CHALLENGES BETWEEN LOCAL AND FOREIGN ORGANIZATION COMPETING IN THE MALAYSIA CONSTRUCTION INDUSTRY

from CHALLENGES BETWEEN LOCAL AND FOREIGN ORGANIZATION COMPETING IN THE MALAYSIA CONSTRUCTION INDUSTRY

CHALLENGES BETWEEN LOCAL AND FOREIGN ORGANISATIONSCOMPETING IN THE MALAYSIAN CONSTRUCTION INDUSTRY.

Norzaihan Binti Mad ZinFaculty of Architecture, Planning and Surveying, Universiti Teknologi MARA (UiTM) Shah Alam,Selangor, Malaysia.

Abstract

The world construction industry had to face massive globalization and liberalization in where it opens for inflows of a foreign company into the certain countries. Malaysia was one of the countries that witnessed a lot of foreign-own companies participating in the nation's development. This somehow has created a prolonged challenge for the local organization in competing with a foreign organization. Competitiveness has been studied widely by previous researchers and practitioners. However, there is still lacking study to relate to the effectiveness of the organization management in overcoming the challenges. Thus, this study aims to identify the challenges facing by the local construction organization due to the competitiveness contribute by the foreign firms in the local construction industry focusing on the management style in the organization. This study was measured through extensive literature review and a structured interview with expertise in regards to their involvement with both local and foreign organization management. Through data analysis, it is found that lacking managerial capabilities and technological advances has contributed to the gap. Suggestions and recommendations are given to improve the organization management to tackle the market competitiveness.

Keywords: Competitiveness, Globalization industry, Foreign Organization, Managerial skills,Project Management.

1.0 INTRODUCTION

Globalization in the construction industry has open more development and trade opportunity which it significantly helps in economic growth. Malaysia was one of the countries that positively impact by this globalization and liberalization especially in the construction industry. Malaysia's government had signed free trade agreements (FTA) as the result of this process (Ab Rani et.al, 2018). In general, the globalization of the construction industry had brought major impacts to our local industry on the factors of productivity, employment creation and managerial capabilities, and upgrading technology. As of today, foreign direct investment (FDI) had encouraged the inflow of advanced technology for the production and manufacture industry, and also increasing of the foreign-owned firms which practicing their input towards our local industry. On the other hand, this scenario seems to cause more competitiveness in the national economy. However, this will increase the productivity, improve knowledge of management and local companies whereases at the same it helps to increase the efficiency in dealing with foreign developers (Salim et.al, 2018).

2.0 RESEARCH PROBLEM OVERVIEW The increasing involvement of the foreign company in the Malaysian construction industry has changed the local perspective throughout the impact on the project successes, reputation, and quality. This somehow has invoked a great challenge to the local contractors where the evaluation on the selected contractors to be awarded for the project currently not only focusing on the cost and time but also stressing on the productivity level of the company too. As stated in Ofori (2000), many developing countries facing a limitation on their local company capability to undertake certain socio-economic development probably due to the complexity of the projects, owing to the size and specialization. This has become one of the main factors of increasing foreign participation in the local construction industry. Thus, this research was to identify the impact on the organization's productivity to the industry competitiveness.

3.0 RESEARCH OBJECTIVES

This study aims to identify the challenges facing by the local construction organization due to the competitiveness contribute by the foreign firms in the local construction industry focusing on the management style in the organization. The aim is supported by the objectives listed below:

To study the management differences between the local and foreign organizations.

ii.

To study the impact of the foreign professionals towards the local professional in the

construction organization.

4.0 LITERATURE REVIEW

Globalization

The current industry landscape has changed in conjunction with global economic growth. Every country including Malaysia believes that in sustaining the local economic growth, internationalism will boost the efforts instead of just relying on the local industry contribution only. Malaysia is well known as a favorite destination for FDI (Ariff & Lopez,2007) probably due to its strategic location right in the middle of the ASEAN country and respect due to its reputation as the most aggressive developed country in ASEAN. Kossof (2016) has highlighted that foreign companies are often attractive to be involved in Malaysian construction projects due to its steady and high economic growth and also offers a stable political and legal environment compared to other ASEAN countries. This scenario has led to competitiveness among the foreign company to be a part of certain country development. According to Orozco, Serpell, and Molenaar (2011), it is found that through previous construction industry bidding process, contractors had to compete only against three or four companies between local contractors, however now they need to compete against ten or more companies consisting from both local and foreign-own firm due to the impact of the globalization. Looking at the positive way, globalization of the Malaysian construction industry could be an event that invokes awareness among the local contractors or companies on their capability. As cited in Ofori (2000), this globalization and deregulation of markets are obligated by fiscal technological, and managerial constraints. Table 1 shows the summarize of the advantage and disadvantages of globalization:

Table 1: Summarize on Globalization Industries in Developing Countries 1

Competitiveness

Varies definitions of “competitiveness” can be found from the previously conducted researches and published journals. Henricsson et.al, (2004) defined “competitiveness” as an aggressive willingness to compete between two or more parties. Meanwhile, Lall (2001) stated that competitiveness depends on many things that can spark determination, where it may contribute by the skills of the workforce at all levels. He also added that skills and competitiveness were related and how this can contribute to the developing countries, wherein our research we can relate it to the competition in getting a certain project. As stated by Ozorhon, Kus & Caglayan (2020), construction is an industry where it is necessary and beneficial to conduct competitive analysis and from their research had found that three factors contribute to the competitiveness of the contractors, which are (i) effectiveness of strategies, (ii) organizational capabilities, and (iii) managerial capabilities. In conjunction with these, several researchers have come out with a similar recommendation in regards to competitiveness. Table 2 shows the extract quotation from the previous literature review:

Ofori, G. (2000, November). Challenges of construction industries in developing countries: Lessons from various countries. In 2nd international conference on construction in developing countries: challenges facing the construction industry in developing countries, Gaborone, November (Vol. 5, No. 24, pp. 15-17).

Table 2: Recommendation on The Competitiveness in Construction IndustryNo. Items References

1 “It is necessary to recognize and subsequently plan for crucial factors for enhancing the construction competitiveness.”

2 “Strategies employed by a firm serve as a tool to achieve firm’s goal and sustain its competitive advantage.”

3 “It is suggested that local contractors in the Malaysian construction must also take significant action to secure their position in competing with foreign contractors and even amongst the local contractors.”

Azeem et al. (2020)

Ozorhon et al. (2020)

Ab Rani et al. (2018)

2.0 RESEARCH METHODOLOGY

This study was involving evaluation and analyses of the data collected through qualitative approaches by method Structured interview with one (1) Project Manager and one (1) Design Head Department in comparison on their experienced working in both local and foreign organizations. The structured interview was conducted to gain the answer to the following objectives (i) to study the management differences between the local and foreign organizations and (ii) to study the impact of the foreign professionals on the local professional in the construction organization. The process of drafting the interview question is based on the literature review conducted earlier. Structured interview question has been distributed in advance to the respondents for their better understanding on this research purpose for them to prepare a clearer and relevant answer. The results were then been summarize and compile in tabulated form for an easier analysis process. A more scientific data analysis will be conducted by using Atlas-ti 9 software to provide the reader a better understanding. The overall flow of this research is shown in Figure 1.

Figure 1: Methodology of The Research

As shown in Figure 1, the interview questions were draft out to focus on the management style adopted in the organization. This is because most of the previous research conducted had found that lacking in organization management had become one of the main barriers for the local company to compete with the foreign organization. Thus, the question is highlighting on the differences in management style between the local and foreign company which covering on elements of managerial capabilities, organization environment, technology enhancement, and human resource capabilities.

3.0 FINDINGS AND DISCUSSION

The purpose of this study is to identify the challenges facing by the local construction organization due to the competitiveness contribute by the foreign firms in the local construction industry focusing on the management style in the organization. According to Zainol et al. (2014), one company needs to have stable operation management and get full support from every personnel. Thus, this has supported the relevance of the survey conducted by the researcher as shown in Figure 1. On the other hand, Yong & Mustaffa (2017) conclude that there are eight (8) factors contributing to critical success factors (CSF) among Malaysian contractors which stated in Table 3:

Table 3: Study on Critical Success Factors among Malaysian Contractors 2

In Table 3 above, the highlighted yellow are embracing the factors in organization management which indirectly affect their ability to attain increased competitiveness in this construction industry.

3.1 Results from Structured Interview

The results from the structured interview were documented and import into Atlas-ti 9 for analysis purposes. Several ‘codes’ have been established in Atlas-ti 9 based on the input received from the previous literature review conducted and had been assign to the interview documents uploaded. The total times of the ‘codes’ to be assigned on the selected quotation in the documents will create a ‘density’ which shows the importance and the relevance of the ‘codes’ to the research subject matter. The overall connection on the ‘codes’ will then create a networking map as shown in Figure 2 below:

Yong, Y. C., & Mustaffa, N. E. (2017). Critical success factors for Malaysian construction projects: an investigative review. International Journal of Built Environment and Sustainability, 4(2).

Figure 2: Atlas-ti 9 Networking Map on Effectiveness Organization Management

Figure 2 shows the complexity of the organization management with establishing the three main components for effective organization management which relatively contribute to the challenges between local and foreign organizations. From the figure above we can see the critical path fall under ‘Managerial Capabilities’ where it become one of the factors to ensure the quality of the projects and organization. Quality control has become the main criteria in assessing the success of certain projects, and our local construction industry is very well known for common delaying projects and cost issues. Meanwhile for foreign organizations, they technically already developed a method to minimize the disputes by adapting numerous innovations into their construction management practices either for project management or organization management. Our local professional is still lacking in term of managerial capabilities where it limits them to explore their skills. This has support from the respondent's answer where both has high votes on the question:

Figure 3: Respondents answer

This has shown, our local professional is still depending on the expertise or superior in the decision-making process. Project management required every single team player to be participated instead of throwing the ball to the project manager or high manager level to get provide the solution. This is again related to the ‘Skills’ abilities among the organization member. To achieve a successful project or unlock the competition, one needs to have relevant skills in their respective field. While in the foreign organization, they encouraged their employee on knowledge upgrading or knowledge transfer.

Advances in technology had become merit to any organization to boost out their productivity and to be more outstanding among other industry players. For example, according to the CIDB roadmap on IBS implementation and BIM adaptation as enforcing by JKR in the local construction industry, the initial milestone targets these two innovations to be achieved by the year 2020. However, due to various reasons such as required mentality changes among the construction company on IBS implementation, and lacking adaptation or training on using BIM in project management which both are very effective in solving the cost and timeline issues in the construction project. This has only allowed more opportunity for a foreign company who already been practicing these technologies in their origin country and due to their financial capabilities, there manage to convince the stakeholders to secure their position in most of the major development project in Malaysia. No doubt this also has been acknowledged by the respondents in their answer as been summarized in Table 4 below:

Table 4: Summarize Respondence Answers

The table above shows that technology enhancement poses an important role to achieve successful project management. Skills to apply new technology required training and exploration by the person to catch the current trend. Adopting this helps to establish a fresher and more modish outcome. By undertaking this, the stakeholders are more convinced and felt valuable by looking at the efforts projected by the organization.

4.0 CONCLUSION

It is time to looks at competitiveness in the Malaysian construction industry from a different angle. As stated by Ponnusamy, Ayob & Yahya (2011), the Malaysian construction industry needs to produce goods based on higher value-added in terms of improved product design and development to move up the chain value. It is also supported by a statement as cited in Azzem, Ullah & Thaheem (2020) that firm competitiveness can be defined where a firm able to produce goods and services that meet the test of international markets while in consequence maintaining or expanding the real incomes of its employees and owners. As for the conclusion, this research had found that challenges that have been facing by the local contractors due to the competitiveness with the foreign organization can be dim out by adapting better organization management that relatively close to the current construction trend which beneficially for both the employees and owners itself. Nowadays, time and cost are all the matter in measuring the success of certain development. Thus, skills and knowledge are required to identify the best method to be used by the organization to tackle the current market trend.

LIST OF REFERENCES

Ab Rani, N. I., Ismail, S., Mohamed, Z., Hussain, A. H., & Ghafourian, K. (2018). Local contractors' awareness on competitiveness towards liberalisation and globalisation in the Malaysian construction industry. Journal of Construction in Developing Countries, 23(1), 21-42.

Ariff, M., & Lopez, G. P. (2007, April). Outward foreign direct investment: the Malaysian experience. In International Workshop on Intra-Asian FDI Flows: Magnitude, Trends, Prospects and Policy Implications April (pp. 25-26).

Azeem, M., Ullah, F., Thaheem, M. J., & Qayyum, S. (2020). Competitiveness in the construction industry: A contractor’s perspective on barriers to improving the construction industry performance. Journal of Construction Engineering, 3(3), 193- 219.

Henricsson, J. P. E., Ericsson, S., Flanagan, R., & Jewell, C. A. (2004, September). Rethinking competitiveness for the construction industry. In Proceedings of the 20th Annual ARCOM Conference, Heriot Watt University, Edinburgh, September 9pp.

Kossof, P. (2016). Foreign Participation in Malaysian Construction Projects: A Practical Introduction. Illinois State Bar Association-The Globe,(Forthcoming).

Lall, S. (2001). "Skills and Competitiveness in Developing Countries". In Competitiveness, Technology and Skills. Cheltenham, UK: Edward Elgar Publishing. doi: https://doi.org/10.4337/9781781950555.00012

Orozco, F., Serpell, A., & Molenaar, K. (2011). Competitiveness factors and indexes for construction companies: findings of Chile. Revista de la Construcción, 10(1), 91-107.

Ozorhon, B., Kus, C., & Caglayan, S. (2020). Assessing competitiveness of international contracting firms from the managerial perspective by using Analytic Network Process. Journal of Construction Engineering, Management & Innovation, 3(1), 52-66.

Salim, M. S., Zakaria, R., Aminuddin, E., Hamid, A. R. A., Abdullah, R., & Khan, J. S. (2018, April). The factors impacted to local contractor from Foreign Direct Investment in advancing economic hub development in Iskandar Malaysia. In IOP Conference Series: Earth and Environmental Science (Vol. 143, No. 1, p. 012034). IOP Publishing.

Yong, Y. C., & Mustaffa, N. E. (2017). Critical success factors for Malaysian construction projects: an investigative review. International Journal of Built Environment and Sustainability, 4(2).

Zainol, H., Wahid, A. M. A., Ahmad, A. C., Tharim, A. H. A., & Ismail, N. (2014). The influence of work adjustment of Malaysian expatriate executives in Malaysian construction companies overseas. In E3S Web of Conferences (Vol. 3, p. 01020). EDP Sciences.

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CHALLENGES BETWEEN LOCAL AND FOREIGN ORGANIZATION COMPETING IN THE MALAYSIA CONSTRUCTION INDUSTRY