Challenges Faced by Overseas Construction Companies

This report delves into the multifaceted challenges encountered by international construction companies operating in developing countries such as India, Sri Lanka, and Bangladesh. It examines major barriers like low profitability, the shortage of skilled labor, client dissatisfaction, unfamiliar market co...Read More

Construction Challenges Faced
By Overseas Companies In The
Developing Countries

EXECUTIVE SUMMARY
The construction industry has enormous amount of challenges as well as problems. Moreover, in
the developing countries, these issues are considered alongside normal conditions such as the
stress levels, organisational weakness, socio economic factors, shortage of resources, lack of
skilled labour forces etc. These factors can act as barriers for any construction company from
expanding in other developed countries such as in India, China, Bangladesh etc. Each of the
developed country has a different set of regulatory framework which is to be followed for
completion of the construction project. Each of the developed country has recognised some
strategies to overcome these issues, so that they can continue in their work and can be able to
achieve the targets.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
Major barriers and key factors leading further delays in problems........................................1
Examining and evaluating issues faced by international construction companies in India, Sri
Lanka and Bangladesh............................................................................................................1
Observing lessons drawn from the recent experience of other countries...............................4
Ways of encouraging construction enterprises and practitioners...........................................5
Useful framework for the analysis of technologies................................................................7
Challenges the construction industry can face and techniques to overcome it......................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
International construction is considered as a term that considers a very essential factors,
called globalisation. This however maximizes the economic growth globally along with the
increasing demand for the construction industries (Meyer, Mudambi and Narula, 2011). Despite
of various barriers and challenges, the industry focuses on giving the efficient results. The report
is about the construction companies of Australia when decides to expand in other developed
countries such as India, Sri Lanka and Bangladesh. It includes what could be the barriers the
company have to face and what would be the methods and techniques so that they can be
overcome.
Major barriers and key factors leading further delays in problems
There are various factors that can lead to various barriers for the construction processes
faced by the overseas companies. Some key areas also needs to be modified for avoiding any sort
of delay or encouragement for the problems (Meyer, Mudambi and Narula, 2011). When the
companies in Australia expand their projects in various developed countries such as India,
Bangladesh and Sri Lanka, they might have to face various barriers and challenges. The areas
that contributes to further delays in issues and requires improvisation are discussed as under :
Profitability
The construction industry has a lower rate of profitability as compared to the other
sectors. For sustaining a happier and healthy development. Margins given are too low. So, this
acts as an encouragement for the problems going on as the companies who are serving good
focuses on a better return also (Deresky, 2017). In Sri Lanka, the challenges that the company
have to face in Sri Lanka can be the financial issues because of the rapid economic changes or
because of the less support from the banking industry. In Sri Lanka, there are very fewer margins
over products, so the company might have to face financial crisis in the country.
Training
The construction industry is currently short of skilled labour. A good amount of people
are being trained as a replacement to the aged workforce. But the process takes time and the aged
people have less strength left to contribute to the work. This factor also contributes to further
delays of the issues being faced by the construction companies. There is a very less amount of
skilled workforce available in India, as all the skilled employees are either working in companies
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or some are engaged in other platforms of their interest. So, the companies that would like to
expand in India may have to face a quite hard time for the searching of skilled labour.
Dissatisfaction of clients
Usually, construction companies overseas fail to satisfy the customers as the projects are
being delivered after the specific delivery. For a huge amount of the clients, this industry seems
to be an option of poor investment. In Bangladesh, according to the reports does not support the
construction industry much, so this challenge can be faced by the company. Along with it, rising
costs of wages, materials, products to be supplied and the ones to be purchased for the project,
the whole productivity etc. these can act as barriers (Olawale and Sun, 2010). The environmental
factors also have an equal role such as sometimes there is soil erosion or control over
sedimentation, so these factors however delays the progress of the work. There is much amount
of the toxic waste and various other things such as asbestos etc. which also make the quality of
the resources quite poor which affects on the whole project of the construction industry.
Unfamiliar market places
It can be considered as a very normal fact that for expanding or working in some other
country, various challenges have to be faced. This is so because the people are unaware of the
budgets, taxes and resource availability etc. Sometimes language also becomes a factor for
increasing issues when one person does not seem able to understand the other person whether it
can be in terms of purchasing of resources or assigning workers, these often acts troublesome. In
new market places, the companies that are residing from a longer time had a strong presence, so
it can be difficult for the new one to emerge as fast as they can (Meyer, Mudambi and Narula,
2011). It takes time to make own presence in a new place. So, this factor can also be considered
as a challenge.
There are some barriers also which contributes to the process. Few of them are discussed as
under :
Entry mode selection
These are defined as some strategies which considers the controlling and management of
resources. They are further classified in two sub parts, equity and the non equity modes. Poor
people handing or less availability of resources can act as a barrier in the entry mode selection.
Being an early entrant
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The biggest disadvantage of being it is that there is a huge risk of possible failure and
others can get aware of one's failure. But the first entrant may have a huge loss. It is also
considered that the first time buyers have a weak loyalty factor. It is better to let go some other
party so that it could be easy for the present one to easily evaluate what should be done and what
not. These can help in producing a better outcome.
Examining and evaluating issues faced by international construction companies in India, Sri
Lanka and Bangladesh
International construction companies faced ample amount issues while working in
developing countries. The governmental polices, offence of public, inappropriate use of
resources are the common issues faced by these construction companies (Acharya, 2014). In
accordance with this context, this part will consist of the issues faced by international
construction companies while handling mega construction projects in developing countries like
India, Sri Lanka and Bangladesh. The issues are provided below:
 Poor productivity and profitability: Currently, the barriers to entry in construction are
low, creating a saturated marketplace with heavy competition. Stagnant construction
labour productivity is compounding this problem. Overseas companies taking
construction projects has to deal with issues like poor productivity and profitability. Due
to low economic value and currency value, companies fails to generate the desired
profits. Moreover, in order to import the highly advance construction machineries are
another issues (De Zoysa and Rudkin 2010). For Example, In India in order to construct
high speed rail corridor from Mumbai to Ahmedabad, Japanese construction companies
needs to export their technologies and gigantic machineries to India, which requires
ample cost and time. The currency value of India, Sri Lanka and Bangladesh are low as
compared to developed countries thus, leads in low productivity and profitability.
 Training: The issue faced by many managers and other employees of international
construction companies, which is to interact with other employees and labour of
particular country. The language of India, Sri Lanka and Bangladesh are different and
managers of construction companies faced difficulties in interacting with them and
transferring information to them (Hwang and Ng, 2013). Thus, training is provided to
both the local employees and management in order to develop effective interaction.
Albeit training consumes time and cost of the organisations and management has to plan
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their budget on the basis of it. For example, management of an international construction
company working in Sri Lanka, faced difficulties while dealing with Sri Lankan
employees and labour. This lead to huge chaos and the project finally shuts down
incomplete.
 Dissatisfaction of clients: Sometimes the projects completed by the international
construction companies are not up to the mark, which leads to huge dissatisfaction of
clients and consumers. The international construction companies work on the basis of
their set standards and policies, which are generally not accepted in other countries. As in
case of Bangladesh, a project of Metro Rail was failed to accomplish as the locals was
not satisfied with the routes (Kibert, 2016). Albeit, Japanese construction firms was ready
to invest, but the government refused to accept. Further, the project of building Padma
Bridge in Bangladesh also leads to failure as international companies could not start
construction due to public offence and cancellation of loan provided by World Bank.
Thus, it implies that dissatisfaction of consumers and citizen of developing countries
leads to the barrier for international construction companies.
 Skilled labour shortage: The construction industry is bracing for a dramatic reduction in
workforce. In developing countries like India, Sri Lanka and Bangladesh, international
construction companies faced shortage of skilled labour. It is very important for the
construction company to have skilled workforce in order to accomplish the project
effectively and efficiently (Baillie Smith and Laurie, 2011). In the case of building
national main roads Sri Lanka, international construction companies faced issue
regarding lack of skilled workforce. This leads to huge loss, which was eventually bears
by the organisation itself. Management blames the Sri Lankan authority for not providing
training to the local labours to improve their skills. This implies that international
construction firms faced issues regarding shortage of skilled labour in developing
countries.
 Concerns for Sustainability: The construction industry is the top global consumer of
raw materials. This is the most common issue faced by any construction company
working in developing country, i.e. utilisation of resources. From the reports it was
identified that international construction companies are accountable for generating high
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amount of carbon emission in the environment. In the case of India, while building dams
and other projects, these companies uses sacred resources inappropriately which leads to
depletion of natural resources (Ball, 2014). The locals and communities after being
aware, protest against the projects and constructions led by international firms.
Eventually, government cancelled the projects which led to huge loss faced by the
organisation.
Observing lessons drawn from the recent experience of other countries
The construction companies of Australia, Japan and USA are known for developing
effective buildings, roads and other construction projects. In order to increase the progress in
developing countries, lessons can be learned from organisations working in these developed
countries. In Japan, in order to construct any project, all the employees and management works
abreast, so that the project can be accomplish effectively (Meyer, Mudambi and Narula 2011).
The developing countries follows the risk assessment technique to establish safe working
condition at construction site in which the companies follows the basic steps which as follows:
 Identifying the hazard, first the construction companies focuses ion analysing due to what
condition and situation risk can arise at the locations which is investigation the location
of construction (Baillie Smith and Laurie, 2011).
 Identifying that the situation can create harm to whom like, either resources or
employees.
 Evaluating the situation or circumstance due to which risk is developing at the locations.
 Determining the appropriate measures to control the risk and hazard.
 Develops plans to completely remove the risk situations from the locations.
 Monitoring and controlling the situation of construction site (Baillie Smith and Laurie,
2011).
Hence, these are the risk assessment steps followed by the construction companies of developed
countries to eradicate risk from construction site to provide healthy and safe working conditions
to employees. In addition to this, there are various legislation like, work health and safety
regulations 2011 and work health and safety code of practice 2015 which are enacted by
government to protect the rights of workers working at risky construction location in which the
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companies are bound to provide appropriate and safe working condition to workers (Anisul Huq
Stevenson and Zorzini2014).
Beside, the company provide various safety gears to employees like helmet, gloves,
aluminium coated dresses etc. in order to prevent them from falling and slip trips of construction
site. The companies also plans a work criteria in which the management determines all the
possible risk which can arise at the site for which the construction organisations make
appropriate plans to protect employees from the risk of construction locations. Moreover, the
developed countries make use of advanced equipments in order to reduce the manual work which
decreases the chances of risk at location. The companies follows the strategy of, leverage
enterprise risk management in which the process of the organisation enhances the consistent risk
approach which prevents risk (Olawale and Sun 2010). Developing risk culture supports risk
management which is done by enabling effective communication and risk management
behaviours. Further, it determines the risk appetite in which the survey of the construction site is
done to identify the risk in order to establish control. Monitoring risk is the approach to used by
construction companies to frequently analyse the situation at the initial stage in order to establish
control over the situations. Henceforth, the enterprise risk management strategy of developed
countries also follows 4 management strategies which comprises, avoidance which includes,
eliminating waste and risk. Reduction which comprises optimization and mitigation. Sharing
which includes transfer and outsource and retention which involves accept and budget the
situation and its consequences.
Managing and monitoring risk at construction companies in developed countries p-lays
vital role in developing the conditions more valuable of employees and country. The risk
management strategies used by the organisation are enhancing the level of work and contribution
in the economy which is also promotion the employees safety acts.
Ways of encouraging construction enterprises and practitioners
Encouragement or motivation can be considered as a way of satisfying the desires or
requirements. It can be normally sourced from the extrinsic as well as intrinsic motives. It can
also make the enterprises in considering that they are also an important part of the company, thus
by these means they can be able to focus more on the work which will further help the company
in achieving their targets (Baillie Smith and Laurie, 2011). Some ways by which the practitioners
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and the other staff in India, Bangladesh and Sri Lanka can be encouraged to an extent that they
stay more focused towards achieving better results, are discussed below :
Recognition of the enterprises and the other staff
Any employee can work better on a regular basis without any sort of recognition. It acts
as a very essential factor. It can be in any form. It is not necessary to be in form of extra rewards
or something, it even can be better compliments, incentives on a monthly or a yearly basis. These
small means make the staff also happy and it also motivates them to work harder for the
company so that it can be able to achieve all its targets in a faster amount of time.
Training
The enterprises and the practitioners must be given proper training and development
before any task so that they don't have any doubt while working on a specified project. Also, if
some employee is unclear of the guidance being provided to them, they may also consult the
authorities for more compliance (Deresky, 2017). Although this will be quite more time
consuming but will make the employees clear of their duties and responsibilities.
Supporting their ideas
It can be a better option to include their ideas and view points as well sometimes.
Although they might be less experienced but that does not means that they cannot suggest
something better. As they are new to the industry, they can also suggest something more creative
and impressive. So, it can be a better idea to support their view points as well. It might prove
beneficial for the company.
Maintaining a suitable environment
It is also important to maintain a culture in which the employees can feel safe, secure and
also able to share their ideas and problems as well if they have. It is the responsibility of the
management to maintain such a happier and healthier culture in which each and every employee
can be able to interact with each other and discuss their issues also so that the second person can
help them in resolving the issue.
Introducing beneficiaries
Incentives or increments are that factors which makes the employees happy. The
company can provide these to the employees on a regular basis to maintain a healthier and
happier environment at the workplace. By these means, employees also consider that their work
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is being appreciated and this makes them more focused towards the work, thus in achieving
targets at faster rate as well.
There are various theories as well which can help in encouraging the construction workers. Some
of these theories are discussed below :
Herzberg motivational theory
The theory is also considered as the two factor theory which includes some factors in the
workplace that promotes satisfaction as well as dissatisfaction in a workplace. The theory
distinguishes between hygiene factors and motivators. The motivators include the increments,
incentives, motivation, challenges, a person's involvement in the decision making process etc.
The construction companies can also involve the trustworthy employees in their decision making
and other important features (Olawale and Sun, 2010). By this way, employees will also consider
themselves an important part of the company and focus more on the work. But, this can also
prove negative as well. Some employees take benefits of it as well. So, it is essential to consider
the safety measures while involving the employees in any important process. On the other hand,
the hygiene factors includes the salary, job security and related factors. These does not lead to
any encouragement or motivation but are features which can motivate one to do something.
Useful framework for the analysis of technologies
A framework can be considered as an agreement in which the people supplying follows
the established regulations or it can also be termed as governing contracts that are necessary to
be followed while starting any project. It sets some general terms and conditions that needs to be
followed. A framework agreement has to be done between two parties. These parties can be
external as well as internal. The government has set different rules and regulations for different
countries on the basis of various factors such as resource availability, taxes etc. Different
countries follow different framework for analysing the materials and technologies which can be
discussed as under :
Framework of India
After the announcement of the New Economic Policy (NEP) in the year 1991, the
structures around the surroundings were considered as the one of the priority fields for
liberalisation and rapid development as well. The topic can cover power projects, water projects,
rail roads, public conveniences etc. After the announcement, it covered responsibility of the
public sector as well as other governmental bodies to have the control and management over
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these structures. Various means of taxes are also a part of this act. Toll taxes are being collected
at every toll post and the money collected by these taxes are the money that is to be used for the
governmental purposes like for making public infrastructures that are necessary and for all the
public convenience as well. This all was decided after this commencement only. It also includes
the improvisation of roads etc. using this money. After all this also, India still faces a wider
unrealised potential in the infrastructural space. None of the sectors have completed development
.A major reason of this can also be the fact that each regulatory framework has to deal with the
laws made by the local authorities. There are a wide range of laws that have been made by the
local authorities. One of the biggest challenge is that there are various delays in the
commencement of the project that has to be allotted to the company.
Framework of Sri Lanka
The construction framework of Sri Lanka is being challenged by various factors such as
different sharp practices among indigenous and contractors which often leads to lesser
productivity. Productivity can be considered as an index value which helps in evaluating the
overall performance and efficiency of the specified construction project (Meyer, Mudambi and
Narula, 2011). The country has recognised some strategies as well for overcoming from these
types of barriers. A conceptual framework has been developed for the enhancement of the
productivity, thus betterment in all construction projects. The government has set a framework of
providing some sort of incentives to the employees on a regular basis so that the individuals stay
confident and motivated towards the work and can be able to give their 100% to the work
(Hopkins, 2012). Rather than these, the authorities also provide them different benefits such as
by providing them an extra week day off from the regular routine. These small efforts by the Sri
Lankan government has made various achievements throughout. BY these ways, employees also
consider that they are an important factor of the company and it helps them in staying more
focused and confident towards the work. It further helps the company in achieving higher targets
and that too at faster rates.
Challenges the construction industry can face and techniques to overcome it
There may be various issues that will occur in the upcoming time which may act as a
challenge for the construction industries in various developing countries such as India, Sri Lanka
etc. Some of these challenges that are expected to be faced by Sri Lanka are discussed as
following :
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Shortage of the qualified workers
According to various contractors, the issue they face the most is the availability of skilled
and qualified workers. Because of this, the industry had also developed some steps such as
increase in pay scale, extra incentives etc. which can attract the professionals or the skilled ones.
But, recently as the construction industry again marked on low scale, so from where will the
money come for the employees (Baillie Smith and Laurie, 2011). So, the same problem will
evolve again. A huge amount of people are being giving training because they will act as the
replacement for the old aged workers. There are various workers that are killed and talented but
almost more than half of them either are already working in some company or are focusing on
their other dreams. So, for a new company, it seems hard to get talented and skilled labour
forces. For that also, the company may have to organise some attractive features such as the
higher pay scale or something like it that can attract the employees to work from them as for a
new company in a different place, it is a tough process to attract the employees and also in
finding appropriate resources and other essential factors.
Technology measures
Technology has transformed the whole world. There are various technologies associated
with the construction as well such as cloud based software's, mobile project management etc.
The company must have techniques to develop these strategies and the ones lacking in
understanding and using these new and modified technologies can only step a step back from the
successful companies. Building information modelling (BIM) and laser scanning are also
important technologies that the construction companies need to use. So, the companies lacking in
it cannot stand in the long run.
Project Complexity
The construction industry may sometime be allotted with a project that involves complex
and complicated functions to operate. This can be a hard situation for the company (Baillie Smith
and Laurie, 2011). As this will be requiring high standard skilled staff, so the company cannot
afford to lose any of the involved operation. The trend of more complex and designed projects
acts as a threat to the scare workforce. At this time, the companies need to be selective enough
for accepting the project.
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The same way India also have to face some major challenges in the future because of the
following factors :
Sustainability
In India, the effect of construction impacts on the surroundings of the environment which
however destroys the sustainability factor. Sustainability is considered as preserving the natural
resources so that the future generation can also make some use of it (Meyer, Mudambi and
Narula, 2011). IT can also be termed as sustainable development. It just means allowing the
future generations and even the generations after them to enjoy the resources and the
infrastructures that need to be enjoyed by the current generation. Various modern technologies
such as BIM acts essentially in the construction process and which can further help the
surroundings to stay preserved from the construction processes.
Skills and Labour
While adapting for new technologies and further, one should does not forget the actual
human skills that gives their 100% to the construction industry, that is their hard work. Each and
every technology has some advantages and along with that, has some disadvantages as well. In
India also, searching for skilled labour is a quite tough job (Baillie Smith and Laurie, 2011).
There are various construction companies but many of them lack of actual standard and skilled
labour forces. This however, affects the whole project.
Non availability of resources
It has been observed that the country may also have to face barriers because of lack of
availability of the required resources and tools. The findings also indicated lower levels of
standardisation, testing facilities, lack of governmental incentives etc. The government collect a
great amount of taxes from various public services such as the toll taxes, are used to be collected
for the infrastructural changes and any required change such as improving the condition of roads
etc. for public convenience. But, it depends how much amount of that is ebbing given to the
construction industry as for initiating the project, some resources are required to be available so
that the aims can be achieved (Deresky, 2017). It is important for government to provide an
efficient share of the amount for the construction industry so that the companies may be able to
achieve their targets and they do not have to face any challenges further.
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CONCLUSION
It can be concluded from the report that while expanding or moving from one country to
another in terms of constructional industries and projects, the company might have to face
various troubles and challenges as one is unaware of the resources, factors and technologies to be
used in other countries. So, it might be challenging for one to expand or construct in some other
international country. The challenges may be the less availability of resources, lack of skilled
labour etc. Each developing country such as India, Sri Lanka and Bangladesh might have chosen
some strategies to overcome these barriers and challenges which can further help in constructing
without any further delays or issues.
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