CREC, China Railway Group is a Chinese enterprise doing business in the construction industry. It was founded by the Chinese Government in 2007, and headquartered is in Beijing, China. The company is doing its operations worldwide. The company is registered in the Shanghai Stock Exchange and Hong Kong Stock Exchange. The current stock price of the company is 5.92 CNY. [1] The chairman of the company is Li Changjin. The main Products of the company are Railways, Highways, Installation, Design, Survey, Manufacturing, Real Estate, Resources, and Investments. 283,637 employees are working in this company. As per its revenue, it is the largest construction company in the world as per the data of 2015. It is also ranked 157th among “Fortune Global 500”. It was also one of the “Top 225 Global contractors” in 2016. Furthermore, it was 7th among “Top 500 Chinese Companies”. This company holds many subsidiaries under it. [2]
Threats of New Entrants
This company is conglomerate which is doing operations in the construction industry. The company is owned by the Chinese Government, which provides a competitive edge to the company among other companies. As this industry depends on the projects companies acquire, for CREC it is easy to take the project as there is government influence in the company. It also helps in acquiring most of the projects in China. Government influence also shows the trustworthiness and more safe choice among other companies. Similarly, in different economies, it is working as China’s Government-owned company, which gives a positive edge to the company. As China is best in most of the industries among different choices. When we talk about the capital, for this industry large amount of funds are needed to start and run the business, due to costly machines used in it. Therefore, for this company threats of new entrants is low.
Threats of Substitutes
As the construction industry is one of the well-established industries in the world. There are several companies doing business in this industry across the world. Every company has to bid for the project. The company with the best price as compare to the value it promises to provide becomes able to acquire the project. There is a certain competitive edge for CREC as it is Government-owned but still different competitors are also doing business in the market. If they provide better service at less price, they can influence the market of CREC, regardless of all the benefits the company enjoys. Therefore, in this industry threats of substitute exists in the market.
Bargaining Power of Buyers
This industry depends on the bidding system. Different companies bid for the project and best among them are selected by the buyer. It shows that the buyer has the number of options available in the market, form which buyer select as per need. Similarly, the switching cost of buyer may influence the profitability of the construction company. So a buyer can influence the company by its actions. Therefore, these factors show that the bargaining power of buyers is high in this industry.
Bargaining Power of Suppliers
As the construction companies need raw material on a large scale because of different construction projects. Different kinds of raw materials are used in operations by these companies. Most of the companies take raw material from different suppliers due to the size of the company and the size of projects. When we talk about CREC, it is doing business on a global level, and a single supplier may not fulfill its requirements. So in this regard, the company may have several suppliers. It shows that the supplier cannot influence the company individually. Therefore, all of these facts shows that the company can switch the supplier due to any factor. It means the bargaining power of suppliers is low in this industry.
Competitive Rivalry
There are many companies doing business in this industry. Every company can be influenced by the buyer’s choice. So in this regard, every company tries to provide greater value to the buyer in return for money. It can be lower prices by the companies or better services. To acquire the project every company tries its best and try to tackle each other by different strategies. Therefore, it shows that there is high competitive rivalry among existing companies.
References
1 Bloomberg, 2019, China Railway Group Ltd, COMPANY INFO, [online], Available at: https://www.bloomberg.com/quote/390:HK
2 China Railway Group Limited, 2019, about, [online], Available at: http://www.crecg.com/english/2687/39952/index.html