Strategic analysis of large local construction firms in China

The many transitory changes in China have raised the intensity level of competition among construction firms. Despite having a high growth economy, some construction firms continue to suffer from low profitability. Meanwhile, practical cases and empirical findings related to Chinese construction firms remain lacking. This research develops a conceptual model for improving the competitiveness of large construction firms in China. The model integrates two main streams of strategic management theories - the industrial organisation theories, and the resource-based and competence-based views. Critical variables that form the model are initially identified from an environmental analysis and the case studies of 12 large Chinese construction companies. The relationships between competitive strategies, important resources and competencies, and competitive advantage are then verified using survey results. The statistical findings suggest that two strategies - differentiation and market/product diversification, and three important resources and competencies - technological innovative capabilities, financial capabilities and guanxi (relationship), directly affect firm performance as measured by revenue and profit growth.