Market Structure of Engineering Services Firms Assignment

Market Structure of Engineering Services Firms Assignment Words: 631

URS Corporation (URS) is a fully integrated engineering, construction and technical services firm that offers program management; planning, design and engineering; systems engineering and technical assistance; construction and construction management; operations and maintenance; and decommissioning and closure services (URS, 2010). With approximately 46,500 worldwide employees and total global revenues of $9. 25 Billion in fiscal year (FY) 2009, URS ranks as one of the largest engineering design firms in the world.

URS is a publicly traded company on the New York Stock Exchange (NYSE) and can be found under the symbol URS. URS is classified as an Engineering Services firm by the North American Industry Classification System (NAICS), which is represented by the NAICS Code 541330. This industry comprises establishments primarily engaged in applying physical laws and principles of engineering in the design, development, and utilization of machines, materials, instruments, structures, processes, and systems.

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The assignments undertaken by these establishments may involve any of the following activities: provision of advice, preparation of feasibility studies, preparation of preliminary and final plans and designs, provision of technical services during the construction or installation phase, inspection and evaluation of engineering projects, and related services [ (NAICS, August) ]. The Engineering Services industry is highly competitive and is comprised of many establishments. As reported in the 2007 United States (US) Economic Census, there are approximately 58,000 establishments (i. . engineering firms) in the US that employ almost one million people, with revenues exceeding $180 Billion annually [ (2007 Economic Census, 2010) ]. URS is one of the biggest Engineering Services firms in the US, however since the market is so large and there is such an abundance of competition, URS’ market share is very small at less than approximately 3% (i. e. URS annual US revenues as a ratio of total industry revenues). The four US engineering design firms with the highest revenues in 2009 were AECOM Technology Corporation ($5. 1 Billion total revenues), URS ($4. Billion total revenues), Jacobs ($4. 3 Billion total revenues) and Fluor Group ($4. 1 Billion total revenues) [ (ENR, 2010) ]. Thus, the four-firm concentration ratio for Engineering Services is approximately 30%, which implies there are numerous other firms providing engineering services in the market. However, no two engineering firms provide precisely the same services. Therefore, the services of each firm are slightly differentiated from one another indicating that the Engineering Services industry operates in a market that is characterized by monopolistic competition.

Since Engineering Services is a monopolistically competitive industry, there is essentially free entry into and exit from the market. Due to the fact that Engineering Services is an industry that is based on the skills and knowledge of the workforce, there are limited fixed and capital expenses required to participate in the industry. For this reason, entry into and exit from the industry is fairly easy, which is one of the reasons there are so many establishments competing in the market. As the population continues to grow and increase and the nation’s infrastructure (i. . roads, bridges, water and wastewater lines, etc. ) continues to decline, there is continuous demand for engineering services. The ever present demand for engineering services and the relative ease of entry into and exit from the market results in a high level of competition within the industry. Therefore, in general, the demand for a particular firm’s services is highly elastic. Economic profits do exist in the engineering services industry. URS reported basic earnings of $3. 31 per share for FY 2009 and $2. 1 per share for FY 2008 [ (URS, 2010) ]; these earnings include an analysis of cost of revenues, therefore implying at least a normal rate of return and positive economic profits. References 2007 Economic Census. (2010, June 25). Retrieved September 30, 2010, from U. S. Census Bureau: http://www. census. gov/econ/census07/ ENR. (2010, April 26). The Top 500 Design Frims. Engineering News-Record . NAICS. (August, 3 2010). Retrieved September 30, 2010, from U. S. Census Bureau: http://www. census. gov/eos/www/naics/ URS. (2010, September). Retrieved September 30, 2010, from http://www. urscorp. com

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