Blue Ocean Strategy in Construction Industry PDF

Strategic Management & Business Process
in Construction Industry in India
MBA ZG623T: Project Work
by
Kumar Krishna
2016HB58527
Project Work carried out at
Gaurishanker Electrocastings Pvt Ltd, Jharkhand
BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE

PILANI (RAJASTHAN)
November 2018
Kumar Krishna k.krshn@gmail.com

Developing Blue Ocean Strategy in
Construction Industry in India
MBA ZG623T: Project Work
by
Kumar Krishna
2016HB58527
Project Work carried out at
Submitted in fulfillment of MBA in Consultancy Management degree

programme
Under the Supervision of

Aditya Vikram, Director
BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE

PILANI (RAJASTHAN)
November 2018

Table of Contents
Chapters Page no.
INTRODUCTION ..................................................... 08
Preface ................................................................. 09
Research Background .................................................. 10
Statement of Problem .................................................. 13
Research Question ..................................................... 14
Research Objective .................................................... 14
Hypothesis of the study ............................................... 15
Significance of the study .............................................. 17
RESEARCH METHODOLOGY ........................................ 18

Preamble ............................................................... 19
Thesis Design .......................................................... 19
Assumptions ............................................................ 19
Anal ytical Tools & Framework ......................................... 20
Limitations of study .................................................... 24
RESEARCH ANALYSIS & INTERPRETATION ...................... 25

WAY FORWARD ...................................................... 41
OPPORTUNITIES IN INDIAN INFRASTRUCTURE CONSTRUCTION

INDUSTRY .............................................................. 42
REFERENCES ........................................................... 44

LIST OF TABLES AND FIGURES
No: Name Page No:
Niti Aayog Investment Projections for Indian

TABLE 1 9
Infrastructure & Construction Industry
Eliminate - Reduce - Raise - Create:

TABLE 2 40
GS Infra
Struc ture o f Indian Co nstruction
FIGURE 1 Industry 11
FIGURE 2 Share of Indian Construction Industry 12
The Differentiation Low Cost Dynamics

FIGURE 3 16
behind value Innovation
FIGURE 4 Four Action Framework 22
Strategy Canvas for five leading

FIGURE 5 30
Infrastructure companies in India
Strategy Canvas for Indian Infrastructure

FIGURE 6 32
Industry
Blue Ocean Strategy Canvas for GS Infra

FIGURE 7 34

INTRODUCTION

Preface
India will become the world’s third largest Construction Market by 2025
according to a study by Global Construction Perspectives (GCP) and Oxford
Economics. Thereby, the Infrastructure Sector is a key driver for the Indian
Economy. The industry is expected to continue to expand over, driven by
investments in residential, infrastructure and energy projects. India's planning
commission has projected an investment of INR 55,74,663 Crores for the
infrastructure sector during the 12th Five Year Plan, with 40 per cent of the
funds coming from the private sector. At the minimum, 45% investment in
infrastructure is towards construction & 20% of the infrastructure spend will be
for modernization of the construction industry.
The industry is expected to continue to expand over the forecast period (2017–
2021 mainly driven by investments in residential, infrastructure and energy
projects. Indian Government have launched many flagship programs such as the
Smart Cities Mission, Housing for All by 2022, the Atal Mission for Urban
Rejuvenation and Transformation (AMRUT), the National Skill Development
Mission (NMSD), Pradhan Mantri Gram Sadak Yojana (PMGSY), Make in India,
and Power for All (PFA) which indicates Government's emphasis on
Infrastructure development in India.
This research aims to formulate Blue Ocean Strategy for the Infrastructure
sector in India wherein incumbents compete on traditional strategies.
Table 1

Research Background
The Construction Industry in India is highly fragmented. There are number of

unorganized players which work on the subcontracting basis and the profitability
of the construction projects varies across different segments. There are mainly
three segments in the construction industry in India like Real Estate Construction
which includes residential and commercial construction, Infrastructure Building
which includes roads, railway, ports, power etc, and Industrial Construction that
consists of oil and gas refineries, pipelines, textiles and so on.
In the present scenario, existing incumbents in the Construction Industry which

includes Infrastructure sector compete in existing market space within preset
boundary limits. Their strategy focuses on beating the competition, exploit
existing demand, make value cost trade-offs and align the whole system of a
firm's activities with its strategic choice of differentiation or low cost. In this
model of competitive strategy, incumbents compete on lower and shrinking
margins. As a result, many companies have had exit the business in the recent
past as they were unable to sustain themselves in this fiercely competitive
environment.
Blue Ocean Strategy offers a new perspective on strategy formulation and

execution. These models could provide new approach to competitive advantage
in the Infrastructure sector. Although, there is no such thing as riskless strategy
as strategy will always involve both risks and opportunities but with proper
formulation and execution these risks can be attenuated.

STRUCTURE OF CONSTRUCTION INDUSTRY
CONSTRUCTION
REAL ESTATE INFRASTRCUTURE
RESIDENTIAL NON RESIDENTIAL ROADS & HIGHWAYS
COMMERCIAL AIRPORTS
SEZ & IT PARKS PORTS
RAILWAYS
INDUSTRIAL CONSTRUCTION
Figure 1

Share of Construction Activities
Share of Construction activities (%)

Commercial
5% Residential
5%
Industrial Infrastructure
54% 36%
Figure 2

Problem Statement
In today's scenario wherein competition is fierce and profit margins are

shrinking, companies take market position as granted and try to build up
defensive positions in the existing market space. To sustain themselves in the
industry, incumbents follow a strategy of building advantages over the
competition by assessing what competitors are doing and striving to do better
and outperform the competitors. Here the whole focus is on dividing existing
industry space and exploit existing demand. In doing so, incumbents make value
cost trade-offs and whole system is strategically aligned towards differentiation
or low cost. This is valid in context of Indian Infrastructure Construction industry
also.
As highlighted earlier, Infrastructure construction is a very attractive sector in

India considering huge investments proposed by the Government for
development of roads, airports, railways, ports & industrial construction. This
has caught the attention of existing construction companies who have formed
new divisions / Strategic Business Unit (SBU) with focus on Infrastructure
construction. New entrants also entered this business due to low entry barriers
and prospects of high profit margins and long term sustainability.
Government played major role in this context by easing out the regulations and
providing financing through different schemes on flexible payment terms. Within
a short span of time this industry started becoming congested with fierce
competition and incumbents focused on competing through conventional method
of beating the competition through low cost rather than differentiation. This led
to shrinking profit margins and value cost tradeoffs which made Infrastructure
construction industry look like a risky business. The set of rules on which
incumbents compete in Infrastructure Construction industry is slightly different
than other industries where intense competition and trade war has led to
commoditization of products and services.

Research Question
Is there any systematic approach and strategic move to achieve and sustain
high performance for a company in Indian Infrastructure Construction industry
and how this strategy can be implemented for long term competitive advantage.
Research Objective
Objective of this research project is to formulate framework and implement Blue

Ocean strategy to the Indian Infrastructure industry. Blue ocean strategy
challenges companies to break out of the red ocean of fierce competition by
creating uncontested market space that makes the competition irrelevant.
Instead of dividing up existing demand and benchmarking competition, Blue
Ocean strategy is about opening up new demand frontiers and breaking away
from competition.

Hypothesis
Technological advances have substantially improved industrial

productivity that allowed producers and suppliers to offer an
unprecedented array of goods and services. As a consequence of this, in
many industries supply exceeds the demand. While supply is on the rise
there is no clear evidence of an increase in demand worldwide. The result
has been accelerated commoditization of products and services, fierce
competition and shrinking profit margins. Product differentiation is
disappearing and brands are surviving on the edge of loyalty. Much of the
success of companies in the past have been due to industry sector
performance rather than companies themselves. This suggests that
existing strategies need to be changed and instead companies should shift
their focus on Blue Ocean strategy.
If there is no perpetually high performing company and if the same

company can be exceptional at one moment and headed for a doom at
another moment, then it suggests that a company is not appropriate unit
of analysis in pursuit of roots of high performance and Blue Ocean
Strategic Move and not the company or industry is the right unit to
explain the creation of Blue Oceans and sustained high performance. A
Strategic Move can be defined as the set of managerial actions and
decisions involved in making a major market creating business offering.
Analysis of industries which have created Blue Oceans and those who
compete using conventional strategy by W Chan Kim and Prof. Renee
Mauborgne indicates that neither organizational characteristics nor
industry explain the distinction between the two groups. What separated
winners from losers was their approach to strategy. Companies which
created Blue Oceans followed a different strategic logic called as "Value
Innovation". This term implies focus on making the competition irrelevant
by creating a leap in value for the buyers and the company instead of
focusing on beating the competition.
It is generally believed that companies can either create greater value to

customer at a higher cost or create reasonable value at a lower cost. In
this scenario strategy is seen as making a choice between differentiation
or low cost. In contrast, those who create Blue Ocean pursue
differentiation and low cost simultaneously. Blue Oceans are created in
the region where a company's action favorably affect both the cost
structure and its value proposition.

Figure below depicts the differentiation low cost dynamics behind Value
Innovation. Cost savings are achieved by eliminating and reducing the
factors an industry competes on. Buyer value is lifted by raising and
creating elements the industry has never offered. Over time costs are
reduced further as scale economics kick in due to high sales volume that
superior value generates.
Figure 3
Six Principles of Blue Ocean Strategy:
Formulation Principles Risk factor each

principle attenuates
Reconstruct market boundaries Search Risk
1
Focus on Big picture not the numbers Planning Risk
Reach beyond existing demand Scale Risk
Get the strategic sequence right Business model Risk
Execution principles Risk factor each

principle attenuates
2
Overcome key organizational hurdles Organizational Risk
Build execution in strategy Management Risk
Source: Blue Ocean Strategy by W Chan Kim & Renee Mauborgne

SIGNIFICANCE OF THE STUDY
This study is significant as Indian Infrastructure Construction industry is going

through a recession after a boom in the industry. With very attractive outlook,
easy financing and government regulations favoring the incumbents many new
players entered this industry which had low entry barriers. This led to a price
war wherein large and established players have survived largely owning to
support from parent groups but a majority of companies and projects were
declared as Non-Performing Asset (NPA) which have led to huge financial burden
on the lenders especially Public sector banks (PSBs) and the country's economy.
This study highlights new strategies which could be implemented for a long term
and sustained competitive advantage as well as explore new businesses within
Infrastructure Construction industry where competition is limited or even non-
existent in broad terms.

RESEARCH METHODOLOGY

PREAMBLE
Five leading companies of Indian Infrastructure Construction industry are

considered for the purpose of this project dissertation. Though there are many
companies presently active in this industry but it is not possible to analyze each
and every company individually.
For this reason leading five companies are selected for this dissertation with
assumption that business strategy of other incumbents are also similar. The
companies used for analysis are as follows:
1. Larsen & Toubro (L&T India)

2. Tata Projects Limited
3. AFCONS Infrastructure Limited
4. IVRCL
5. Gammon India
THESIS DESIGN
For the purpose of this study, five leading Indian Infrastructure Construction
companies are selected and their business strategy is used for analysis. A
relatively new entrant " GS Infra" intends to compete in this industry. The tools
and framework as suggested by Prof. W. Chan Kim and Prof. Renee Mauborgne
for Blue Ocean Strategy are used for detailed analysis to propose strategy for
long term and sustained competitive advantage in Indian Infrastructure
construction industry for GS Infra. The objective is to analyze the existing
strategy used by incumbents in Indian Infrastructure construction industry and
prepare Strategy Canvas, Four Actions Framework and Eliminate-Reduce-Raise-
Create grid and make an unique proposition for strategy applicable for GS Infra.
ASSUMPTIONS
Following assumptions are made for the purpose of this study:
1. Infrastructure Construction sector will continue to grow and Government's

investment plan in this sector will continue to increase as stipulated.
2. Government will continue with its Public Private Partnership (PPP) model for
investment in Infrastructure Construction sector.
3. India has a requirement of investment worth Rs 50 trillion (US$ 777.73

billion) in Infrastructure Construction sector by 2022 to have sustainable
development in the country.
4. Logistics sector in India will grow 10 per cent annually and is expected to
reach US$ 215 billion in 2019-20.

Analytical Tools & Framework
Effective Blue Ocean strategy should be about risk minimization and not risk taking.
Analytical tools help us in effective implementation of Blue Ocean strategy. As proposed by
INSEAD's Prof. W Chan Kim & Prof. Renee Mauborgne Blue Ocean strategy uses three
analytical tools namely:
1. Strategy Canvas
2. Four Actions Framework
3. The Eliminate - Reduce - Raise - Create Grid.
It is important to mention basic concepts in brief of these tools for better understanding of the
research work and make it more cohesive.

Strategy Canvas
The strategy canvas is both a diagnostic and an action framework for building a
compelling Blue Ocean Strategy. It depicts the current level of play in the
existing market space. This allows to understand where the competition is
currently investing, the factors the industry currently competes on in products,
service and delivery and what customers receive from the existing competitive
offerings in the market.
The Strategy Canvas can be depicted in graphical form. The vertical axis of the
Strategy canvas captures the offering level that buyers receive across all these
key competing factors. The horizontal axis captures the range of factors the
industry competes on and invests in. A high score indicates that the company
offers buyers more and hence invests more in that factor. Next step is to plot
the current offering across all the above factors to understand strategic profiles
or value curve. A value curve is a graphic depiction of a company's relative
performance across the industry's factors of competition.

Four Actions Framework
In crafting a new value curve, Four actions framework is used which helps to
break the trade-off between differentiation and low cost and to create a new
value curve.
Figure 4
The first action considers eliminating factors that companies in our industry have
long competed upon. Often these factors are taken for granted even though they
no longer have value or may even detract from value. Sometimes there is a
fundamental change in what buyers value, but companies are so focused on
benchmarking one another that they often do not act upon or even pursue the
change.
The second action requires to determine the products or services which have
been overdesigned or are of little value to the buyer and therefore these factors
can be reduced to lower the cost which otherwise add up to the overall cost
structure.
The third action pushes to uncover and eliminate the compromises industry
forces the customer to make and thereby raising these factors well above the
industry standard.
The fourth action forces to determine entirely new value offering to the customer
which have never been offered before ad thereby raising the value chain well
above the industry standard. Collectively these four actions framework allow us
to systematically explore and reconstruct buyer value elements across
alternative industries thereby offering an entirely new value chain to the buyers.

When the four actions framework are applied to the strategy canvas it gives an
insight into the opportunities that are yet to be explored.
The “Eliminate - Reduce - Raise – Create” Grid
This is a third tool that is key to creation of Blue Ocean strategy. It is a

supplementary analysis tool to the four actions framework. This grid lets
companies not only to ask all the four questions as envisaged in Four actions
framework but also act on them to create a new value curve. When the grid is
filled with all the fours actions of Eliminating; Reducing; Raising; Creating,
immediate benefits are achieved namely through:
 It pushes companies to simultaneously pursue differentiation and low cost

to break the value cost trade off
 It highlights companies that are focussed on raising and creating thereby

lifting their cost structure often by over designing products and services
 It is easily understood by managers at any level thereby creating high of

engagement in its application
 It drives the companies to robustly scrutinize every factor that industry

competes on, making them discover the range of implicit assumptions
they make while competing both consciously and unconsciously
Characteristics of a good strategy
When expressed through value curve then an effective Blue Ocean strategy has
three essential qualities namely: Focus; divergence; compelling tagline. Without
these qualities a company's Blue Ocean strategy will be tangled,
undifferentiated, hard to communicate with a high cost structure. Every great
strategy has focus and a company's strategic profile or value curve should
clearly show it. Divergence implies that the value curve of Blue Ocean strategists
should stand apart from the value curves of the competitors. When a company's
value curve lacks focus, its cost structure will be high and business model
complex in implementation and differentiation. When a company value curve
lacks divergence, its strategy is similar to other incumbents and there is nothing
to make it stand apart from others. A good strategy has a clear cut and
compelling tagline.

LIMITATIONS OF THE STUDY
This research study focuses only on proposing alternative business

strategy for Indian Infrastructure Construction sector company called as '
GS Infra" and implementation of this strategy is outside the scope of this
study. The study uses tools and framework as stipulated for Blue Ocean
Strategy by W Chan Kim & Renee Mauborgne.

RESEARCH ANALYSIS AND INTERPRETATION

I have selected Leading Indian Infrastructure Construction sector
companies for this research dissertation along with a brief write-up about
these companies and their business strategy.
Larsen & Toubro (L&T India)
L&T is India's largest Construction company and ranked amongst World's

Top 30 Contractors. L&T's businesses includes Construction (both
Infrastructure & Real Estate), Hydrocarbon Engineering, Power,
Metallurgical & Material handling, Heavy Engineering, Defence,
Shipbuilding, Information Technology, Electrical & Automation,
Construction & Mining Machinery, Finance etc.
L&T's workforce comprises of more than 50,000 people spread globally. In

the Infrastructure Construction sector, Company possesses capability in
executing Metro rail projects, Ports, Power plants, Roads & Highways,
Bridges and Industrial Construction. In short, L&T is having business
presence in all segments of Infrastructure Construction sector. More than
seven decades of a strong, customer-focused approach and the
continuous quest for world-class quality have enabled it to attain and
sustain leadership in all its major lines of business.
Some of the key highlights of L&T's strategy are:
1) L&T's technology strength constitutes a strategic mix of in-house

Research & Development and the expertise of its joint venture
partners through Engineering Design & Research Centers
(EDRC).
2) Competency cells for upgrading skills, improving construction
methods, imparting training and skill development to staff.
3) Project Execution capability
4) Pool of talented employees
5) Digitized project control
6) Advanced formwork system
7) Global Supply Chain management
8) Public Private Partnership model through L&T IDPL subsidiary

Tata Projects Limited (TPL)
TPL operates its business through four Strategic Business Groups (SBG)
namely Industrial Systems (Plants & Systems, Construction &
Environment); Core Infra (Transmission & Distribution, Transportation);
Urban Infra (Heavy Civil Infra, Urban Built Form); Services (Quality
Services, Utility Services). The company has plans to expand its
operations globally in select business verticals. For global operations,
TPL's strategy is to execute highly differentiated value based projects with
key focus on value rather than volume.
In Indian Infrastructure construction industry, TPL aims to leverage on

the business opportunities available in Infrastructure facilities such as
Smart Cities, high speed transportation system, dedicated freight
corridors, metro rails, ports, airports, mass construction of residential
houses, irrigation projects, rural electrification, Nuclear, Waste to
Electrification, Coal Gasification etc. TPL currently have 4,500 employees
on its rolls spread across globally.
Some of the key highlights of TPLs strategy are:
1) Advanced construction methods

2) Collaboration and joint ventures for technology
3) High Quality standards
4) High Safety standards
5) On-time execution of projects
6) Digitized project control
7) Robust project Control Budget / Cost to Completion process for
managing / controlling the project cost and profitability

AFCONS Infrastructure Limited (AFL)
AFCONS Infrastructure Limited is part of Shapoorji Pallonji Group which is

second largest construction group in India. AFL have presence in
Infrastructure construction industry through various business verticals
comprising of Marine & Industrial, Surface Transport, Rail & Metro, Oil &
Gas, Hydropower & Underground, Cathodic Protection.
AFL relies on its key strength of owning, operating & maintaining

strategic construction equipment / machinery through dedicated
Construction Plant & Equipment (CPE) department and collaborations /
alliances through joint venture partnerships with leading global companies
for execution of complex projects.
Some of the key highlights of AFL's strategy are:
1) Business Innovations
2) Total Satisfaction
3) De-risking as key component of growth
4) Transnational Infrastructure projects
5) Increase share of turnover from overseas market
6) Collaboration and joint ventures for technology

IVRCL
IVRCL is an Indian Infrastructure Construction company with business

interests mainly focused within India, The company has also executed
projects in Africa and Middle East. The company operates its business
through Strategic Business Units namely: Water and Environment;
Transportation; Building & Industrial Structures; Power Transmission;
Mining, Technical Services & Solutions. The company has over 3000
Employees on its rolls.
Some of the key highlights of IVRCL's strategy are:
1) Foreign Collaborations
2) New Methods of project execution and construction
3) Timely Execution
4) Engineering & Design
5) Retrofit and Revamp
6) Comprehensive O&M
Gammon India
Gammon India Limited was formed in year 1922 and is amongst the
largest Infrastructure Construction companies in India. Gammon India is
having business interests primarily in Infrastructure Construction,
irrigation, Boiler & Turbines. In infrastructure construction, the company
executes projects in Transportation, Power Generation, Environmental
(Water Treatment), Industrial & residential buildings. Gammon India
employs approximately 9000 permanent and contractual employees on its
rolls.
Some of the key highlights of Gammon India's strategy are:
1) Operation & Maintenance (O&M) services

2) Project advisory services
3) Primary investment through PPP basis
4) Focus areas - Roads, Ports and Renewable

0
1
2
3
4
5
6
ADVANCED CONSTRUCTION MATERIALS
HIGH QUALITY STANDARDS
IN HOUSE ENGINEER IN G & DESIGN

CAPABILITY

ON-TIME COMPLETION OF PROJECTS
COLLABORATION FOR TECHNOLOGY
INVESTMENTS THROUGH PPP MODEL
L&T
HIGH SAFETY STANDARDS
TPL
DIFFERENTIATION IN EXECUTIO N
Figure 5
AFCONS
IVRCL TRAINIING OF EMPLOYEES
MACHINERY & EQUIPMENT
DIGITIZED PROJECT CONTROL

GAMMON
TRANSNATIONAL INFRA PROJECTS
DERISKING AS KEY COMPONENT OF GROWTH
RETROFIT & REVAMP CONTRACTS

STRATEGY CANVAS FOR FIVE LEADING INDIAN INFRASTRUCTURE CONSTRUCTION COMPANIES
PROJECT ADVISORY SERVICES
OPERATION & MAINTENANCE

Above Strategy Canvas for five leading Infrastructure Construction
companies are drawn considering factors on which the existing
incumbents are competing or intend to compete in the industry.
It can be observed that the existing incumbents compete on factors which

are generic to this industry with some factors which are unique to specific
company depending on their business model. Core strategy for
Infrastructure Construction companies can be derived from the above
Strategy Canvas which is plotted on the Strategy Canvas.
On the X-axis of the Strategy canvas are the factors on which these
companies compete and Y-axis represents the offering levels that end
users or customers receive from these companies across all the key
competing factors.
It can be observed from the Strategy Canvas that the industry is

competing primarily on factors such as Collaboration for technology,
Machinery & equipment, High Quality standards, High safety standards
etc. From the above Strategy Canvas key competing factors can be
identified which indicates the factors around which the value chain of
incumbents revolves.
Next step is to plot a generic Strategy Canvas for whole Indian

Infrastructure Construction industry.

0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
IN HOUSE ENGINEERING & DESIGN

CAPABILITY

DIFFERENTIATION IN EXECUTION
Figure 6
TRAINIING OF EMPLOYEES

INDIAN INFRASTRUCTURE CONSTRUCTION INDUSTRY
TRANSNATIONAL INFRA PROJECTS

STRATEGY CANVAS FOR INDIAN INFRASTRUCTURE CONSTRUCTION INDUSTRY
DERISKING AS KEY COMPONENT OF

GROWTH
RETROFIT & REVAMP CONTRACTS
PROJECT ADVISORY SERVICES
OPERATION & MAINTENANCE

The strategy canvas of five leading Indian Infrastructure Construction
companies give useful insights into the key factors on which the whole
industry is competing or intend to compete. In the above Strategy
Canvas, the key factors which form basis of competition and
differentiation in the Indian Infrastructure Construction industry between
existing incumbent are plotted.
The horizontal axis represent the factors on which current industry is

competing using conventional strategy and the vertical axis represents
the level of offering or value to the end user / customer these Indian
Infrastructure Construction companies offer.
It is evident from the Strategy canvas that High quality standards, High
safety standards, On-time completion of projects and Collaboration for
technology are the factors which are of prime importance and major
value is captured through these offerings by the Indian Infrastructure
Construction companies to the end user / customer. Factors which are at
low level in the value chain are Engineering & Design capability and
differentiation in execution.
Many companies in the Indian Infrastructure Construction industry do not

have dedicated engineering and design team as these services can be
outsourced easily and are considered as factor which is of low significance
in terms of overall project cost. Differentiation in execution is achieved by
innovative solutions, project management, cost & budget control, site
management and supply chain management. Though most of incumbents
use the same project management tools, have identical strategy for
supply chain management and innovative solutions are limited due to
preset technical specifications and henceforth the level of value offered to
end user / customer is low.
Next step is to plot Strategy Canvas for a prospective company competing

using Blue Ocean Strategy and compare it with conventional strategy.

0
1
2
3
4
5
6
IN HOUSE ENGINEERING & DESIGN

CAPABILITY

OPERATION & MAINTENANCE SERVICES
GS INFRA
BLUE OCEAN STRATEGY CANVAS FOR GS INFRA
Figure 7
DIFFERENTIATION IN EXECUTION
GLOBAL SUPPLY CHAIN MANAGEMENT
TRAINING OF EMPLOYEES
INDIAN INFRASTRUCTURE CONSTRUCTION INDUSTRY2
PROVISION FOR FUTURE EXTENSION
BUSINESS INNOVATIONS
BONDS ISSUE FOR PROJECT FINANCING

For the purpose of formulating Blue Ocean Strategy for Indian
Infrastructure Construction Industry, we select a company named
"GS Infra" and use it for plotting Blue Ocean Strategy Canvas for Indian
Infrastructure Construction Industry. For the purpose of this thesis it is
assumed that GS Infra is also competing in the same Indian
Infrastructure Construction domain as other incumbents. GS Infra is a
relatively new entrant to this industry but have done extensive market
research and study to identify the key strategy of other existing
incumbents.
Instead of competing in the industry using the same value chain, GS Infra
decides to create a new value curve altogether thereby uplifting the value
for the end user / customer. GS Infra’s strategy involves retaining some
of the competing factor levels as other incumbents such as High Quality
standards, Collaboration for technology while reducing or infact even
eliminating non key factors which can be outsourced such as Engineering
Design Capability, Operation & Maintenance services. The reason for
retaining some factors as other incumbents is that these are the basic
value offerings which are of significance to the end user or customer and
should not be reduced or eliminated. These factors cannot be reduced less
than industry standards as these are the minimum acceptable limits and if
possible these factors should be uplifted but there is considerable cost
involved with that. The value factors which can be reduced significantly or
even eliminated altogether are the factors which can be outsourced as
there are companies specializing in these services. Retaining or uplifting
these factors will add up to extra cost without any significant value
addition to GS Infra.
Blue Ocean strategy for GS Infra shows divergence from the conventional
Indian Infrastructure Construction Industry Strategy Curve. Use of
advanced construction materials provides leverage over the competitors
in the sense that it reduces overall cost, faster execution time and uplifts
the value for the end user / customer. Initial cost might be high but the
outcome will allow to oversee the initial expense when the project
execution time is reduced and quality of construction is good also
lowering maintenance cost. In long run it may also happen that the use of
advanced construction materials proposed by GS Infra may become
industry norm and could be a pre-requisite for contract technical
requirements of new projects.
High quality standards is a basic requirement for Infrastructure

Construction Industry and GS Infra intends to follow the industry standard
or may even offer higher quality than the incumbents. Engineering &
design capability can be reduced since it is an activity which can be
outsourced as there are companies specializing in these services.

On time completion of projects is a factor which is most important to any
end user / customer as it has huge financial implications for both the
parties and therefore GS Infra has special focus on this aspect of the
value offering. Operation & Maintenance is an activity which does not add
any value to GS Infra as this can be outsourced to third party specializing
in these services. Having it as part of GS Infra's value curve will add to
overhead and long term sustainability is also questionable.
Collaboration for technology is crucial for any Infrastructure Construction

company as it is not possible for all companies to have competency in all
the business areas and therefore it becomes important to tie-up with a
technology provider. GS Infra also adheres to same principal which is
common to other incumbents in the Infrastructure Construction industry.
With change in way Infrastructure projects are financed in India and
Government's focus on investments through Public-Private Partnership
(PPP) , it has become essential for incumbents to follow the same route
and GS Infra's strategy also follows the same level of offering as other
competitors.
High safety standards for GS Infra is higher on the value curve compared
to other incumbents as reputations are built on this factor and there are
instances when end user / customer highly appreciates and encourage
high safety standards, This is essential for GS Infra to uplift the value
offering.
GS Infra's strategy involves high levels of differentiation in project

execution. For any Infrastructure project, faster execution means cost
savings and this can be achieved only when the way projects are
executed is different than the competitors. What this means is use of
specialized software for project monitoring, cost and budget control,
streamlined communication with suppliers and sub vendors, clarity of
scope, daily progress review meetings can have huge impact the way
projects are executed. GS Infra puts less emphasis on the factor of
owning the machinery and equipment even though it is critical for many
competitors but running and maintenance of these equipment can be a
huge issue. GS Infra intends to lease out these equipment instead of
owning them as they involve huge initial cash outflow.
Supply Chain management is an integral part of EPC business as

procurement of equipment and material plays a vital role in cost of
project. Existing incumbents have so far focused on procuring the
material and equipment from local Indian market which limits the
bargaining power of buyer in many cases. GS Infra instead is going global
with global supply chain management. This has advantage over the
competitors as equipment and material can be sourced anywhere from
the world and increases the options available with GS Infra. This also

limits the bargaining power of the supplier as they know that they are
competing with global suppliers.
Manpower are vital to any organization's strategy and for Infrastructure

Construction industry they are non expendable assets. It is important to
retain the existing talent, but what is even more important is regular
training of the talented manpower to keep them updated with the latest
technical skills required for the specific job. GS Infra strategy includes
training of manpower on regular basis as this gives them considerable
advantage over the competitors.
Flexibility and future planning is what every end user / customer

appreciates in the Infrastructure Construction projects. When the projects
are bound by predefined scope and contract, companies often limit
themselves to their scope and anything beyond that is considered non-
contractual. Though this is the correct way of executing projects but
companies do not consider future extension in their engineering design
unless there is a contractual obligation to do so. GS Infra gives the end
user / customer flexibility of future extension in their engineering design
irrespective of the contract and cost wise it does not add up to any major
cost to keep provisions in design for future extensions.
While existing players in the Infrastructure Construction industry use the

same basic software for project planning and control but their efforts on
digitalization is limited to that only. At most some companies have
implemented ERP systems for procurement. But GS Infra have gone a
step ahead in the process by using digital media for engineering,
documentation, project planning, online digital library to access complete
project history and extend these facilities to the end user / customer who
can monitor the project status from anywhere. GS Infra gave a new
meaning to Digitalized Project execution by making all the project
monitoring Cloud technology based. This gives GS Infra competitive
advantage as workflow, daily schedules, contractor monitoring, meeting
MOMs, site progress photos accessible to anyone and anywhere. GS Infra
can utilize available software tools such as 'Procore' for this purpose
which are custom built for the Construction industry. Digitized project
control can raise the value for end user / customer and GS Infra as well
as lower the cost of execution though initial investments may be required.
Business Innovation is valid for any industry irrespective of their core

area of operation. For long term sustained growth and competitive
advantage, GS Infra need to innovate by learning from past project
experiences and from other incumbents. Business innovation can come
from project sites, corporate office, engineering team, execution team but
no matter how small the idea may seem but it should not be discarded
without proper consideration.

Project financing is a herculean task especially in current Indian
Infrastructure Construction Industry scenario where securing loan or
project financing is difficult. To overcome these challenges, GS Infra plans
to explore the relatively unexplored Bond market in India through issue of
project specific Bonds.
The Strategy Curve of GS Infra has focus and divergence which are
qualities of a good strategy and its value curve deviates significantly from
the industry standards. Next step would be to formulate Eliminate -
Reduce - Raise - Create Grid for GS Infra.

Four Actions Framework : GS Infra
In crafting a new value curve, Four actions framework is used which helps
to break the trade-off between differentiation and low cost. Four actions
framework when applied to GS Infra can identify the factors on which
Infrastructure Construction Industry have long competed and taken for
granted but can be eliminated, reduced, raised or created. In this context
'created' implies the services or value which the industry has never
offered to end user / customer. Services which have no value addition to
the end user / customer can be eliminated and if required they can be
outsourced. Alternative industry which can be used for Four actions
framework study is the Real Estate Construction industry which is also
closely related to Infrastructure development. In the Real Estate
Construction industry, the factors which uplift the value of the end user /
customer is High Quality, On time completion of projects, advanced
construction materials etc. Most of the companies in the Real Estate
Construction industry use leased equipment and machinery which further
reduces the maintenance and service cost and is of low significance to
end user / customer. Post construction operation and maintenance is nil
and provision for future extension is always ensured. Using such a
methodology, Eliminate - Reduce - Raise - Create Grid can be drafted for
GS Infra with respect to Indian Infrastructure Construction Industry

The Eliminate - Reduce - Raise - Create Grid: GS Infra when
compared to Indian Infrastructure Construction Industry
Eliminate Raise
Operation & Maintenance Services High Safety Standards
Equipment & Machinery Differentiation in execution of

projects
Advance Construction Materials
Training of employees
Global Supply Chain management
On time completion of projects
Reduce Create
Engineering & Design Capability Digitized project control
Investment through PPP mode Business Innovation
High Quality Standards Bonds issue for project financing
Table 2
The Eliminate - Reduce - Raise - Create Grid for GS Infra is another tool
used in Blue Ocean Strategy Framework. It indicates the factors which
can be eliminated, reduced, raised and created i.e. factors on which the
industry has long competed on. Eliminating and creating prompts the
companies to change the factors themselves thereby making the existing
rules of competition irrelevant. GS Infra eliminated ownership of
equipment and machinery as these are expensive to purchase and
maintain. Instead GS Infra plans to lease out these equipment. GS Infra
introduces factors which need to be created such as Digitized project
control, Business innovations, Bonds issue for project financing.

WAY FORWARD
This study aims to formulate Blue Ocean Strategy for Indian

Infrastructure Construction Industry which could be implemented for a
long term and sustained competitive advantage . Once Blue Ocean
Strategy has been developed for Indian Infrastructure Construction
Industry, the next step is implementation of this strategy. However,
execution of this strategy is different ball game altogether as companies
have to overcome four hurdles namely; Cognitive: Limited Resources;
Motivation; Politics. These hurdles are faced by all the companies
irrespective of the industry and therefore it is true for Indian
Infrastructure Construction Industry also. Although, degree of severity
varies with each company and to overcome these hurdles is the key to
attenuating organizational risk. Way forward would be to overcome these
hurdles and successfully implement Blue Ocean Strategy. This is not the
case with industry wherein existing incumbents own large number of
equipment.

OPPORTUNITIES IN INDIAN INFRASTRUCTURE CONSTRUCTION
INDUSTRY
Most of the incumbents in Indian Infrastructure construction industry are

focused on projects in sectors such as Electricity, Renewable Energy,
Roads & Bridges, Metro rail projects, irrigation, Water supply & sanitation,
Ports and Airports. A glance at the 12th Investment Plan proposed by Niti
Aayog clearly indicates that these are logical options considering the
investment proposed. However, this has led to intense competition in
these focus areas which have created a situation wherein many
companies involved in these projects have filed for bankruptcy or are on
verge of doing so. The sectors which have been ignored or accorded less
priority by existing incumbents in Indian Infrastructure construction
industry are namely: Telecom; Storage. Some of the key highlights of
these two sectors are:
Telecom Infrastructure
1. Third highest investment area after Electricity, Roads & Bridges.

2. Investment proposed (Revised Niti Aayog Projections) - INR 4,53,792
crore.
3. Potential for economic growth (GDP) - INR 23,26,275 crore
4. Broadband connectivity to all villages by 2022 as per Govt. plans
India is currently the world’s second-largest telecommunications market
with a subscriber base of 1.17 billion and has registered strong growth in
the past decade and half. The Indian mobile economy is growing rapidly
and will contribute substantially to India’s Gross Domestic Product (GDP),
according to report prepared by GSM Association (GSMA) in collaboration
with the Boston Consulting Group (BCG). App downloads in the country
grew approximately 215 per cent between 2015 and 2017.
The liberal and reformist policies of the Government of India have been
instrumental along with strong consumer demand in the rapid growth in
the Indian telecom sector. The government has enabled easy market
access to telecom equipment and a fair and proactive regulatory
framework that has ensured availability of telecom services to consumer
at affordable prices. The deregulation of Foreign Direct Investment (FDI)
norms has made the sector one of the fastest growing and a top five
employment opportunity generator in the country. Infrastructure
construction companies need to capitalize on the opportunities available
in areas such as IBS, Wifi Hotpots, Optical Fiberization, Infrastructure
building etc.

Storage Infrastructure
1. Investment proposed (Revised Niti Aayog Projections) - INR 41769

crore
2. Higher investment proposed than Airports Infrastructure
3. Includes Agricultural warehousing, Industrial warehousing, Cold
storage, Container freight stations, Logistic parks
The storage and warehousing industry in India is largely unorganized
Earlier, due to the unorganized nature of the industry the equity IRR for a
development project was low. Now after accorded status of Infrastructure
industry and with all the policy reforms that are being undertaken there is
a paradigm shift in the industry structure where it is becoming favorable
for organized players. On account of this structural transformation, the
attractiveness of taking up a storage and warehouse development project
is evident.
The growth in Storage & Warehousing industry in India is primarily being
driven by growing manufacturing activity, rising and changing pattern of
domestic consumption, increasing international trade, the emergence of
organized retail in the country and increasing private and foreign
investments in infrastructure with the easing of government regulations.

REFERENCES:
1. Blue Ocean Strategy by W. Chan Kim & Renee Mauborgne

2. http://niti.gov.in/
3. Niti Aayog Annual Report 2016-17
4. PWC report on Opportunity and challenge of Indian
Infrastructure
5. https://www.tataprojects.com/
6. http://www.larsentoubro.com/
7. https://www.afcons.com/
8. http://www.ivrcl.com/page.php
9. http://www.gammonindia.com/home/gammon-india.htm
10. L&T Sustainability Report 2016

Blue Ocean Strategy in Construction Industry PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Blue Ocean Strategy in Construction Industry PDF

Uploaded by

Copyright:

Available Formats

Strategic Management & Business Process

in Construction Industry in India

MBA ZG623T: Project Work

Project Work carried out at

Gaurishanker Electrocastings Pvt Ltd, Jharkhand

BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE

Kumar Krishna k.krshn@gmail.com

MBA ZG623T: Project Work

Project Work carried out at

Gaurishanker Electrocastings Pvt Ltd, Jharkhand

Submitted in fulfillment of MBA in Consultancy Management degree

Under the Supervision of

BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE

Kumar Krishna k.krshn@gmail.com

Chapters Page no.

RESEARCH METHODOLOGY ........................................ 18

RESEARCH ANALYSIS & INTERPRETATION ...................... 25

OPPORTUNITIES IN INDIAN INFRASTRUCTURE CONSTRUCTION

Kumar Krishna k.krshn@gmail.com

No: Name Page No:

Niti Aayog Investment Projections for Indian

Eliminate - Reduce - Raise - Create:

FIGURE 2 Share of Indian Construction Industry 12

The Differentiation Low Cost Dynamics

FIGURE 4 Four Action Framework 22

Strategy Canvas for five leading

Strategy Canvas for Indian Infrastructure

Blue Ocean Strategy Canvas for GS Infra

Kumar Krishna k.krshn@gmail.com

Kumar Krishna k.krshn@gmail.com

Kumar Krishna k.krshn@gmail.com

The Construction Industry in India is highly fragmented. There are number of

In the present scenario, existing incumbents in the Construction Industry which

Blue Ocean Strategy offers a new perspective on strategy formulation and

Kumar Krishna k.krshn@gmail.com

REAL ESTATE INFRASTRCUTURE

RESIDENTIAL NON RESIDENTIAL ROADS & HIGHWAYS

SEZ & IT PARKS PORTS

Kumar Krishna k.krshn@gmail.com

Share of Construction activities (%)

Kumar Krishna k.krshn@gmail.com

In today's scenario wherein competition is fierce and profit margins are

As highlighted earlier, Infrastructure construction is a very attractive sector in

Kumar Krishna k.krshn@gmail.com

Objective of this research project is to formulate framework and implement Blue

Kumar Krishna k.krshn@gmail.com

Technological advances have substantially improved industrial

If there is no perpetually high performing company and if the same

It is generally believed that companies can either create greater value to

Kumar Krishna k.krshn@gmail.com

Six Principles of Blue Ocean Strategy:

Formulation Principles Risk factor each

Execution principles Risk factor each

Kumar Krishna k.krshn@gmail.com

This study is significant as Indian Infrastructure Construction industry is going

Kumar Krishna k.krshn@gmail.com

Kumar Krishna k.krshn@gmail.com

Five leading companies of Indian Infrastructure Construction industry are

1. Larsen & Toubro (L&T India)

Following assumptions are made for the purpose of this study:

1. Infrastructure Construction sector will continue to grow and Government's

3. India has a requirement of investment worth Rs 50 trillion (US$ 777.73

Kumar Krishna k.krshn@gmail.com