Resourcing and Construction Venture between Australia and Indonesia

Introduction

The scholar of the present research study referred in this Business Assignment mainly concentrated on discovering several aspects of international construction projects. Therefore, there exist several types of market entry mode which strategically utilized by the stakeholders for entering in an overseas market. However, taking appropriate decision on market entry modes is very crucial in order to enter into the selected market. Additionally, recognizing the best possible way is important so that international contractors can make a profit and can sustain in the competitive market. Though, it can be emphasized that there exist several barriers that the construction firms have to face and deal with while entering a new market. However, the rapid growth of global construction industries is fueled by the growth of population and cities greatly contributing to the world’s economic development. Indonesia is a developing market for construction projects with lots of potentiality of further development. Though, economic achievements of this country are broadly recognized. Therefore, in the following Business Assignment, the scholar has depicted a clear conception about the influence of technological advancement on the development of international construction industries. On the other hand, emphasized on the joint venture as a major market entry mode utilized by the construction companies for exploring in the international markets. In addition to that, the way local markets get benefited by the joint venture mode of global businesses is also revealed in the following study.

Past Few Years of Construction Record between Various Countries

The construction industry has been highly contributing to the economies of developing and developed countries. The significance of construction industry on the economy of a country can be recognized through its contribution to GDP (Gross Domestic Product), investment and as well as the employed labour volume. On an international level, the contribution of construction industry to gross domestic product is from 3 percent to 10 percent which is more in developed economies and less in developing economies. In 1970s, when the first plan of national strategic development was established, a crucial role has been played by the construction industry in Indonesia’s cultural, social and economic development. The GDP of the country had shown an increase from 3.9 percent in the year 1973 to 7.9 percent in the year 1996. The work of construction from the year 1996 to the year 1999 was strictly reduced because of the monetary crisis in the Asian continent.

BMI (Business Monitoring International) of the year 2009, has predicted that the nation of Indonesia is the future of fastest-growing industries of construction in the Asian region despite of the fact that the growth rate of construction is anticipated to remain lower than 10 percent over the period of 2006-2010. This prediction is acceptable because the economic outlook of Indonesia is the most positive in the region of Asia Pacific. The construction value and the number of the establishments of construction is expected to grow continuously in the upcoming years as the sector of construction was contributing six to seven percent of gross domestic product in the period before 2006-2010. It was also predicted by Business Monitoring International that in the year 2013, the construction industry can reach a value of US$78 billion which is double the value it reached in the year 2008. It was also foreseen by BMI that the construction industry will hire about 5.6 million employees and will reach 6.5 million in the year 2012.

The government of Indonesia has rapidly adopted the method of procurement, i.e. PPP (Public Private Partnership). In this regard, it can be said that it has opened a new way for transferring the funds of international private sector into bigger projects of infrastructure. Due to this fact, the competition in regard to FDI (Foreign Direct Investment) has increased among countries. It has been noted that the maximum number of international companies of construction in Indonesia are from, China, Japan, US and Europe. These companies operate in Indonesia with the help of a policy of loan agreement and as well as international competitive bidding specifically in the sector of oil and gas, projects of power plant and also big projects of infrastructure that occurs under grant or loan agreement. It has been identified as an institutional factor that allows the international companies to acquire advantage in the host nations. Through an internal perspective, it was reported that various Indonesian business organizations have been facing difficulty due the process of public procurement which leads to high transactions of cost, low competitiveness, collusion, and low growth and profitability. Therefore, it can be argued by referring this section of Business Assignment that the government of Indonesia should take certain adequate initiatives in order to attract foreign multinational companies for running their business in the operating market of Indonesia.        

Technology Advancement in the Construction Industry

It can be asserted that technological development has brought significant changes in the global industrial development. In this section of the study, all the major factors that impacted on Indonesia’s industrial effectiveness will be discussed. In addition to that, implementation of modern technological equipment within the constructional industries of Indonesia considerably contributed to rising Indonesia’s competitiveness. The economic state of a country is an important factor for recognizing major networks through which technological equipment have been transported into the market of Indonesia. Therefore, foreign direct investment (FDI), technical licensing contracts, capital goods importation, practical support by the foreign consultants, available finance for model technological equipment, well performance of technology support services are the major channels through which technology have been transferred in the market of Indonesia (Ashworth and Perera 2018, p. 8).

However, the contribution of Japanese technology for the development of Indonesia’s construction firms can be emphasized. Japan has, directly and indirectly, invested a lot in the construction market of Indonesia. In the year 1996 the by the statement of late Hero Kuntjoro-Jakti at the Indonesian University `we should buy or even steal the technology … If we keep waiting for Japan to be willing to transfer its technology to us, we’ll be disappointed the early crisis period of Indonesia is revealed (Lindblad et al. 2002, p. 3). On the other hand, the increasing use of information technology can be identified within the global business industries in order to develop services, to save money and time, promote supply chain as well. However, the adoption of information technology in the field of construction entered slowly. Implementation of IT which is comprised of electronic machines helps in processing, transfer, storage, and holding information. However, the effective execution of IT within the construction industries of China has smartly adopted to bring development in constructional activities (Feng 2006, p. 2). Different kind of IT equipment such as CAD, office applications, various cost-effective software, calculation of quantity software, software for managing quota is observed to be utilized in the field of construction in China. On the other hand, a great technological implementation in an effective manner can be observed in the market of Australia from the past few decades (Merschbrock and Munkvold 2015, p.5). Grounded on the different aspects as discussed above section of Business Assignment, it can be asserted that appropriate implementation of advanced technology helps an organization to improve their productively as well as profitability. In this regard, it will help this organization to accomplish their organizational goals within a specific time frame. Hence, the higher authorities of construction firms should introduce advanced technology in their business operation to improve their work quality, which will help them to meet the expectation level of their target market customers. 

Though, it cannot be denied that the technical implementation for the business expansion extensively reliant on the economic state of a country. Therefore, a huge potentiality can be observed within the constructional sectors of Australia with the rapid execution of modern technologies (Stewart et al. 2004, p. 11). It can be asserted that technological accomplishments are necessary and significant enough for enhancing building performance, product maintenance and to reduce time and cost of a construction project. On the top of that, implementation of technological equipment in the field of constructions helps and guides the contractors to run the project work in a systematic manner so that the project can be delivered to the client on time. As it is evidenced that now a day, the time management is an important fact factor for the business organizations for satisfying the needs and desires of the clients.  However, it can be emphasized that Australian technological based construction industries have attracted a large number of investors to venture with the native companies and investing their funds for several construction projects. On the contrary, advanced technology helps the Australian construction firm to enter into the foreign market successfully.

Impact of International Joint Venture

The president of Indonesia, who was elected in the month of November, 2014 is paying strict attention on the development of infrastructure in Indonesia. The lack of development in infrastructure and increased dependence on commodities had been slowing the economic growth in the country. Certain aspiring infrastructure targets comprises of construction over twenty-four sea ports, three thousand km of railway, three thousand km of road, fifteen airports, and also thirty-five thousand megawatt electricity generation capacity (Willar et al. 2015, p.471). Apart from this, there exists no significant improvement in the existing infrastructure in the country. In order to accelerate the development of infrastructure in Indonesia, the government has formed a new committee named, KPPIP (The Committee for Acceleration of Priority Infrastructure Delivery). The employees of the committee are professionals hired from private sectors. The Committee of Acceleration of Priority Infrastructure Delivery is assigned to complete an electricity program and thirty ‘priority projects by the year 2019 (Hartono et al. 2014, p.276).

Joint venture is one of the popular foreign market entry mode. Market entry mode is basically a strategy to enter into the new market. An appropriate market entry mode helps an organization to enter into a new market. With context to the impact of the joint venture between the two companies, it can be said that, in the business world of today the multinational firms and as well as the smaller firms are engaging the utilization of joint venture and several different methods of strategic alliances while entering an international market. The international joint venture between the two companies will benefit the economy of the hosting country (Yan and Luo 2016, p.3). In addition, joint ventures are less expensive as compared to acquisition and it tend to minimize the risk because of the partnership with local business firm. The profit and return associated with an international joint venture is comparatively more than the other modes of investment. However, a joint venture can be affected through bad performance and management problems. However, the cultural differences between the two countries can prove to have a considerable amount of impact on the joint venture (Han et al. 2015, p.473). On the other hand, the costs of transactions is also probable to increase when there lies cultural differences among partners and at the same time it can result in the absence of trust in the business. Another disadvantage which can arise in the joint venture between the two companies is the factor of mutual control and thus, all profit should be shared equally among them. In order to eradicate the conflicts between two international joint ventures, the government of Indonesia should reform their rules and regulations and improve their infrastructure. Simultaneously, the higher authorities of both the companies should take certain adequate initiatives in order to control the internal conflicts in a positive manner. 

Financing the projects of infrastructure can prove to be challenging in terms of raising and securing capital. The contractors of the joint venture possess various alternative funding sources for the reason to maintain the flow of finance and also to circumvent any kind of dissatisfaction among the collaborated partners (Shehu et al. 2014, p.1478). The financing method comprises of sources such as international funding sources, increasing capital, short term and long term funding of projects. In addition, economic challenges can highly contribute to impact the joint venture between the two companies. In the case of joint venture of construction, there exist various economic challenges like, economics, culture adaptation and political risk. The divergence upsurges through the perspectives of SVP in economics which comprises of joint venture among the con tractors because their assets have already been allocated in the contracts. 

  

     

Benefits of Local Market for International Companies

The local companies can be highly benefited by working with international companies. International companies are evolving and international marketing has become a significant trend in the modern business environment of today (Georgakakis et al. 2016, p. 432). Owing to this effect, various studies regarding purchase behavior and consumer demand for different international products are being undertaken. International marketing can be referred to a management responsibility process which identifies, anticipates and satisfies the needs and demands of the customers across international borders. The local company of Indonesia helps the Australian construction firm to understand the market condition of Indonesia, which will help the company to take appropriate strategies for the betterment of their organization.

Globalization can have crucial impacts on the local business firms and as well on its workers. The transition process with respect to local firms for working with international companies can prove to be an obstacle for them if the employees are less skilled (Hitt et al. 2016, p.66). However, the high growth domestic firms will benefit from working with international companies. In this regard, it can be said that the high-growth domestic firms can capture the advantages from foreign direct investment. These above-mentioned firms possess the capability to realize the significance of new information and also to implement it in an efficient manner to bring an improvement in their processes of production. The generation of spillover benefits from the international companies to domestic high-growth firms depends on the motivation for investment in the host country.

The main objective of any business organization is to generate profits. In this regard, it can be said that the domestic markets do not have the capacity to provide high profits, thus working with international companies will enable the local firms to develop various advanced and innovative strategies to increase the productivity of the business. By working with the international companies, the local firms can expand its capacities of production beyond the needs and demands of the domestic market. In this regard, it is important to mention that the local firms are required to sell the extra production to the developed international countries. On the other hand, the domestic firms will be provided with increased target market with a higher purchasing power if they internationalize their business operations (Georgakakis et al. 2016, p. 432). In addition, another advantage associated to work with the international companies is an increased market growth in the business. Also, the domestic firms will be provided with high living standards if  they work in an international company based in a country that have the benefits of human resources, raw materials, climatic conditions and natural resources to produce products of high quality and at low-cost. It will enhance the business of the local firms and will help them to reach out to a large number of customers. Internationalization will also widen the market size of the local firms. In this con text, it can be asserted that the firms will not have to depend on the product demand, customer’s preferences and tastes in only one country (Hitt et al. 2016, p.66). The political and commercial risks will lessen for the domestic firms that are engaged in foreign business because of its expansion in various countries.   

Governmental and Environmental Impact on the development of the Construction Firms

 A governmental and environmental impact on the international constructional industries differs from place to place. Every government of the countries has their own terms and conditions that have to be followed by every business organization. The environment impacts on the development such as global warming demands significant changes from the government and the industries. However, it cannot be denied that the construction sector is highly responsible for harmfully impacting the environment produced by the developed countries. Therefore, the building and construction industry of Europe is highly responsible for polluting environment. Almost 40% of all the environmental pollution is added by the European construction union measured by EIA (environmental impact assessment) tool (Cabeza et al. 2014, p. 2). Though, it can be emphasized the construction industries faces with numerous problems and challenges by the environment and government factors precisely while entering in an external market. However, by the end of 1995, the government of South Africa initiated set strategies and its proper execution policies with the help of PWD (public work department) for the development of construction industry (Aniekwu 2003, p.2). Therefore, the Japanese government also major steps for the development of construction industries by creating a micro economic and constructional environment that significantly contributed to rapid industrialization. Though, the Nigerian construction industry has less potential and capacity to accomplish construction objectives due to the economic state of the country.  However, most of the construction sectors of the countries contributing around 7% to the world economy which is certainly a subject to government involvement for developing the procedures of construction (Birgonul and Ozdogan 1999, p. 1).

The global construction industry is in increasingly faced with several challenges and obstacles. In the developing economies, there exist these challenges and difficulties and along with it a general circumstance of shortages of chronic resource, socioeconomic stress, institutional weaknesses and the capability to manage the key issues also exists.  However, improving volume and competence of the construction industry is the most significant aspect for the economic development of a country. Moreover, in the year 2011, a construction strategy document was published by the cabinet office where the effective performance of UK’s public organizations for the development of construction sector can be recognized (Pamulu 2010, p. 11).

New strategies adopted by the International Construction Firms

It can be asserted that the international construction industries need to deal with multiple obstructions while expanding business wings in a different region. Despite the amplified competition, the construction industries require to implement several market effective strategies for capturing the population of the selected market and to increase their market sustainability. However, strategies are generally implemented by the business organizations for the overall business development by directing the operations in an organized way. However, it is important to experimentally demonstrate the significance of marketing strategies for the management and development of ICFs (indigenous construction firms). The terms of marketing strategies and promotional tools of Nigerian enterprises were declared in the year 1972 which was later modified in the year 1977 (Ogbu 2017, p. 3). 

Marketing is a very crucial subject for every business organization including constructional sector. Though, the first national strategic expansion designs were first formed in the year 1970. Hence, the construction industry of Indonesia plays a pivotal role in the overall cultural, social and economic development of the nation. On the other hand, the American marketing association (AME) in the year 2013 reveals a statement on marketing that the marketing is "the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large" (Lasserre 2017, p. 12).

In contrary to that, the prospect and potentiality of the Indonesian construction industry are very bright and significant with the implementation of effective strategies. In addition to that, the contribution of the construction industries of Indonesia can be measured by its contribution to the GDP growth powered by its investment amount and capacity of workforce hired. However, in the present study, the scholar has talked about the best possible entry modes that are effective for the constructional industries for penetrating in an external market. Therefore, the joint venture has been considered as one of the best market entry strategies for the constructional industries. It reduces the risks of facing political and, environmental and social barriers for a newly emerging company. In addition to that, there is a greater possibility to earn a huge profit for a new company while venturing with an already existed organization. On the other hand, it strengthens the new workforce and helps to acknowledge the requirements of the new market customers.

In addition to that, implementation of modern technologies and IT equipment can be observed among the global constructional industries in order to enhance their business sustainability that can be certainly considered as one of the development-eccentric strategies. The key constructional activities can be categorized into five kinds conducted by the higher construction authority of Indonesia these are civil, electrical, architectural, environmental and mechanical (Pamulu 2010, p. 11). Though, most of the construction companies of this country are found to be involved in mechanical and environmental services. However, construction services often prefer to produce some unique products which should be different from the products of other similar organizations which can be considered as one of their strategies. On the top of that, strategies are generally implemented by the construction of higher authorities based on the client and the publicity of the selected market. In addition to that, sometimes implementation of effective strategies required for enhancing the project performance which is centered on the involvement of the third party. At the same time, the economic condition of the firms also regulates the volume of employing strategies that finally determines the performance and growth of a constructional organization.

Conclusion

Based on the above analysis in this Business Assignment it can be comprehended that there are several aspects of the International construction industries which are thoroughly analyzed in the present research study. Therefore, the significance of the joint venture and its purposes are also revealed in the study. In addition to that, the joint venture can be considered as one of the major market entry modes that can be effective for the construction firms. However, the impact of the joint venture on the construction project is described in the study. It can be observed in this Business Assignment that after the election of 2014 the country (Indonesia) is offering enough attention towards the development of construction industries.  The newly formed committee (KPPIP) of the respective government took several initiatives for the betterment of industrial infrastructure. On the other hand, through the joint venture strategy, the contractors can have a lot of opportunities for funding their projects. The international companies also expressively contribute to the advancement of the local market. While a native company of a developing country gets merged with a foreign organization of a developed country automatically they get to know about their strong business strategies and technological implementations which they can further utilize in their native businesses. However, it is inferred in this Business Assignment that the influence of globalization on the world’s economy cannot be denied. In contrary to that, utilization of modern technologies and IT equipment by the construction authorities of different countries are also revealed in the study.

Recommendation

After analyzing the present research it can be emphasized that still, global construction industries are dealing with multiple obstructions while entering an overseas market. Therefore, it can be recommended that at first, the organizations should evaluate the selected market for acknowledging the people’s requirement and market status. Therefore, all the business-centric terms and conditions of the respective government of the selected region should be measured to avoid sudden obstruction during market entry. On the top of that, the appropriate agreement should be done between the two companies while getting merged to mitigate all the feasible risks (Ortiz et al. 2009, p. 9). Therefore, registration of consultant and contractors should be done at the earliest. On the other hand, technology should be adopted for the betterment of the business. Hence, the topmost concern of the contractors to deliver the project on time to the client in order to fulfill their needs. In this context, technological implementation will assist to reduce time and money for the building at the same time the project can be delivered on time. Moreover, the impact of the working atmosphere for the workforce dedication towards a project cannot be undervalued. Bottom level management can be effective build an effective working atmosphere (Ochieng et al. 2013, p. 12). Knowledge of the experienced employees should be shared among the newly hired employees for enhancing the quality of the construction project.