Meiktila University of Economics Research Journal 2019, Vol. 9, N0.

Analysis on Competitive Strategies and Organizational

Performance of Construction Firms in Mandalay, Myanmar
Daw Nge¹, Daw Khin Sandar Tun²

Abstract

Recent political and economic reforms in Myanmar have led to a

considerable transformation in the business environment. Since the investors
look to capitalize on economic liberalization and major public infrastructure
programs, the construction industry becomes a major growth driver of
Myanmar’s economy. Along with the growth of construction industry, the
study of strategy and performance of construction firms has become a
relevant topic of research. This study aims to identify the current strategies
adopted by construction firms in Mandalay, and to analyze the effects of
adopted strategies on firm performance. The study found that amongst
various competitive strategies, the focus strategy is applied in the sampled
firms in Mandalay to a great extent, and the adopted strategies have
significant effects on the profitability of the firms.

Key Words: Competitive Strategies, Organizational Performance,

Construction Firms, Myanmar

Introduction
The construction industry is one of the key contributors to most
economies, and it is set to become a major growth driver of Myanmar’s
economy, as investors look to capitalize on economic liberalization and major
public infrastructure programs. The growth in the construction industry is
expected to remain strong, driven by the government’s focus on developing
infrastructure to support the nation’s growth, and the rising interest of
domestic and foreign real estate developers on constructing residential units to
meet the population’s huge housing demand. Strategic management practices
are now becoming more popular within construction sector. Since the strategy
may have different effects on organizational performance based on the
geographical location and culture, it would be interested to test these

¹ Corresponding Author, Professor, Department of Management Studies, Meiktila

University of Economics
² Principal Author, Lecturer, Department of Commerce, Meiktila University of
Economics
40 Meiktila University of Economics Research Journal 2019, Vol. 9, N0.1

hypotheses in developing countries, especially in Myanmar. Moreover, the

practical examples and empirical studies related to the Myanmar construction
industry remain scare. This becomes one of the motivation factors to conduct
this study.

Objectives of the Study

Given the role of construction industry in the economic development
of Myanmar, this study has taken the following specific objectives:
1. To identify the competitive strategies adopted by the construction
firms in Mandalay
2. To analyze the effects of competitive strategies on organizational
performance of construction firms in Mandalay

Concepts of Strategic Management

Jemison (1981) defined strategic management as the process by which
general managers of complex organizations develop and use a strategy to co-
align their organization’s competences and, opportunities and constraints in
the environment. Strategic management is concerned with making a decision
on strategy and planning how the decided strategy is to be put into effort.
Developing a successful strategy requires capability of a firm, creativity
through understanding of resources, and comprehensive analysis of
competitive market. Thompson et al., (2007) observed that strategy is a long
term plan of action designed to achieve a particular goal, most often winning.
According to Mintzberg (1994), strategy is a scheme, policy, grand design
employed in moves; role and stratagem intended to outperform competitors at
the same time as fulfilling stakeholders’ expectations consistent with the scope
of enterprise.

Competitive Strategies
There are three generic strategies: cost leadership, differentiation and
focus, consolidating a choice as competitive advantage looked for with the
extent of strategic focus or goal wherein competitive upper hand is to be
accomplished (Porter, 1998).
Meiktila University of Economics Research Journal 2019, Vol. 9, N0.1 41

Cost Leadership Strategy

This strategy focuses on gaining competitive advantage by having the
lowest cost in the industry (Porter, 1987; Anon, 1998; Cross, 1999; Hyatt,
2001; Davidson, 2001). For an effective cost leadership strategy, a firm must
have a large market share (Hyatt, 2001). It is directed by productiveness,
capacity, magnitude and knowledge and skills.

Differentiation Strategy
Under this strategy, a company focuses its efforts on providing a
unique product or service (Porter, 1996; Cross, 1999; Hlavacka et al., 2001).
This strategy provides high customer loyalty and allows organizations to
charge a premium price to capture market share (Porter, 1985; Cross, 1999;
Hlavacka et al., 2001).

Focus Strategy
This strategy affords an enterprise to concentrate its exertion on one
specific section of the market, gives attention to low cost or differentiation in
its objective portion in the constrained competitive latitude. Focus strategy
enables a firm to form a competitive advantage by providing goods or services
that satisfy the needs of their specialty customers.

Organizational Performance
Organizational performance refers to the capacity of an organization to
achieve such objectives as production of superior products, commanding huge
market share, generation of high profit, legitimate financial outcomes, and
survival during turbulent times while employing appropriate strategies for
activity (Koontz & Donnell, 2003). As indicated by Swanson (2000),
organizational performance might be subdivided into three classifications such
as monetary performance (income), internal non-money related general
performance (productiveness) and outer non-monetary general performance
(customer satisfaction). This study uses four indicators such as profitability,
market share, customer satisfaction and business growth to measure the
organizational performance of sample firms in Mandalay.
42 Meiktila University of Economics Research Journal 2019, Vol. 9, N0.1

Empirical Research Studies

Several studies have empirically researched the impact of Porter’s
competitive strategies on the general performance of enterprises. Kalia (2012)
studied the competitive strategies adopted by Chinese construction firms in
Kenya, and found that these firms embraced generic strategies, growth
strategies and grand strategies to sustain their performance. Dess and Davis
(1984) studied the general performance results of competitive strategies in the
manufacturing SMEs in Ghana. In their study, they found that focus category
firms experienced the best earnings burgeon, followed by cost leadership,
differentiation and stuck in the middle groups.

Conceptual Model
To measure the effects of competitive strategies on organizational
performance of construction firms in Mandalay, the study applied the
conceptual model shown in Fig. (1).

Fig. (1) Conceptual Framework of the Study

Independent Variables Dependent Variable

Cost Leadership
Strategy
Performance
Profitability
Differentiation Market Share
Strategy Customer Satisfaction
Growth

Focus Strategy

Source: Porter M. E. (1998)

Research Methodology
The methodology of the study includes investigating the common
strategic management areas through literature review, in-depth interview and
questionnaire survey with the owners/managers of construction firms in
Mandalay, along with accessing public reports on construction industry in
Myanmar, and performing statistical analysis to meet the research objectives.
As in 2018 data, there are 173 construction firms which were registered in
Meiktila University of Economics Research Journal 2019, Vol. 9, N0.1 43

Mandalay City Development Committee (MCDC). The study selected 50

registered firms (representing 28.9% of population) by using systematic
random sampling method, and 45 respondents filled and returned the complete
questionnaires, representing 90% response rate.

Analysis and Discussions

The study includes the information on the demographics of
construction firms including life and size of organization, the competitive
strategies adopted by most of the construction firms, and the effects of
competitive strategies on organizational performance of selected firms in
Mandalay. In the analysis of competitive strategies and performance of the
firms, the sampled firms are asked to describe the extent of the application of
strategic approaches and the resulting changes in their performance in terms of
five scales: 1 – No extent, 2 – Little extent, 3 – Moderate extent, 4 – Great
extent and 5 – Very Great extent. The mean values are then manipulated and
compared to find out the extent of application of competitive strategies and
effects of strategies on the performance indicators (profitability, market share,
customer satisfaction and growth). The analytical results of demographic
characteristics, competitive strategies, and effects on organizational
performance are described in the following tables.

Table (1) Demographics of Sample Construction Firms

Particular Frequency Percent

Total 45 100.00
Duration of Operation
1-5 years 10 22.20
6-10 years 17 37.80
11-15 years 8 17.80
16-20 years 5 11.10
21 years and above 5 11.10
No. of Employees
1-25 employees 5 11.10
26-50 employees 5 11.10
51-75 employees 3 6.60
76-100 employees 7 15.60
Above 100 employees 25 55.60
Source: Survey Data (January, 2018)
44 Meiktila University of Economics Research Journal 2019, Vol. 9, N0.1

As shown in Table (1), the majority of the sample construction firms in

Mandalay have less than 11 years of operation experience, and they are the
large-scale enterprises that employed above 50 employees. It is indicated that
there has new entrants in the construction industry where most of the firms
undertake large infrastructure projects as Mandalay Regional Government has
been improving its basic infrastructures needed for smooth transportation and
logistics systems.

Table (2) Cost Leadership Strategy

Sr.
No Statement Mean SD
.
1 The company prices its products lower than its rivals. 2.20 0.056
2 The company procures the materials and components in 3.05 0.686
bulk to reduce cost.
3 The company is very strict on waste of materials. 2.70 0.174
4 The company outsources some functions which are not 2.55 0.999
core to reduce costs.
5 The company employs high mechanization and 2.85 0.182
technology in its operations to reduce costs.
6 The company has cut costs on overheads such as human 2.95 0.146
resource to reduce costs.
7 The company strives to reduce costs in administration 2.95 0.234
activities.
8 Employees are continuously trained on work methods and 2.80 1.056
practices, leading to effective cost management.
9 The company continuously exercise tight cost control and 2.80 1.005
pay attention to details.
10 The company has positioned itself as low cost in its 2.50 1.051
industry.
Overall Mean 2.74
Source: Survey Data (January, 2018)

The average score resulted with a mean of 2.74 indicating that the
construction firms in Mandalay rarely apply cost leadership strategy to gain
competitive advantage and outperform their competitors. The highest mean
value resulted for an item “The company procures the materials and
components in bulk to reduce cost” with the mean score of 3.05. The lowest
mean value was for “The company prices its products lower than its rivals”
(mean = 2.20). It seems that the respondents pay attention to cost savings in
the procurement of materials and components, but this is not a strategic part of
their endeavors for competitiveness.
 Meiktila University of Economics Research Journal 2019, Vol. 9, N0.1 45

Table (3) Differentiation Strategy

Sr.
No Description Mean SD
.
1 The company uses different ways to produce products with 2.35 0.226
the aim of reaching different markets.
2 The company employs branding to differentiate itself from 2.45 0.050
competitors.
3 The company lays emphasis on improving quality and 2.30 0.174
producing high end products.
4 The company provides budget for research and 2.50 0.889
development activities.
5 The company has well-trained and skillful human 3.65 0.933
resources.
6 The company has ability to handle customer complaints. 3.55 0.945
7 The company has a popular brand name. 2.35 0.875
8 The company has reputation for quality and innovation. 2.40 0.995
Overall Mean 2.69
Source: Survey Data (January, 2018)

The average mean of 2.69 indicates that the most common strategy of
the sample firms is not the differentiation strategy. The highest mean value
resulted for an item “The company has well-trained and skillful human
resources”, and the lowest mean value was received for “The company lays
emphasis on improving quality and producing large quantities of end
products”. It seems that the sampled construction firms have trained their
taskforce with the main aim of getting basic skills and handling customer
complaints, but not for quality and productivity of end products.

Table (4) Focus Strategy

Sr. Mea
Description SD
No. n
1 The company targets the Local Government projects. 4.60 0.598
2 The company focuses on roads projects. 4.10 0.119
3 The company targets residential building projects. 4.20 0.834
4 The company targets commercial building projects. 4.15 0.933
5 The company targets industrial building projects. 2.90 0.447
6 The company focuses on projects from private developers. 3.55 0.191
7 The company focuses on National Government projects. 3.75 0.851
Overall Mean 3.89
Source: Survey Data (January, 2018)
46 Meiktila University of Economics Research Journal 2019, Vol. 9, N0.1

The average mean value of 3.89 indicates that the common strategy
adopted by the construction firms in Mandalay is the focus strategy. The item
“The company targets the Local Government projects” received the highest
mean score of 4.60. This means that the main target segment of most of the
construction firms in Mandalay is the government projects, including road,
railway, hydropower and logistics projects. The item “The company targets
industrial building projects” received the lowest mean value of 2.90. It can be
interpreted that the residential building projects are not the main focus of
construction firms in Mandalay.

Table (5) Competitive Strategies Adopted by Construction Firms

Sr.
No Strategy Mean Value
.
1 Cost Leadership 2.74
2 Differentiation 2.69
3 Focus 3.89

Table (5) implies that the focus strategy is applied to a great extent
with highest mean value of 3.89 by construction firms in Mandalay while cost
leadership and differentiation are applied to a moderate extent with the mean
of 2.74 and 2.69 respectively. It seems that the construction firms in Mandalay
do not solely apply the focus strategy but jointly with cost-effective or
differentiation strategy since they procure the materials and components in
bulk, and they trained their employees well.

Table (6) Organizational Performance of Sample Construction Firms

Sr.
Performance Indicators Mean Value
No. 47
1 Profitability 3.20
2 Market Share 2.58
3 Customer Satisfaction 3.08
4 Business Growth 3.00
Source: Survey Data (January, 2018)

As shown in Table (6), the profitability is highest and market share is

lowest among four performance indicators of construction firms in Mandalay.
The sample firms have been reporting an increase in profitability over the
years out of construction works as a result of effective cost management and
Meiktila University of Economics Research Journal 2019, Vol. 9, N0.1 47

controls. On the other hand, local construction firms are faced with increasing
both domestic and foreign competitors, leading to losing market share.

Table (7) Effects of Competitive Strategies on Organizational

Performance
Unstandardized
Standardized
Model Coefficients t Sig
Coefficients
B Std. Error
Constant 2.504 .920
Cost Leadership -.209 .147 -.393 -1.414 .176
Differentiation .351** .155 .621 2.263 .038
Focus .082 .183 .104 .448 .660
R2 .642
Adjusted R2 .401
Source: Survey Data (January, 2018)
** is significant at 0.05 or 5% level (2 tailed).
Dependent Variable: Organizational Performance
Organizational Performance = 2.504 + 0.351 Differentiation Strategy
The result of regression analysis provides that the differentiation
strategy has positive and significant effects on organizational performance. As
the construction firms in Mandalay do the differentiation of their products and
services from rival firms, the organizational performance of the firms will be
increased. Cost leadership and focus strategies that the firms pursue do not
affect organizational performance. As the value of R2 is 0.642, the
competitive strategies (predictors) can explain the 64 percent of total variance
in organizational performance. The moderate adjusted R2 tells that the model
predicts organizational performance of construction firms in Mandalay to
some extent.

Figure (2) Conceptual Framework with Regression Results

Independent Variables Dependent Variable
Cost Leadership t = -1
Strategy .414,
p= 0.176 PERFORMANCE
t = 2.263, p = 0.038 Profitability
Differentiation
Market Share
Strategy
0 Customer Satisfaction
p= 0.66
. 448, Growth
t=0
Focus Strategy
Significant
Not Significant
Source: Survey Data (January, 2018)
48 Meiktila University of Economics Research Journal 2019, Vol. 9, N0.1

According to the regression analysis results, only differentiation

strategy positively and significantly enhances organization performance
through performance measures (profitability, market share, customer
satisfaction and business growth). According to the nature of construction
industry in Mandalay, the main building block to achieve competitive
advantage and improve organizational performance is to provide unique, new
and customized products and services. Producing unique and differentiated
products and services leads to improvement in organizational performance. As
per findings, cost leadership and focus strategies have no effects on
organizational performance.

Findings and Discussions

The study found that the strategy mostly adopted by construction firms
in Mandalay is focus strategy. They focus mostly on the Local Government
projects, including road, railway, hydropower and logistics projects, and they
are making competitive tendering for large government projects. On the other
hand, they rarely target the industrial building projects in Mandalay region. In
the analysis of performance of the sample firms, the results report the
remarkable increase in profitability over the years out of construction works,
which is confirmed by the highest mean score, as a result of effective strategic
management practices.
In the correlation analysis, the study found that the organization
performance correlates positively and substantively with differentiation
strategy at 0.01 significant level. As the construction firms in Mandalay
differentiates their products and services by means of faster, newer and better
strategies than competitors, it is likely to contribute to better organization
performance. The result of regression analysis provides that the differentiation
strategy has positive and significant effects on organizational performance.
Producing unique, differentiated and customized products allows the sample
firms to improve their performance and to gain competitive advantage.

Suggestions and Recommendations

Even the result of the study indicate that the focus strategy is the most
common strategy that is adopted by the sampled firms, the effects of focus
Meiktila University of Economics Research Journal 2019, Vol. 9, N0.1 49

strategy on organizational performance are not obvious and significant. The

study suggests that the firms should use the joint strategy: focused cost
leadership strategy or focused differentiation strategy for improving
performance, maintaining leading role and achieving sustainable competitive
advantage in the industry.
Moreover, the competitive strategies adopted by the construction firms
in study area have effects only on the profitability of the firm, not on customer
satisfaction, market share and business growth. The profit objective of
adopting strategies is short-sided one and it cannot lead to long-term survival
and success. The firms should adopt not only generic strategies that enhance
the profitability of the firms but also survival strategies such as growth
strategies and grand strategies that allow them to satisfy clients, increase
market share and grow business.
In their efforts to improve organizational performance, corporate and
project managers should find themselves with significantly more data on
clients, project sites and internal resources. Project managers are in possession
of data already, and working with and developing experience with data
intelligence, they should need to leverage data to understand the use of
resources, information exchange and stakeholder behaviors. These insights are
important in improving organization performance, such as client satisfaction,
market share and profitability.

Limitations and Needs for Further Studies

The study was limited in scope since it has reviewed the competitive
strategies adopted by construction firms in Mandalay, and their effects on
organizational performance. Therefore, the findings of the study may only be
applicable to a different industry or firms at a minimum extent. Further study
should be the nation-wide analysis of construction industry in Myanmar.
The study was also limited to certain strategies whereas there are many
more strategies which firms can adopt to remain competitive. All relevant
strategies for construction industry should be included in further study in order
to explore the common construction strategies in Mandalay as well as in
Myanmar.
50 Meiktila University of Economics Research Journal 2019, Vol. 9, N0.1

Acknowledgements
I would like to express my profound thanks to owners, executive directors
and functional managers of construction firms in Mandalay for their warmth and kind
cooperation in my study. My profound gratitude is extended to my supervisor, Dr.
Daw Nge for her invaluable guidance and kind-hearted support.

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