Short strategic analysis on costruction Industry focused on NCC DK construction company. NCC is one of the leading construction and property development companies in the Nordic region. The Group had sales of SEK 58 billion in 2013, with approximately 18,500 employees.

1. Prof.ssa Francesca Vicentini
Arrigo Gaetano
Rinaldi Alessandro
Scaletta Martina
Tuè Valentina23 Maggio 2014
ECONOMICS OF STRATEGY
NCC Construction Danmark

2. NCC Construction Danmark
NCC Group is one of the leading construction and property development
companies in the Nordic region.
In particular, NCC DK was formed in 1999 through a merger of Rasmussen &
Schiots and the Danish interests of Superfos Construction.
In 2005, the company went through a crisis, due to the downturn of the
construction market.
In 2006, through a difficult five years period, Torben Billmann, CEO of NCC DK,
transformed the deep financial crisis of the company in an opportunity of growth.

3. Objectives of NCC DK
• Create value for its customers and shareholders.
• Be a leading player in the markets in which it is active.
• Be the customers’ first choice.
• Customer centric.
• Practice fair price.
• Be profit centric.
• Cut costs (Cost reduction).
• Be leader in sustainability (i.e. social responsability, comply with the energy
class 1, European Green Building standard).

4. Values
• Renew the construction industry: the best path toward profitable
growth was to change the rules of the game in the Danish
construction industry.
• Provide superior sustainable solutions.
Vision
• Become the one-stop shop that customers would go to first.
Mission
• Honesty
• Respect
• Trust

5. ABELL MATRIX
How do we define the business?
Customer Group:
• Residential Home Owners
• Public Sector Clients
• Business Customers
Needs:
• High quality fair price
• No delays in execution
Technology:
• Virtual Design and
Construction (VDC)

6. Levels of Strategy
Corporate Strategy
Where does the firm compete?
• Diversification
Before 2006: Residential
home owners (B2C)
After 2006: Public Sector clients (52%
projects) and Business Customers (45%
projects). Task forces were created to assess
all projects.
VS
• Vertical Integration
Before 2006:
• Separation between
project phase and
execution phase of
buildings’ projects
After 2006:
• The entire process of constuction from
initial concept and design, choice
materials, detailing the civil construction
and installation of the MEP systems.
• Close relationship with suppliers.
VS

7. Levels of Strategy
Business Strategy
How does the firm compete?
• Cost Leadership
2006
Cut costs by 30%:
• Lean business routines;
• Central procurement
system;
• Labor hour registration;
• Contract Review Board;
• Downsizing (Blue Collar
from 1.035 to 1.264
employees; White Collar
from 985 to 892)
• Differentiation
2008
Differentiation based on
sustainability
Create value by granting to the
customers the chance of saving in
their long term operating costs,
albeit with a higher initial
investment cost (Class 1 energy
products)

8. SWOT ANALYSIS (2006)
Strenghts
• Knowledge in engineering
• Reputation and brand value
Weaknesses
• No diversification (B2C residential houses)
• Too many business heads
• Dysfunction in organization (high costs
and number)
• Volume orientation
• Craftsman mindset
• Production centric
Opportunities
• Growing competence in
constructing energy efficient
building
• Growing competence in virtual
design construction
• Attractive growth opportunities in
the B2B and B2P segments
Threats
• High fragmentation of market
• Inefficient value chain that characterizes
the industry
• Climate change and breakdown in global
energy supply

9. Resource-Based View
Intangible Resources:
• Knowledge in engineering, materials sourcing, civil
constuction, installation of MEP systems
• Brand and reputation of NCC Group
Human Resources:
• White collars
• Blue collars
• Task forces
Tangible Resources:
• Financial resources (high)
• Infrastructures

10. Resource-Based View
Capability
Digital Construction: competence in making the industry’s
preferred software packages for architecture, engineering and
costruction communicate seamlessly with each other and the
abilities to integrate sustainable design choices with cost
control
Core Competence
Virtual Design and Costruction (VDC) helps NCC DK to find
standard construction solutions that could be re-used across
project to save costs and could be also a big help in furthering
the company’s sustainability agenda.

11. VRIO Framework of VDC
Rare?
YES
Costly to
imitate?
YES
Exploited by
organization?
YES
Valuable?
YES
Competitive
implications
?
Sustained
advantage

12. Convergence
Even if NCC DK was born as a construction company, it is now involved in a new process, by
which the boundaries across industries become blurred, so changing the competitive
landscape and creating a “metamarket”. This process is named “convergence”.
CUSTOMER NEED CONVERGENCE
Introduction of a Front Office and a Back
Office service in order to offer multiple
points of direct contact with the customers
INTRA INDUSTRY COMPETITION
Creation of a “key customer program”,
combining solutions and services in a
unique product (multifunctional)
TECHNOLOGICAL CONVERGENCE
A) SUBSTITUTION
Upgrading of energy efficiency:
Climate-fiendly single family home
B) INTEGRATION
Industry’s value chain:
Integration of Architects+
Engineering Consultants
INTER- INDUSTRY COMPETITION
Same product(housing) differentiated
In terms of sustainability
CROSS-INDUSTRY COMPETITION
The firm (NCC DK) crosses the
boundaries of construction industry, to
achieve a piece of “design and project
industry”, creating a product that is
well (and self) designed and buildable
at the same time.
METAMARKET =
Design and engineering industry +
Energy and efficiency industry +
Back and Front Office industry

13. SCP Paradigm
[b] ENVIRONMENTAL ANALYSIS (basic conditions)
Where does the NCC DK act? What are the environmental conditions?
-Nordic Area : no good climate conditions => specific needs
-Strong and international economy
-Elevated pro/capite income (diffused richness)
- Young and small-sized population
[S ]market STRUCTURE
- Mature and price based => low DIFFERENTIATION;
-High CONCENTRATION of small and-mid sized firms with a collective share of 80% (smaller
subcontractors are more profitable, but they are at the mercy of bigger players, thus
carrying more risks ) =>
- Inefficient value chain: poor coordination across architects-engineers/ contractors-
subcontractors
[F] firm CONDUCT
- best quality at best prices (quality assurance)
- Focus on risk management
- From volume to profit centric organization
[ P] firm PERFORMANCE
- No good price-level vs production costs (elevated)
- One of the six largest players with 2,5% share in the danish market

14. Porter’s Five Forces (IBV)- before 2006
1) THE THREAT OF SUBSITUTES
ELEVATED
- homogeneous products
- price-based competition = buyer’s propensity to lower-cost subsitutes
2)THE THREAT OF NEW ENTRANTS
HIGH
- low entry barrieres (no significant regolatory barriers neither capital requirements)
-High concentration of small and mid-sized firms that carried more risk
3) THE BARGAINING POWER OF SUPPLIERS
STRONG
the suppliers had the power to fix the prices
4) BUYER’S POWER
STRONG
-price-sensitive buyers: the attention is above all focused on price and not on quality,
performances or innovation
5) RIVALRY
DEGREE:
a) Intensity = high : powerful companies +a lot of small and mid-sized firms
b) Basis = poor : limited differentiation of products; competition is based on price

15. Porter’s Five Forces (IBV)- after 2006
1) THE THREAT OF SUBSITUTES
REDUCED
-Differentiation makes the difference
2)THE THREAT OF NEW ENTRANTS
LOWER THAN BEFORE 2006
After the crisis in 2008, over 1000 construction companies in 2010 filed for bankruptcy:
- higher barriers: only big-sized and/or well structurated companies are able to absorb the
cost/risks and to invest
3) THE BARGAINING POWER OF SUPPLIERS
DECREASED
- No more price-based competition: suppliers have to get more skills and offer best quality
standards at best prices
4) BUYER’S POWER
Beeing DETERMINANT
-From price-sensitive buyers to less-rational buyers: the attention is now also focused on
quality and product performances and standards
5) RIVALRY
DEGREE:
a) Intensity = high : powerful companies with more share in the market
b) Basis = wide : by introducing “differentiation”

16. Institutional Based View(InBV)
<<Institutions are the RULES of the GAME in a society or, more formally, are the humanly
devised constraints that shape human interaction>>. (Peng)
INSTITUTIONS
FORMAL CONSTRAINTS
In 2008 the Danish government introduced
building regulation that ordered the gradual
upgrading of energy efficiency in all new
buildings, reducing the energy consumption
to 75% of 2000 levels
INFORMAL CONSTRAINTS
Social responsability
Climate change and breakdown in global
energy supply are two of the ten largest risk
for Nordic countries
ORGANIZATIONS
CONSTRUCTION INDUSTRY
Buildings are one of the biggest
contributors to CO2 emissions
FIRM SPECIFIC RESOURCES
NCC Top management saw this
constraints as a great opportunity to
leverage its fast-growing competencies in
sustainable developement, by:
1)Reduction of company’s own carbon
footprint
2) Reduction of the energy demand
STRATEGIC CHOISES
SUSTAINABILITY = Energy analysis, Design and project planning system
to enable clients to incorporate long-term and climatic and energy
consumption objectives in any new construction or renovation.

17. Strategy definition
Strategy change:
Three-phase transformation
•Stabilization (2006-2007)
•Efficiency & Sustanaibility (2008- )
•Business development (2010- )
Shift from B2C to B2P and B2B business
Changes in organization:
Reduced the number of business
In 2011 NCC DK had a clear strategy

18. Strategy definition
Strategy change: Phase I – Stabilization (2006-2007)
Reduce B2C business
Downsizing: Reduce the workforce
Restructuring: Each department become a cost center
Result: departments not profitable were sold or closed down
Risk management: new risk metrics for walk away from projects highly risky
Contract review board: review of each projects and assigned a red,yellow or green
mark

19. Strategy definition
Strategy change: Phase II – Efficiency & Sustanaibility (2008- )
Conference at IMD business school in Switzerland: the BoD define 12 Must-Win
battles after reduced until 2: cost reduction and sustainability
MWB1: Cost reduction
Cut cost of 30%
Central procurement system (economics of scale)
Wages based on number of hours recorded (no more forfait)
Reduction by 5% for the overhead costs
Document management, planning system, calculation system
MWB2: Sustainability
Upgrade of energy efficiency in new Building( Institutional BW formal and
informal)
Two oppurtunities (differentiation):
Reduce the company’s own carbon footprint
Reduce energy demand and carbon footprint from the buildings

20. Strategy definition
Strategy change: Phase III – Business Development (2009- )
MWB3: Task forces – staffed with cross-functional resources
Railroads, infrastructure, bridges, sports and parking facilities, hospitals,
refurbishment/energy, energy service companies, concept housing, concept
business.
Improve B2P and B2B business with 2 new MWBs
MWB4: Key customer Program
Work proactively with clients offering a full solution with consulting advice
Changes in front office (customized solution) and back office (reduce overhead
costs).
MWB5: Sales and Tendes Teams
New bidding strategy: bid submitted only if the price cover the risk.
New sales process ( PPVVC – Pain, Power, Vision, Value, Control)

21. SWOT ANALYSIS (2011 and Beyond)
Strenghts
• Company’s unique capability in digital
costruction (VDC)
• Close relationship with its suppliers
• Business mindset (risk managment)
• Customer –centric
• Commitment to sustainability
• Expertise in many parts of the value
chain
Weaknesses
• The VDC is focalized for internal
use
Opportunities
• Growing importance of sustainability;
• Change the rules of the game in the
Danish construction industry
• Internationalization
• Focalization of VDC more externally
• Differentiation based on sustainability
Threats
• High fragmentation of market
• Risk of imitability

22. Conclusions & suggestions
NCC DK want change the rule of the game making a vertical integration with
architects (Co-Creation)
VDC 5D modeling (time & cost) externally focused.
The choise of NCC DK to invest more on technology systems like VDC is a positive
sign.
Nowdays for a construction company is crucial to use a BIG DATA system.
Not only store data but be able to analyse them.
The focus on clients will help NCC DK to focalize the resources only the business
that gives a posite return.
A vertical integration create a new market/industry with high barries to entry, and
reduce the power of suppliers and possible substitute.
NCC DK create with CO-Creation a new concept of product, they don’t sell any
more buildings but a service including a building (Total customer experience)