CONSTRUCTION INDUSTRY

 Threat of new entrants: Due to the necessity for substantial capital investments and
competence in managing complex projects, the construction industry faces substantial
entrance hurdles. However, the business is always threatened by new entrants.
 Bargaining Power of Suppliers: The construction sector is highly dependent on the
availability of raw materials and equipment, making suppliers a crucial aspect. However, the
presence of several suppliers and the capacity of construction corporations to switch
between them limits the bargaining power of suppliers.
 Bargaining Power of Buyers: The construction market is extremely competitive, and
customers have access to a variety of contractors. This offers them considerable bargaining
leverage, particularly in regards to cost and quality.
 Threat of Substitute Products or Services: Substitute products or services pose a small threat
to the construction sector. Nonetheless, alternative building methods and materials may
pose a threat to established building practises.
 Rivalry among Existing Competitors: Multiple large and small construction companies
compete for projects in a highly competitive industry. This can result in extreme price
competition, which can have a negative influence on profits.

Q1. Which is the most powerful force(s)?

Ans.Most powerful forces among the five are given as follows

Bargaining power of Buyers

Rivalry among existing competitors

Q2. What are the reasons behind its/their power?

Ans.
A) Bargaining Due to the availability of replacements, low switching costs, sector fragmentation,
economic conditions, and government regulations, the purchasing power of consumers might be
substantial.
1) High availability of substitutes: Buyers have the option of selecting from a variety of alternatives,
such as different construction companies or other building procedures. As a result, they now have
leverage to negotiate lower prices or improved terms.
2) Low switching costs: Customers have easy access to the ability to switch to a new supplier without
incurring significant additional fees. As a result, they have greater bargaining power, enabling them
to demand better prices, quality, and service.
3) Fragmented industry: A vast number of small and medium-sized enterprises compete for
consumers in the building and construction industry, which is typically fragmented. This equates to
consumers having a vast selection of options from which to choose, allowing them to rapidly
compare various service providers.
4)Economic conditions: When there is an economic downturn or recession, the demand for
construction services may decrease, which can improve the negotiation power of purchasers.
5) Government regulations: When government laws or requirements are imposed on a business or
industry, the number of potential suppliers might be decreased. This reduces competition, which in
turn undermines customers' negotiating position. However, there are other cases in which
government regulations can increase competition and strengthen the bargaining position of
consumers.
B) Overall, the combination of a fragmented market, low barriers to entry, price competition,
high fixed costs, and a project-based nature can all contribute to high rivalry among existing
competitors in the construction industry.
1. Fragmented market: The construction industry is often characterized by a large number of
small and medium-sized firms competing for business. This can lead to intense competition
for projects and contracts, and drive down profit margins.
2. Low barriers to entry: Because the barriers to entry may be quite low in the construction
sector, it is much simpler for new businesses to enter the market and compete with the
competitors that are already there. This may result in an increase in the total number of
participants, which in turn may result in an increased degree of competitiveness.
3. Price competition: The construction sector is usually price-sensitive, and as a result,
consumers frequently look for ways to save expenses, including receiving competitive bids
from a number of different contractors. This might result in a highly competitive pricing
environment and slim margins for profit.
4. High fixed costs: When it comes to equipment, staff, and materials, building projects
frequently demand large expenditures. As a result, construction companies frequently face
high fixed expenses. Because of this, there may be further pressure to obtain contracts and
earn money in order to cover these expenditures, which may increase to the already severe
level of competition.
5. Project-based nature: Due to the fact that the construction sector is usually project-based,
competitors are frequently pitted against one another in competitive bidding for specific
contracts or projects. This might result in severe rivalry for certain projects and generate
pressure to succeed in winning contracts in order to keep or increase market share.