Impact of competitive forces to the contractors in Sri Lanka: an industry analysis using porter’s five forces

Abstract

The nature of the business environment is very complex in the construction industry. Huge capital investment, supply chain management, resource scarcity and uncertainty create a multifaceted background along with impressive external environmental impacts. Thus, contracting organizations are highly influenced by the competitive nature of the construction industry. Hence identifying the impact of competitive forces to the contractors in Sri Lanka is identified as vital. Besides, Porter’s five competitive forces model is grounded to interpret the competition through external environment and it denotes that there are five forces which can affect to the competition of an industry; new entrants, suppliers, buyers, substitutes and the existing competitors. Thus, the research leads to examine the impact of competitive forces to the contractors in Sri Lanka using a comprehensive Porter’s Five Forces analysis. The research employs a quantitative approach consisting of preliminary survey of experts and questionnaire survey with the participation of construction experts in Sri Lanka. In order to analyse the collected data, statistical tools such as RII method and measurements of central tendency were employed. The results of the analysis elicited 28 significant factors that determine the power of the five competitive forces on local contractors. Accordingly, the final outlined Porter’s five forces analysis matrix enables the contractors to analyse the impact of each competitive force through identified determinant factors which would provide a proper guidance on determining necessary offensive or defensive strategies to be taken to survive in the market.