Page 1: Understanding the external environment
Corus examined its construction strategy in light of the external environment, to identify future market needs. By linking Corus competencies and technical knowledge to future market needs, Corus aims to develop products that give the company a competitive advantage in construction.
PEST analysis is a powerful tool that can be used to help analyse the external construction environment. This analysis involves examining the current situation with regard to the following factors:
- Political - UK Government policy and EU directives, for example, planning and environmental issues including sustainability affect the construction industry.
- Economic - The health of the economy and interest rates affect demand for commercial and residential property. The UK government is using taxation as a means to encourage improving environmental performance e.g. The Climate Change Levy, Aggregates and Landfill taxes. The construction industry is increasingly interested in whole life costs of the building, which includes initial capital costs, operating and maintenance costs - understanding how better design can improve all these costs.
- Social - Changes in the birth/divorce rates and the average number of people living in a household affect the demand for housing. Increasing crime, ageing population, and people's well-being are part of the social dimension - research shows that the highest number of disagreements amongst neighbours is due to car parking.
- Technology - New construction technologies affect working practices in the building industry, constructing more component systems in factories rather than on the building site.
PEST analysis can be extended to SLEPT through the addition of Legal factors including legislation that regulates industry. This is further extended to consider environmental factors known as PESTLE.
- Legislation - The UK and European governments believe the construction industry is highly fragmented and the only way to improve the performance of the industry in terms of safety and environmental performance is to increase legislation.
- Environmental - Two of the main issues here are meeting the Kyoto Agreement in production of Carbon Dioxide from the burning of fossil fuels and waste going to land fill.
Note: When using PESTLE as a tool for analysis it is possible to get overlap between an issue which can be put into two sections. What is more important here is to identify the changes and understand how those changes will impact on the construction industry.
The factors identified in the analysis are concerned with the current situation. However, to get first mover advantage it is essential to plan for the future through forecasting events over the next 20 years using the factors from the PESTLE analysis.
This is partly due to the need to have accreditation for products. This is a testing regime carried out by an independent body against relevant British/International standards and building regulations. On successful outcomes of the tests, a performance certification is issued for the specific product in the specific application - generally stating structural, fire, acoustic, thermal and durability performance of the product.
This is important as the Construction industry is generally very conservative and hence, to introduce a new product, it is essential to have third party validation that the product will perform as the manufacturer states. Achieving this accreditation can take up to a couple of years to get, and it then takes a substantial amount of time to develop the product for today's construction industry.
The process of forecasting future events is known as Road Mapping to Corus. It allows Corus to understand changes in PESTLE factors over time, identify how these affect the construction industry and link product developments to these changes. Road Mapping allows Corus to identify market opportunities, develop products to meet these and identify which existing technologies can manufacture them.