Building Material Industry In Gulf 

<p>Construction in the Gulf is valued at 2.4 trillion dollars. It has been hit by increased demand for building materials worldwide as construction fever spreads to countries such as China.&nbsp;</p><p>The Gulf region has experienced its building frenzy over the past few years on the back of record-high crude oil prices, which are pumping huge liquidity into the economies of GCC.&nbsp;</p><p>But this building boom in the GCC member states &ndash; Bahrain, Kuwait, Oman, Qatar, Saudi, and UAE &ndash; has put extra pressure on the supply and cost of construction materials and labor force.&nbsp;</p><p>There is a chronic shortage of resources. Clients are facing a shortage of contracting capacity, while contractors have difficulty sourcing labor and materials. Among the critical factors was, knowing the limit in terms of the availability of materials and labor force.&nbsp;</p><h2><span style="font-size: 14pt;">Mitigation </span></h2><p><strong>Product&nbsp;</strong></p><ul><li style="list-style-type: none;"><ul><li>Deleting products from the existing portfolio (low or non-performing)</li><li>Categorizing products as per brand equity and positioning in the market</li><li>Addition of products bringing volume/profit and uniqueness &nbsp;</li><li>Economical and durable products</li><li>Characteristic differentiation among products (no cannibalism)</li><li>Market-specific product segmentation, e.g., industrial, premium projects, economical</li><li>Focus on after-sales service</li></ul></li></ul><p>&nbsp;</p><p><strong>Sales</strong>&nbsp;</p><ul><li style="list-style-type: none;"><ul><li>Two modes of operations: Franchisee or Distributorship</li><li>Brand-wise sales budget inclined on market share rather than incremental</li><li>Focus on new unexplored markets</li><li>Detail budget: market-wise/industry-wise</li><li>Techno-commercial personnel focusing on projects and institutional sales</li><li>Architects/consultants/specifiers visits</li><li>Monthly MIS review meetings</li><li>Debtor's aging control&nbsp;</li></ul></li></ul><p>&nbsp;</p><p><strong>Marketing </strong></p><ul><li style="list-style-type: none;"><ul><li>Experience centres at strategic points rather than showrooms</li><li>Focus on BTL activities</li><li>Architects/consultants/contractors meets</li><li>Programs for product-specific installators/plumbers/fabricators/painters</li><li>Loyalty programs for contractors (point based)</li><li>Social media promotion (SEO), especially for area expansion</li><li>Separate website for building material division</li><li>CRM to establish integration with customers, data analysis to study info</li><li>Programme for retail customers Referrals</li><li>Professional pricing strategy</li></ul></li></ul><p>&nbsp;</p><p><strong>Systems And Controls </strong></p><ul><li style="list-style-type: none;"><ul><li>System-oriented than people-oriented</li><li>Credit and inventory control system</li><li>Sufficient working capital and optimization of the same</li><li>Monthly finance reviews to analyse ROI, ROS, ROW</li><li>Efficient full-fledged purchase department</li><li>Effective after-sales support and complaint mitigation</li></ul></li></ul><p>&nbsp;</p><p><span style="font-size: 10pt;"><em>This article was contributed by our expert Santosh Balakrishnan </em></span></p><p>&nbsp;</p><h3><span style="font-size: 18pt;">Frequently Asked Questions Answered by Santosh Balakrishnan</span></h3><h2><span style="font-size: 12pt;">1. What is the most important challenge the construction industry faces right now?</span></h2><p>The main challenges are - procuring skilled labor and the right mix of building materials at the right time. These countries, mainly trading entities, depend on other manufacturing /supplying countries to fulfill their requirements, especially China.</p><h2><span style="font-size: 12pt;">2. How much of the UAE GDP is construction?</span></h2><p>The UAE's construction industry contributes around 14-16% to the GDP, which is expected to grow at 5% CAGR. 60% of the construction happens in the energy and utility industry (oil and gas being the main contributor), which is the scenario in the entire Gulf.</p><p>Focus on infrastructure development in countries like Oman, Saudi, etc., with massive empty lands.</p><h2><span style="font-size: 12pt;">3. What are current trends in construction?</span></h2><p><span style="font-size: 12pt;">Trends&nbsp;</span></p><ul><li style="list-style-type: none;"><ul><li><span style="font-size: 12pt;">Sustainable architecture will be the future of all constructions, especially residential and commercial, involving nature as the key element in furnishing the construction</span></li><li><span style="font-size: 12pt;">PEB structures/dwellings are going to be the cost-effective as well as durable constructions warranted as need of the hour</span></li><li><span style="font-size: 12pt;">Surprisingly, premium and luxurious interiors with a demand for eloquent furnishing materials and sanitary will rise</span></li><li><span style="font-size: 12pt;">Vertical gardens and the preservation of natural resources like water and clean air will immensely influence the design of constructions.<br /></span></li></ul></li></ul><p>&nbsp;</p><h2><span style="font-size: 12pt;">4. How has the COVID-19 pandemic affected the construction industry?</span></h2><p><span style="font-size: 12pt;">Covid has adversely affected the sector in all areas, and the pent-up demand in countries like China has reduced the imports, apart from the restrictions on employing labor, since indigenous labor resources in these countries are negligible.</span></p><p><span style="font-size: 12pt;">Post covid, the market is conducive enough for growth provided finding the right mix of availability of all the resources and cost-effective execution of a project. Utilizing the available resources and optimization will be the key.<br /></span></p><p>&nbsp;</p>
KR Expert - Santosh Balakrishnan

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