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Understanding€construction€industry …

188 Understanding construction industrycompetitiveness: the introduction of the HexagonframeworkStefan Ericsson Henricsson Jewell of Construction Management and Engineering, University of Reading, UKAbstractThe link between competitiveness and the sustained prosperity of a nation, industry or firm, is awell established argument and the basis for policy making and strategic changes. However, inorder to develop, implement and monitor any initiatives for improving competitiveness, there is aneed for a framework through which competitiveness can be measured and understood. Thispaper reviews the existing frameworks for analysing competitiveness and especially theirapplication to the construction industry. Based on this review of frameworks, a new model toanalyse construction industry competitiveness is introduced.

192 3.2.2€ The€Double€Diamond€Framework As€a€result€of€the€debate€on€whether€Porter€had€dealt€with€multinational€activity€properly€or€not,

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1 188 Understanding construction industrycompetitiveness: the introduction of the HexagonframeworkStefan Ericsson Henricsson Jewell of Construction Management and Engineering, University of Reading, UKAbstractThe link between competitiveness and the sustained prosperity of a nation, industry or firm, is awell established argument and the basis for policy making and strategic changes. However, inorder to develop, implement and monitor any initiatives for improving competitiveness, there is aneed for a framework through which competitiveness can be measured and understood. Thispaper reviews the existing frameworks for analysing competitiveness and especially theirapplication to the construction industry. Based on this review of frameworks, a new model toanalyse construction industry competitiveness is introduced.

2 Most importantly, the new modeldistinguishes between the indicators that are used to measure actual competitiveness, relativeefficiency in achieving objectives, and the factors that influence and explain differences in thecompetitiveness of construction :Competitiveness, construction industry, frameworks, measurement1. IntroductionThe research community agrees that despite the increased attention over the past decade and anabundance of literature in the area, competitiveness remains a vague concept and theories andframeworks have yet to prove their relevance in competitiveness practices [1].In order to develop, implement and monitor any initiatives for improving competitiveness, there isa need for a framework through which competitiveness can be measured and , both Momaya and Selby [2] and Ofori [3] concluded that no appropriate frameworkexists for analysing the competitiveness of a construction purpose of this paper is to review the existing frameworks for analysing and understandingcompetitiveness and especially their application to the construction industry.

3 Based on thisreview, a new framework is introduced, which capitalises on the strengths and weaknesses of theexisting Characteristics of CompetitivenessMany authors have engaged in an intellectual debate about competitiveness and contributed to awider understanding of, the subject, so before embarking on the tour of competitivenessframeworks, it is useful to point out some characteristics of the concept. Multi-defined:There is no general, generic definition of competitiveness and hence theterm is subject to misinterpretation and consequent confusion [4, 5, 6, 7, 8]. Multi-measured:There is no single, generic measurement of competitiveness. Insteadmeasurements vary with the definitions [9, 6, 10]. Multi-layered:Competitiveness may be applied at national, industrial and firm levels [1,7, 11].

4 Dependent:The meaning of competitiveness depends on the values of the stakeholders ofthe entity under investigation [2, 6]. Relative:Every measurement of competitiveness needs to be looked at in a relative sense,either against some maximum, ideal level or against its peers [6, 7]. Dynamic:The factors that influence competitiveness change with time and context, the national economy moves from a less to a more developed stage [1, 8]. Process:Competitiveness involves assets, processes and performance, where processesturn assets into performance [9, 12].3. Frameworks for Analysing Competitiveness and TheirApplication to ConstructionThis section reviews various competitiveness frameworks and how these have been applied to theconstruction industry. For further discussion, it is important to note the cause-and-outcome-relationship between the measurement of competitiveness and the understanding and explanationof it.

5 Interestingly, one major criticism of the model used by the World Economic Forum (WEF)in their Global Competitiveness report , is that the model does not clearly differentiate betweenthe factors which determine competitiveness of a nation ( causes of competitiveness) and theindicators that are used to measure its competitiveness ( outcomes) [13, page 121].The frameworks of competitiveness found in the literature can be divided into three categories,those that: Measure competitiveness Provide an explanation and understanding of competitiveness Integrate the explanation and Frameworks for Measuring CompetitivenessThis section introduces two frameworks that have been developed with the main objective toproduce an ultimate competitiveness score. The score would then enable an assessment of oncompany s competitiveness in comparison with The Three Dimensions of CompetitivenessFeurer and Chaharbaghi [6] introduce a framework for measuring firm competitiveness.

6 Theysuggest that a system for measuring competitiveness is dependent on an organisation sperception of customer and shareholder values, the competitive environment and the drivers thatdetermine competitiveness in that environment [6, page 54].The model comprises three dimensions;Customer values,Shareholder values andAbility to Actand React. Each of these dimensions may be quantified using various criteria: cost andspeed; financial key ratios; and financial terms or non-financial terms, innovativeness or riskmanagement for the three dimensions , these three dimensions build up a room in which the organisation may map itself inrelation to its competitors. The final position in this room reflects the trade-off betweensatisfying customer and shareholder values and maintaining financial strength [6, page 58].

7 Thisframework has not appeared in any assessments, or been applied to any industry or firm The Total Value Competitiveness (TVC)This is a computer-aided decision support system, produced to enable a contractor to assess itsown competitiveness, or for a client to assess the contractor s competitiveness. Although it wasspecifically designed to suit the Chinese construction industry, the methodology may be of use inother on criteria identifiedby Li and Shen [14], Shen etal. [15], organised theirTVC-framework in a three-level hierarchical illustrated in figure 1, thetop-level parameters are;Social influence (CM-A),Technical ability (CM-B), Financing ability and Accounting status (CM-C), Marketing ability(CM-D), Management skills (CM-E) and Organisation structure and Operation (CM-F).

8 Each ofthese parameters in turn has sub-categories and sub-sub-categories, in all there are 98 criteria, toenable assessments at different levels of the organisation. For each of the 98 criteria, there is abenchmark book that provides a benchmark score from 0 to 100. Furthermore, in order toTotal Value CompetitivenessCM-ACM-CCM-BCM-ECM-DCM-FF igure 1: The top-level of the the varying importance of the various criteria, Shen et al. [15] provide a weightedmatrix for each of the different levels of the Frameworks for Understanding CompetitivenessThis category of frameworks represents attempts to understand and provide an explanation towhy some nations, industries or firms meet their objectives better, more efficiently than The Diamond FrameworkBy far the most established, applied and debated framework on competitiveness is the DiamondFramework , introduced by Porter [4].

9 He investigated why firms based in a particular nation areable to create and sustain competitive advantage against the world s best competitors in aparticular field. Porter concluded on a wide range of factors that influence, determine and explainthis international success and categorised these factors under four determinants, which in turnwere famously arranged in the shape of a diamond. See figure 2 first determinant,Factor conditions, coversfactors related to human,physical and knowledgeresources. TheDemandconditions describes thesize, structure andsophistication of the homemarket demand for theproducts and services of aparticular supporting industriesreflects the presence orabsence of internationally competitive related and supporting industries of a particular industry ina nation.

10 The fourth and final determinant,Firm strategy, structure and rivalry, includes thestrategies and structures of firms as well as the nature of domestic rivalry. For a morecomprehensive description of the framework, see [4] and for its credits, criticism and debate, seefor example [8] and [16].Ofori [17] used the Diamond framework to formulate a long-term strategy for Singapore sconstruction industry, and in Ofori and Betts [18] found it to be a framework suitable forstrategic planning in construction. Oz [19] applied the Diamond framework to the Turkishconstruction industry in order to find the sources of its competitive conditionsRelated andsupporting industriesContext for firmstrategy and rivalryDemand conditionsGovernmentChanceFigure 2: Porter s Diamond The Double Diamond FrameworkAs a result of the debate on whether Porter had dealt with multinational activity properly or not,Rugman and D Cruz [20] introduced the so-calledDouble Diamond, and applied it to Canada[20], Mexico [21] and New Zealand [22].


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