Abstract
Higher failure rates of construction business have been observed as a recurring phenomenon in the construction industry. This research focuses on the causes behind a range of performance modes of construction business. The growth and capacity under-investment archetype has been used as the main systems archetype to develop a causal structure for understanding the business performance. A system dynamics model was developed to create a simulation platform for the causal structure. A context of a typical small and medium construction company has been used in the simulation model. This research considered and experimented with a set of selected managerial policies and practices that can lead the construction business to failure, sustenance, or growth. In order to achieve the expected growth or sustenance, it is found that a certain level of balance needs to be secured on how much emphasis is to be given to win new projects, how much profit margins to work with, and how much capacities to be arranged and deployed for project operations, management, and execution.
Highlights
IntroductionIt can be observed that the registered construction firms would be remarkably large in number
In any progressive economy, it can be observed that the registered construction firms would be remarkably large in number
This paper focuses on the issue of growth and failure of construction firms, by exploring the underlying causes in the domain of construction business management
Summary
It can be observed that the registered construction firms would be remarkably large in number. The indicated volume of construction work in terms of their monetary value is perceived to be huge, and at the same time, barriers to entry in the market are generally low for construction firms (Dikmen et al, 2010; CIDB, 2006; Kenley, 2003) Because of these reasons, entrepreneurs, especially the small and medium ones, get attracted to the construction business. Because of the sheer number of SMEs, their collective contribution to the construction industry and the overall economy is quite significant Another set of observations indicates that these small and medium construction companies are facing many challenges in sustaining their business in the industry. The construction industry in Australia accounted for 20-25% of all insolvencies, with the proportion of 8-10% contribution in the GDP (Murray, 2018)
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