Business models for foreign firms offering construction-related consultancy services in China

Abstract

Many foreign firms are expected to enter China’s growing construction market. The objectives are to: (i) identify the extent to which Porter’s generic business strategies and practices are adopted by local Chinese architectural, engineering and construction firms (Chinese firms) and foreign firms offering construction-related consultancy services in China (foreign firms); (ii) investigate the extent to which Porter’s generic strategies contribute to firms’ competitiveness in China; and (iii) propose a business model framework for construction services in China. Using a structured questionnaire, data were collected via mail and face-to-face interviews. In total, 37 and 45 completed questionnaires were received from foreign and Chinese firms, respectively. Both foreign and Chinese firms adopt Porter’s differentiation and focus strategies to a significant extent. Foreign firms emphasize value offerings that incorporate superior design, technology and quality significantly more than Chinese firms. The findings show that Porter’s cost leadership and differentiation strategies are significantly correlated with firms’ competitiveness, especially the practices relating to cutting suppliers’ prices, reconfiguring the value chain, providing innovative services and offering comprehensive services. To help them succeed in China, it is recommended that foreign firms develop their business models based on the framework developed here.

Keywords:

• Business model
• China
• competitiveness
• Porter’s generic strategies