PERFORMANCE
The structure and conduct part before draw up the environment in which the individual companies have to perform. Performance is therefore the last level of industrial analysis of the water management market.
Profitability of the water management sector is not that impressive. From the annual reports of the largest companies in the national context, we found that profits vary between the 2 and 5 percent of the turn over are common. Because the heavy competition on the international market, the high overhead costs like ships, yards, offices over the world, international principals and employees; there is less space (financial and organizational) to dive in to research and development labs in order to come up with 20% useful innovative thinking. Companies in this field are applying a survival strategy, which pay them the ability to survive in the competition. To keep your employees busy, sometimes asks for creative project proposals, like taking deficit in a short term or work on non profit base.
Our history with water management oriented companies, agencies and institutes lead to a high number of people working in this area. For example the Dutch Water Boards do contain the third largest amount of governmental employees (The association of Water Boards). Besides the governmental employees, the several knowledge institutes and dredging companies do ad for a large extend in the amount of labour force in the water management sector.
As already notices within the conduct analysis, most part of the innovation in the water sector is conducted from the knowledge intensive institutes like RIVM, Rijkswaterstaat, the UNHCR-IHE and TNO. The latter are concerned with a broad scope of research and development. From explicit research for dike improvements after high waters in the rivers (1999, 2000, 2002) until a scenario analysis for see dunes after 20 years of increasing see level.
Innovation often takes place in order of the government or related institute. This finding is direct the largest problem of the knowledge institutes in the water management sector. Because the demand for knowledge is often not interpret directly from the sector (represented by the dredging companies itself), but mainly indirect via political processes of safety improvement or societal awareness. When market demand for knowledge, being general or applied, is used as enforcer for research and development efforts, there should be more market relevant innovations be announced.
The efficiency of the knowledge institutes could be improved by introducing (international) market mechanism, in order to match supply and demand for applied and general knowledge. In contrast to the large dredging companies in the Netherlands, they perform highly efficient because of the large and heavy competition in the international market of water sector related projects.
11 April 2006 at 15:40
Is it not so that the water management is based on the the technology driven engineers from the ’80. A very protective society.
The low profits (where did you base your profit numebers on) is that through heavy competitiion or the ineffeciency (high employment) of the sector itself (you only look at the national companies, how is that for other countries)?
15 April 2006 at 21:10
Protection policies are not allowed any more. Economic globalisation and the European Union in special sense, demands for a free market competition between national and international firms. The sector of watermanagement do not get a special service in this sense, and do have to perform in a market competition.
Figures on the performance (profitability) of the executing companies in this sector are based on the annual reports of Boskalis and Ballast Nedam, calculated by dividing the annual turn over by the amount of profit that year.
The strong competition is to a large extend due to the international competition in this executing sector, where as other international companies have the advantage of cheap labour. Therefore pushing the Dutch companies to more efficient measures.