Information Innovation Consulting ® IIC-Infonovation ®
Confidentiality agreement expired on Nov. 2007 Client specific data were removed on purpose
Authrised re-publishing By - IIC's CEO Jan'08 - Kuwait City
Tower Crane Business In the Middle East
Case of Kuwait
Nov. 2005 Ahmed Al Olaimi, Ph.D. Information innovation Consulting – Kuwait City
2005 .Nov
P.O.Box: 26138 Safat, Kuwait City - 13122 Kuwait T: [965] 245-9318/9 F: [965] 245-9320
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www.infonovation.com
Information Innovation Consulting ® IIC-Infonovation ®
Confidentiality agreement expired on Nov. 2007 Client specific data were removed on purpose
Authrised re-publishing By - IIC's CEO Jan'08 - Kuwait City
Information Innovation Consulting – Kuwait City 2005 .Nov
Introduction
With every political stability a massive economical growth is to follow Economy growth is driven by Sense of security out of political stability
Believe in the stock market Growth in population Growth in commercial trading Increase in construction and real-estate development
P.O.Box: 26138 Safat, Kuwait City - 13122 Kuwait
T: [965] 245-9318/9 F: [965] 245-9320
www.infonovation.com
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Information Innovation Consulting ® IIC-Infonovation ®
Confidentiality agreement expired on Nov. 2007 Client specific data were removed on purpose
Authrised re-publishing By - IIC's CEO Jan'08 - Kuwait City
Information Innovation Consulting – Kuwait City 2005 .Nov
Original Offering
Tower Crane Leasing Business for Middle Eastern Market.
Leasing from Korea to Kuwait first and then expand the offering to neighboring countries Shipping Installation and technical support from Korea Operator is a local construction company Minimum lease period is 18 months
P.O.Box: 26138 Safat, Kuwait City - 13122 Kuwait
T: [965] 245-9318/9 F: [965] 245-9320
www.infonovation.com
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Information Innovation Consulting ® IIC-Infonovation ®
Confidentiality agreement expired on Nov. 2007 Client specific data were removed on purpose
Authrised re-publishing By - IIC's CEO Jan'08 - Kuwait City
Information Innovation Consulting – Kuwait City 2005 .Nov
Korean Market
Methodology: Transportation Assembling Operation Dismantling Storage
All are responsibility of Leaser (Rental Co.) except overseas shipping & handling
Brand and Cost:
Liebherr Model No. Monthly charge 132 U$3,000 154 U$3,500 220 U$4,000 708 U$5,000 290 U$5,500
Types
Manned Un-Manned
Minimum Period for Rental:
50 Months
P.O.Box: 26138 Safat, Kuwait City - 13122 Kuwait
T: [965] 245-9318/9 F: [965] 245-9320
www.infonovation.com
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Information Innovation Consulting ® IIC-Infonovation ®
Confidentiality agreement expired on Nov. 2007 Client specific data were removed on purpose
Authrised re-publishing By - IIC's CEO Jan'08 - Kuwait City
Information Innovation Consulting – Kuwait City 2005 .Nov
Kuwait Market
Methodology: Transportation Assembling Operation Dismantling Storage
All are responsibility of Leaser (Rental Co.) except operations & equipment guarantee
Brand and Cost:
Liebherr Model No. Monthly charge 132 154 U$3,000 220 708 290 U$5,000
Types
Manned Un-Manned
Minimum Period for Rental:
3 Months
P.O.Box: 26138 Safat, Kuwait City - 13122 Kuwait
T: [965] 245-9318/9 F: [965] 245-9320
www.infonovation.com
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Information Innovation Consulting ® IIC-Infonovation ®
Confidentiality agreement expired on Nov. 2007 Client specific data were removed on purpose
Authrised re-publishing By - IIC's CEO Jan'08 - Kuwait City
Information Innovation Consulting – Kuwait City 2005 .Nov
Kuwait Market Trends
Increase in construction of high raised commercial buildings Construction boom is touching every corner of Kuwait
Urban Remote areas Strategic governmental facilities
Power Plants Refineries Sporting clubs Public housing Etc.
New real-estate companies in the last 24 months doubled their presence
New ventures New establishment Real-Estate loans is in a constant growth of %17 per annum Interest rates are low (4.5 – 5.2 %)
Government of Kuwait have a record surplus in revenue with focus into revamping the national infrastructure towards development.
P.O.Box: 26138 Safat, Kuwait City - 13122 Kuwait T: [965] 245-9318/9 F: [965] 245-9320 www.infonovation.com
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Information Innovation Consulting ® IIC-Infonovation ®
Confidentiality agreement expired on Nov. 2007 Client specific data were removed on purpose
Authrised re-publishing By - IIC's CEO Jan'08 - Kuwait City
Information Innovation Consulting – Kuwait City 2005 .Nov
Tower Crane Business Analysis
Construction Companies
7 23 350+ Main (U$15MM) in capital Mid-sized companies (U$3MM) small size (U$500K - U$3MM)
Main construction companies are buyers and occasionally rent tower cranes Only 4 Tower Cranes suppliers
80% Liebherr/German – 15% French – 5% Spanish Leasing is the norm (Local transport, surveillance, assembling, maintenance, and disassembling) Minimum lease periods are 3 months Buy cranes for themselves and rent/lease them to the market Only 2 models are in demand HC154 and HC290 Serious interest in Luffing models but not available
ME Locale markets are not interested in renting from foreign suppliers (local supplier are faster & better support) Market is NOT willing to invest in new brands !!!
P.O.Box: 26138 Safat, Kuwait City - 13122 Kuwait T: [965] 245-9318/9 F: [965] 245-9320 www.infonovation.com
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Information Innovation Consulting ® IIC-Infonovation ®
Confidentiality agreement expired on Nov. 2007 Client specific data were removed on purpose
Authrised re-publishing By - IIC's CEO Jan'08 - Kuwait City
Information Innovation Consulting – Kuwait City 2005 .Nov
Kuwait Market Demand
Construction Companies
Always in search for used tower cranes to buy Extended warrantee Leibherr is the preferred brand of choice Very knowledgeable engineers Cost is always a main concern
There are 13 major financing and leasing companies
Consumer finance Corporate finance Heavy equipment lease and finance Projects finance
The immediate mandate is a price list for used tower cranes including shipping and handling
HC154 and/or compatible (quality assurance is a must) HC290 and/or compatible ~ Luffing and/or compatible ~
P.O.Box: 26138 Safat, Kuwait City - 13122 Kuwait T: [965] 245-9318/9 F: [965] 245-9320 www.infonovation.com
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Information Innovation Consulting ® IIC-Infonovation ®
Confidentiality agreement expired on Nov. 2007 Client specific data were removed on purpose
Authrised re-publishing By - IIC's CEO Jan'08 - Kuwait City
Information Innovation Consulting – Kuwait City 2005 .Nov
Opportunities
There are three scenario cases to penetrate Kuwait market and then move forward to Middle-East region
Press on the original business offering (remotely lease from Korea) Establish a Korean-Kuwaiti entity that would venture and invest in
Importing and operating minimum 10 units Storage yard Establish line of credit with construction companies
Shift attention towards existing tower crane leasing companies that would include the following business lines
Import and sell new and used tower cranes Master lease agreement with Korea and sub-lease in Kuwait
P.O.Box: 26138 Safat, Kuwait City - 13122 Kuwait
T: [965] 245-9318/9 F: [965] 245-9320
www.infonovation.com
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Information Innovation Consulting ® IIC-Infonovation ®
Confidentiality agreement expired on Nov. 2007 Client specific data were removed on purpose
Authrised re-publishing By - IIC's CEO Jan'08 - Kuwait City
Information Innovation Consulting – Kuwait City 2005 .Nov
Opportunities – Option One
Press on the original business offering (remotely lease from Korea)
Pros
Less overhead in operations Secure financial transactions Pay back period is immediate with first deal Kuwait office is “lead generator” only, contracts are from Korea direct
Cons
Market psychology is not acceptable (result of 6 weeks of efforts) Shipping is a real competitor
Cost (approximately $30,000 per crane) Time (6-8 weeks shipping vs. 1 week set up on demand)
New brand are not favored nor easy to sell Technical support are far away (3 days of arrival on dispatch) Spare parts and maintenance is not well defined Post lease storage costs are not counted for (real threats) Market is more likely not to deal directly with foreign company for due-diligence purposes Corruption is always a threat (paying under the table for corrupted engineers)
P.O.Box: 26138 Safat, Kuwait City - 13122 Kuwait T: [965] 245-9318/9 F: [965] 245-9320 www.infonovation.com
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Information Innovation Consulting ® IIC-Infonovation ®
Confidentiality agreement expired on Nov. 2007 Client specific data were removed on purpose
Authrised re-publishing By - IIC's CEO Jan'08 - Kuwait City
Information Innovation Consulting – Kuwait City 2005 .Nov
Opportunities – Option Two
Establish a Korean-Kuwaiti entity that would venture and invest in Leasing Business
Pros
Silence is easy to obtain and acquire Kuwaiti Identity that would ease the due-diligence process Immediate storage yard to ease transportation, delivery, support On site technical sales staff ready to sell for rest of the region Iraq market will be very easy to access Long term relations and business assurance & security Ability to introduce newer models other than the dominating 2 model Possibility to sell used and new cranes as a side business to rental
Cons
Very tough competition especially with very well established suppliers Serious initial investment
Minimum 10 cranes stock Storage yard rental Staff and operations costing
New brand needs significant efforts to market and sell Korean managing partner must be present locally Return of investment (ROI) is going to be realized after minimum 18 months
P.O.Box: 26138 Safat, Kuwait City - 13122 Kuwait T: [965] 245-9318/9 F: [965] 245-9320 www.infonovation.com
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Information Innovation Consulting ® IIC-Infonovation ®
Confidentiality agreement expired on Nov. 2007 Client specific data were removed on purpose
Authrised re-publishing By - IIC's CEO Jan'08 - Kuwait City
Information Innovation Consulting – Kuwait City 2005 .Nov
Opportunities – Option Three
Shift attention towards existing tower crane leasing companies that would include the following business lines
Pros
Immediate access to their client list Ability to over ride their existing sales muscles Relief from storage yard, transportation, delivery, support On site technical training for master operator only Avoid immediate competition Long term relations and business security Ability to introduce newer models other than the dominating 2 model Meet the demand of sell used and new cranes Minimize risk by avoiding expenditure to it’s minimum (no shipping unless paid for)
Cons
Deviation for original offering of leasing direct Minimum investment of 1 or 2 cranes to be shipped for reliability tests New brand needs significant efforts to market and sell Competition between 2 products
P.O.Box: 26138 Safat, Kuwait City - 13122 Kuwait
Sale of new and used cranes Rentals of new and used cranes
T: [965] 245-9318/9 F: [965] 245-9320
www.infonovation.com
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Information Innovation Consulting ® IIC-Infonovation ®
Confidentiality agreement expired on Nov. 2007 Client specific data were removed on purpose
Authrised re-publishing By - IIC's CEO Jan'08 - Kuwait City
Information Innovation Consulting – Kuwait City 2005 .Nov
Conclusion
Currently the situation is:
Market is looking for a local entity to buy or rent crane from Construction companies are already hand in hand with major real-estate developing companies (strategic alliances) The Luffing crane is in demand but the market is not exposed to it, yet it yields high potential in down town projects Kuwait government just allowed up to 50 floors high towers buildings to be constructed (2 towers wills start 2006) Leibherr detected Hankook Tower Cranes market penetration attempts and cut their prices 30% Best prices for end market in renting is U$3000 / month Minimum period for rentals is 3 months and started to go higher for the construction boom of high raised buildings (20-40 floors buildings) And immediate request for prices list for both new and used tower cranes (used are based of condition and guarantee/warrantee)
P.O.Box: 26138 Safat, Kuwait City - 13122 Kuwait T: [965] 245-9318/9 F: [965] 245-9320 www.infonovation.com
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