Risk and competitive advantage in the Russian construction industry

Risk identification, mapping and analysis are relatively commonplace in other, more developed construction markets. However, in the Russian market, there has been little attention paid to this area to date.

This article compares contractors’ perceptions of the risks they face in Russian versus the US construction industries. The implications for the industry of these perceptions are examined and coping strategies suggested.

The results of a survey of the top 100 US contractors are considered. The survey clearly demonstrates that, in the US market, concern is centered on those more operational risks that are typically under the control of the contractor.

The Russian construction industry is young and fragmented, wheras the US market is mature.

For example, labor, equipment and material availability, quality of work, and safety. Comparison with a similar survey of Russian contractors shows significant differences between the two industry environments.

This raises the question: why do contractors surveyed in the US and Russian markets have different and sometimes counter-intuitive perceptions of some risks?

The hypothesis put forward for consideration is that the differences are due to the different industry environments in the two countries. To assess this hypothesis, the survey results are mapped onto well-defined industry environment types and the differences between the two are examined. The suggested conclusion is that the Russian construction industry environment is fragmented.

A fragmented industry environment is defined as one in which a large number of companies have varying market share but no companies significantly dominate the market. The characteristics of the Russian construction industry are examined and provide evidence of the fragmented nature of the industry environment.

The article concludes with suggested strategies to overcome or cope with fragmentation for competitive advantage in the Russian market.

The complete article was written by:

  • B. Kagan Ceylan
    BREEAM Int. Assessor, LEED-GA, MRICS, PMP. Manager in Construction Project Management Group, Ernst & Young (CIS) BV

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