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Article

Thanuja Ramachandra and James Olabode Bamidele Rotimi

The construction industry suffers from significantly large number of insolvencies than other industries due to its inherent characteristics and these have dire…

Abstract

Purpose

The construction industry suffers from significantly large number of insolvencies than other industries due to its inherent characteristics and these have dire consequences on project participants and the industry at large. The purpose of this paper is to determine both the causes of liquidation and the distribution of losses to construction parties through an analysis of liquidators' reports on some construction firms based in New Zealand.

Design/methodology/approach

The study collates primary information from Liquidators' reports for firms operating within three main sub‐sectors of the construction industry. The information was then analysed using simple interpretative techniques for the period covering 2005 to 2009. Altogether the data set used for the analyses included 65 construction firms.

Findings

The major reasons for construction insolvencies are found to be: financial difficulties due to non‐payment, poor debt management, drop in property prices, and the liquidation of related companies. Other reasons are discussed within the paper. The paper also illustrates that liquidation of construction firms causes payment delays and consequential losses to project stakeholders. The results show that settlements of trade creditors take an average of 18 months and payment is usually not received fully after liquidation proceedings. It is apparent that there is little security for payment losses in construction insolvencies.

Originality/value

In this paper, information on reasons for and the consequences of liquidation provide a valuable thought‐starter for managing payment problems in the construction industry. The paper extends knowledge on possible security to payment losses experienced by lower tier project participants when the upper tiers become illiquid.

Details

Journal of Financial Management of Property and Construction, vol. 17 no. 2
Type: Research Article
ISSN: 1366-4387

Keywords

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Article

Christopher Amoah and Leon Pretorius

Risk management has become an integral part in businesses around the world. In the construction industry, risk management has also been introduced and has been mainly…

Abstract

Purpose

Risk management has become an integral part in businesses around the world. In the construction industry, risk management has also been introduced and has been mainly entrusted in the hands of the project team to go through a laid down risk management processes to identify possible risk events, which may occur during the project execution and the impact they may have on the project deliverables should they occur. It is, however, believed that small construction firms do not take risk management as a serious exercise even though most of the project risks are transferred to them as subcontractors. The purpose of this study was, therefore, to investigate risk management processes in the small construction companies and the impact of risk management on their project deliverables.

Design/methodology/approach

A case study of a single construction company was used for this study. Data were collected through structured questionnaire to 16 respondents who are involved in the project execution in the case study company. Two managing directors of the case study company were also interviewed. In total, 11 project site meetings were also attended to observe meeting proceedings and to record issues discussed. In total, 15 monthly project reports and project close-out reports were also studied. In total, One hundred and five completed projects of which 58 per cent were renovation projects, 27 per cent were new projects and 15 per cent were civil/structural works were also examined. The data were then analysed using excel analytical tool and the content analysis method.

Findings

The findings indicate that small construction companies with respect to the case study company do not have a specific laid down risk management processes that project team are made to go through before and during the execution of their projects. There is, however, no conclusive evidence regarding the impact of risk management on project performance as a significant number of projects done were able to meet a successful project performance indicators even though risk management exercises were not done. Some of the identified risk events that caused project failures are payment delays, labour related issues, subcontractor/main contractor related issues, insufficient contingency reserves/plan, etc.

Research limitations/implications

Only one construction company was used as a case study for this research and all sources of data were related to a single company. The results may, therefore, be not generalisable.

Practical implications

The research has discovered that projects outcome could have improved tremendously if proper risk management exercises were implemented before project execution as most of the causes of project failures could have been identified through the risk management processes. This study, hence, gives an insight as to why small construction firms like the case study company should take risk management seriously in their projects execution to improve on the performance of their projects.

Originality/value

The research has discovered that projects outcome could have improved tremendously if proper risk management exercises were implemented before project execution as most of the causes of project failures could have been identified through the risk management processes. This study, hence, gives an insight as to why small construction firms like the case study company should take risk management seriously in their projects execution to improve on the performance of their projects.

Details

Journal of Engineering, Design and Technology , vol. 18 no. 3
Type: Research Article
ISSN: 1726-0531

Keywords

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Article

Maria C.A. Balatbat, Cho‐Yi Lin and David G. Carmichael

Construction businesses are perceived uncertainly by investors, and are generally assumed to represent more risk than other businesses. Added to this is the perception of…

Abstract

Purpose

Construction businesses are perceived uncertainly by investors, and are generally assumed to represent more risk than other businesses. Added to this is the perception of poor business management practices being adopted by construction companies, sometimes resulting in business‐failure. Fluctuations in construction workload contribute to investor anxiety. In this light, the paper aims to present a study of the comparative management efficiency performance of construction companies.

Design/methodology/approach

Publicly listed Australian construction companies over the ten‐year period 1998‐2007 are examined. Performance is compared with a select number of “blue chip” companies as a benchmark. In total, 19 management efficiency measures are used including asset management ratios, debt and safety ratios, and cash flow ratios. The construction companies used in the study engage in work covering the full range of construction activities.

Findings

The results indicate that construction companies perform as well as, and in some cases better than, other businesses, dispelling some of the misconceptions about construction businesses.

Originality/value

The paper's finding will be useful to those investing in the construction industry, and will lead to a better public perception of construction businesses.

Details

Engineering, Construction and Architectural Management, vol. 18 no. 2
Type: Research Article
ISSN: 0969-9988

Keywords

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Article

Gul Polat

Construction companies typically allocate limited resources, i.e. human resources and funds, for marketing activities; so, they commonly face the problem of deciding in…

Abstract

Purpose

Construction companies typically allocate limited resources, i.e. human resources and funds, for marketing activities; so, they commonly face the problem of deciding in which marketing activities they should primarily invest and how much resource they should allocate for the selected marketing activities. Indeed, the problem of selecting the best set of marketing activities should be treated as a multi‐objective optimisation problem with multiple obligatory and flexible goals with different priorities, several interdependencies, and multiple constraints on resources. The main objective of this paper is to solve the problem of optimal allocation of scarce marketing resources using the combination of analytic network process (ANP) and zero‐one‐goal‐programming (ZOGP) models.

Design/methodology/approach

The research methodology of this paper mainly involves: reviewing the relevant literature on marketing and construction marketing; identifying the marketing activity alternatives in which construction companies may consider to invest; constructing an ANP model in order to calculate the importance weights of the different marketing activities; formulating a ZOGP model, which uses the weights obtained from the ANP model and considers the obligatory and flexible goals with different priorities, interdependencies and constraints on resources, that enables construction companies to optimize their scarce marketing resources; and conducting two case studies in order to illustrate how the proposed methodology works.

Findings

This paper provides construction companies with an integrated decision‐support methodology, which will assist them in allocating their limited marketing resources for different marketing activity alternatives in a more efficient way. The proposed methodology does not only consider the constraints on marketing resources and priorities of the goals that need to be satisfied but also show the deviations from the desired goals.

Originality/value

This paper is of benefit to construction companies as it offers an efficient and convenient tool that allows construction companies to optimise scarce marketing resources.

Details

Construction Innovation, vol. 10 no. 3
Type: Research Article
ISSN: 1471-4175

Keywords

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Article

Hui Ying Lai, Abdul Rashid Abdul Aziz and Toong Khuan Chan

– The aim of this case study is to characterize the impact of the 2008 global financial crisis on the financial performance of public listed construction companies.

Abstract

Purpose

The aim of this case study is to characterize the impact of the 2008 global financial crisis on the financial performance of public listed construction companies.

Design/methodology/approach

Financial analysis was conducted on 32 public listed construction companies in Malaysia. Twelve financial ratios were examined to determine the profitability, liquidity, activity, leverage and solvency of these companies over the period between 2005 and 2010. This was complemented by a distress analysis using Altman’s Z-index. The study also used a content analysis of the Chairman’s or Managing Director’s statement to shareholders to uncover the responses and strategic initiatives undertaken by the management in response to the financial crisis.

Findings

The only direct impact of the financial crisis was a reduction in profitability. Total revenues and total assets of these companies continue to grow due to increased demand for construction from year 2007 following two large capital investment programs initiated by the Malaysian Government to mitigate the potential effects of the financial crisis. Net profits rebounded back to 5 per cent by year 2010. These companies immediately responded to the crisis with more prudent financial management; curtailing expenses, cutting dividends, reducing bank borrowings, increasing equity; and to the extent of disposing of assets to mitigate losses.

Research limitations/implications

The sample of only 32 public listed companies out of a total of more than 60,000 construction companies may be considered small, but these 32 companies represent nearly 20 per cent of the total construction volume for 2010.

Practical implications

The study documents the effects of increased capital spending by the government to mitigate the loss of investor confidence followed by a slowdown in economic growth during a period of global financial distress. Key findings will inform on prudent financial management to withstand future financial crises.

Originality/value

The responses and strategies adopted by the management to mitigate the effects and to enhance future performance of these companies have been uncovered. These are important considerations in managing construction companies; the analysis and observations will be invaluable to researchers intending to study how the construction industry responds to a future slump in demand.

Details

Journal of Financial Management of Property and Construction, vol. 19 no. 3
Type: Research Article
ISSN: 1366-4387

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Article

Aki Pekuri, Laura Pekuri and Harri Haapasalo

The purpose of this study is to investigate project selection in the context of business management with the specific aim of understanding the role of business models in…

Abstract

Purpose

The purpose of this study is to investigate project selection in the context of business management with the specific aim of understanding the role of business models in project selection. The logic followed for making decisions and selecting projects significantly influences construction companies’ success.

Design/methodology/approach

The research objective is pursued by conducting a multiple-case study. Managers acting in key decision-making roles from eight construction companies are interviewed. A conceptual framework is developed for analysing the interview data and the prevailing project selection practices in construction.

Findings

The findings suggest that project selection is not guided by any specific business model, but that the decision-making process is dominated more by short-term factors such as need of work and profitability. Thus, estimation know-how largely determines the kind of projects companies are willing to consider, regardless of their competence to deliver them.

Research limitations/implications

The study produces a hypothesis that ignorance of business models in project selection and their general underutilisation in management have negative effects on performance of the construction industry. More consistent management practice would enable the development of business models and processes, contributing to performance and help companies to distinguish themselves from each other.

Originality/value

As opposed to previous studies that have produced bidding models that emulate the current industry practices, this research analyses the prevailing logic of project selection from a more critical perspective. In addition, the project selection practices of Finnish construction companies have not been investigated previously.

Details

Construction Innovation, vol. 15 no. 2
Type: Research Article
ISSN: 1471-4175

Keywords

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Article

Susan McGrath‐Champ and Sturt Carter

Human resource (HR) practices are increasingly concerned with adding value through increased skills, autonomy and contribution. Whilst useful in some cultural and industry…

Abstract

Human resource (HR) practices are increasingly concerned with adding value through increased skills, autonomy and contribution. Whilst useful in some cultural and industry contexts, there is potential for incompatibility with other norms, especially those outside western culture or the manufacturing industry mainstream. Australian construction companies in Malaysia use the language of normative HR, but they are challenged by the differing cultural norms of Asia. It is concluded that HR policies and corporate culture are used as marketing devices not solely as management strategy.

Details

International Journal of Manpower, vol. 22 no. 4
Type: Research Article
ISSN: 0143-7720

Keywords

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Article

Chung-Ju Tsai, Tzong-Ru (Jiun-Shen) Lee, Szu-Wei Yen and Per Hilletofth

– The purpose of this research is to investigate how companies in the reinforcing bar industry and the construction industry operate and implement brand alliances.

Abstract

Purpose

The purpose of this research is to investigate how companies in the reinforcing bar industry and the construction industry operate and implement brand alliances.

Design/methodology/approach

This research uses a qualitative interview survey and the grounded theory method to extract key factors of brand alliance development and management in the targeted industries. The interview survey included six managers from different construction companies in Taiwan.

Findings

This research identifies four common firm-level operational process stages (core categories) of brand alliances including different multidimensional factors, and proposes a conceptual model based on these identified core process stages. The four common core process stages include selection of brand alliance partners, communication with brand alliance partners, enforcement of brand alliances and assessment of brand alliances.

Originality/value

The proposed model offers a tentative explanation of the development and management of brand alliances between the reinforcing bar industry and the construction industry. This study represents an initial research attempt in this field and explains how reinforcing bar and construction companies operate and implement brand alliances.

Details

European Business Review, vol. 27 no. 4
Type: Research Article
ISSN: 0955-534X

Keywords

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Article

Gul Polat and Umit Donmez

The purpose of this paper is to provide construction companies with an analytic model, namely a four‐level analytic network process (ANP) model, to assist them in…

Abstract

Purpose

The purpose of this paper is to provide construction companies with an analytic model, namely a four‐level analytic network process (ANP) model, to assist them in prioritising and thereby selecting marketing activities which offer maximum return on investment, for which they should primarily allocate their limited resources.

Design/methodology/approach

The research methodology of this study mainly involves: reviewing the literature on marketing and construction marketing in order to identify the marketing activity selection criteria and their constituent sub‐criteria; determining the marketing activity alternatives in which construction companies may consider to invest; constructing an analytic model, namely a four‐level ANP model – to assist them in selecting the most viable marketing activities for which they should primarily allocate their limited resources; and conducting two case studies, one in a bidding contractor and the other in a developer, in order to illustrate how the model works.

Findings

This paper illustrates how to empirically prioritise marketing activities by using a four‐level marketing activity selection model. Two case studies are also demonstrated in order to illustrate how the model works. The case studies indicate that the rankings of the marketing activities for these companies are rather different due to the type of the construction company (i.e. bidding contractors or building developers) and its client profile (i.e. public or private owners). The findings of the case studies concurred with the expected direction in these companies.

Originality/value

This model is of benefit to construction companies and researchers. The proposed ANP model offers an efficient, convenient and simple tool that allows construction companies to select the marketing activities for which they should primarily allocate their limited resources. It also allows researchers to see the potential use of ANP in the marketing activity selection problem.

Details

Construction Innovation, vol. 10 no. 1
Type: Research Article
ISSN: 1471-4175

Keywords

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Article

Sanjay Bhattacharya, Kirankumar S. Momaya and K.C. Iyer

Successful handling and delivery of projects requires commensurate growth in the business capabilities of construction companies. The current scenario of exponential…

Abstract

Purpose

Successful handling and delivery of projects requires commensurate growth in the business capabilities of construction companies. The current scenario of exponential infrastructure boom in India necessitates scaling up to meet the challenges of competitiveness. The objectives of this study are to (1) identify the enablers of sustainable business growth among Indian construction companies, (2) identify gaps in the deployment of the enablers in comparison to competitive successful international construction companies and (3) suggest strategic initiatives to top management of companies and policymakers for promoting business growth and industry competitiveness.

Design/methodology/approach

A detailed literature review first identifies an adapted framework for enablers of growth and growth performance of successful international construction companies on basis of industry trends. Thereafter, a questionnaire survey was administered on the leading construction companies in India to assess the deployment of enablers and gaps thereof. A total of 108 valid responses were obtained from top management executives of the companies and analysed through descriptive statistics and hypothesis testing.

Findings

Studies indicate that anticipation of new demands and capabilities; business opportunity scanning and human resource skills and capabilities are among the most important enablers of growth. The role of leadership vision and focus on development of human resources is critical to competitiveness and growth. The successful international construction companies have delivered growth utilising their ability to deploy multiple strategies, diversification and new business opportunities. These are sparingly deployed by Indian companies.

Research limitations/implications

The study is limited to the opinion and perceptions of the top management personnel of the construction companies.

Practical implications

High economic growth context offers a unique opportunity for domestic Indian construction companies to leverage. The valuable insights gained from this study provide hints to the top management of these companies to draw managerial implications for facing the challenges ahead and delivering projects in the dynamic and hyper-competitive construction industry. The policymakers on their part are responsible to support and promote initiatives for sustainable growth.

Originality/value

The study suggests business growth enablers to construction companies in India to improve their international competitiveness.

Details

Built Environment Project and Asset Management, vol. 11 no. 2
Type: Research Article
ISSN: 2044-124X

Keywords

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