Top considerations for expanding a construction business globally.
Many construction companies start as humble and small operations only to grow into major drivers of the industry. Yet no matter how big a company grows within its domestic market, the demand for construction services is limited by the country’s economy, governmental support for growth and many other factors. Breaking out of the borders of your home country can be one of the best ways to find new opportunities to grow, but there are also significant obstacles in the path to globalization. Any construction firm ready to jump into the global construction market, which is projected to reach a value of $13 trillion by 2022, needs to thoroughly assess its suitability for making the leap.
For those not sure what challenges a construction company might face when expanding internationally, our ebook “Building Across Borders: Expanding a Construction Business into International Markets” prepares teams to face any obstacle. Download it today and kick off the consideration process of going global.
Key Considerations for Expanding a Construction Business Beyond Borders
Any construction company interested in expansion must assess if it has enough resources to extend itself into a new distant market that’s physically and culturally different from its own. Not only are there many direct costs associated with global expansion, but the decision also affects personnel, divides the company’s focus and stresses current management practices. A healthy and stable construction firm can handle all these strains with ease during expansion, while a company that’s already struggling will only struggle more.
Settle any ongoing issues before taking on a major expansion project, especially an international one. While breaking into international markets early in development is recommended in some industries, it’s not necessarily a great approach in construction. Construction firms that are well established within their domestic fields before branching out tend to enjoy better success thanks to the effort spent on building a proper foundation to supply the funds and experienced project managers necessary for growth.
Does the company employ project managers already willing to relocate to an unfamiliar country? If they’re willing, do they have the skills necessary to handle the cultural, legal and business challenges they’ll face once they get there? Your company must be able to answer “yes” to both questions before planning a big international project.
Hiring the right manager and then immediately sending them off to another continent risks a lack of familiarity with the company and its processes, while training an existing project manager takes time. Set aside some time for either finding a suitable candidate and acclimating them or training your best project managers for the role abroad.
Total Team Support
While only part of the construction firm will be directly involved with the international projects it takes on, the entire company needs to support the decision. Resentment or confusion about the firm’s direction at any level, even among low-level employees, can cause poor work performance or loss of skilled workers. Presenting the plan for international growth and explaining how it benefits everyone is an essential step toward uniting the team behind a common goal of expansion. Since going international allows your construction firm to follow demand across multiple markets, all employees benefit from the increased stability, even when domestic demand drops.
Budgets for everything from infrastructure to private home building vary greatly from country to country. Material and labor costs also vary, making it more complex than you might think to determine if you can turn a profit at a particular price point. There are also often hidden costs for operating under unfamiliar regulatory bodies. Expanding construction firms often fail to account for these costs until after realizing an international project returned less than expected. If the firm has many fixed costs it can’t change when entering a different market, the company may struggle to find a niche that provides the same profit balance as current domestic partnerships.
Demand for Your Services
Before assuming a growing construction firm can tap into a booming market in a specific company, check for specific demand for your strongest services. A country that’s pouring billions into huge infrastructure improvements may or may not have any demand for a home builder or a warehouse specialist. Don’t assume that construction growth within a specific country indicates demand across all sectors of the industry. There’s little point in expanding a construction business into a market that’s already full of domestic providers or shrinking rather than growing.
Also, avoid trying to expand into services that the construction company has relatively little experience with. Start with the strongest fields and polish your other specialties within your home area so there’s more direct control over unfamiliar processes.
For example, the U.S. is currently in a construction boom as of 2019, yet many construction firms based there are finding their particular niche is already filled. There’s a limit to demand in every sector of the industry, and no construction company can survive waiting years for the competition to drop or demand to rise higher.
Breaking out of the limitations of your company’s current home market is one of the best ways to avoid competition by entering a country with openings in your specialty. Regardless of the type of construction the company handles, there’s likely a country that has both a demand for your services and a relative lack of competition.
A joint venture with an established construction company in the target international market is a great way to ease into doing business in an unfamiliar environment. Your company can tap into the familiarity and network of contacts already developed by the venture partner. Do keep in mind that many companies have restrictions on international companies bidding on infrastructure and public projects, so partnering with an established local firm may be the only way in for some bids.
Ready to Learn More About International Construction Projects?
Don’t get overwhelmed by all the criteria required for expanding a construction business beyond your home country. Start with our ebook to get a good start on approaching the decision.