Abstract
The paper is providing in-depth profitability analysis of Fluor Corporation by evaluating various external environment factors. The Industry is analyzed on five major forces as suggested in General Force matrix and porter’s five forces model. These forces play a major role in growth of any organization. The paper is focusing on analyzing engineering and construction industry trends and future performance.
Fluor External Environment Analysis
Thesis Statement: the paper is presenting a detailed analysis of external environment forces that play a major role in influencing the growth and profitability of Fluor Corporation and engineering industry. The paper further elaborates upon General forces matrix and Porter Five Forces model to evaluate industry response to major external environment forces.
Introduction
For more than hundred years, Fluor Corporation is successfully providing its services in the field of engineering, maintenance, construction, project management and procurement businesses. Fluor is having offices in around twenty-five countries across the world. The company is handling various big projects in different countries hence it faces challenges in dealing with external environment forces of different countries. Every country has different economy, government policies, culture, demography, technology and climate. These external factors cannot be control by organization. The growth of company or respective industry is influenced by these forces.
Description of Theories/Core Concepts
Pearce and Robinson have suggested five major forces that mainly influence the operation and performance of an industry. As per them, the major external environment forces are: economy, demographics, Government/ Law, Technology and physical environment. General force analysis matrix is very helpful in evaluating these five forces for Fluor Corporation. Porter’s five forces model is another effective tool to evaluate external environment forces. As per Porter, five external environment forces are: barriers to entry, substitutes, bargaining power of suppliers, bargaining power of buyers and competitive rivalry. General forces matrix evaluate remote environment forces whereas porter five forces evaluate more specific industry related environment forces.
Analysis/Explanation/Discussion
General Force Matrix Analysis
Economy: if we look at the history, economy of various countries including America is directly influencing the performance of engineering and construction industry. For past few decades, the booming economy affected construction industry in great way hence industry reported a significant growth rate. Construction industry is major contributor in GDP of the world. The industry remains as a one of the major source of employment. A slowdown in economy directly affected the industry in year 2007 as the sales of residential properties went down and commercial properties also noticed drop in sales. In developing countries the future of industry is very promising (EconomyWatch, 2010).
Technology: the industry has trend of using advance technology to perform tasks quickly and effectively. The use of traditional approach to manage projects on papers was vanished because the approach was costly and time consuming. Use of advance equipments helps in performing task very brilliantly and saving manpower. Example of one the latest technology in the industry is Building Information Model. This helps in managing various projects together in a collaborative manner. This trend is expected to continue in future (Craig S. Fleisher and Babette E. Bensoussan, 2007).
Demographics/ Social/ Culture: these forces also impacted the growth of industry. In the past population growth rate directly impacted the requirement of various facilities like: health care, education, entertainment, shopping places and residential property etc. social and cultural values of any country can directly be seen in its art and architecture.
Government/ Law/ Military: government policies and plan have huge impact on economy and infrastructure development of any nation. The policies of American government during the past were favorable which provided immense opportunities to industry to grow. The trend is continuing in developing countries like India where government is focusing on development of various facilities.
Physical Environment: the industry has a trend of developing urban areas than look for other remote and rural areas. The industry is noticing a slight change in this trend and looking for developing rural areas as well.
Porter Five Forces Analysis
Barriers to entry: Capital requirement is one of the major barriers in this industry. Huge investment in technology and raw material increase the initial capital requirement. Unfavorable Government policies and adverse economic conditions are also barriers to the entry (Kpmg, 2012).
Substitutes: the industry is having almost nil or very few substitutes available. It is not easy for customer to find other product to meet their demands.
Bargaining Power of Suppliers: the industry is having advantage in term of low bargaining power of supplier. Ample number of suppliers made easy for companies to negotiate a better value and high quality. The supplier switching cost is also very low.
Bargaining Power of Buyer: presence of various renowned companies in the industry increases purchasing power of buyers. The customers look for special and customize products. Customers want high quality of product and services.
Competitive Rivalry: the industry is of large size having various rivals. The top three competitors of Fluor are: Arcadis N.V., Balfour Beatty Construction LLC, and Bechtel Group (Charles Hill and Gareth Jones, 2009).
Conclusion
. Above discussion clearly indicate that the Fluor Corporation is in strong position in terms of having vast experience, huge location and customer base, good supplier power, no competition from substitutes and loyal customers. Changing economy trend and increasing completion can emerge as a potential threat to Fluor.
Extending the Conversation
What will be Flour strategy to changing economy scenario?
Developing countries provide immense opportunities for engineering and infrastructure companies, how?
References
Charles Hill and Gareth Jones. (2009). Strategic Management Theory: An Integrated Approach. Stamford, Connecticut: Cengage Learning.
Craig S. Fleisher and Babette E. Bensoussan. (2007). Business and Competitive Analysis: Effective Application of New and Classic Methods. Upper Saddle River, New Jersey: FT Press.
EconomyWatch. (2010, June 30). Economy Watch. Retrieved May 9, 2012, from www.economywatch.com: http://www.economywatch.com/world-industries/construction/trends.html
Kpmg. (2012, January 24). Retrieved May 9, 2012, from www.kpmg.com: http://www.kpmg.com/global/en/issuesandinsights/articlespublications/global-construction-survey-2012/pages/opportunities-and-threats.aspx
