Strategic business model typologies evident in the Chinese real-estate industry
Abstract
The Chinese real estate industry has emerged over recent decades as one of the key drivers of Chinese economic growth and attracted thousands of players nationwide. Yet, despite the continuing importance of the real-estate industry in China, there has not been any work done to identify nor describe the strategic business models used by enterprises within the sector. This study fills this gap in the literature. This paper begins by building a framework for studying the strategic business models used within the Chinese real-estate industry, and then goes on to identify the generic models that exist in the industry. A two-step cluster analysis of 117 Chinese real-estate companies was carried out over seven parameters identified in the literature as impacting business models: 1) clients, 2) products offered, 3) market locale, 4) financial structure, 5) value chain embeddedness, 6) core competency, and, 7) revenue source. Five generic strategic business models that characterize the Chinese real-estate industry were identified: 1) commercial property model, 2) government servicing model, 3) cost efficiency model, 4) asset management model, and, 5) high-turnover model. The findings will assist industry practitioners in evaluating and informing their own competitive positions within the Chinese real-estate industry.
Keyword : real-estate, business strategy, business model, business competition, cluster analysis, China
How to Cite
Liu, G., Li, K., Shrestha, A., Martek, I., & Zhou, Y. (2018). Strategic business model typologies evident in the Chinese real-estate industry. International Journal of Strategic Property Management, 22(6), 501-515. https://doi.org/10.3846/ijspm.2018.6275
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
Abdelkafi, N., Makhotin, S., & Posselt, T. (2013). Business model innovations for electric mobility – what can be learned from existing business model patterns?. International Journal of Innovation Management, 17(1), 1-41. https://doi.org/10.1142/S1363919613400033
Ball, M. (2010). The housebuilding industry: promoting recovery in housing supply. Department for Communities & Local Government (DCLG), London.
Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120. https://doi.org/10.1177/014920639101700108
Brege, S., Stehn, L., & Nord, T. (2014). Business models in industrialized building of multi-storey houses. Construction Management and Economics, 32(1), 208-226. https://doi.org/10.1080/01446193.2013.840734
Brettel, M., Strese, S., & Flatten, T. C. (2013). Improving the performance of business models with relationship marketing efforts – an entrepreneurial perspective. European Management Journal, 30(2), 85-98. https://doi.org/10.1016/j.emj.2011.11.003
Casadesus-Masanell, R., & Zhu, F. (2010). Strategies to fight ad-sponsored rivals. Management Science, 56(9), 1484-1499. https://doi.org/10.1287/mnsc.1100.1199
Callcutt, J. (2007). The Callcutt review of housebuilding delivery. Department for Communities & Local Government (DCLG), London.
Chesbrough, H. (1996). Business model innovation: it’s not just about technology anymore. Strategy & Leadership, 35(6), 12-17. https://doi.org/10.1108/10878570710833714
Dahan, N. M., Doh, J. P., Oetzel, J., & Yaziji, M. (2010). Corporate-NGO collaboration: co-creating new business models for developing markets. Long Range Planning, 43(2-3), 326-342. https://doi.org/10.1016/j.lrp.2009.11.003
Dasilva, C. M., & Trkman, P. (2014). Business model: what it is and what it is not. Long Range Planning, 47(6), 379-389. https://doi.org/10.1016/j.lrp.2013.08.004
Doganova, L., & Eyquem-Renault, M. (2009). What do business models do?: Innovation devices in technology entrepreneurship. Research Policy, 38(10), 1559-1570. https://doi.org/10.1016/j.respol.2009.08.002
Fellows, R. F., & Langford, D. A. (1980). Decision theory and tendering. Building Technology and Management, 45(1), 36-49.
Fraley, C., & Raftery, A. E. (1998). How many clusters? Which clustering method? Answers via model-based cluster analysis. The Computer Journal, 41(8), 578-588. https://doi.org/10.1093/comjnl/41.8.578
Goodier, C., & Pan, W. (2011). The challenges for UK housebuilding. RICS Residential Property Journal, May-June (2011), 4-7.
Hamel, G. (1998). The challenge today: changing the rules of the game. Business Strategy Review, 9(9), 19-26. https://doi.org/10.1111/1467-8616.00062
Johnson, M. W., Christensen, C. M., & Kagermann, H. (2008). Reinventing your business model. Harvard Business Review, 87(12), 52-60.
Lambert, S. C., & Davidson, R. A. (2013). Applications of the business model in studies of enterprise success, innovation and classification: an analysis of empirical research from 1996 to 2010. European Management Journal, 31(6), 668-681. https://doi.org/10.1016/j.emj.2012.07.007
Li, H., Guo, H., Skibniewski, M. J., & Skitmore, M. (2008). Using the IKEA model and virtual prototyping technology to improve construction process management. Construction Management and Economics, 26(9), 991-1000. https://doi.org/10.1080/01446190802290477
Li, K. J., Zhou, Y., Shrestha, A., & Liu, G. W. (2018). A cluster analysis of real estate business models in China. Proceedings of the 21st International Symposium on Advancement of Construction Management and Real Estate. Singapore: Springer. https://doi.org/10.1007/978-981-10-6190-5_1
Liu, Q., Luo, J., & Tian, G. (2016a). Managerial professional connections versus political connections: evidence from firms’ access to informal financing resources. Journal of Corporate Finance, 41, 179-2000. https://doi.org/10.1016/j.jcorpfin.2016.09.003
Liu, Q., Luo, J., & Tian, G. (2016b). Political connections with corrupt government bureaucrats and corporate M&A decisions: a natural experiment from the anti-corruption cases in China. Pacific Basin Finance Journal, 37, 52-80. https://doi.org/10.1016/j.pacfin.2016.03.003
Liu, G. W., Li, K. J., Zhao, D., & Mao, C. (2017). Business model innovation and its drivers in the Chinese construction industry during the shift to modular prefabrication. Journal of Management in Engineering, 3(33). https://doi.org/10.1061/(ASCE)ME.1943-5479.0000501
Magretta, J. (2002). Why business model matter. Harvard Business Review, 80(5), 86-92.
Martek, I., & Chen, C. (2014). Competitive strategies associated with particular localization patterns adopted by implanted architecture, engineering, and construction firms in China. Journal of Management in Engineering, 30(4), 1-13. https://doi.org/10.1061/(ASCE)ME.1943-5479.0000232
Martek, I. & Chen, C. (2013). Localization typologies evident amongst foreign enterprises active in the Chinese construction market. Journal of Construction Engineering and Management, 139(10), 1-12. https://doi.org/10.1061/(ASCE)CO.1943-7862.0000719
Mangematin, V., Ravarini, A. M., & Scott, P. S. (2017). Practitioner insights on business models and future directions. Journal of Business Strategy, 38(2), 3-5. https://doi.org/10.1108/JBS-10-2016-0130
Moore, G. A. (2004). Darwin and the demon: innovating within established enterprises. Harvard Business Review, 82(7), 86-99.
Morris, M., Schindehutte, M., & Allen, J. (2005). The entrepreneur’s business model: toward a unified perspective. Journal of Business Research, 58(6), 726-735. https://doi.org/10.1016/j.jbusres.2003.11.001
Osterwalder, A., & Pigneur, Y. (2005). Clarifying business models: origins, present, and future of the concept. Communications of the Association for Information Systems, 16(16), 751-775.
Ovans, A. (2015). What is a business model?. Harvard Business Review, 27, 167-178.
Pan, W., & Goodier, C. (2012). House-building business models and off-site construction take-up. Journal of Architectural Engineering, 18(2): 84-93. https://doi.org/10.1061/(ASCE)AE.1943-5568.0000058
Pekuri, A., Suvanto, M., Haapasalo, H., & Pekuri, L. (2014). Managing value creation: the business model approach in construction. International Journal of Business Innovation & Research, 2014(1), 36-51. https://doi.org/10.1504/IJBIR.2014.058045
Penrose, E. T. (1959). The theory of the growth of the firm. New York: John Wiley & Sons.
Podsakoff, P. M., Mackenzie, S. B., Lee, J. Y., & Podsakoff, N. P. (2003). Common method biases in behavioral research: a critical review of the literature and recommended remedies. Journal of Applied Psychology, 88(5), 879-903. https://doi.org/10.1037/0021-9010.88.5.879
Porter, M. (1985). Competitive advantage: creating and sustaining superior performance. New York: Free Press.
Rousseeuw, P. J. (1987). Shilhouettes: a graphical aid to the interpretation and validation of cluster analysis. Journal of Computational & Applied Mathematics, 20(1987), 53-65. https://doi.org/10.1016/0377-0427(87)90125-7
Seaden, G., Guolla, M., Doutriaux, J., & Nash, J. (2003). Strategic decisions and innovation in construction firms, Construction Management and Economics, 21(21), 603-612. https://doi.org/10.1080/0144619032000134138
Schaltegger, S., Lüdeke-Freund, F., & Hansen, E. G. (2013). Business cases for sustainability. International Journal of Innovation and Sustainable Development, 6(2), 95-119. https://doi.org/10.1504/IJISD.2012.046944
Shafer, S. M., Smith, H. J., & Linder, J. C. (2005). The power of business models. Business Horizons, 48(3), 199-207. https://doi.org/10.1016/j.bushor.2004.10.014
Smith, W. K., Binns, A., & Tushman, M. L. (2010). Complex business models: managing strategic paradoxes simultaneously. Long Range Planning, 43(2-3), 448-461. https://doi.org/10.1016/j.lrp.2009.12.003
Sako, M. (2012). Business models for strategy and innovation. Communications of the ACM, 55(7), 22-24. https://doi.org/10.1145/2209249.2209259
Teece, D. J. (2010). Business models, business strategy and innovation. Long Range Planning, 43(2-3), 172-194. https://doi.org/10.1016/j.lrp.2009.07.003
Thomas, R. (2001). Business value analysis: coping with unruly uncertainty. Strategy and Leadership, 29(2), 16-24. https://doi.org/10.1108/10878570110695129
Timmers, P. (1998). Business models for electronic markets. Electronic Markets, 8, 3-8. https://doi.org/10.1080/10196789800000016
Tykkä, S., et al. (2010). Development of timber framed firms in the construction sector: Is EU policy one source of their innovation? Forest Policy & Economics, 12(3), 199-206. https://doi.org/10.1016/j.forpol.2009.10.003
Voelpel, S., Leibold, M., & Tekie, E. (2004). The wheel of business model to leapfrog competitors. Journal of Change Management, 4(3). https://doi.org/10.1080/1469701042000212669
Weng, J. Y. (2004). Mesoscopic business model: nano research of management areas. China Economic Studies, 2004(1), 34-40.
Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5(2), 171-180. https://doi.org/10.1002/smj.4250050207
Wirtz, B.W., Schilke, O., & Ullrich, S. (2010). Strategic development of business models: implications of the web 2.0 for creating value on the internet. Long Range Planning, 43(2-3), 272-290. https://doi.org/10.1016/j.lrp.2010.01.005
Winterhalter, S., Weiblen, T., Wecht, C. H., & Gassmann, O. (2017). Business model innovation processes in large corporations: insights from BASF. Journal of Business Strategy, 38(2), 62-75. https://doi.org/10.1108/JBS-10-2016-0116
Yuan, L. (2007). Reconstruction of business model. China Industrial Economy, 2007(6), 72-81.
Ball, M. (2010). The housebuilding industry: promoting recovery in housing supply. Department for Communities & Local Government (DCLG), London.
Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120. https://doi.org/10.1177/014920639101700108
Brege, S., Stehn, L., & Nord, T. (2014). Business models in industrialized building of multi-storey houses. Construction Management and Economics, 32(1), 208-226. https://doi.org/10.1080/01446193.2013.840734
Brettel, M., Strese, S., & Flatten, T. C. (2013). Improving the performance of business models with relationship marketing efforts – an entrepreneurial perspective. European Management Journal, 30(2), 85-98. https://doi.org/10.1016/j.emj.2011.11.003
Casadesus-Masanell, R., & Zhu, F. (2010). Strategies to fight ad-sponsored rivals. Management Science, 56(9), 1484-1499. https://doi.org/10.1287/mnsc.1100.1199
Callcutt, J. (2007). The Callcutt review of housebuilding delivery. Department for Communities & Local Government (DCLG), London.
Chesbrough, H. (1996). Business model innovation: it’s not just about technology anymore. Strategy & Leadership, 35(6), 12-17. https://doi.org/10.1108/10878570710833714
Dahan, N. M., Doh, J. P., Oetzel, J., & Yaziji, M. (2010). Corporate-NGO collaboration: co-creating new business models for developing markets. Long Range Planning, 43(2-3), 326-342. https://doi.org/10.1016/j.lrp.2009.11.003
Dasilva, C. M., & Trkman, P. (2014). Business model: what it is and what it is not. Long Range Planning, 47(6), 379-389. https://doi.org/10.1016/j.lrp.2013.08.004
Doganova, L., & Eyquem-Renault, M. (2009). What do business models do?: Innovation devices in technology entrepreneurship. Research Policy, 38(10), 1559-1570. https://doi.org/10.1016/j.respol.2009.08.002
Fellows, R. F., & Langford, D. A. (1980). Decision theory and tendering. Building Technology and Management, 45(1), 36-49.
Fraley, C., & Raftery, A. E. (1998). How many clusters? Which clustering method? Answers via model-based cluster analysis. The Computer Journal, 41(8), 578-588. https://doi.org/10.1093/comjnl/41.8.578
Goodier, C., & Pan, W. (2011). The challenges for UK housebuilding. RICS Residential Property Journal, May-June (2011), 4-7.
Hamel, G. (1998). The challenge today: changing the rules of the game. Business Strategy Review, 9(9), 19-26. https://doi.org/10.1111/1467-8616.00062
Johnson, M. W., Christensen, C. M., & Kagermann, H. (2008). Reinventing your business model. Harvard Business Review, 87(12), 52-60.
Lambert, S. C., & Davidson, R. A. (2013). Applications of the business model in studies of enterprise success, innovation and classification: an analysis of empirical research from 1996 to 2010. European Management Journal, 31(6), 668-681. https://doi.org/10.1016/j.emj.2012.07.007
Li, H., Guo, H., Skibniewski, M. J., & Skitmore, M. (2008). Using the IKEA model and virtual prototyping technology to improve construction process management. Construction Management and Economics, 26(9), 991-1000. https://doi.org/10.1080/01446190802290477
Li, K. J., Zhou, Y., Shrestha, A., & Liu, G. W. (2018). A cluster analysis of real estate business models in China. Proceedings of the 21st International Symposium on Advancement of Construction Management and Real Estate. Singapore: Springer. https://doi.org/10.1007/978-981-10-6190-5_1
Liu, Q., Luo, J., & Tian, G. (2016a). Managerial professional connections versus political connections: evidence from firms’ access to informal financing resources. Journal of Corporate Finance, 41, 179-2000. https://doi.org/10.1016/j.jcorpfin.2016.09.003
Liu, Q., Luo, J., & Tian, G. (2016b). Political connections with corrupt government bureaucrats and corporate M&A decisions: a natural experiment from the anti-corruption cases in China. Pacific Basin Finance Journal, 37, 52-80. https://doi.org/10.1016/j.pacfin.2016.03.003
Liu, G. W., Li, K. J., Zhao, D., & Mao, C. (2017). Business model innovation and its drivers in the Chinese construction industry during the shift to modular prefabrication. Journal of Management in Engineering, 3(33). https://doi.org/10.1061/(ASCE)ME.1943-5479.0000501
Magretta, J. (2002). Why business model matter. Harvard Business Review, 80(5), 86-92.
Martek, I., & Chen, C. (2014). Competitive strategies associated with particular localization patterns adopted by implanted architecture, engineering, and construction firms in China. Journal of Management in Engineering, 30(4), 1-13. https://doi.org/10.1061/(ASCE)ME.1943-5479.0000232
Martek, I. & Chen, C. (2013). Localization typologies evident amongst foreign enterprises active in the Chinese construction market. Journal of Construction Engineering and Management, 139(10), 1-12. https://doi.org/10.1061/(ASCE)CO.1943-7862.0000719
Mangematin, V., Ravarini, A. M., & Scott, P. S. (2017). Practitioner insights on business models and future directions. Journal of Business Strategy, 38(2), 3-5. https://doi.org/10.1108/JBS-10-2016-0130
Moore, G. A. (2004). Darwin and the demon: innovating within established enterprises. Harvard Business Review, 82(7), 86-99.
Morris, M., Schindehutte, M., & Allen, J. (2005). The entrepreneur’s business model: toward a unified perspective. Journal of Business Research, 58(6), 726-735. https://doi.org/10.1016/j.jbusres.2003.11.001
Osterwalder, A., & Pigneur, Y. (2005). Clarifying business models: origins, present, and future of the concept. Communications of the Association for Information Systems, 16(16), 751-775.
Ovans, A. (2015). What is a business model?. Harvard Business Review, 27, 167-178.
Pan, W., & Goodier, C. (2012). House-building business models and off-site construction take-up. Journal of Architectural Engineering, 18(2): 84-93. https://doi.org/10.1061/(ASCE)AE.1943-5568.0000058
Pekuri, A., Suvanto, M., Haapasalo, H., & Pekuri, L. (2014). Managing value creation: the business model approach in construction. International Journal of Business Innovation & Research, 2014(1), 36-51. https://doi.org/10.1504/IJBIR.2014.058045
Penrose, E. T. (1959). The theory of the growth of the firm. New York: John Wiley & Sons.
Podsakoff, P. M., Mackenzie, S. B., Lee, J. Y., & Podsakoff, N. P. (2003). Common method biases in behavioral research: a critical review of the literature and recommended remedies. Journal of Applied Psychology, 88(5), 879-903. https://doi.org/10.1037/0021-9010.88.5.879
Porter, M. (1985). Competitive advantage: creating and sustaining superior performance. New York: Free Press.
Rousseeuw, P. J. (1987). Shilhouettes: a graphical aid to the interpretation and validation of cluster analysis. Journal of Computational & Applied Mathematics, 20(1987), 53-65. https://doi.org/10.1016/0377-0427(87)90125-7
Seaden, G., Guolla, M., Doutriaux, J., & Nash, J. (2003). Strategic decisions and innovation in construction firms, Construction Management and Economics, 21(21), 603-612. https://doi.org/10.1080/0144619032000134138
Schaltegger, S., Lüdeke-Freund, F., & Hansen, E. G. (2013). Business cases for sustainability. International Journal of Innovation and Sustainable Development, 6(2), 95-119. https://doi.org/10.1504/IJISD.2012.046944
Shafer, S. M., Smith, H. J., & Linder, J. C. (2005). The power of business models. Business Horizons, 48(3), 199-207. https://doi.org/10.1016/j.bushor.2004.10.014
Smith, W. K., Binns, A., & Tushman, M. L. (2010). Complex business models: managing strategic paradoxes simultaneously. Long Range Planning, 43(2-3), 448-461. https://doi.org/10.1016/j.lrp.2009.12.003
Sako, M. (2012). Business models for strategy and innovation. Communications of the ACM, 55(7), 22-24. https://doi.org/10.1145/2209249.2209259
Teece, D. J. (2010). Business models, business strategy and innovation. Long Range Planning, 43(2-3), 172-194. https://doi.org/10.1016/j.lrp.2009.07.003
Thomas, R. (2001). Business value analysis: coping with unruly uncertainty. Strategy and Leadership, 29(2), 16-24. https://doi.org/10.1108/10878570110695129
Timmers, P. (1998). Business models for electronic markets. Electronic Markets, 8, 3-8. https://doi.org/10.1080/10196789800000016
Tykkä, S., et al. (2010). Development of timber framed firms in the construction sector: Is EU policy one source of their innovation? Forest Policy & Economics, 12(3), 199-206. https://doi.org/10.1016/j.forpol.2009.10.003
Voelpel, S., Leibold, M., & Tekie, E. (2004). The wheel of business model to leapfrog competitors. Journal of Change Management, 4(3). https://doi.org/10.1080/1469701042000212669
Weng, J. Y. (2004). Mesoscopic business model: nano research of management areas. China Economic Studies, 2004(1), 34-40.
Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5(2), 171-180. https://doi.org/10.1002/smj.4250050207
Wirtz, B.W., Schilke, O., & Ullrich, S. (2010). Strategic development of business models: implications of the web 2.0 for creating value on the internet. Long Range Planning, 43(2-3), 272-290. https://doi.org/10.1016/j.lrp.2010.01.005
Winterhalter, S., Weiblen, T., Wecht, C. H., & Gassmann, O. (2017). Business model innovation processes in large corporations: insights from BASF. Journal of Business Strategy, 38(2), 62-75. https://doi.org/10.1108/JBS-10-2016-0116
Yuan, L. (2007). Reconstruction of business model. China Industrial Economy, 2007(6), 72-81.