Critical strategies for Chinese architectural, engineering and construction firms to achieve profitability

Abstract

Purpose An appropriate choice of strategies helps firms to survive and develop in a turbulent economic environment. The problem is that there are many strategies that can be adopted, but it is not clear which ones would boost profitability. The purpose of this paper is to investigate how architectural, engineering and construction (A/E/C) firms headquartered in mainland China (Chinese A/E/C firms) can achieve profitability in China; specifically, to uncover the critical strategies and practices adopted by Chinese A/E/C firms to achieve profitability using Porter's generic competitive strategies, Sun Tzu's Art of War, and the networking approach. Design/methodology/approach The data collection instrument was a structured questionnaire. The data collection methods were mail survey and face‐to‐face interviews. The population comprised all A/E/C firms headquartered in China. Samples were randomly drawn from the China Construction Industry Association's database. Stratified sampling was adopted to select only firms that operated in Shanghai or Beijing. Findings The finding is that profitable Chinese A/E/C firms are more likely to adopt practices that differentiate them from competitors instead of pursuing a low‐cost strategy or focus strategy. In addition, they adopt practices that make them adaptable and flexible. Also, practices that involve collaboration, knowledge sharing, and obtaining resources from firms in the network are adopted by profitable firms. Research limitations/implications The data gathered might not be easily generalized to Chinese A/E/C firms operating in other parts of China because interviews were conducted with Chinese A/E/C firms operating in Beijing and Shanghai which are members of China's Construction Industry Association. Practical implications The paper is to inform practitioners of the practices and strategies that lead to profitability. Foreign firms that are planning to partner with Chinese A/E/C firms may also use the findings to assess whether their prospective Chinese partners are adopting some of these practices, so that they would be profitable and not face financial difficulties in the course of the partnership. Originality/value The paper shows that profitability could be achieved by certain critical practices, which are underpinned by Porter's generic competitive strategies, Sun Tzu's Art of War based on military tactics, and Granovetter's network approach based on social network theory.

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