An exploration of competitive advantage in the plasterboard industry

Colley, John Graham (2011) An exploration of competitive advantage in the plasterboard industry. PhD thesis, University of Nottingham.

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Abstract

There is a widespread presumption in the strategy literature that firms enjoying a competitive advantage in commodity-producing industries do so as a result of following cost leadership strategies. This thesis as monograph re-evaluates that presumption by a detailed exploration of the bases for competitive advantage in the plasterboard industry, one of the most important materials used by the construction industry. It explores price and non-price based methods of competition, plant scale economies, and the influence of order of entry on firm performance. The thesis draws upon detailed industry-, firm- and plant level data collected by the author. These data include time series price, demand and capacity figures for the US and UK, plant factor usage data for 50 plants covering four years, and data relating to 56 attempted entries to the European plasterboard industry. Analytical methods include time series regression methods with ADF and Engle Granger tests. Panel data methods include OLS regression with fixed and variable models. Dummy variable methods are also employed with these approaches.

The nature of the relationship between price and supply and demand is used to indicate the character of competition. Price would be expected to reflect the relationship between supply and demand. The study finds that this does occur in the USA where non-price based methods of competition are rarely applied. The UK Industry makes extensive use of bundling methods which result in no discernible relationship between price and supply and demand. The influence of the respective competitive environments is also considered. The study also finds that prices are upwards sticky' In the USA, which has implications for the theories of Means (1935) and Sweezy (1939). A novel theoretical analysis is provided to explain this finding.

The study identifies Edgeworth (Maskin and Tirolle, 1988) price cycle behaviour in the UK plasterboard industry. Novel conclusions are drawn regarding the sources and environment which instigate this behaviour. The findings are important as previous empirical work has been confined to the gasoline industry.

Panel data methods are used with a uniquely detailed database to identify and quantify manufacturing plant scale economies in labour and energy by functional use. This level of detail has not previously been available to researchers. Evidence of management diseconomies of scale is identified, and also learning effects for new plants. Initial investment costs are examined and found to yield scale economies in both equipment and civil engineering categories of expenditure. These are discussed in the context of scale economy sources.

Finally, historical methods (Golder, 2000) are used to study the 56 attempted entries to the 21 industries which comprise the European plasterboard industry. A model is devised to predict the prospect of entry success in relation to factors including order of entry, country regime, resource endowment and demand. A link between order of entry and long-term market share advantage is identified. Evidence is identified to support the proposition that second movers select a cost base to compete with the first mover. The relevance of resource endowment is discussed and the concept of `dominant process' emerges as important factors in the likelihood of entry success.

Item Type:Thesis (PhD)
Supervisors:Thompson, R.S.
Amess, K.
Uncontrolled Keywords:Plasterboard industry, costs, industrial, competition
Faculties/Schools:UK Campuses > Faculty of Social Sciences, Law and Education > Nottingham University Business School
ID Code:2687
Deposited By:Ms Valerie Airey
Deposited On:18 Jun 2012 09:36
Last Modified:18 Jun 2012 09:36

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