Porter five forces model is used for identifying and analyzing the five competitive forces which shapes the industry. It helps in determining the weaknesses and strengths of the industry. Many companies used the model to identify the structure of the industry and determines the corporate level strategies suitable for the situation. The model is flexible and used in different segment for searching the attractiveness and profitability of the company (Chappelow, 2019).
China State Construction Engineering was established in 1982, and now becomes the global construction and investment group which features the market-oriented operations and professional development. The business it carries is the management initiatives and activities through public company of the group, which is also listed in Stock exchange of China. It has more than hundred secondary subsidiaries and seven companies listed in stock exchange. The company is doing business across the globe around 100 countries, by covering the development and investment in real estates, construction operations and financing, infrastructure and housing, along with designs and survey. In China, the company has built over 90% of the skyscrapers above 300meters, one-third of the utility tunnels, three-quarters of the airports and satellite launch, and half of the nuclear power plants. It is also involved in the construction of houses (CSCES, 2019). Here is the detailed Porter five forces analysis of China State Construction Engineering;
Bargaining Power of Buyers:
The customers are the clients of the construction companies, and they can be consortium, government bodies or high-income individuals. Bargaining power of the customers are high, as the CSCE has to bid in lowest possible prices to gain the project, or else the competitor will, because the client wants to have the best service in lowest prices (Blogspot, 2013).
Bargaining Power of Suppliers
Supplier bargaining power is low in the case of CSCE, because of the huge brand name in the industry, suppliers are willing to work with the company. There are many suppliers in the industry for the raw materials needed in the construction industry but few buyers, so the suppliers are willing to work on the prices set by the Construction company. New products are entering in market, and construction company wants the updated product for the better quality and hence suppliers have to lower down the prices in order to gain business (UK Essays, 2018).
Threats of New Entrants
Threats of entrants in the construction industry are quite low because of multiple obvious factors, which are; huge capital investments, as the construction company does not only need management and staff and projects, but it needs machines, big construction equipment, which are expensive to buy. Moreover, the companies like CSCE is also working at global level is leading the China construction industry, it is difficult for the new entrants to compete on such high level. For CSCE, threats from the new entrants are very low because it is involved in multiple sector like house construction, infrastructure building, etc (CSCE, 2019).
Threats from the Substitute Products
There are basic needs of raw materials and resources in the construction industry, which are not easy to substitute, almost impossible, so CSCE has to not worry about the threats from the substitutes, because there are no such substitutes available. Increase demand of Boat-home, holiday cabins, etc. are short term, the construction of skyscrapers, houses, civil constructions are impossible to substitute. However, some of the factor of productions like human resource can be substitute to robots but not at much higher level. So, the this is the weak force for the construction company like CSCE (UK Essays, 2018).
Rivalry of Existing Players
Because of the downturn in the economy at global level, majority of the construction companies have shown the contrasting responses towards downturn in the public sector engineering and construction operations. This resulted in decrease in the capital investment from the public sector. China State Construction Engineering looks forward for acquisition and mergers to reduce the competition in the industry and so are the other big firms like Balfour Beatty. The construction companies along with CSCES is also diversifying and expanding geographically and their portfolios to maintain their position. The company started to bid in new projects and offer more housing construction. The company is also expanding in Middle east to grab more projects and stay in limelight (MEP, 2018).
References
Blog spot, 2013. Construction development. [Online], Available at: http://tryfinakgokong.blogspot.com/2013/02/porters-5-forces-applied-to.html, [Accessed on: 17th July, 2019].
Chappelow, J. 2019. Porter’s 5 forces. [Online], Available at: https://www.investopedia.com/terms/p/porter.asp, [Accessed on: 17th July, 2019].
CSCES, 2019. Company Profile. [Online], Available at: https://english.cscec.com/AboutCSCEC/Companyprofile/, [Accessed on: 17th July, 2019].
MEP, 2018. MEP Awards 2018: China State Construction Engineering Corporation wins MEP contractor award. [Online], Available at: https://www.mepmiddleeast.com/events/mep-awards/71613-mep-awards-2018-china-state-construction-engineering-corporation-limited-wins-mep-contractor-award, [Accessed on: 17th July, 2019].
UK Essays, 2018. Developments of the Construction Industry: Economic Analysis. [Online], Available at: https://www.ukessays.com/essays/economics/the-history-of-the-construction-industry-economics-essay.php, [Accessed on: 17th July, 2019].