DESCON Engineering

Management Project: Critical decision Making

DESCON ENGINEERING – IN FOCUS

“To become a world-class engineering, manufacturing and Construction Company operating

internationally .”

VISION

DESCON Engineering

Management Project: Critical decision Making – outline

• POWERDESCON

• ENGINEERINGDESCON

• CHEMICALSDESCON

DESCON Engineering

Management Project: Critical decision Making

Established in 1997

Industry; Engineering, Construction, Manufacturing & EPC

Private Business

Based in Lahore, Pakistan

SERVICES; Engineering, construction and EPC for  onshore projects

Developed into a multi-discipline engineering services company

Serving a wide range of industries

Expanded its businesses in GCC Countries, Abu Dhabi, Qatar, Kuwait and Sharjah

Management Project: Critical decision Making

DESCON Engineering

Plan and Analyze

Bid for the Project

Procurement Managemen

t Plan

Construction and

ExecutionMonitor Evaluate

DESCON’S SYSTEMATIC APPROACH

THE CRITICAL DECISIONProject: providing supply to

the construction site of power plantWorth: PKR 50 Million

Project Time: JUNE 2014 - DECEMBER 2014 (6 months)Decision: Choose among two vendors of DG sets

Standard manufacturing time of DG set: 8 monthsCost allocated for DG sets: PKR 20 Million

Vendor A (American based) Vendor B(London based)Manufacturing time: 8 months 4 Months Cost charged: >PKR20 Million 20 MillionMarket foot prints: High LowObjective: Gain maximum returns ( ZERO LDs) and client satisfaction and loyalty

S • Social- Demand in power generation is ever growing, from thermal power plants to windmills.

L • Legal- Contract bindings and Clients might cash the guarantees, legal obligations in GCC countries might differ.

T• Technological- DESCON needs to keep up with new

advancement into technology, it prefers to be technology leader (Competitive edge) like Pakistan's largest Crane

E • Economical- increase in Inflation rate may lead to revision in rates and budgets of products

P• Political- Changes in Government might lead to change in

Civil Construction projects. Governments in GCC countries hold different interests.

DESCON Engineering

Management Project: Critical decision Making

Buyerspower

SUPPLIERSNEW

ENTRANTS

SUBSTITUTES

HIGH TO MEDIUM PRESSURE

LOW PRESSURE

MEDIUM PRESSURE

MEDIUM PRESSURE

HIGH PRESSURE

PORTER’S FIVE FORCES ANALYSISThreat of New Entrants/Potential Competitors: Medium PressureEntry barriers are relatively high for local firms due to the high costs involved in such projects. However, international firms do have the financial capacity to meet these costs, and hence the entry barriers are relatively lower for foreign firms. DESCON, while primarily a construction company, is not a product manufacturer. Recently, a new rival has emerged in the form of ABB (a manufacturer), which is trying to break into the construction industry by quoting high values for the project products, making it difficult for the DESCON to win the bidding process.

Threat of Substitute Products: Low pressure The CCC can pose a threat to DESCON as they integrate innovative techniques with low cost models. However DESCON also invests in latest technology to keep pace with the changing environment.

The Bargaining Power of Buyers: Medium to High pressureThe civil construction clients have high bargaining power because they have access to international EPC firms, whereas the local contracts related to fertilizer and chemical industries possess relatively low bargaining power.

The Bargaining Power of Suppliers: Medium pressureThe suppliers depend on the project type and bidding strategy to complete with product manufacturers. If a product manufacturer is participating for a project, DESCON usually opts for a joint venture with another product manufacturer to be competitive. For most of E&I projects, DESCON’s suppliers are PEL, ABB, GE, Chinese suppliers (if allowed by client), Philips, and Pakistan cables.

Rivalry Among Existing Firms: High Pressure The main competitor for DESCON in this project was Flowtronix, which also has a wide range of engineering and construction services. Both DESCON and Flowtronix are the predominant engineering firms dealing in the Engineering, Procurement and Construction (EPC) segment of the regional market. There are other engineering firms that have achieved a formidable market share, like Simon Engineering and Consulting, Schneider Engineering PLLC, Siemens, Zelcon, and CCC. There are many other local firms which are posing tough competition to DESCON for smaller projects.

DESCON Engineering

Management Project: Critical decision Making

StrengthsTechnically qualifiedBudgets were favorable for the client

WeaknessesLow on fundsE&I lacked experience, new domain and team

SWOT

CONS:8 months manufacturing timeHigh price (although negotiable but being a market leader it enjoyed high supplier power)LDs for first week= 0.1 MillionLDs after first week= 0.5 Million30 Million Penalty(serious delay)

Vendor A

PROS:4 Month manufacturing timeFavorable price Low Defect rate LDs on DESCON would be transferred due to the contract

Vendor B

DESCON Engineering

Management Project: Critical decision Making

BENEFITS OF CHOOSING VENDOR B: GAINED CLIENT’S SATISFACTION INCREASE IN REVENUE OF 35% A NEW PKR 4 BILLION CONTRACT WAS AWARDED ESTABLISHED E&I E&I GAINED MOTIVATION AND EXPERINECE

Tools used to analyze the decision• Budget and variance analysis• Trends of efficiency• Benchmarking against leading firms • Management By Objectives (MBO) approach• Feedback control

DESCON Engineering

Management Project: Critical decision Making

THANK YOU!