Construction Industry Strategies for Emerging Markets, an Expected $6.7 Trillion Market by 2020

Accenture analyzed 37 leading construction companies for the basis of its report on the trends in the construction industry. The report shows how the multipolar world, characterized by multiple centers of economic power and activity, has impacted the old business models and created challenges for construction companies. Yet, the new macroeconomic environment also offers opportunities for those companies that can favorably position themselves in the changing landscape.

The global construction industry is expected to grow over the next decade—especially in the rapidly emerging economies of Asia, Latin America, the Middle East, Africa and Eastern Europe. Fuelled by urbanization, globalization, infrastructure renewal and the burgeoning needs of developing “megacities,” construction in emerging markets is expected to double within a decade and will become a $6.7 trillion business by 2020, accounting for some 55 percent of global construction output, according to the “Global Construction 2020” report published by Global Construction Perspectives and Oxford Economics.

To benefit from trends in the construction industry, Accenture recommends that companies look at adopting new construction industry strategies to better position themselves to manage the supply side and capture the increased demand.

Download an infographic outlining seven trends in the construction industry [PDF, 414KB]

While the downturn in 2007-09 heavily affected the construction segment globally, the impact was not felt evenly. During this period, the emerging market construction companies started to pull away from their developed market competitors. Although construction market output has begun to recover, thanks to continued emerging market growth and stimulus packages, emerging-market players remain better positioned to capture demand.

In Brazil, for example, population growth is spurring large government investment in housing and energy. Similarly, India’s ongoing program of urban renewal, energy and transport development will help make the country the world’s third-largest construction market by 2018, just behind the United States (second) and China (first).

Accenture applied its High Performance Business methodology to a peer group of 37 leading international construction and engineering groups, selected from diverse geographies and revealed three basic building blocks to sustain high performance in the construction industry:

• Market focus and position—The strategy adopted to secure competitive advantage.

• Distinctive capabilities—The systems and processes that enable value creation.

• Performance anatomy—The culture and mindset that sustain success.

Becoming the high performers of tomorrow

The global construction industry is changing fast. More growth opportunities in emerging markets, new funding mechanisms, and evolving customer demands are driving the industry’s players to diversify, both geographically and in terms of their offerings. Today’s high performers have diversified more than most, developing more efficient and customer-focused operating models to help them.

To compete, companies will need to maintain new approaches to risk management and capital allocation, operational efficiency, and supply chain management. And they will need to develop novel ways of attracting, retaining and deploying a mobile and multilingual workforce with relevant skills. As the industry continues to evolve from B2B to B2B2C—these strengths will become even more critical differentiators for the high performers of tomorrow.