Application of Vertical Integration in the Tanzanian Construction Industry

Abstract

Vertical integration originated from the manufacturing industry in the last quarter of the nineteenth century in the United States of America as means of reducing per unit cost of production. It was later adopted by the construction industry as means of solving some of the problems associated with construction. Despite its many benefits, it is still uncommon in the Tanzanian construction industry. Since Vertical integration is originally from the manufacturing industry and relatively a new concept in the Tanzanian construction industry, it is worth looking at the way it is currently applied, to see its driving forces, benefits, and challenges that construction firms face, hence recommend the best way it can fit into the Tanzanian construction industry to make it more feasible and maximize its benefits. A qualitative research approach was adopted. Through a case study design an interview survey was conducted with 15 respondents from 3 case companies in Tanzania. The collected data and interview transcripts were analyzed using content analysis method. The study showed that the main driving factor that motivates Tanzanian contractors to integrate is the increase in competition that has come with the gradual growth of the industry while cost control and quality maintenance were the main benefits identified. The absence of contracts that allow for vertically integrated firms to prosper was the most mentioned challenge which calls for government’s intervention. The study emphasizes the need to adopt other procurement systems other than the traditional procurement system to support the vertically integrated firms. A call for change to the government, being one of the biggest clients for large construction projects. The key contributions of this research include; bringing awareness on the topic as there is barely any study on vertical integration in the Tanzanian construction industry hence provide necessary knowledge for any firms interested in applying vertical integration to help them understand how to deal with challenges associated with it so as to enhance its benefits and being useful to future researchers and academicians wishing to carry out further study on the field. Moreover, this study addresses the government on the role it needs to play in supporting vertically integrated Tanzanian construction firms.