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.
Conclusions from the analysis of the external environment
A sustainable building is one that limits energy use and scarce resources. This is vital because 26% of the UK’s energy use is linked to heating buildings.
- Governments will use building regulations and planning permission controls to meet the Kyoto protocol.
- Outer town developments will be restricted in favour of inner city developments including brownfield sites.
- There will be a shortage of housing as demand increases because of more households and increased life expectancy.
- Land will be increasingly scarce and therefore expensive especially in the South-East so it will have to accommodate more people per acre, through dense development.
- As car ownership increases, there will be a 50% increase in car journeys.
Sustainability
Sustainability was a key theme in Corus’ analysis of the external environment. In 1987 the Bruntland Commission defined sustainable development as ‘meeting the needs of the present without compromising the ability of future generations to meet their own needs’.
Most of the energy we consume – whether it is the petrol for cars or the gas that heats our houses – comes from non-renewable resources like coal, oil and gas. The reduction in energy use is, therefore, a key objective of Government’s.
As well as a cost to the environment, energy has a cost to those who buy it, and it makes good sense to reduce usage from both these perspectives. Fuel poverty affects between 4 to 6 million people of the population in the UK, this is not due to fuel being too expensive, but because they live in accommodation which has poor thermal insulation.
Efficient use of resources including energy is paramount during the life of a building. Buildings start off as raw materials like glass, which is used to manufacture components like windows. These are then assembled into systems like facades, which are constructed to form buildings. At the end of a building’s life the sustainable loop describes how the product life can be extended.
Corus is aiming to develop solutions that, as well as being resource efficient, have a flexible and adaptable design. This means that the usage of a building can be adapted internally without altering the structure or exterior of the building (re-use). It is not possible to do this with a building whose internal walls support/act as the structure and support the floors. It is much more difficult to achieve this without major modifications.
Aims, objectives and adding value
Working from its conclusions Corus has set out what it wants to achieve in a vision for sustainable construction.
‘Corus aims to create valued added products and services to promote steel intensive commercially viable buildings. Through advanced design and technology we will improve the quality of life in society whilst enhancing the life-cycle credentials of the built environment.’
Corus regards it as important for all staff to know the direction towards which they should be going, and vision statements are used as an effective way of communicating this.
Added value is a key part of this vision statement. Corus’ potential customers in the construction sector include businesses which own offices and other commercial property. These customers want, like Corus, to increase profit and therefore returns to shareholders. They can do this by:
- extending the life of the building so they can earn revenue from it longer. The average life of a commercial property is currently only 20 years
- reducing the costs incurred over the life of the building especially energy costs
- earning more revenue from a workforce which is more content because of a better working environment.
Corus is developing solutions to add value for customers by helping them in all these three areas.
By examining the energy costs incurred over the life of an office block and its environmental impacts, Corus has identified larger opportunities for saving costs. This understanding will hopefully provide Corus with a competitive advantage. Corus is also trying to concentrate on solutions for reducing energy impacts during the ‘use’ phase of the life-cycle.
Products and solutions from Corus
This section explains two of the product areas where Corus is developing systems in response to the findings of the external analysis.
Residential solutions
Steel frames for homes and modular residential systems for flats, constructed off-site in a controlled environment to precise specifications (reducing waste), ensuring improved insulation (reducing energy consumption) and air tightness (reducing energy loss). These homes are being produced to the highest comfort and energy efficiency standards that traditional building technology struggles to achieve.
Modular railways platforms
Rail traffic is growing, passenger numbers increased by 30 in the last 5 years. The number of trains increased by 20 but the network is congested and needs to be used more efficiently as mass transit is more environmentally friendly than cars.
To raise capacity on the rail network, the train operating companies are planning to introduce longer trains. However, many station platforms on the existing rail network are too short, resulting in travellers having to walk down the carriage to exit the train.
Corus has developed a system for the rapid construction of new/extended platforms. This allows for the implementation of the longer trains and does not tie up the track for long periods whilst the platform is being installed.
Conclusion
By examining trends in the wider (macro) environment it is possible to identify product and market opportunities.
The need for sustainable construction presents many opportunities for Corus to add value, and develop a competitive advantage.
Using PESTLE analysis is an excellent tool to examine the macro environment and by linking this tool with future trends it is possible to develop products for future opportunities.