E-commerce Overview Series: Construction Industry in Canada

Publication Date: February 2004

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Description of the Sector

The Canadian construction sector includes more than 218,000 firms according to Statistics Canada (2000). They are typically small- and medium-sized enterprises (SMEs) with fewer than five employees. Geographically, most of these firms are based in four provinces. In order of importance, Ontario has the largest number, with the Toronto area serving as the engine that drives construction activity in Canada, followed by Quebec, British Columbia and, finally, Alberta. The largest numbers of these companies operate in the residential construction, electrical, plumbing and equipment installation, exterior finishing and interior finishing sectors. The Canadian construction industry breaks down into nine sub-sectors (refer to diagram 1).

Diagram 1
Size of Sub-sectors Based on the Number of Firms
N = 218,746 firms, all categories included

d

Note:  Treating residential and non-residential construction as two sub-sectors increases the number of sub-sectors to ten.

Role of Information and Communication Technologies (ICT) in the Sector

All sectors included, on average, 15% of Canadian construction companies have a Web site. This proportion is slightly higher in Ontario (16% of firms) and a bit lower in Quebec (11% of businesses) (refer to Table 1).

Sub-sectors such as those for specialty contractors, land development and residential construction have a higher proportion of businesses with Web sites, at 23%, 21% and 20% respectively. Firms having Web sites in the interior finishing and siding sub-sectors have the lowest percentages, at 8% and 9% respectively.

13%

Table 1
Proportion of Firms Having a Web Site in Each Sub-sector by Region

Sub-sector	Percent of Web Sites
	CAN	ON	QC
Land Subdivision and Land Development	21%	11%	22%
Residential Construction	18%	15%	20%
Non-residential Construction	20%	16%	21%
Construction - Infrastructure	15%	20%	14%
Construction Management	17%	10%	20%
Construction - Exterior Finishing	12%	12%
Construction - Interior Finishing	8%	5%	8%
Electrical, Plumbing and Equipment Installation	14%	9%	16%
Siding, Fences, Paving and Surfacing	9%	0%	11%
All Other Specialty Trade Contractors	23%	0%	28%
Total - Construction	15%	11%	16%

Source: Scott's Business Directories, 2002.

The proportion of firms having a Web site varies with their size. Only 8% of companies with fewer than 10 employees have Web sites, while 82% of firms with 200 to 299 employees, have a Web site.

New Electronic Business Models

The principal electronic business (e-business) models in the construction industry are collaboration platforms and e-malls. The e-malls are initiatives among geographic and sectoral groups. Diagram 2 sets out a few examples of firms or Web sites that stand out in the construction industry. Canada's SMEs in this industry belong mainly in quadrant three, with revolutionary models emerging along with a reduction in the strategic scope of initiatives.

Habitation.com and Construction.ca are two examples of Canadian e-malls.

Diagram 2
Technology Solutions Arising From Business Models

d

Note:  An e-mall features several sellers under a single site. A collaboration platform provides tools and information supporting collaboration between companies.

To fully understand diagram 2, the reader should consult the document entitled "Electronic Business Models: A Conceptual Framework for Small- and Medium-sized Canadian Enterprises" at the following address: www.cefrio.qc.ca/english/pdf/Strategis%20_Eng.pdf. This document describes in detail the four main models illustrated in the above diagram.

Issues for Canadian Firms

Procurement is a key function in the construction industry. Firms in Canada's construction industry must foster awareness of e-business initiatives that might offer attractive advantages. Such initiatives can create favourable conditions for Canadian suppliers and can offer good opportunities for the development of regionally based sectoral portals.

Barriers

In terms of e-business, key barriers to adopting solutions may be technological (for example, various construction trades are slow to adopt personal computers) and/or cultural in nature. Contractors and sub-contractors have maintained a strong tradition of verbal and informal negotiation in contrast to the specific requirements of e-business for formal procedures and business practices.

Opportunities Open to Firms in the Sector

E-business suggests significant opportunities for development in the area of procurement in the construction industry. These opportunities are more prevalent in the procurement of services among contractors and sub-contractors as well as the various construction trades. They also exist in the purchase of construction materials.

E-business holds out opportunities to contribute toward standardizing business procedures in the industry. It is a strategic opportunity because many sectors of the industry are mainly cottage-type operations.

E-business also encourages updating technological and management practices and contributes to a reduction in the cost of transactions among suppliers, professionals and contractors. Finally, significant improvement in the management of projects may result from e-business initiatives in the construction industry.

References

• Statistics Canada, 2000, Canadian Business Patterns (Beyond 20/20)
• Scott's Quebec Industrial Directory, 2002
• www.construction.ca
• www.habitation.com
• http://strategis.gc.ca

To learn more, you can visit these Web sites: 

• www.cefrio.qc.ca/english/indexAccueil.cfm
• http://strategis.gc.ca/bis
• http://strategis.gc.ca/ebizenable
• www.sourcecan.com

Published in Partnership

This document has been prepared by CEFRIO, as part of the project "New E-business Models and SME Development", a project undertaken in cooperation with Industry Canada, the National Bank of Canada, TELUS, CANARIE and Canadian Heritage.

The research team included Mrs. Louise Côté and Mr. Michel Vézina from HEC Montréal, and Mr. Vincent Sabourin from the Université du Québec à Montréal.

For more information, please go to the CEFRIO Web site - the authority on information technology appropriation - at: www.cefrio.qc.ca/english/indexAccueil.cfm.