Value Creation for Kenyan Construction Industry Firms to Ensure that they Remain Highly Competitive with the Threat of New Entrants in the Local Market Kimani Thomas Njuguna Ahmad Omar Alkizim Mugwima Njuguna Jomo Kenyatta University of Agriculture and Technology, School of Architecture and Building Sciences, Department of Construction Management, P. O. Box 62000, 00200 City Square, Nairobi, KENYA. Abstract—In the wake of many infrastructure construction projects, a booming real estate industry, a shift towards global market driven concepts and increased competition with other skilled actors in the value chain, Kenyan Construction industry firms have to adapt quickly to stay competitive. With the country's progress and economic growth, construction projects have become international affairs with multi-national construction firms taking positions as lead consultants and contractors for major projects in Kenya. The historically monolithic Kenyan construction industry is slowly being diffused by foreign competition and there is pressure on the local actors to increase productivity and reduce costs. Value innovation for both consultants and contractors with fundamental changes in the way the firms create and appropriate value is crucial for their survival. Analysis of the possibilities and restrictions of the activity system in relation to the individual firms and the supply chain for the construction industry firms has also been explored in this study. Identification of an emergent system: International collaboration in the supply chain has also been explored. Insights into business model design for the construction industry firms have also been given, this is since most firms in the Kenyan construction industry tend to focus on the design quality of the service they offer, largely neglecting the entrepreneurial side of the business which requires managerial attention. The study consequently leads to the demonstration of the application of the activity system in the Kenyan construction industry. Keywords—Construction Industry; Value Creation; Consultants; Contractors; New Entrants; BIM; Business model design; PoR I. INTRODUCTION With the fast-growing international trade and development, the construction industry has been provided new opportunities by the World Trade Organization (WTO) agreements (WTO, 2013). Emerging economies entry into the WTO has sped up the process of liberalization, privatization and institutional reforms, thus pushing many firms from the developing world to internationalize in order to counter the intense competition at the domestic and regional markets (Gammeltoft, 2010). In the wake of globalization, firms are now exposed to newer challenges as they have to compete within ever changing and expanding marketplaces (Murphy, 2007). Fuelled by Kenya's fast changing society and increasingly unpredictable economy, organizations ability to adapt has become more important to survive. Firms need to develop new business models or alter their existing ones to create and capture value when markets, technologies and legal structures are changing (Teece, 2010). Thus, constant innovation of the business model is essential to maintain a healthy business. For example, procurement of construction services by Kenyan authorities does not favor the local Construction industry player. Contractors have been complaining that they have been left out as Chinese firms take the largest percentage of local projects (Omondi, 2015). Kenya National Highway Authority (KeNHA) has in the last five years awarded seven of eleven major road construction contracts to Chinese contractors. The remaining four are taken by three European contractors and one Indian contractor. Kenyan contractors do the maintenance and even this not guaranteed. As China's and other International firms presence is felt in the country, Kenyan presence in the Construction industry is being swept to the periphery. Kenyan Authorities claim that Kenyan contractors do not have financial and human resource capacity (Omondi, 2015), ironically, the same authorities are tasked with the development and promotion of the local industry. Therefore, even with increased pace and broadened scope of construction projects, vibrancy in architectural and engineering consultancy services and the evolving construction technology, Kenyan Construction industry firms are facing stiff competition from foreign players. For example, the main obstacle for local contractors involvement in donor funded projects is the special pre-condition that the contractor be on the approved contractor list of funding agencies (Omondi, 2015). The study seeks to identify activity systems that can be used within the construction industry in Kenya to create and capture value. The activity systems also involve the Vol. 5 Issue 03, March-2016 International Journal of Engineering Research & Technology (IJERT) ISSN: 2278-0181 http://www.ijert.org IJERTV5IS030127 (This work is licensed under a Creative Commons Attribution 4.0 International License.) Published by : 213