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Benchmarking Construction Industry in Developed and Developing World

The construction industry plays a vital role in the economic development of a country. It contributes approximately 10% to the GDP for the developed economies and more than 4% for the developing ones (data from UNCTAD Stats). While major challenges such as capitalization, availability of labour (skilled and unskilled), technological constraints, proper planning of project timelines, etc. remain common globally. The industry is very localised and there may be many differences in the way construction companies function and perform in different parts of the world, for instance, cost and time overruns or quality issues could be a result of the availability of labour in developed economies or technological constraints in developing economies. Hence, benchmarking companies from different regions/countries require a thorough analysis from both operational and financial perspective.

  1. Benchmarking can be done for a project, company or at a country level, depending on the answers an organisation is looking for. Benchmarking helps in identifying important KPIs (Key Performance Indicators) for comparison with industry peers or competitors. It also facilitates positioning of company's products and business services to gain a competitive edge in the industry.

    Order book, execution capability, employee cost competitiveness, construction value added, profitability, cash flow ratio are key parameters to benchmarking construction companies within a country or across geographies. In the graph below, are the few parameters that would highlight the differences between companies in developing and developed economies, for some of the above-mentioned KPIs.

    Construction value added: Developed countries with better technology and processes have higher manufacturing value added sales as compared to developing countries.

    Employee cost competitiveness: Developing countries have higher employee cost effectiveness due to the availability of cheap labour as compared to developed countries.

     
    BvsA
    Source: Televisory internal Analysis. Data for FY2015. 
    BvsA
     Note: Data provided in the table is for leading Foundation Contractors in the mentioned countries for FY2015.
    Source: Televisory internal Analysis

    Availability of cheap capital is another key parameter in developing countries. While developed countries have easier access to capital, emerging markets like India with under penetrated bond markets faces significant levels of indebtedness, including financially stress PPP (Public Private Partnership) infrastructure assets and stalled infrastructure projects.

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