Los Angeles, CA (PRWEB) October 16, 2013
Industrial building and warehouse construction has a buyer power score of 2.9 out of 5. Although recent price trends have edged upward only moderately and price volatility has been low, increased demand for construction services and low supplier profit margins have weakened buyer power. “The low level of price volatility indicates a stable market in which buyers can be confident that price shocks are unlikely to occur,” says IBISWorld procurement analyst Kiera Outlaw. “However, low profit margins run rampant across the marketplace, even among the top suppliers.” Low supplier profit margins erode buyer power because suppliers are unable to budge on prices. Moreover, industrial building and warehouse construction firms largely compete on price and quality. To win large-scale projects, suppliers are more likely to operate on the lowest margins possible.
Buyer power for industrial building and warehouse construction is also reduced due to the low availability of substitutes. Within the marketplace, the most viable substitute goods are prefabricated buildings. Buyers also have the option to rent or lease industrial buildings and warehouses. While these options have lower initial costs, the likelihood that prefabricated buildings or existing leasable structures will meet their specific needs without renovation or retrofitting is unlikely. Moreover, prefabricated buildings are largely reserved to storage and warehousing space.
“High switching costs from one supplier to another also mitigate buyer purchasing power, resulting in a low buyer power score for this market,” says Outlaw. “Once a buyer is locked in with a construction firm, it becomes very expensive to switch to another firm, especially once construction on the project is underway. Typically, when either or both parties are unhappy at any point during the project, the issues are dealt with through negotiation. However, should the issue leave the negotiation table unresolved, buyers (and suppliers) must take the next step and the issue will likely be resolved by adjudication in a court of law, which can be highly expensive. Major vendors include Bechtel Corporation, Fluor Corporation, Jacobs Engineering Group and KBR Inc. For more information, visit IBISWorld’s Industrial Building & Warehouse Construction procurement research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of new industrial building and warehouse construction services. In addition to constructing industrial facilities and warehouses, contractors also offer maintenance, repair, and alteration and expansion services. A variety of buildings fall within this market, including dry cleaning plants, food product manufacturing or packing plants, paper or pulp mills, truck and automobile assembly plants and pharmaceutical manufacturing plants.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Vendor Financial Benchmarks
Buying Lead Time
Key RFP Elements
Buyer Power Factors
About IBISWorld Inc.
IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.