Volume building as competitive strategy

Abstract

The competitive strategy and advantage of building contractors is examined. In Hong Kong, just a few contractors have dominated the market of public housing construction, where prefabrication is mandatory. Does prefabrication technology lead to business success? Based on quantitative analysis of a questionnaire survey and its validation with interviews, we find that prefabrication by itself is not regarded as a sustainable source of competitive advantage. Instead, market share is the most statistically significant factor related to business growth. The experience curve theory suggests that, upon acquiring a critical volume of business, contractors have the opportunity to exploit economies of scale, bargaining power and learning to reduce costs to get more business. Through this iterative process, some contractors would manage to innovate their building process to make their supply chain management more efficient and effective than others', thus attaining competitive advantage in cost leadership and getting more business in return to sustain their volume building strategy. The findings suggest that, to succeed in a mature industry such as building construction, it takes clever harnessing of the construction process rather than simply the mastery of prefabrication technology itself.

Keywords:

• Competitive advantage
• strategy
• prefabrication
• Hong Kong

Acknowledgements

This study is based on a research project fully supported by a grant from the Research Grants Council of Hong Kong Special Administration Region (Project no.: PolyU 5010/02E). We are grateful to Mr Lawrence Lok for his research assistance, to our respondents who filled in the questionnaire, to our four interviewees and to the four anonymous reviewers for their comments.