Table of Contents
Introduction.2
Mission and Goals2
Situation Analysis3
Corporate Level Strategy..10
Business Level Strategy11
Executive Summary
This is a case analysis of Turner Construction Company, a subsidiary of HOCHTIEF operating in the construction industry and offering related services. The report starts with a short introduction followed by the company’s goals and objectives. This is followed by situational analysis of the company’s past and present situation using strategic tools such as SWOT analysis. The subsequent section that follows is the company’s corporate and business level strategy. This is followed by business structure, promotion and finally recommendation of the future direction that should be taken by the company.
Introduction
Turner Construction Company has been in business for more than a century building head-turning projects. It is the same company that built the Madison Square Garden and is ranked among the leading innovative general builder in the United States since the early 1900s. Turner Construction Company deals with project management and construction services for airports, multifunctional and multifunctional buildings, and stadiums, in addition to educational, correctional, entertainment, and manufacturing facilities. The company emphasizes on green projects that include green roofs and gardening Tops. The Company also prides itself as a leader in green and sustainable building practices. The company which was founded by Henry Turner in 1902 is the major operating unit of The Turner Corporation, which is a subsidiary of HOCHTIEF, a German construction group of companies.
Mission and goals
The aim of the company is to become the most successful and the best construction company in the US and abroad with a record for delivering according to customer’s specification. In addition, the company strives to maintain a lasting relationship with their customers through integrity, reputation, and quality that will outlive their work. The mission of Turner Construction is to succeed through the integrity of the people who work in their projects and offices, through their commitment to serving with consideration and respect for their clients and for one another, with their passion of building structures that are durable, outstanding, and constructed through sustainable technology. The company achieves its mission through upholding the company’s culture and working as team to professionally manage time, cost, and quality. Turner Construction Company’s goal is to maximize on the utilization of small, local, and disadvantaged businesses within the local cities in which it does business with (Turner, 2012). In 2009, the company awarded more than $1 billion worth of contracts to women and minority-owned business. Turner has a tradition of creating long-term relationships with people living in local communities. The company’s commitment is more than making business sense, but about giving back to the community that has been supportive to them.
Situational Analysis
Turner Construction owns and operates several national segment groups, with each focusing on a particular type of building. The company’s products include green building, pharmaceutical and biotechnology, healthcare, sports, public assembly, transportation, and aviation. Turner Construction has placed emphasis on green projects and sustainability by ensuring that all their staff and partners get training in an attempt to improve their ability to deliver green buildings to their clients. The company also offers a variety of services including supply chain management, logistics service, and facilities management solution. With an extensive network of offices within and outside the US, the company boasts of the most comprehensive network in the industry. This broad geographic reach combined with local delivery ensures that the company their clients with the close-to-home focus they desire in addition to availability of extensive resource they demand. Turner Construction maintains a network of offices within and outside North America with a staff of 5,000 people working on more than 1,200 projects annually. As a US-based international company, the firm is in a position to present their clients with the support and accessibility of a local firm with the resource and stability of a multi-national organization.
The company’s principles lies on firmness on quality of service, responsiveness to clients needs, and hard work, which has led to its success in the industry’s competitive landscape. The company has achieved growth due to its ability to find and serve diverse markets, address changing conditions and demand, and expand its services. The business environment is changing, which implies that even the firm’s adherence to highest standards is not adequate. There exist a number of obstacles that the company faces including increased competition, and more demanding and complex technology, and the firm must strive to mitigate these challenges.
The construction industry requires firms to be innovative, conduct business differently, and enhance collaboration and teamwork. Turner has been able to transform these concepts into tangible ways of doing business. The company employs sustainable practices and systems while implementing better and new approaches to deliver quality projects. Turner use Lean construction principles, which has enabled to it to find ways of minimizing waste and maximizing use of labor, time, and ,materials. Through the principle of Lean construction, Turner has recognized the importance of collaboration and planning, which has enabled it to achieve uninterrupted workflow, which allows delivery of projects that satisfies clients.
Turner is also a pioneer member of the US Green Building Council, in which it has participated in environmentally sensitive building practices. Currently, the company has more than 400 green projects that are in various stages of completion. Turner’s emphasis on green projects includes producing green roofs and roof top gardening. In addition to green projects, the company has engaged and implemented sustainable company practices including implementing a Construction Waste Management plan, reducing greenhouse gas emission, seeking LEED Certification for its offices, and instituting set standards for sustainability for job trailers and field offices. The company has launched international operations in more than 20 countries in addition to initiating community affairs program, and establishing Turner School of Construction Management.
SWOT Analysis
Strengths
Weaknesses
Leading edge in construction industry through innovations
Strong order build up
Single point for all solutions-from construction, operations, to financing
The company operates globally, which makes it vulnerable to currency fluctuations and volatility
Turner’s service division has been susceptible to global downturn with declining revenue
Opportunities
Threats
Good reputation in completing massive projects
Sustainable and green construction promoting the performance of the company in the US construction sector
Potential in high growth markets will boost revenues
Shaping major cities presents a strong prospect for Turner construction
Booming healthcare construction market
Increasing competition
Rising cost of inputs
Declining construction in the US
Changing technology
Strengths
Innovations
Turner has been in the construction industry for more than 100 years. Innovation has been the company’s important philosophy since 1902, when Henry Turner initiated the use of reinforced concrete on New City subway stairs. The company has used new methodologies and ideas in its processes since its inception, constructing unique structures that clients can be proud of. The pursuit for innovation has contributed a great deal to Turner’s ongoing success. Being the leading builder in the US, the company has done some of the world’s most challenging buildings including the Burj Khalifa in Dubai and New York’s Yankee Stadium.
Turner centers it innovative energy on fundamental challenge-finding means of resolving unanticipated construction issues that can result into bringing construction process into a halt. In order to solve such problems, Turner use a combination of SMART and Building Information Modeling (BIM) that enables the teams to detect problems before they occur. The BIM process enables the teams to develop a 3D simulation model of a project displaying information such as projected time and cost. BIM and SMART solutions provides suitable environment for everyone in the construction process to easily identify and focus on the problem areas in different elements in the building. Turner’s staff is able to work remotely through their interactive iRooms, which are equipped with SMART Board interactive whiteboards and a computer.
Innovative process has enabled Turner to increase productivity as evidenced on projects such as Sea-Tac airport car hire which presented significant implication for the company. According to the company’s website, the ability to provide feedback that facilitates optimization of the construction process thereby giving the company ability to save money and ensure timely project delivery.
Strong order build-up
Turner has a strong position in the industry with a strong order backlog. Turner’s name is behind some of the most high-profile projects in the world including several professional sports stadiums since 1990s. The purchase of Turner Construction by HOCHTIEF has enabled it to gain access to HOCHTIEF’s operations in United Kingdom and Australia in addition to heavy construction field. Turner is a founding member of the US Green Building Council and it now has more than 400 green projects at various stages of completion. Turner’s parent company, HOCHTIEF’s order backlog reached a high of EUR 50.26 billion ($63.83 billion) for the first quarter of 2012. Turner Construction maintains a network of offices within and outside North America with a staff of 5,000 people working on more than 1,200 projects annually. Turner Construction is strongly placed with many projected under construction and many more in the pipeline thereby providing a continuous flow of revue in the near-to-long term.
Single point for all solutions
Turner Construction through its parent company, HOTCHTIEF provides all solutions that clients require under one roof. The company provides an integrated modular offering into one package. Turner is able to bundle design, construction operation, and financing thereby enabling the company to complete an entire project regardless of its size. In addition to construction, Turner also provides services including supply chain management, logistics, and solutions for facility management. Turner, through its parent company provides end-to-end services throughout the project’s whole life cycle. The cooperation among units enables the firm to develop new business potential through harnessing cross-selling effects.
Opportunities
Sustainable and green construction
Turner Construction has potential for growth in sustainable and green construction. According to sources from the industry, construction projects promoting climate protection has the potential of generating additional $285.6 billion in the US by 2030. Sustainable and green building in the US construction sector is playing a major role in enhancing revenues. Another report from the industry reveals that the green construction market increased from $ 71.7 billion in 2010 to $98.9 by the end of 2011. By 2011, the company had complete 274 projects bearing the LEED Certification in the US Green Building Council (USGBC). The company aims to reduce its corporate greenhouse gas emissions to a five percent by 2012. In addition, the company has achieved LEED Certification of 10 offices.
According to the Green Building Barometer, a publication produced by Turner Construction, sustainable or green building continues to occupy top position in the agenda of real estate developers, owners, and corporate owner-occupants. Respondents to the report interviews expect to include some aspects of green features in their subsequent construction projects. The major concern to many is to reduce energy and operating expenses, although some companies are also focused on broader set of gains including well-being and health of occupants and the positive impact on corporate and brand reputation. With the growth of green and sustainable construction, Turner is actively participating in this segment to enhance its performance further.
Potential in high growth markets
The Asian market is among the primary growth markets in which the company plans to focus in. The company has completed a number of projects in the Asian market including the Bitexco Financial Tower, Taipei 101, and Tea Tree among others. According to industry estimates, the overall GDP of Gulf Co-Operation Council is predicted to record a growth of more than 10%. The real estate sector in Saudi Arabia, the largest in the GCD is growing at a very high rate. In addition, the Indian construction market is experiencing a strong growth, the national government of Oman plans to invest $20 billion on upgrading infrastructure of the country in the next five years.
Shaping major cities
Turner Construction is involved in developing state of the art in major cities in the US and oversees. The company engages in a number of renovations of structures in major cities. This provides a potential for growth for the company since many clients consider renovation a means of saving costs. Turner has complete major projects including Lincoln Financial Field and Cira Center among others that put the company in the market’s visibility. These big projects put the firm in a suitable position of getting constant flow of orders in the future.
Weaknesses
Majority of Turner’s construction work is done internationally, which therefore renders the firm susceptible to currency fluctuations and volatility. This in turn affects the financial profitability of the firm. The company’s service division is also experiencing low performance as result of global economic downturn which has greatly affected the financial market and bank lending rates.
Threats
The company is poised to experience increased competition in the construction industry. This is partly due to the fact that the company has a wide global base, which makes it easy for stringer regional players beat Turner in their home countries. The increase in input cost due to the resulting effects of economic downturn in North America and Europe could threaten Turner Construction since a substantial amount of its business emanates from these regions. The decline in construction projects in the US and rate of change in technology may also threaten the profitability of the company in the construction industry since this market represents its major stronghold.
Corporate level strategy
The company’s major target is to receive high levels of new orders, increase net profit, and obtain massive growth throughout its international branches. The main method undertaken by the company to achieve this is to undertake calculated risks on expansion in high-earning, high-growth market segments. The company has initiated and completed some of the world’s most challenging structures including the Burj Khalifa in Dubai and Taipei 10, in addition to Yankee Stadium in New York. Even though it has been highlighted that Turner’s reliance on overseas market as a weakness as a result of currency risk associated with revenues from overseas, it is notable that this issues has been under control by flexibility of infrastructure spending in emerging markets.
The US healthcare construction market has been on the rise and is expected to grow to $55.6 billion in 2012. In addition, changes in environmental and safety requirements have forced healthcare facilities to adopt rebuilding or renovation. The projected growth in the healthcare construction sector presents opportunity for further growth for the company. Growth of this market segment could help the firm mitigate the risks involved with overreliance on revenues from overseas.
The increase in new orders was a boost to the company’s backlog, which experienced a growth of 28.3% to reach $53.06 in the first half of 2011, resulting into a much more optimistic for the company in the first half of 2011. The company received a revenue growth of more 3-9% during the same year.
Business level strategy
The company guiding philosophy since inception lies on innovation, technology, and teamwork. The company has realized the potential of sustainable and green development, and is taking innovative steps toward ensuring that its structures meet environmental standards. Turner’s sustainability strategy enabled it to achieve revenue of $9.1 billion in 201. According to industry reports, Turner made strategic commitment to sustainability that saw it receive a revenue growth from sustainable construction activity at a CAGR of 26% between 2006 and 2010, and a target to reduce absolute carbon emission of 5% based on 2006 figures by 2011 (Smith, 2012). This strategic commitment has enabled the firm to deliver an overwhelming 200 LEED Certified buildings in the US. The sustainability action plan has enable Turner to reposition itself in the construction industry in order to effectively mitigate the negative impacts of increasing competition.
Turner has operations across the globe, in both emerging and developed economies. This has insulated the company to some degree from country-specific downturns. The company has a network of offices in North America and around the world, with a staff of 5,000 employees working in more than 1,200 projects annually. This has enabled the company to rank the first in the industry’s major markets with a annual construction volume of $8 billion. The company is able to offset the increasing competition due to its local presence in various global locations with stable and resources of a multi-national organization.
In order avoid unanticipated issues that result into cost overruns and scheduling delays, Turner has developed BIM and SMART solutions to build digitally first and resolve issues before they arise. This has greatly increased productivity and collaboration, since schedules are more reliable and limited time is spent solving problems. In a recently completed project in Seattle, Turner enabled the owner to save $2 million as a result of using the new technology-enabled process. Since its inception in 1902, innovation has played a major part in the company’s philosophy, after Henry Turner pioneered the use of reinforced concrete on New York City subway stairs.
Business Structure
The company’s core business is construction, with a staff coming from a wide array of professional backgrounds. Turner Construction Company is organized into departments and/or areas of responsibility. Each department plays a significant role in the entire construction process ranging from the original sale to pre-construction, construction and project completion.
Business unit organizational structure
Turner is a subsidiary of HOCHTIEF operating in the US, which has the biggest construction market in the world. HOCHTIEF holds the controlling interest of Turners stock, which makes it dependent on the overall corporate holding company. Turner is positioned to have access to the marketing power of HOCHTIEF, which has massive capital base and strong global presence. Turner is able to form joint ventures and partnerships since the parent company does not have a large corporate bureaucracy.
Turner has a nationwide network in the US and a strong global presence in twenty countries. The company boasts of the most comprehensive network of local offices with local delivery, thereby providing their clients with wide array of resources they demand and the customized close-to-home focus they desire.
Promotions
Turner Construction undertakes promotions through a number of ways in order to gain a competitive edge. To start with, Turner has a long history in community outreach and involvement. The company takes part in and sponsors a number of programs from local to international level initiatives including annual canned food drives for the Salvation Army and Habitat for Humanity projects. Such initiatives promote the company’s image in the market and helps in copping up with competition.
Turner Construction has developed an image as a sustainable and green company through completion of a number of projects that are LEED certified. The company has positioned itself in the industry through its commitment to green building and sustainability. The company strives to make itself more sustainable through improved corporate governance and transparency in reporting of environmental metrics.
Turner Construction maintains a single website that automatically determines the location of each visitor, and shows contents tailored to their local office. This demonstrates the firm’s local knowledge in addition to the global Turner Construction Company brand. Individual local offices have access to their own CMS that enables them to create content specific to their offices. The global marketing holds the power to review and approve changes before they go live in order to maintain the brand message. The company’s site is easy to navigate, giving visitors the ability to quickly choose what interests them such as hospital using the latest green building technology. Through such strategies, Turner is able to maintain a strong brand as an international construction company with deep experience in local markets.
Recommendations
The company’s service division has been susceptible to the global downturn with declining revenues. Turner should consider concentrating its resources in the construction sector with more emphasis on sustainable and green projects. There is an increasing number of organization seeking environmentally friendly structures in order to promote individual well-being and enhance corporate image. Turner should fully focus on such organization and reap more profits from such ventures.
Since the company is already established in the US and many other key growing areas, it is a good idea to take advantage to take advantage regions with high potential for investments such as the Asian continent, south-eastern Europe and Central and Eastern Europe. The healthcare construction market in the US is experience a steady growth and the company should dedicate more resources at meeting the needs of this market segment.
In response to the increasing competition in the industry, Turner Construction should come up with new products and services to enable it compete in the industry. The company should develop innovative products that beat the industry standard so as to get a competitive edge. The construction industry is becoming more complex with demanding technology and Turner must address these challenges. The company should devise and use sustainable practices and systems while implementing better and new approaches to deliver projects. In response to increasing competition, the firm should upgrade its service sector to offset competition pressure
Reference:
Gary J. Tulacz, “The Top 100 Green Contractors,” ENR, September 13, 2010; Gary J. Tulacz, “The Top Green Contractors,” Engineering News Record, September 24, 2007
Hiltz, Kara. 2011 A/E/P and Environmental Consulting Industry Outlook, 2010
“Smart Solution” Web 8 August 2012.
Smith, Andrew. 2012 Construction Industry Outlook. Web 8 August 2012.
Turner Construction Company. 2010 Green Building Market Barometer. Turner Company, 2010. Web 8 August 2012.< http://www.turnerconstruction.com/about-us/sustainability/green-market-barometer>
Turner Construction Company. Company Website. Web 8 August 2012.
