critical decisions and willing to take responsibility IPMs need to understand sustainability, international ethics, laws & regulations, competition, and multiple cultures 7
8 Global Project Management Framework Sustainability Org. Structure Int. Ethics Multiple Cultures International Project Manager (XLQ) Laws & Reg. Virtual Env. Value Chains (based on Grisham, 2010) 8
9 Issues Facing Malaysian International Contractors Completed Projects Current Projects (Source: compiled by author from CIDB, 2016) 1. Why the reduction? 2. How Malaysian contractors perceive project success? 3. What are the strategies used to venture in the global market? 88% 78% Local contractors are loosing market share 9
10 Why the reduction? Designation Experience Ownership (years) for Firm Senior Manager 26 Private Project Manager 25 Private Project Manager 25 Private Senior Manager 22 Private Senior Manager 17 Private Senior Manager 15 Private Project Manager 15 Private Project Manager 15 Private Project Manager 15 Private Project Manager 12 Private Project Manager 10 Private Project Manager 10 Private Project Manager 9 Private Project Manager 8 Private CIDB Government Head 25 Government CIDB Special officer at PM s office 15 Government General Manager (Business & Corporate Sector) 25 Government Senior Manager 10 Government Project Consultant 25 Private Head of International Construction Business Management Research Group 21 - Project Consultant 15 Private Project Consultant 15 Private 10
11 Declination factors Financial Funding limit, payment issues, no profit Economic Downturn, fluctuation of prices, currency, and interest rate, change of fiscal policies and taxation, competition Strategic Lack of strategic mgment, unsuitable project, unsuitable location, unavailable resources Cultural & political Cultural diversity, language, lack of cooperation and trust, dispute, war, riots, terrorism, unstable policies and legislation, constraints on expatriates, corruption Managerial Different working system, poor relationships in host country, lack of resource mgment, low competent project managers and team, organization structure Project-related Defective design, design change, delay in payment, quality, subcontractors competition 11
12 How to overcome the problem? Micro Solutions Financial strategies (strict financial control, new financial instrument, better planning of budget, cash flow monitoring, future balance sheets) / efficient corporate plan / risk analysis / awareness of market conditions and economic situation / savvier in contracting / networking and market intelligence analysis / Joint Venturing with the right companies / analysis of niche market / selecting the right project / right Market Entry strategy / maintain liability and standards / diversification / cost of resources / improvement of quality / recruit specialists in a number of fields Meso Solutions Balance the supply and demand market / contractual agreements / bilateral trade and linkages / banking system / availability of special expertise in the market and employment patterns Macro Solutions Government initiatives for R&D, training, educations, and practices / overall improvement of the industry / provision of good finance and financial packages / setting global standards and liabilities 12
13 How project success is perceived? Survey of 120 participants - top international contracting companies Participants included project managers, consultants, engineers The data was analyzed using factor analysis and regression analysis 13
14 Results Project Management Success (40%) Success Criteria Functional Success (14%) Organization Success (11%) 14
15 Results External Environment (8%) Organization Capability (6%) Resource Availability (17%) Project Support (5%) Team Power and Skills (26%) Success Factors Project Organization (4%) 15
16 Results TPS Project manager competency Project manager power RA Team coordination MS EE OC Contractor s competition Strong financing capacity FS Success of international construction projects PS Troubleshooting skill OS PO Project size and value Project social environment Notes: - TPS (Team Power and Skills), RA (Resource Availability), EE (External Environment), OC (Organization Capability), PS (Project Support), PO (Project Organization), MS (Management Success), FS (Functional Success), OS (Organization Success) - Variables in thick line are significant for the overall success criteria 16
17 Venturing strategies Over 450 international construction projects were analyzed covering 5 periods of market fluctuations Boom Period Recession Period Boom Period Recession Period Boom Period Sampled contractos Overall contractors 17
18 Venturing strategies The influence of 6 strategies on contract sum of projects was analyzed Region Diversification Product Diversification Localization Joint Venture with Home-country Contractors Entry Time (early movers vs late movers) 18
19 Results Boom ( ) Recession ( ) Boom ( ) Recession ( ) Boom ( ) Variables Beta Sig VIF Beta Sig VIF Beta Sig VIF Beta Sig VIF Beta Sig VIF Region Diversification Product Diversification Localization JV Home Early Entry Late Entry R Square Adj. R Square Sig. F Change Durbin-Watson Companies Region Diversification ~ - (2 nd boom) Product Diversification + (2 nd recession) Localization + (1 st recession) JV-home Country + (2 nd recession) Future research Resources Cost Allocation, Corporate Financial Strategies, and Technological Strategies 19
20 Conclusion Contractors performance have declined Findings aligned with CITP initiative Factors contributing to the success of global projects No clear strategy to venture and sustain business A long-term strategy is required 20
21 Acknowledgement & references This research was supported by the University of Malaya Research Grant (UMRG No. RG307-14AFR) References: Grisham, T. W. (2010). International project management: Leadership in complex environments. John Wiley & Sons. CIDB. (2016b). CIDB International Project Database: Total Projects By Year. Retrieved 21 March 2016, from The Construction Industry Development Board CIDB. (2015), Construction Industry Transformation Programme , Kuala Lumpur, Construction Industry Development Board (CIDB) Malaysia. 21
22 22
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