Al-Ayuni Contracting and Investment Company Harvard Case Solution & Analysis

Social

The social factors are also a key contributor in shaping the overall environment of the industry and with the growing trends and increase the population around the globe a large shift is expected to happen in the way people live. People in emerging countries are expected to increase their standard of living and tend to move towards urbanization. This increasing trend will encourage the construction companies to satisfy the growing demand of infrastructure building in many developing countries.

On the other hand, the opportunity is always there for construction to explore developing countries and build infrastructure there as people have brought a drastic change in their standard of living. It is important for a company to select the best possible location in which the company can use the skills and strengths to cope up the growing challenge.

Technological

Changing trends in technology have increased the demands of modern technologies in the infrastructure or construction industry, for example, ICT in order to ease their process and make the work more efficient and time-saving. Concepts like Building Information Modeling is highly adopted in the construction industry as it is increasing the efficiency level and bringing safety and visualization in the work.

The company Al-Ayuni needs to pay attention towards the growing trends in the new technologies being adopted in the industry. Secondly, this is also essential in order to see success globally. The company needs to become competitive by adopting new technologies and also to survive intense competition globally.

Environmental

Environmental laws and challenges are always there for construction companies as construction results in and generate many issues that eventually damage the environment. Some of the major factors involve waste generation, emission of carbon dioxide and creating pollution that may turn environmental rights organizations to put obstacles in many ways for construction companies.

Therefore, the company has to focus on reducing the emission of carbon dioxide in order to get rid of the highly strict laws in many European and emerging economies regarding the environment. Furthermore, the millennium development goals have shifted trend towards becoming environment friendly, and companies are trying to provide cleaner energy, thus creating an immense opportunity in the sector of energy infrastructure.

Legal

The construction industry has to bear many legal challenges due to accidents occurring during construction, therefore, countries have made some regulations regarding the safety of workers. These regulations have made the use of improved and safe standards for the construction compulsory for a construction company.

On the other hand, especially developed countries are in favor of increasing legislation on the construction industry as they believe that the industry is highly fragmented and in order to improve the safety standards legislation are necessary. The company has to pay considerable attention towards these factors in order to succeed as the environment in Saudi Arabia is different as compared to other countries.

External Analysis

Porter’s Five Forces Analysis

Bargaining Power of Buyers

Buyers have a strong power in terms of bragging as the companies wanted to develop projects, had a considerable amount of information to take decisions. The players who can develop major projects were few and therefore the clients can select on the basis of price negotiation in which power remains to the clients.

On the other hand the demand has also decreased, which is why the construction companies are not showing any power as the demand is very low. Furthermore, clients prefer low cost in doing so they can also opt for delaying the project, which is why the construction companies cannot resist.

Bargaining Power of Suppliers

Since the trend of construction is declining, and demand is very less due to the economic crisis and lack of the availability of funds, the construction companies prefer to do backward integration. The suppliers are readily available, and the switching cost is also at the lowest for the construction companies, therefore, the suppliers have low power to bargain.

On the other hand, a collaborative effort is required between suppliers and construction companies in order to deliver a quality project. But due to high costs and low demands, the companies are choosing to become self-sufficient. Besides that the companies want to sustain global competitive advantage, and in order to do so the companies have to become cost effective. In order to become cost effective, the companies are trying to minimize cost and reduce many suppliers and thinking to start those operations that were been performed by the suppliers..............................

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