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.
Highlights
Companies must have a basis on which to conduct business if they are to capture market share, sell products and services, and achieve a reasonable return on investment
Given that real-estate is such a crucial industry in China, responsible for much of the country’s GDP growth, and given that China’s growth has entered a mature phase with the inevitable economic downturn nearing, an understanding of the business models used by real-estate firms within the Chinese real-estate industry is long overdue
This paper aims to build a framework for studying the strategic business models used within the Chinese real-estate industry, and identify the generic models that exist in the industry
Summary
Companies must have a basis on which to conduct business if they are to capture market share, sell products and services, and achieve a reasonable return on investment. This ability has been described as a ‘strategic competitive advantage’, and in its simplest form reduces to the capacity of a firm to offer a product or service, either cheaper than that of competitors, or, recognizably and desirably different from competitors (Porter, 1985). A firm must be able to identify the mechanism, or ‘business formula’, by which it can generate superior profits through the delivery of differentiated or cheaper outputs This recipe for generating profits (higher revenue streams over cost streams) has come to be known as the ‘business model’ (Ovans, 2015)
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