Academic journal article Advances in Competitiveness Research

Project-Based International Business Strategies: The Case of the International Construction Services Industry

Academic journal article Advances in Competitiveness Research

Project-Based International Business Strategies: The Case of the International Construction Services Industry

Article excerpt

ABSTRACT

Focusing on the International Construction Services (ICS) industry, this paper explores how far these models apply to non-traditional situations. Do such models capture how firms in the ICS industry compete? Do these models help ICS firms develop appropriate strategic responses to the rapidly changing global environment? Do the typologies of existing models fit the characteristics and the cycle (value chain) of an international construction project? This paper argues that existing models do not capture the complexity of the business environment, the ICS firm or its strategic responses. Modifications are proposed to help ICS executives not only assess the rules of the game with greater insight, but also develop viable strategic responses (new rules and if necessary, new games). Research implications are discussed

INTRODUCTION

In recent years the international construction industry has experienced great prosperity and opportunities around the world (Reina, Tuclacz and Schexnayder, 2006). For many firms it has led to increasing industry consolidation. For example, Jacobs Engineering Group plans to acquire the Edwards and Kelcey engineering firm in 2007 because of the opportunities throughout the United States in the infrastructure market of the industry (Rubin, 2007). How do we analyze trends in the global construction industry? Ofori (2003) and Schulte (2004) provide some insight. However, in the broader literature, contemporary models of competitive strategy are often generalized across industries and sectors developed in a manufacturing context.

There are many approaches used to understand the dynamics of industries and strategic responses to global competition in the construction industry. Seminal work applying the global integration and local responsiveness (GI/LR) typology has presented a very concise review of the literature on the converging fields of strategic management and international management. Many authors, led by Porter (the "industrial organization-based" view of strategy), have posited that the nature of global competition depends on the industry and the phase of the value chain (Kogut, 1991). The "process school" emphasizes management actions and strategic processes in the MNC (Prahalad and Doz, 1987). More recently, some scholars, adhering to the "knowledge-based" view of strategy, have proposed that firm-specific resources and capabilities provide much stronger predictions of performance than industry characteristics (Ribiere, Park and Schulte, 2004). Recent research applying the popular GI/LR typology on global firms includes research by Ghemawat and Ghadar (2006) and Vereecke, Van Dierdonck and De Meyer (2006).

One common denominator among these different approaches is that the research on global industries and global strategies has been based primarily on data and cases from the manufacturing sector. This may have limited applicability to construction and other service industries. To accurately answer the questions raised here, executives must understand how well these models fit service industries, including unique project-based industries such as ICS. Historically, services have played an important role in the development of the industrial revolution, including finance, transportation, and communication. In fact, services include a wide range of activities that are an integral part of the value chain of every firm, including manufacturers. Services are tied to the sale of manufactured goods and these are tied to the sale of services; they are interdependent (Enderwick, 1989).

In the particular case of the ICS industry, firm-specific advantages of international contractors are likely to differ from those normally associated with the success of manufacturing MNCs for a variety of unique reasons, some of which are discussed below.

First, in most cases, the nature of the ICS "product" requires local production. Unlike the export of commodities, the final output must be totally constructed in the host country, which creates a series of peculiar consequences for the Contractor-Client relationship over an extended period of time. …

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