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Construction Sector of Kuwait

Kuwait construction sector:

Kuwait is an Arab country, for the development of the country it is focusing to invest in the construction sector. It is estimated that in 2015, the infrastructure of Kuwait will flourish by 15 to 20 %. The country is working on many large construction projects. The aim is to increase the tourism, decrease the destination, and open the doors for the business people.  In 2030, it will provide houses to 2.6 million people. The country gas and oil sectors are playing a key role in these construction projects.  There are some internal and external strengths and weaknesses that faced by the construction industry of Kuwait.  Four types of factors are used in SWOT analysis:

Internal factor:

Strengths:  strength shows the actual and internal ability of team, projects, and business that provides the advantage over the others.

Weaknesses: these are the actual elements or characteristics, brings the disadvantages in the company.

External factor:  

Opportunity: These are the potential and actual; success factor of a company.

Threats: Threats are the risk or dangers that company faced from outside the environment or from their competitors.

Base on this SWIOT analysis we can do the PESTEL analysis of Kuwait’s construction industry.

Porter’s five forces:

Porter’s five forces have a deep influenced on the construction industry on Kuwait.  The bargaining power of suppliers, buyers, threats of substitution and new entry threats, all these factors affect the intensity competition of the construction industry.

The government of Kuwait does not recognize the political parties. Most parliament members are pro government and they are independents, but the fact is that there are many political parties exist in Kuwait. For example, Islamic Salafi Alliance, National Islamic Alliance, The Islamic Constitutional Movement, National Democratic Alliance (NDA), Popular Action Bloc, and Justice and Peace Alliance.

Kuwait is considered the most moderate and liberal society in this region, but still Kuwait is facing a conservative from Western point of view. There is not enough political stability in Kuwait. The Ministry of Foreign Affairs of Kuwait set the precedence of international relations of Kuwait in three steps:  

Middle East: to build the corporation with the other Arabs countries to resolve the Israeli-Palestinian issue. The other aim is to free the region from the weapons of mass destruction and to establish the sovereign Palestinian state.

Gulf Cooperation Council: The MoFA of Kuwait is contributed to its efforts to build good and strong economic relationship with the Gulf Countries.

Internationally: It support the internationally communities in ultimate aim for the wellbeing of humanity and to achieve the safety.

Internationally, Kuwait has good relation with all the other countries except Denmark (due to the story of Mohammad cartoon). With U.S.A, it has good trading relation. Kuwait provides good health facilities to their people. It also grants free health care service to its citizens. However, Kuwait investments low amount on the healthcare than other Gulf countries.  All these factors play an important that affect on the suppliers, buyers, substitutions, new entry threats and rival among competitors. 

Threat of new entry:

In the construction industry the threat of new entry is low due to the following reasons. The high or excessive requirements of investment in Kuwait lower the threat of new entry. It is also due to difficulty or intricacy in achieving the economies of scale and due to the experiences curve obtains or takes long time to grow or gain. 

Bargaining power of buyers:

In the construction industry the bargaining power of buyers is high because of crisis the cost of project is low. In Kuwait, many construction companies are willing to obtain or take any project.  Due to low switching cost the bargaining power of buyers is high in Kuwait.

Bargaining power of suppliers:

In the construction industry, the bargaining power of suppliers is low.  The bargaining power is low because there are many construction firms in Kuwait. There are many engineering firms, many contractors and consultants and few projects lower the bargaining power of supplier.

Threat of substitutes:

The threat of substitutes in construction industry of Kuwait is high. Many construction industries are willing to acquire or take any projects with lower of sillier prices and with the better quality and performance.

Rivalry among competitors:

As a results and consequence of above forces, the rivalry in industry shows the following characteristics:

It increased the competition among the construction firms. In Kuwait there is higher growth in this sector. The price competition is high and it increases the competition among the firms. The construction industry is unattractive as the result of above mentioned forces. There is an increase in the closure costs that make the firms unprofitable and firms faced difficulty to close down.

This shows that despite of many pros and strengths, the construction industry faced many weakness and threats.  (Al Sayegh, 2010)

Suggestions for the improvement in the construction industry of Kuwait:

Due to the many threats and weakness, I would like to give the some suggestions to the construction industry of Kuwait.

Government:

The government or political situation of Kuwait is not strong because there is many political parties exist in Kuwait that makes the decision of government weak. Some ministries are independent and they make the decision own-self, sometimes they even do not share information with each others. Construction sector is a sector in which the involvement of government is very important and plays an important role. However, government does not participate proactively in the construction activities of Kuwait. 

I suggest the Kuwait’s government to proactively participate in the constriction activities because, it can increase the investment in the country and can open the new door the foreign investors.  Government should make the policies and regulation for the development and growth of the construction industry. Government should provide the funds to the construction so that this sector may use the new machinery, technologies to build the building, roads, etc.  Government should establish some standards and prices so that the bargaining power of suppliers increased and the threats can be reduced.

Contractor:

Companies must choose the best contractor for the construction. Sometimes contractors do not make the construction in best way, companies must make the corrective action. This can be taken by using the following program such as: Before any construction it is necessary to take all the safety measures and plan safety.  It would be reduced the hazard of accidents and injuries of employees. Offer the safety measures and plan so employee without any fear work with attention and involvement. Provide the proper training to employees so they can effectively participate in the construction activities. By implement the best management practices in the construction sector, the growth can be increased.

If the people find out opportunities in the construction sector they will attract towards it and more educated people will attach with this sector. I would suggest that constructor perform their task effectively and it can increase the bargaining power f the suppliers and can reduce the threat of new entry.  They should establish the costs and prices and do not charge separately with their clients. They should not take any projects and do not lower their standard. It will increase the demand of the constructors and the construction activities. In return it will grow the construction industry in Kuwait.

 Innovation in the designs:

This sector is needed to bring innovation in the design. I would suggest that this sector offer new design and innovative ideas that will increase the investment opportunity in Kuwait. When the construction sector build the infrastructure of the country then it will also increase the popularity of the contractor of Kuwait and it will also increase the foreign investment in Kuwait.

Green building:

Green building is a new project that is started by Kuwait but due to no awareness it is unable to gain its important. It is a very appreciative project and it is also beneficial for the environment. It is also benefit for the society and it can reduce the pollution from the community. It can reduce the effect of harmful radiations and the bad effects that increased in the society due to the traffic or industries’ smoke.

Kuwait has oil and gas reserves. It can avail these reserves and other natural recourses to implement this green building project. There is a need to spread the awareness among the people about the benefits of the green building project. I would suggest that government helps the construction sector so that it can complete and successfully implement this green building project. If this project successfully implement in Kuwait it will give the competitive advantage to the construction industry of Kuwait. For this purpose Kuwait must take funds from other Gulf countries.

Kuwait is a popular Arab country and it is famous in liberalism and moderate country than other Gulf and Arad countries. The construction industry of Kuwait had faced many challenges in past but now it is growing. It will be estimated that in 2030. It will grow more as compare to the previous years. However, there is still a need to flourish this sector.

Reference:

Al Sayegh, N. K. (2010, June). The Impact of Diversification Strategy on the Construction Organisations Corporate Level Performance. Retrieved December 7 , 2015, from http://bspace.buid.ac.ae/bitstream/1234/260/1/70039.pdf

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