Value chain supply procurement strategies in international construction: Cases of foreign constructors in China

Igor Martek (School of Architecture and Built Environment, Deakin University, Geelong, Australia)
Chuan Chen (Business School, Sichuan University, Chengdu, China)

Management Decision

ISSN: 0025-1747

Publication date: 21 March 2016

Abstract

Purpose

Firms compete using a variety of strategies. Typically they aim to provide something different, to be better, or simply cheaper. In the construction industry, the performance characteristics, quality and cost of the final delivered project will be the outcome of the interplay of capabilities of all the firms involved in the project. Consequently, in order to improve competitiveness, firms must pay attention to not only their own competitive advantage but to those of the firms, both up-stream and down-stream, on whom they depend in delivering their projects. For foreign constructors in China, those competitive considerations will be informed by circumstances different from home. How then do foreign constructors adapt themselves to the problem of sourcing competitively when located within a China-based supply chain? The paper aims to discuss these issues.

Design/methodology/approach

In this study 60 foreign enterprises operating within the Chinese construction sector were investigated by using a comparative case study approach.

Findings

Four generic procurement strategies were identified. First, firms adapt themselves in the search for optimal supply sources by replicating home-based suppliers, controlling local suppliers, or by remaining agile and non-aligned. Second, firms develop niche supply monopolies through market dominance, uniquely differentiated offerings, or by integration with down-stream providers. Third, firms find opportunities to bring in off-shore technology intensive procurements, where that technology is either protected, improved upon, or sold. Finally, firms also seek to transit to China as a procurement base in order to reduce local supply cost, service world-wide operations, or as part of a total strategy of China relocation.

Originality/value

The identification of this rich range of procurement approaches will be of interest to internationalization strategists, as well as to industry practitioners looking to find appropriate business models for off-shore operations.

Keywords

Acknowledgements

The authors would like to acknowledge the financial support from the Sichuan University Humanities and Social Sciences Hundred Young Talents Program, Sichuan Province Hundred Talents Program, and National Natural Science Foundation of China (NSFC) under the project No. 71371131.

Citation

Martek, I. and Chen, C. (2016), "Value chain supply procurement strategies in international construction: Cases of foreign constructors in China", Management Decision, Vol. 54 No. 2, pp. 501-521. https://doi.org/10.1108/MD-01-2015-0018

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Publisher

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Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited

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