Business Procurement and Contractual Practice

Question 1:

Different principles or practices of Corporate Social Responsibilities and its impact on the firms involved in the international construction industry

Corporate Social Responsibility is one of the self-regulating business models that aim to assist the company to become accountable with all members or staff associated with the firm as well as help to improve society (Ferrell et al., 2019). With the help of different CSR activities, any company may help to take care of the health of its major stakeholders like suppliers, customers, employees as well as distributors. Besides this, there are some practices that may help the company to protect the environment from different pollution or chemicals emitted at the time of organizational production (Griffiths and Lucas, 2016). In the case of the construction industry, there are different subsidiary firms or enterprises associated with various international construction firms.  After conducting various researches it can state that the help of effective CSR activities may help more than 1500 small and medium construction firms to establish a good reputation in the market. This will further help the firm to maintain a steady flow or regulation of business profit by successfully fulfilling the various demands and needs of both customers and stakeholders.

There are several CSR practices and principles followed by different construction industries discussed below:

• Focus on improving employee welfare:

  The construction industry comprises an enumerable number of local as well as regional or international firms along with wide numbers of employees. It is important for the firm to focus on improving the standard as well as health safety of all members associated with the firm (Górny, 2017). Due to the construction of different big buildings as well as using huge machines, there is the presence of high risks on the life of all labours who contributed to developing buildings. Besides this, some different suppliers and dealers ensure the availability of various raw materials required for construction purposes. Thus, it is the major responsibility that may help the company to provide different facilities that may help labours as well as their family members to afford possible medical facilities during an emergency.

• Provide attention to protecting the environment:

  

  Every construction firm needs to focus on developing a cost-effective production system that may help the firm to minimize the generation of organizational waste materials. During constructing different buildings or other infrastructure, it has been observed that there is an increase in air and water pollution at the place of construction. Besides this, due to the increase in the growth of different construction industries, the level of stress present in different places has been reduced. This has further increased the pollution level in the atmosphere. Thus, it is the duty of construction industries to continue their business in an eco-friendly manner.

• Developing a good relationship with stakeholders:

  In order to ensure the development of the construction firm, the administrative manager of that firm needs to maintain a good relationship with major stakeholders. It is the duty of the manager to negotiate with different dealers and suppliers effectively that may help the company to ensure the proper supply of required raw materials. Besides this, it is the foremost duty of different construction industries to take care of the safety and security of their major customers by providing quality products or services (Mayorova and Lapitskaya, 2016).

• Contributing towards the development of the societal standard:

  With the aim of maintaining a sustainable position in society, the construction industry needs to think about improving the standard of people present in the same locality. Providing a high rate of employment opportunity at an attractive salary package to the local people may help the construction firm to contribute towards the development of the standard of different people present in the same society. It will also help the firm to improve the lifestyle of local community people.

• Helping the government to overcome the financial crisis:

  Providing effective contribution to helping the government to overcome different difficulties or natural calamities may help the company to ensure the generation of a good position in the market. This will also help the company to remain in the government’s good book and continues the regulation of effective business and improve the profit level of the organization.

Importance and impact of maintaining different CSR activities on the international construction market

Different importance of maintaining different CSR activities for improving the standard of the international construction market are discussed below:

• The construction industry plays a vast role in stabilizing the economic condition of any country and with the help of effective CSR activities the company may develop great relationships with both customers as well as stakeholders (Abdel-Salam, 2018). This will further provide a positive impact on the actual profit level of the firm.
• It will help the construction industry to overcome different legal or governmental barriers by maintaining a good relationship with the societal people as well as contributing towards the development of the nation.
• Employees are one of the most important resources required for the development of the construction industry and the company need to fulfil all the demands (Lin et al., 2018). Thus, with the implementation of different CSR activities, the manager of the firm may develop a mutual trust and bond with all the employees and other stakeholders for the effective development of the firm. According to the statistics, this has helped to develop more than 1500 construction firms as well as increased their annual profit margin by 7% than their average revenue in the year 2019.
• With the help of providing secure and safe products or outputs to different customers at a reasonable budget, more than 200 construction firms in different developing countries have expanded their business in the international market.

Thus after analysing different papers, it can state that corporate social responsibility is a necessary step that may help any company to develop a good reputation as well as an effective relationship with its staff. It has also helped the firm to protect the environment by maintaining a good relationship with the government and develop a sustainable position in the market.

Question 2:

Different advantages and disadvantages of local content clauses in contraction industry for completing a project in the developing country

Local content plays a vital role in developing the organization’s profit level by improving the capacity building of any construction industry. It may help the firm to recognize the presence of different weaknesses that may affect the overall production as well as the company’s net profit level. Before discussing the role of local content for improving the capacity building of any construction industry, it is important to understand the term Capacity Building. Capacity building can be defined as the contribution or investment usually done by the administrative as well as the management department of the firm for improving the skills of different internal staff or labours for improving the production level of the firm (Detsimas et al., 2016). Besides improving the basic skills of labours the manager of the construction industry focus on improving the communication skills of different key employees required for conducting deals with clients. It will also help the company to understand the basic demands of all clients and develop any building or infrastructure as per the preferences of different clients.

Here are some basic advantages of local content for improving the capacity building of the construction industry:

• Minimization of the dependency on outside experts or resources:

  Any construction industry needs to reduce the dependency on outside resources as well as skilled personals for improving the profit level. With the help of different local members or local suppliers, the company may avail various effective raw materials for completing the product within a given time (Ng et al., 2018). Thus, local content or local people play a vast role in maintaining the sustainable growth and development of the firm by delivering effective products within the given schedule. Besides this, it will help the company to reduce the extra expenses for purchasing different raw materials or skilled human labour or engineer from outside the country.

• Solving local issues effectively:

  In the case of solving different local issues or the company need to take the help of local people. This local person may help to encourage employees or staff for improving their communicative skills for discussing different local problems effectively. This has further helped the company to overcome different regional, as well as the local obstacles, emerged at the time of constructing new infrastructure at the crowded place. Besides this, with the help of strong and skilled local employees, the company may get different relevant information about the choices and preferences of customers present in the same area (Gambatese et al., 2019). This has further helped the company to improve its confidence level as well as develop a sustainable position in the market.

• Improving the skills of employees by understanding their local issues:

  Local content has helped the construction industry to improve its capacity building by successfully utilizing different resources for producing high-quality products. By providing huge employment opportunities to different local people the company may contribute towards the development of the community people and establish a good relationship with the government. This may further help the company to continue its business without facing major legal or governmental barriers.

• Ensuring the effective supply of different raw materials:

  Any construction industry needs to ensure the proper supply of different raw materials that may help the firm to produce products efficiently. Moreover, with the help of local employees, it is easy for the firm to recognize an effective supply chain or effective suppliers that may help the company to construct different buildings effectively.

Disadvantages of local content clauses in the construction industry

Here are some major disadvantages of local contents clauses for improving the capacity building of the construction industry mentioned below:

• With the purpose of improving the capacity building of the construction industry that may help the company to reduce expenses of conducting effective training programs improving the skills of employees. This has further affected the profit level of the organization.
• In order to recognize different local issues of employees, the company may delay in making an effective decision as well as put a negative impact on the organizational profit.
• Lack of skilled engineers and labours may affect the product quality and failed to satisfy the different needs of customers. According to the recent survey report of the AGC, more than 76% of the construction firms have faced major challenges of not having skilled and efficient workers in the year 2018. Besides this, it may increase the overall time of the firm to complete any particular project in an effective manner.
• In case of focusing on different problems and issues of community people or contribute to the development of the same, the manager of the firm may struggle to enhance the actual profit level of the firm.
• Due to the lack of adequate equipment and machines in the construction sites, the company need to invest huge money for mitigating the risks involved in constructing different buildings. Besides this, the company need to bear all medical expenses of any labour faced any kind of accidents at the time of working in the firm or the construction site. This will further affect the profit level of the firm badly.
• Due to the presence of local suppliers, there is a huge chance of getting poor quality of raw materials and this will further compel the firm to compromise with the quality of the product or the output (Liao et al., 2017). This has further raised a question on the safety and the security of different customers who invest their money while purchasing the building.

Question 3:

Challenges of expanding construction industry in the Gulf Region

In order to improve the profit level of any construction industry, the company need to expand its business in the different foreign market. After analysing different points of the given case study, it has been observed that the private construction firm of Egypt consists of more than 1300 workers who wants to expand its business in the Gulf region. Before developing different strategies for expanding the business in different Gulf regions the company need to focus on identifying different challenges of setting business in mentioned places. Due to the presence of a huge population, the government of Saudi Arabia, the United Emirates and Israel has imposed strict rules in regulating different businesses or entering into the competitive market of the same place. Any company need to have verified data and a trade licence for entering into this market and need to select any authentic business guarantor. On the other hand, the company need to develop new strategies for providing training to all the existing employees for adopting different cultures and tradition of the Gulf region. This may compel the owner along with the CEO of the firm to reframe new policies and redesign organizational structures for successfully entering into the competitive construction market of the Gulf region.

Here are some other challenges that the company may face while expanding its business in the Gulf regions:

• Uncertainty in the price of Oil:

  Frequent fluctuation in prices of oil in Saudi Arabia and other Gulf areas may consider as one of the biggest problems faced by different construction industries in the year 2016. Based on the demand and supply of oil the government of the Gulf region has set the price of the oil and may vary from time to time. This may not only affect the production process of the company but also hamper its overall revenue (Al-Maamary et al., 2017). In the case of any real estate company, the manager of the firm needs to determine the budget for completing the project. Due to the 50% fall in the price level of oil has declined the company’s budget as well as reduced the price of the property. This has directly put a negative impact on the profit level of the firm.

Figure: Varying prices of oil in Gulf Regions

(Source: Author)

• Lack of skilled employees:

  Due to the excessive presence of digital excellence maximum number of employees present in the gulf region lacks practical skills and they are more dependent on artificial technologies. This has further raised problems for all the existing members of the said organization to cope up with advanced features and technologies used by local employees Gulf region. Besides this, it has further affected the unity among all members present in the construction firms after shifting its business in the Gulf regions.

• Language and cultural barriers:

  Cultural differences are one of the main issues that may hamper the production of the private construction industry. The gulf region is the home of three different religions namely Christianity, Islam and Judaism. This has further raised serious barriers for the existing employees of the construction industry that wanted to expand their business in the Gulf region. Moreover, language plays a vital role in setting business in different places in the world. The official language of different places in the Gulf region is Arabic. This has further raised major barriers for the company to communicate different ideas and share knowledge required for constructing different buildings or infrastructure. This lack of communication may further hamper the relationship between different suppliers, dealers and agents present in Saudi Arabia, Israel and the United Arab Emirates and other popular places in the Gulf Region.

• Poor Management system:

  In order to expand the business in the Gulf region, the company may face serious problems in getting accustomed to different demands and basic requirements of staff. Besides this, the manager of the firm needs to develop a constant monitoring system for understanding the activities of different employees present in the firm.  This will further help the company to reduce the possible chances of reducing the generation of conflict among both the exiting and the local employees of different gulf regions. This will further affect the unity and the effectiveness of teamwork required for maintaining the growth level of the firm.

• Strict rules imposed by the government:

  Though Saudi Arabia has been expanding its business in the construction industry, the government of this place developed some strict rules on different local as well as governmental construction firms. Before signing any deal the contractor needs to focus on conducting the production process without affecting the environment of the same place. In this case, the manager of the firm needs to focus on ensuring the generation of a minimal amount of waste products at the time of constructing different buildings or infrastructure. In case of violating any rules, the company need to provide a penalty to the government.

• Excess Competition:

  More than 30% of the construction firms have settled their business in different places of Saudi Arabia and other Gulf Region (Cordesman,2018). This has not only increased the competition but also reduced the opportunity for any small or private construction firm to enter this market. With the purpose of developing a good position in this competitive market, the company need to develop unique strategies after analysing market policies of similar firms present in the Gulf region. Thus with the help of detailed information about different business strategies of major construction firms the company may enter this market and gradually develop a sustainable position.

• Problems in getting perfect office space and licence:

  Another major problem in developing a good position in the construction sector of the Gulf region is the company need to have authentic source present in the same place. In other words, the manager or the owner of the firm needs to have some genuine sources exist in any particular place of the Gulf region. This will further help the owner to get a fixed place for stabling its offices as well as help in getting a trade licence for continuing its business in the same place.

After focusing on different data, it can state that the private company need to overcome all the above-mentioned challenges for expanding the construction business in the Gulf region.

References

Abdel-Salam, A.N., 2018. Corporate Social Responsibility of Construction and Real Estate Development Companies in Developing Countries: An Assessment Model (Doctoral dissertation, Purdue University).

Al-Maamary, H.M., Kazem, H.A. and Chaichan, M.T., 2017. Renewable energy and GCC States energy challenges in the 21st century: A review. International Journal of Computation and Applied Sciences IJOCAAS, 2(1), pp.11-18.

Cordesman, A.H., 2018. Bahrain, Oman, Qatar, and the UAE: Challenges of security. Routledge.

Detsimas, N., Coffey, V., Sadiqi, Z. and Li, M., 2016. Workplace training and generic and technical skill development in the Australian construction industry. Journal of Management Development.

Ferrell, O.C., Harrison, D.E., Ferrell, L. and Hair, J.F., 2019. Business ethics, corporate social responsibility, and brand attitudes: An exploratory study. Journal of Business Research, 95, pp.491-501.

Gambatese, J., Karakhan, A.A. and Simmons, D.R., 2019. Development of a Workforce Sustainability Model for Construction. Center For Construction Research & Training.

Górny, A., 2017. Safety-at-work competencies as a driver of corporate social responsibility. In MATEC Web of Conferences (Vol. 121, p. 11009). EDP Sciences.

Griffiths, M.R. and Lucas, J.R., 2016. Corporate Social Responsibility and Business Ethics. In Value Economics (pp. 213-226). Palgrave Macmillan, London.

Liao, S.H., Hu, D.C. and Ding, L.W., 2017. Assessing the influence of supply chain collaboration value innovation, supply chain capability and competitive advantage in Taiwan’s networking communication industry. International Journal of Production Economics, 191, pp.143-153.

Lin, X., Ho, C.M. and Shen, G.Q., 2018. Research on corporate social responsibility in the construction context: A critical review and future directions. International Journal of Construction Management, 18(5), pp.394-404.

Mayorova, E.A. and Lapitskaya, N.V., 2016. Assessment of customers’ perception of social responsibility of trade business. International Journal of Economics and Financial Issues, 6(2S).

Ng, S.T.T., Wong, J.M.W., Chiang, Y.H. and Lam, P.T.I., 2018, December. Improving the competitive advantages of construction firms in developed countries. In Proceedings of the Institution of Civil Engineers-Municipal Engineer (Vol. 171, No. 4, pp. 234-244). Thomas Telford Ltd.