India Is the Great New Consumer Frontier, But What Does That Mean for MNCs?

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As cited in a December, 2015 Building Design + Construction editorial, a report from Global Construction Perspectives and Oxford Economics now ranks India as the 7th largest economy in the world and predicts that it will become the third busiest construction market on the globe.

What could MNCs be in danger of missing?

A rosy case for opportunistic MNC market expansion belies what’s hidden behind cultural nuances that can bring increased market entry risk.

Who better to present a more carefully balanced, yet still optimistic, perspective on the potential of India than Greg Pasley, who recently returned from a 2 ½ year post in India for BlueScope, parent company of Butler Manufacturing. Pasley was tasked with leading the engineered building solutions business as part of the Tata BlueScope Steel Ltd joint venture. He has worked directly with many well-known and respected U.S. corporations – including PepsiCo, Unilever, Johnson & Johnson, General Electric (GE), and Lubrizol – on very sizeable and successful construction projects.

“Prior market and cultural experience is a must, in my opinion. Multinational companies building in India need to be connected with someone who can give them a sense of trust.”Greg Pasley, Vice President - Building Solutions, Tata BlueScope Steel responsible for Butler® building systems in India

Pasley’s account of the unique culture, tricky conditions and challenging operational circumstances within India’s construction industry offers rare insight into why MNCs should work with a building solutions provider that has vast local market experience.

4 Construction Challenges in India and the Ways to Overcome Them

Adherence to Budgets/Schedules

Consistency of Labor

Worker Safety

Installed Quality

1 Managing adherence to budgets & schedules

Two critical factors that can completely disrupt the ability to control project budgets and schedules in India are cultural influences and weather.

Only 31% of all global projects come within 10% of budgets, and only 25% come within 10% of original completion dates.KPMG International 2015 Global Construction Survey*

Adherence to budget is highly influenced by Indian culture. “It’s important to understand that Indian people don’t like to say ‘no’; not to deceive you, but instead, not to disappoint you,” explained Pasley. “So you have to know how to communicate; set realistic expectations; and get specific commitments to terms that the local contractor will deliver on. Every detail of the contract must be made clear and resolved upfront.

Then, there’s the weather. Few other locations are as impacted by it as India. “Schedules can be especially compromised during monsoon season,” Pasley continued, “where heavy rains can shut down a project for months. You must anticipate and plan for this… employ workarounds. We made sure to have good site drainage and insisted on solutions to provide an all-weather site surface to enable continuous work, prevent schedule impediments and improve site safety.”

Another way to minimize weather impact is with Butler engineered systems and a design-build approach versus the reinforced concrete solution that’s typically offered in India. In systems construction, the structural, wall and roof components are manufactured as systems in the controlled environment of a plant, unaffected by weather. Then the custom-manufactured systems are delivered to the job site in phased sequence for erection. This not only improves safety by taking skilled labor off the job site, but it, alone, can accelerate a job schedule by weeks to months, thereby even further minimizing the impacts of weather.

2 Establishing standards for labor consistency

In India, construction sites are sometimes forced to shut down completely because laborers will walk off the job for a week to attend a cultural festival. Without realizing this possibility, it’s impossible to prepare for it. Combine that with an overabundance of unskilled labor, and inconsistent or lax labor practices, and project owners can quickly find themselves facing very challenging circumstances.

44% of survey respondents say they struggle to find qualified craft labor in global markets.KPMG International 2015 Global Construction Survey*

“Overcoming this requires working with a provider who has more control over labor,” Pasley explained, “We created a list of a dozen or so criteria that our contractors were first required to meet. In that way, Butler® buildings are erected by certified builders who are qualified by Tata BlueScope Steel. Only one in six builders are able to meet our ‘Certified Builder’ qualification. Beyond having to achieve our standards, we also train them in our systems approach to construction. So owners can be assured that the work will be done to the highest quality,” stated Pasley.

“We are also among only a very few companies that perform full-time site supervision and inspection. That’s not the case with other building suppliers. In fact, it’s common for laborers to be left on their own with little to no oversight.”

3 Making worker safety a priority

Safety is an under-developed focus in India. “It’s still common to see job-site laborers in sandals or open-toed shoes, working without a hard hat, or high up on bamboo scaffolding and not tied off,” said Pasley. “Safety is something that takes constant reinforcement and attention. It requires unconditional adherence to best practices.”

“Butler is known for having very strong safety credentials, and that is something that our customers appreciate,” said Pasley. In fact, on a project for GE India, Mr. Srikant Srinivasan, Director, Manufacturing GE India, Pune recognized the commitment to safety by saying, “…the dedicated construction safety team has supervised our building erection and followed the latest construction techniques, which have significantly reduced safety risks at our site.”

4 Placing an emphasis on installed quality

In regard to quality of installation, Pasley offered this reflection, “Traditional construction in India involves manual, labor-intensive reinforced concrete with minimal, if any, on-site construction management. Quality assurance is simply more difficult to control. To better manage installed quality, take the need for skilled labor off the job site.”

An engineered systems solution solves for higher quality control because much of the labor-supplied job site assembly work is done on the plant floor in the manufacturing of the envelope systems. These systems are then delivered, erectable to the job site.

Also, with rigid quality materials standards and a well-established supply chain, consistency is assured. The proof of success is hundreds of Butler projects completed in India to date for a notable list of Fortune 500 multinational companies.

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With due diligence and effort, the promise of India can be fulfilled

The Indian market is vast and flexing its newfound buying power and trade muscle. Given the complexities of the market, it’s wise to seek out relationships with companies that have already done their due diligence and navigated the ground that you seek to build on.

If you’re considering facilities development in India, contact an experienced Butler Corporate Accounts Manager. For more information or to schedule a meeting, complete this simple form.

* KPMG 2015 Global Construction Survey of corporate project owners, titled “Climbing the Curve,” © 2015 KPMG International Cooperative (“KPMG International”), online at kpmg.com.

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