Globalisation And Its Effects On The Construction Industry In Australia - Management Assignment Help

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Executive SummaryThis Globalisation report provides an in-depth analysis and evaluation of two key components:
The term ‘Globalisation’ and what it entails.
The effects globalisation has on the construction industry within Australia.
The first section of the report entails an in-depth definition of the term ‘Globalisation’, along with all the components involved with it.
The second section of the report creates a globalisation index which discusses:
Economic impact
Social impact
Environmental impact
Technological impact
Outsourcing
Future impact
Materials/Resources
Employment/Labour
Combined with statistics, tables and graphs, this report is able to analysis, compare and distinguish the impacts in which globalisation has not only on the construction industry, but also within our modern-day society, specifically within Australia.


Introduction
The idea of globalisation does not only apply to the construction industry, as construction is not a product or service that can be simply traded throughout the international markets. It is also clearly apparent that construction does not extend itself to internationally combined production, due to the fact that production within the construction industry takes place on site (Strassman and Wells, 1988). Nevertheless, it is clearly evident that construction has changed in response to globalisation, and the objective of this report is to analysis in depth both the changes and the implications globalisation has had and will have on the future of construction industry within Australia.
What is globalisation? Globalisation is the process of integration and interaction amongst the government, people and companies of nations around the world. This process is compelled by 3 key components:
International trade
Investments
Technology
These three components affect the economical, social, environmental and cultural elements of any society (The Levin Institute, 2016). The key benefits of globalization are seen as the chance for social and economical growth, along with greater standards of living through wealth and technology transfer (Najjar et al. 2000). It can be said that free trade generates significant job growth, increases the standard of living and nurtures peace due to the effect of newfound prosperity. Throughout this report the idea of Globalisation will constantly be linked back towards various key components of the construction industry, analysing how it may affect these factors of the industry within Australia. These factors include:

• Economic impact
• Social impact
• Environmental impact
• Technological impact
• Outsourcing
• Future impact
• Materials/Resources
• Employment/Labour
• Economical Impact

From an economical outlook, globalization exemplifies the increase of both capital flow and the trades of goods and services coming in and out of Australia, along with the spread of free-market capitalism to essentially every country around the world (Soros,1998).
Social Impact
From a sociological standpoint, globalization symbolises the distributing and exchange of beliefs, ideas and values along with human rights, working conditions and consumer protection issues.
Legal Impact
From a legal viewpoint, globalization signifies the rules and regulations of organisations and companies, one being World Trade Organisation (WTO). From a political standpoint, globalization represents the international relationship and Multilateral trade agreements with the removal of trade barriers between economic communities and individual countries. (George R Najjar, N/D)

Technology, Human and Material ResourcesGlobalisation has a major influence on the growth of the Australian construction industry through its access to technology, materials and human resources. As stated by Darwish (2012), Globalisation allows companies a wider range of access in construction markets, which in turn allows for more direct competition. This diversifies the market bringing in a range of options, which in turn, forces competitive prices amongst suppliers offering builders the best value for money.
Companies in Australia must adapt the operations of their business to adjust with the evolving market and new technologies and resources being offered on the market in order to remain competitive with larger companies around them. Abbasi (2004) wrote that Globalisation has added international and global awareness to certain issues like information technology and telecommunications and has encouraged local and economic development within Australia. Globalisation has allowed for information and communication technologies to lead a free trade and improved market economy to “attract new investments, create more jobs, improving productivity, reducing the number of people living in poverty, and led to general economic growth” (Ghesquiere 2004).
The access to globalised technologies, materials and labour promotes competition between suppliers and a progression in world trade, overall, reducing costs of goods and services. Just like other industry sectors, the Australian construction industry isn’t static. With the evolution of technologies, practices and markets, they bring about emerged opportunities for companies with insight, imagination and resources to capitalise innovative methods of building.
Caterpillar Incorporated is a brand of construction and mining machinery which has helped revolutionise the access Australia has to such technology. It has provided access to machinery such as Excavators, Bulldozers and Wheel Loaders. The access to this machinery Australia has provides opportunities to minimise construction programme times with the use of this machinery completing earth works much quicker and efficiently.
Along with the benefits that internationally sourced machinery technology has brought to the Australian Construction Industry, access to electrical fittings is another example of materials that have been sourced from overseas. By establishing warehouses in countries such as India, companies like Philips have access to cheaper labour and cheaper operation costs. By reducing preliminaries costs and human resources costs, they are able to produce their electrical fittings at much lower prices than they can in countries like Australia and America. Philips can then be competitive within the Australian market offering builders and suppliers fittings much cheaper than companies operating within Australia can due to their higher expenses leading to higher sales prices.
Another example of materials sourced from overseas are aluminium doors and windows. For the same principal as the light fittings, the aluminium doors and windows can be manufactured much cheaper in China than they can in Australia. This being a large package tendered on projects, it is a major cost saving to purchase these doors and windows from companies who have the material manufactured overseas and can afford to supply and install them at cheaper rates. This also creates competitive rates between subcontractors offering builders the best price on their tenders.
The Department of Economic Development, Jobs, Transport & Resources Victoria published that changes in the construction industry are being driven by a wide range of aspects including:
Efficiencies resulting from new production methods
Demands for better environmental performance, including for existing building stock
Expectations of higher safety levels
Rapid advances in information technology applications
Changing demographics bringing new consumer preferences
The ongoing search for new ways to contain costs and minimise construction times.
When adopting new techniques utilised globally, this will create new trading opportunities for businesses. This can have a negative effect on local suppliers through off-shore competition. By sourcing off-shore construction materials for cheaper prices, this puts pressure on local Australian suppliers as they endure reduced sales and a forced to either lower their sales prices or reduce the quality of their resources.
The Victorian Government have developed three focal strategies that they have implemented which has significant potential in developing the Victorian economy in its construction works including:
Digital technologies offer building companies new methods of planning, modelling and managing construction processes, infrastructures, buildings and assets. Solutions and applications of construction technologies have substantial development potential which can cultivate a legion of innovative digital technology firms through the support of connection development with the construction industry, Information Technology sector and sources of capital. The greatest scale impact, however, is mostly evident through effective application of BIM through the provision of digital technology.
Firms in Victoria hold a national leadership in off site construction technologies. There is a rapidly growing interest in off site construction, such as in manufacturing plants, and is transforming the construction industry. This engenders a network of organisations to develop into Australian and offshore markets.
Sourcing new building materials and products creates a potential for shortening construction programmes while maintaining efficient and effective environmental, cost, and quality benefits. When sourcing this material internationally, it is essential to ensure that they meet Australian Standards to assure safety and quality in structural, fire and acoustic ratings.
The implementation of Globalisation has opened up new market opportunities for companies to sell products and identify new suppliers in. The advancement of information and communication technology has developed an ability for companies to globalise their productions and have greater access to new markets. Fredriksson (2011) reported that supplier and customer markets have become more global and have forced companies to consider restructuring their supply chains to take advantage of opportunities in terms of costs, competence, etc. at different locations. Taking advantage of these opportunities can be in the form of outsourcing parts or all of the production to overseas suppliers and manufacturers.
By outsourcing production, this involves adapting from inhouse material supply to a purchase of the material from an international supplier. Production outsourcing can then lead to a disadvantaged material supply if delivery reliability, lead times and product quality are not effectively managed. If properly managed, production outsourcing can help lower costs of material purchased in Australia and can help reduce construction programme time where international countries can provide a finished material quicker. Fredriksson (2011) also reported that one way to take advantage of opportunities in other locations is to redesign the value adding chain by outsourcing parts of the production to suppliers.
Effectively, construction companies, manufacturers and suppliers in Australia are able to achieve cost reduction strategic goals by outsourcing the manufacture of their products in low-cost countries, for example within Asia. This reduces costs on the supply of raw materials to make that final product, reduces costs through the use of cheaper labour and reduces costs of warehouse and machinery hire/purchase. This then allows construction companies and suppliers to focus their resources on the core goals of their business. By outsourcing parts of manufacture and material supply to a more skilled and cheaper globalised market, it will increase the efficiency of the Australian companies to continue with their strengths of their business rather than reducing cost maximisation by wasting money and time producing in Australia if it is not their strength.
Future Effects of Globalisation

Graph: Flows of Goods, Services and Finance 1980-2014
According to the Australian Trade and Investment Commission, the McKinsey Global Institute (MGI) report on Globalisation within Australia articulates the graph above and summarises that since the repercussion of the Global Financial Crisis in 2007, conventional Globalisation (measuring cross border drifts of trade of goods, services and finance assets) appears to have stalled. Thirlwell 2016 summarises that the stall occurred:
After peaking at 26.6 per cent of world GDP in 2007, international trade in goods had fallen to 24.6 per cent of GDP by 2014;
Cross-border financial flows reached 21 per cent of global GDP in 2007 but have since plummeted to only seven per cent of GDP as of 2014;
Trade in global services has actually continued to grow as a share of world GDP, but at just 6.3 per cent of world output in 2014 remains much smaller than trade in goods or financial assets.
As a final result, the share of world output measured a combined value cross border traditional flows in 2014 to be 14% below the point of pre crisis peak in 2007. Globalisation within the Australian Construction market has been severely damaged since the Global Financial Crisis and has shown a slow increase since the fall. However, Thirlwell 2016 reports that “there is a contrast of the loss of momentum in goods and financial flows with a huge surge in cross-border flows of data and the expansion of a digital web of international connectivity.” This shows that the increase in Information and Communication Technologies across the globe is the key to the regrowth of the Australian Construction Market.
The Impacts of Globalisation
There are several impacts of globalisation that have an effect on the construction industry in Australia which include social, political and environmental impacts. These globalisation factors possess many pros and cons that significantly contribute to the overall effectiveness of construction projects. Also, it is recognised that Australia is one of the countries to have benefited from the impacts of globalisation.
Social Impacts
There are many social aspects of globalisation that have an effect on the construction industry in Australia. The social perspective of globalisation represents diverse culture through expressing beliefs and values, sharing and exchange of ideas as well as safety and wellbeing of workers, working conditions and human rights (Swirk n.d).
Construction sites in Australia employ people from diverse cultural backgrounds allowing them to provide their knowledge and experience in practice and opportunities to develop a variety of skills. Many Australians will become aware and more understanding of what other cultures contribute to construction, making it more diverse in the construction industry. There are implications that result from effective management of cultural diversity that include productivity, welfare, health and safety of construction workers. A survey of 1150 site operatives in Australia found that 57% of people spoke a language other than English at home, 54% were born overseas and 70% worked on construction sites overseas. These cultural differences play a major role in shaping workers’ perceptions of others making the construction industry a diverse workforce improving the quality and wellbeing of workers and enhancing the built environment (Loosemore 2012).
A survey was conducted to explore the attitudes and social wellbeing of cultural diversity of construction workers in the Australian construction industry. The survey also demonstrated the challenges posed of cultural differences and the strategies with cultural diversity on Australian construction sites. This survey found that majority of construction workers are able to interact efficiently with different ethnicities both socially and work-related activities, demonstrating effective cultural interaction on construction sites. This cultural interaction will benefit workers with a positive relationship with opportunities to grow through developing skills and knowledge in the Australian construction industry.
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Table: Survey of construction operatives of different cultures.
Additionally, many Australian companies established key performance indicators (KPI’s) that enables them to successfully track, monitor and record the effectiveness of cultural diversity implemented on construction sites. KPI’s demonstrated the effectiveness of diverse cultures in varying working conditions in the development and maintenance of construction buildings.
Moreover, a major challenge on Australian construction sites was communication problems due to language barriers that impacted on the social relations between diverse cultures and work-based activities. Low English proficiency is a major concern in construction because different cultures do not agree on the same terms and not able to understand the activities that need to be completed, resulting in poor workflow efficiency and productivity. Also, safety implications due to language barriers were raised because workers of different culture may not be able to read safety notices in English that is highly important for the safety and wellbeing of workers on site.
Conclusively, the social impact of globalisation has considerable effect on the Australian construction industry which explore the attitudes and values of culturally diverse workers. The implementation of strategies to effectively manage challenges is important for the social and work-based wellbeing and safety of workers.
Environmental Impacts
It is critical to consider the environmental impacts of globalisation and its effects on the construction industry in Australia. Each stage of the construction process has the potential to possess environmental impacts on construction sites. This involves direct impacts such as water pollution on building sites, waste management issues, materials, energy and toxic chemicals (Tyler 2017). Due to a rapidly developing construction industry in Australia, it is important to consider the environmental impacts on projects and to effectively reduce the impact for future development.
The aforementioned direct impacts can result in greenhouse gas emissions and other waste products that pollute the air and contribute to the effect of global climate change. There is a growing trend for materials and resource use in Australia that influences the environmental impact in the construction industry. This level of environmental impact is determined by the way in which materials are processed. An example is the harvesting of timber material for construction using native forests which can impact the habitat of species (Australian Bureau of Statistics 2003).
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Table: Composition of waste in Australia.
The construction and demolition of buildings in Australia contributes to 40% of waste which goes to landfill. This could be used for more important purposes, however this can result in environmental implications such as greenhouse gas emissions, depletion of natural resources and energy wastage for production of materials. During the construction process, the water can be polluted and even once construction is completed the water quality can still cause issues. This is due to an increase in demand for water supply, therefore increasing pollution due to an increasing population.
It is important that these environmental impacts are carefully considered to minimise environmental impact on the construction industry. According to Nichols (2016) states that to successfully reduce greenhouse gas emissions, implementing cool or green roofs can reduce emissions or the use of landscaping plants on roofs on a construction project. Additionally, the process of developing a passive design for a building using natural resources is essential to minimise the impact of waste of excess material. It is pivotal to consider the environmental impact of future and long-term impact of construction. The development of solar energy is essential for heating water and powering a home.
How Has Globalisation Allowed For The Australian Economy To Grow?Globalisation has played a major impact on the way it has changed and redeveloped the Australian economy which ultimately allowed it to grow into the thriving economy it is today. One of the major industries in the Australian economy that has been greatly affected by globalisation is the construction industry. There are many ways that globalisation has affected the Australian economy and more specifically the construction industry. The main factors that have changed the construction industry through globalisation are technological advances, import/export of materials, development methods and an increase in overseas investors.
Technological advances have changed the way the construction industry operates dramatically. The advances in technology has increased efficiency on construction sites for easier transportation of materials, or better tools to create ease with specific tasks. The advances in technology do not only apply to the on-site aspects of construction, however also have changed the way off site management has been conducted. More specifically it relates to the development of the internet and programs that allow the principal to easily contact the stakeholders and pass on information in only seconds. Such programs include emails, computers/tablets/laptops all of which allow for the same work to be conducted whether on the move or in the office, and specialised construction programs where correspondence, all site documents, plans and contacts are all stored on a cloud allowing access to all relevant people.
Import/Export Of Materials
Globalisation has dramatically changed the way materials in the construction industry are imported and exported. Globalisation has allowed for countries all around the world to benefit from each other’s building resources and innovative construction materials. Globalisation has allowed it to become easily accessible through easier and more efficient transportation methods such as cargo ships and planes. Combine this with the ease of accessing and ordering the supplies, it has created increased efficiency as there is very rarely a lack of supplies.
Development Methods
Globalisation has brought along ease of countries working together to develop or redefine different methods of development. Whether it be the use of new and innovative construction materials and systems, to innovative construction methods. Having the ability to keep up with the rest of the world has proven to benefit Australia’s construction industry which ultimately increases the economy as a result.
Increase In Overseas Investors
One of the major factors that has tremendously boosted the construction industry in Australia is the major interest in foreign investors, predominantly from Asia. These foreign investors have contributed to a large number of the developments that occur in Australia through their direct interest in what Australia has put on offer for these investors. Thanks to globalisation, these foreign investors have been able to access the Australian market, which in turn increased the number of developments. This has led to increased jobs for Australians in the construction industry and boosted the economy, all while strengthening the relations with other countries
GDP

Graph: Australian GDP From Construction
The table above indicates the GDP produced from construction in the Australian economy over the past 10 years. In 2008 when the global financial crisis was in full effect the construction industry was at a rather low point, producing around 26 billion dollars. The graph evidences that over the next few years it has experienced a steep climb, eventually reaching approximately 34 billion dollars in 2014. This would not have been possible without globalisation as the connection with the rest of the world helped rejuvenate the construction industry.
Advantages
Empowerment To BusinessesGlobalisation has affected businesses both big and small giving them greater empowerment in terms of operation. It has allowed businesses the power to work the same way whether large or small because it has made the same resources, methods and materials to be accessible to all businesses.
Offers A Larger Market For BusinessesBusinesses have been offered a larger market through globalisation. For example, the increased interest in overseas investors has allowed building companies to have a market outside of Australia. This has helped businesses who have made agreements with these investors as they continuously provide ongoing projects on a regular basis.
New Innovation To The Construction MarketNew innovation in the construction market is an advantage for businesses and the Australian economy. This is because businesses and developers have been coming across many different methods and materials that have had major success overseas and implementing them in the saturnalian construction industry. Without globalisation this would have not been possible
Financial DevelopmentsFinancial developments in the construction industry has greatly increased due to globalisation. As evidenced through the GDP for the construction industry in Australia, globalisation has assisted in the boom of the construction industry over the past 10 years, thus increasing the financial capacity.
Disadvantages
Reducing Job OpportunitiesThere will always be some form of disadvantages that will come as a result of the construction industry. One of the main disadvantages is the reduction in job opportunities. This is a direct result of the increase in new technologies that are being rolled out and used in the construction industry, which have resulted in machinery taking over some of the tasks that are usually conducted by skilled professionals.
Limiting Work MarketsLimiting work markets is another disadvantage, this is because majority of businesses are working to keep up with the new trends in the construction industry, thus limiting the markets of old, which were once thriving in the Australian construction industry.
Gathering The Right Resources Is Not PreciseFathering resources from overseas can be a major disadvantage if it that product or work method has not been trialled and tested to suit the Australian standards. Basically, if a product is sourced from an overseas supplier via the use of brochures and emails, it is hard to determine whether the resource sourced is of Australian standards, and taking that risk may be very costly.
Organisational ChangeAs globalisation grows throughout the Australian, there has been a dramatic increase in the changes that companies make to implement the supply that the global market can have on the design and manufacturing of the construction industry (Ilahi, R 2018). Throughout all Australian industries, particularly for construction, there has been a persistent urge to minimise the overall expenses when both producing and manufacturing buildings (Construction Executive 2014). This has led companies to create various management strategies to make organisational change throughout the construction industry (Raftery, J. et. all 2010). Two of these strategies include outsourcing and economies of scale, where companies subcontract non-core activities to specialists globally, allowing the companies to consolidate and acquire the operations of other businesses globally, who produce similar or likeminded products (Ilahi, R 2018). For both of these strategies, Australian based companies have the access and the ability to reach across the national borders to complete the required work.
OutsourcingOutsourcing is the practise of having certain jobs and/or activities to be completed outside of a company, rather than having an in-house department or employee handle them (Heaney 2018). Outsourcing can be considered as having a subcontractor either locally within Australia, or on a global scale to complete the task. As globalisation has grown, there has been a large increase in the companies that have been outsourcing goods, materials and activities to international companies.
Outsourcing ImpactsThe outsourcing of materials and goods by companies within Australia has in recent years shown the vast impacts that resulted from globalisation growing.
Since outsourcing allows companies to redirect certain jobs to international suppliers, it allows Australian companies to become more efficient. This is a result of the companies giving certain work or activities which can not be accomplished in-house, whether it be too hard to complete, faster to complete elsewhere, not have access to certain materials or cheaper to source internationally (Chris 2015). It allows this work to be completed by companies overseas who are specialised in the field, and have the tools, technology and accessibility to complete the jobs correctly and quickly (Patel 2017). Allowing both quality and efficiency to be dramatically improved.
When a company choses to outsource the materials, goods and technology to international sources, it allows a company to manage upcoming costs well, while also minimising internal labour costs. That is, activities that should be completed on the job will be completed in a factory overseas where the materials and labour comes at a package, and tends to often be discounted (Patel 2017). This means that the budgeting for labour costs on site will be deducted dramatically as that task will no longer be required, other than for the installation of the works. Companies will know from early on if they are choosing to outsource materials globally, allowing them to allocate a budget for those works, improving their cost control (Chris 2015).
The biggest negative impact that outsourcing has on the construction industry within Australia is that it results in job losses nation-wide (Heaney 2018). 53% of manufacturing companies took advantage of the growth of globalisation, allowing them to outsource tasks, to improve their efficiency and cost management (Ayers Group 2014). This resulted in millions of people becoming unemployed as a result. That being said, as there are many positive impacts of outsourcing materials, it will result in less jobs being available within Australia in the construction industry.
There is a common impact that companies can begin to exploit third-world labourers when outsourcing materials and goods from them. That is, companies can try to push them to go cheaper to complete jobs, which can ultimately push third-world labourers to be completing works at an unfair rate (Chris 2015)..
Economies of ScaleGlobalisation allows materials and goods to be produced in different parts of the world, allowing companies to achieve economies of scale. An economy of scale is a proportionate saving in costs gained by an increased level of production. That is, there is a decrease in the average cost per unit due to an increase in the absolute volume of an order (Pettinger 2017).
Economies of Scale ImpactsThere are numerous impacts that economies of scale have on the construction industry for Australia, both positive and negative.
Companies who are large enough, that they can require various materials and goods to be producing internationally are at a great advantage incorporating economies of scale into their construction process. Companies can consequently grow bigger than they were previously. This is a result of the company having access to more materials, goods and technology that other companies within Australia don’t have access to. This could be that they are sourcing their materials from countries which are more advanced, or more specialised in that particular field, making parts of their construction be exclusive to the company in Australia.
The costs of building will ultimately be reduced, if purchasing in bulk. If a company is large enough that they can supply materials to not only one house, but numerous construction properties, they can purchase materials for all the jobs by purchasing in bulk, which will allow the company to receive bulk discounts from their suppliers (Pettinger 2017). Ultimately allowing the company to raise profitability. As globalisation spreads labour to a global scale, companies can export labour and production processes that are less profitable and instead, learn to specialise in labour that is more profitable on site (Akers 2018).
Efficiency within the construction of projects will also be improved dramatically, as particular activities or jobs for the structure can be completed internationally and will not have to be managed on site (Pettinger 2017). This can minimise the hazard and injury potential on the job, as fewer people will be working on site. It also allows other jobs to be commenced, which don’t rely on the inclusion of that item, allowing more activities to commence at the same time. Project managers can also schedule activities to work on and around the time which materials will be brought onto the site. With a larger scale of production, companies can focus on improving their organisational skills to their resources, whilst also improving the techniques for production and distribution (Pettinger 2017).
The most common negative impact is that businesses don’t fully understand economies of scale, and its likeliness of upsurging (Weir 2016). This results in a diseconomy of scale, which is a cost disadvantage that a company can accrue due to an increase in the companies’ size or output, resulting in an increase in the per-unit costs of all materials and items (Metcalf 2018). That is, there is a maximum amount of output that can be achieved a company with its access to labour, materials and so on, however if a company grows, it will ultimately result in the company having to increase the labour and materials to allow an efficient amount of input to be achieved to satisfy its rising market (Metcalf 2018). However, this does result in foods and services having an increased per-unit cost, which can set Australian companies who are outsourcing to have to encounter unforeseen price increases and ultimately leaving them with a unachievable techniques used within the building if they are unable to acquire this increased cost (Metcalf 2018).
Another negative impact is that small businesses within Australia who are competing domestically with companies that are using materials and technology from overseas, will ultimately be affected negatively (Weir 2016). That is, smaller businesses are limited to the materials and technology that is available to them within Australia, as they will ultimately be at a disadvantage if opting out to purchasing materials from International suppliers, as they will not be able to receive discounts for purchasing for a “one-off” order, as larger companies often would. There is also a high chance that bigger companies within Australia will be able to offer cheaper building rates, as they have access to cheaper materials, which can result in fewer clients building with the smaller business, who will consequently have a higher construction price.
ConclusionIn conclusion, the in-depth study of this report has provided a precise analysis and evaluation of what Globalisation is and the effects it has had on the construction in Australia. In analysing this, it explored topics such as the economic, social and environmental impacts it has had on the Australian construction market. It also discussed the access to technology, human and material resources and the positive impacts it has offered to the market and the predicted future path it may take. It is clearly evident that Globalisation has impacted the Australian Construction Industry in various ways but can be concluded that it has brought great positive impact in improving the market with the access it has to globalised sources.

 

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