Vertical Business Integration Strategies for Construction

Abstract

The complex environment facing the U.S. construction industry is causing some construction analysts to call for a new kind of construction executive who understands not only project level engineering and management, but also comprehensive construction company management. One of the main issues that faces this construction manager is what competitive strategy to take in the highly competitive constuction industry. This paper discusses competitive strategy formulation, competitive strategy in fragmented industries such as construction, and a more specific aspect of competitive strategy—vertical integration. A specific vertical integration model developed by Kathryn Harrigan of Columbia University is explained and correlations to the construction industry established. Various vertical integration strategies and forces are explained, as well as vertical integration implications for construction managers. This vertical integration discussion is for the construction professional in companies whose primary focus is creating the physical construction product.