Large Construction Firms Research Articles

Strategic assets driving financial capability of Thai construction firms

Technological advancement, innovative procurement patterns such as build‐operate‐transfer, build‐own‐operate‐transfer as well as intrusion of international contractors have immensely changed the construction market. Local contractors need to devise a strategy to raise not only its technological capability but also financial capability which becomes increasingly necessary to compete successfully in this new landscape. This study aimed to investigate strategic assets which have been driving financial capability of construction firms in Thailand. Four large construction firms in Thailand were investigated through case study method and the result was verified with twelve industry experts. Three strategic assets were found contributing to competitive advantage of Thai construction firms including access to capital, efficient cash management, and effective capital investment. It was also found that strong relationship was the needed ingredient in developing these particular assets in Thailand. The findings should assist managers of construction firms in realizing the impact of financial capability, envisaging its driving strategic assets, and comprehending the mechanism which provides competitive advantage.

Capital structure choice in European Union: evidence from the construction industry1

In this article, we examine the determinants of the capital structure of large listed European construction firms from 1996 to 2004. We investigate if there are solid and mutual factors that can characterize the capital structure of large construction firms. We identify nine factors–validated by many theories from the literature of finance–that give reasonable results. The existence of such factors provides strong evidence that the European Union converges, despite the different particular country characteristics, the corporate financial decisions of large listed firms in the construction industry.

ICT implementation and evolution

PurposeThe purpose of this paper is to discuss the interview findings of five large construction firms who pioneered their intranet and extranet (IE) uptake to generate a co‐operative virtual workplace and business environment with internal and external project teams. The main objective was to investigate IE implementation and evolution among the selected construction firms in order to showcase their successful ICT uptake experience in practice.Design/methodology/approachThe research was conducted using case study approach using five UK construction companies, i.e. architect, developer, project management and cost consultant, and contractors. All interviewees held significant roles for IE implementation and/or development in their respective organisations. The interviews were recorded and transcript. The transcripts were analysed and sent to the companies for comments.FindingsThe findings show that the motivation among surveyed construction organisations for taking up an advanced IE was predominantly influenced by three main factors: the need for better business communications and knowledge dissemination; increased global competitiveness; and enthusiasm to be at the forefront of technology developments.Originality/valueThe study demonstrates real‐life ICT uptake experiences and feedback to highlight how the full benefits of ICT investment can be achieved and aligned to business needs and objectives. In addition, the findings provide a valuable business case study for construction professionals, information technology managers, and businesses when considering an ICT investment in IE as part of their overall business strategy.

Strategic adaptations to environments inside China

PurposeThe purpose of this paper is to examine a series of environmental factors and industrial conditions governing the construction industry in China. The outcome of this part of the analysis sheds light on the development of appropriate competitive strategies and important resources and competencies (IRCs) to establish long‐term competitive advantages.Design/methodology/approachThe overarching conceptual framework consists of both external and internal analyses. Since, the scope of work is very broad, the materials presented in this paper is limited to external analysis of environmental factors. The study is primarily derived from a literature review and synthesis of data gathered from various public sources. Certain parts of the analysis utilize frameworks developed by other researchers and selective statistical methods.FindingsSome environmental factors, such as government intervention and legal and regulatory systems require the development of Guanxi (relationships) to cope with. Other factors including market structure, project procurement systems, horizontal market segments related to construction, regional characteristics and upstream and downstream functions within the construction value chain are suggestive of five potential types of competitive strategies: cost leadership, differentiation, market/product diversification, geographical diversification, and vertical/functional integration.Research limitations/implicationsThe research study as a whole is targeted at large construction firms in China that belong to the First class qualification category. Therefore, the proposed competitive strategies and IRCs may not be applicable to small and medium construction enterprises.Originality/valueApplication of strategic management theories and empirical findings related to the Chinese construction industry is lacking. This research fills this gap and builds a foundation for future studies related to this industry.

Strategic analysis of large local construction firms in China

The many transitory changes in China have raised the intensity level of competition among construction firms. Despite having a high growth economy, some construction firms continue to suffer from low profitability. Meanwhile, practical cases and empirical findings related to Chinese construction firms remain lacking. This research develops a conceptual model for improving the competitiveness of large construction firms in China. The model integrates two main streams of strategic management theories—the industrial organisation theories, and the resource‐based and competence‐based views. Critical variables that form the model are initially identified from an environmental analysis and the case studies of 12 large Chinese construction companies. The relationships between competitive strategies, important resources and competencies, and competitive advantage are then verified using survey results. The statistical findings suggest that two strategies—differentiation and market/product diversification, and three important resources and competencies—technological innovative capabilities, financial capabilities and guanxi (relationship), directly affect firm performance as measured by revenue and profit growth.

Fundamental Analysis of Profitability of Large Engineering and Construction Firms

This research examines the strategic performance of sixty-one large international engineering and construction (E&C) firms from the regions of North America, Europe, and East Asia. The primary objective is to identify critical factors of corporate strategy that potentially affect the prospects of a large E&C firm. The research methodology relies on financial analysis and strategic management theories to draw meaningful conclusions. Statistical tests are selectively conducted to assess various aspects, including profitability, capital structure and asset liquidity. This paper documents the research findings for the first aspect—profitability. The first part of the findings suggests that there is no significant correlation between firm size and profitability. Large firms, which are endowed with greater resources and prowess, are not guaranteed to be more profitable. However, firm size has some influence on generic strategies, as large firms tend to adopt either a broadly targeted or a nonrelated diversifica...

Interactions between Business and Financial Strategies of Large Engineering and Construction Firms

In this research study, selected indicators are set up to analyze the strategic performance of large international engineering and construction (E&C) firms from North America, Europe, and East Asia. The primary objective is to examine critical areas of corporate strategy that would affect the long-term prospects of E&C firms and provide guidance for their growth and survival. This paper focuses on the relationships between selected aspects of business strategies (internationalization and product/service diversification) and financial strategies (asset liquidity and capital structure). By analyzing data derived from financial reports and other public sources, it is deduced that internationalization is positively associated with current ratio but negatively correlated with book leverage. An opposite trend is found for the aspect of diversification. These results signal different risk management strategies for the respective modes of business strategies. It is thus suggested that if liquidity cannot be increased in the near term to support internationalization, firms should then concentrate on product/service diversification. Overall, the study confirms the importance of examining interactions between business and financial strategies.

Empirical Study of Strategic Performance of Global Construction Firms

This paper presents an empirical study of factors contributing to the success and failure of 24 large international construction firms originating in the United States, Europe, and Japan. The study is conducted using fundamental analysis, a methodology that is commonly applied in economics and investment practices to study the prospects of a company. Based on publicly available data, both quantitative and qualitative measures are developed and assessed collectively to derive insightful knowledge about corporate strategy and firm outlook. Preliminary conclusions drawn from this study include: (1) A universal formula for success is elusive.critical success factors can be uniquely derived from different modes of operational, financial, technological, and human-related conditions and (2) causes of failure are diverse, thus construction firms must consistently check the downside risks of all measures. Thus, debates concerning the merits of common dichotomies such as diversification versus focused differentiation appear rather hollow. These aspects of strategy are far from fixed and should instead be treated as variables. The findings suggest that an open perspective of strategy is necessary in construction organizations and provide the foundation for the development of a new strategic model for the industry.

Alliance targets Iraq opportunities

The Shaw Group Inc has formed an alliance with Al-Khudhairy Group, one of Iraq’s largest construction firms, to undertake major reconstruction projects in the country. Visit www.worldpumps.com for the latest pump industry news

Alliance targets Iraq opportunities

The Shaw Group Inc has formed an alliance with Al-Khudhairy Group, one of Iraq’s largest construction firms, to undertake major reconstruction projects in the country. Visit www.filtsep.com for the latest filtration industry news

Appropriate innovation in small construction firms

Innovation‐led performance improvement in the construction industry is significantly influenced by the innovation performance of small firms. There is a dearth of research investigating innovation from the perspective of the small construction firm. This paper contributes to this underdeveloped area by offering relevant empirically based results. The findings stress the important role that owners of firms play in successful innovation. The type of innovation undertaken, and the different organizational factors which are brought into play, is shown to depend on the characteristics of the interaction environment in which the firm is operating. Small construction firms need to incrementally nurture, or identify and move into, supportive enabling interaction environments. This is achieved through an integrated development of a firm's business strategy and market positioning, organization of work, technology and people. The process of innovation is demonstrated to be subject to cyclical peaks and troughs as the progress of the innovation competes with day‐to‐day pressures. Small construction firms have their own distinctive characteristics, which are profoundly different from those of large construction firms. The implication for policy is that any initiatives geared toward improving appropriate innovation need to appreciate these differences.

Enterprise Resource Planning in a large construction firm: implementation analysis

In most large Dutch construction firms, Enterprise Resource Planning (ERP) systems have replaced non‐integrated information systems with integrated and maintainable software. The implementation of ERP systems in such firms is a difficult task. So far, ERP implementations have yielded more failures than successes. This study tries to understand the factors that lead to the success or failure of ERP in large construction firms by focusing on the fits between the following pairs of elements in ERP implementations: business and IT strategy, maturity of the IT infrastructure and the strategic role of IT, and the implementation method and organizational change. The premise of this study is that for an ERP implementation to be successful these elements must somehow fit together. Empirical research was conducted through a case study of three ERP implementations in different business units of a Dutch‐based construction firm. Implementing different systems within one company is typical of the way large construction firms in the Netherlands have dealt with ERP. The study shows that the success of ERP implementations depends on consistent patterns between: IT strategy and business strategy, IT maturity and the strategic role of IT, and the implementation method and organizational change.

Competitive strategy of low financial in a context resources

Traditionally, firms in developing countries, especially in Africa, cannot mobilize large-scale financial resources and assets to create competitive advantage against larger international companies from developed countries. An alternative strategy is developed to create new competitive advantages for construction firms with low financial resources. Resource-based strategic management is reviewed and its relevance extended to the construction industry. A pilot study involving ten construction companies in Botswana assessed their attempts to create competitive advantages. This case study indicates that small construction firms with low financial resources can build competitive advantages by creating firm-specific capabilities rather than imitating the strategies of large construction firms that are often based on the accumulation of large physical and financial resources. On sait que dans les pays en voie de développement, notamment en Afrique, les entreprises n'ont pas la possibilité de mobiliser des ressources financières importantes ni d'autres actifs pour créer un avantage concurrentiel face aux grandes entreprises internationales des pays industrialisés. Une stratégie alternative se met en place qui consiste à créer de nouveaux avantages concurrentiels pour les entreprises du secteur de la construction qui disposent de faibles ressources financières. Dans cet article, l'auteur analyse une stratégie de gestion basée sur les ressources et étend son application au secteur de la construction. Une étude pilote portant sur 10 entreprises du secteur de la construction au Botswana a évalué les tentatives de ces entreprises à créer des avantages concurrentiels. Cette étude de cas indique que les petites entreprises de construction aux ressources financières faibles peuvent constituer des avantages concurrentiels en créant des capacités qui leur sont spécifiques plutôt que d'imiter les stratégies des grandes entreprises de construction qui reposent souvent sur l'accumulation d'importantes ressources physiques et financières.

Are House Lessees Economically Disadvantaged People?

There have been opposing views on several issues regarding the House Lease Law in recent years. One view is based on the idea that the house lessees are economically disadvantaged people. This idea originates from the miserable life of house lessees in Edo era (referred to as “uratanagari”). It supports the present legal system which provides legal protections for house lessees. The other view challenges this idea and supports a revision of the present legal system aimed at reducing such legal protections. [Chapter 1]With the societal changes that took place in Meiji era, the standard of living of house lessees improved gradually. Furthermore, the Civil Code of 1896 and House Lease Law of 1921 provided several rules for the protection of house lessees. After the revision of the House Lease Law in 1941, it became practically impossible for the owner of a house to terminate the tenant's lease contract without“just cause.”With this revised statute, the agreement of the lease period was practically of no legal effect. [Chapter 2]An improvement of economic conditions in the Postwar Period brought about an elevation in the living standard of house lessees. Against this background, a proposal was made to establish tenancy for a specific number of years. The parties to a house lease contract would agree on the number of years of tenancy. This period would be specified in the contract and the lease would terminate upon its expiration. Accordingly, a“just cause”would not be necessary to terminate the lease. Proponents of this proposal persuaded politicians of the ruling party to back it and succeeded in passing it into law in 1996. [Chapter 3]Under the Japanese Civil Code, the interest of the mortgagee of a real property take priority over that of the lessee if the mortgage is registered before the implementation of the lease contract. There is an exception to this principle in the case of:“short-term leases.”The lessee of a real property who meets certain requirements (as a short-term lessee) need not vacate the leased property even if the mortgage is foreclosed, the property is auctioned, and the vendee demands the lessee to vacate the leased property. Since a short-term lessee is not always a disadvantaged person, the rationale of legal protection for such a lessee is at issue. As this privilege of the short-term lessee is often abused by gangstars and others and causes a disturbance in real estate financing, many influential scholars support its abolition. Others argue, however, that abolishing this privilege would harm the innocent lessees. They are trying to devise compromising solutions. This argument is still unsettled. [Chapter 4]Finally, large construction firms that plan urban redevelopment projects urge landowners to build high-rise buildings on their land, as an investment. Under this scheme, when the landowner builds a building, he leases it to the construction firm. The construction firm, in turn, subleases rooms of the building to sublessees. The difference between the rent paid and earned becomes the profit of the construction firm. In this case, the construction firm is surely a lessee of the building. Therefore, some scholars support the application of the House Lease Law to this type of lease. It is against the spirit of the House Lease Law to allow legal protections to such a big business, however. Thus, more than a few scholars reject the validity of applying this Law to this type of lease. Many cases involving this issue are now under litigation. [Chapter 5]Underlying these various legal issues are opposing ideas as to whether or not it is appropriate to regard house lessees as economically disadvantaged people and allow them legal protections. Finding a settlement to these opposing ideas is the most difficult problem to solve.

Constructing a new reward strategy

Reviews reward management practice in the construction industry, based on a postal survey of larger construction firms. The research results provide little evidence of thorough‐going use of reward management to encourage and reinforce organizational change. Collective agreements survive for manual employees. Non‐manual employees are loosely grouped in broad‐banded grading structures with significant scope for managerial discretion in the treatment of individual salaries. However, there is little evidence of developed performance management systems. The absence of more formalized reward systems may provide a short‐term benefit in allowing considerable flexibility but may have negative implications for long‐term productivity, the control of wage costs and the availability of skills. Given the uneven gender balance, existing pay systems could also give rise to claims for equal pay.

Developing and Managing Innovative Construction Technologies in Japan

Construction technology innovation is becoming an increasingly important factor for the growth of many large Japanese firms. It has become essential that new construction technologies be identified, obtained on the most reasonable terms, and transferred smoothly to the construction site. This paper describes the four major factors that contribute to the development of innovative construction technology in Japan: (1) strategic alliances; (2) effective information gathering capability; (3) reputation through innovation; and (4) technology fusion. The paper also illustrates the technology evaluation process used by a typical large general contractor in Japan. It is concluded that global technology information gathering has increased the awareness of the large construction firms in Japan to outside technology. To implement synthesis of technology, these companies have participated in cross-industry research projects. The crucial link between innovation and business strategy in a large construction firm in Japan was found to be the long-range technology forecasting that integrates action of today with the vision of tomorrow.

Experiencing Computer Integrated Construction

The future success of large Japanese construction firms may well depend on the widespread implementation of computer integrated construction (CIC) concepts. Because of changes in the competitive environment, the nature of the construction industry is evolving in fundamental ways. Construction companies that emphasize CIC are likely to gain a significant competitive advantage over those that do not. In today's construction industry, information technology must be viewed as a potential resource. CIC is a strategy, incorporating computers and robotics, for linking existing technology and people in order to optimize business activity. There is no standard formula for CIC. A strategy for implementing CIC should be formulated, and each company must define its own system. The strategy must be supported and promoted at the highest company level. The objective of this paper is to describe the experiences gained in CIC research from a Japanese construction company's viewpoint, and to present a test‐base model for CIC implementation. Although the model is not a comprehensive system, it can be considered as a methodology toward total CIC.

Construction field operations and automated equipment

This paper will present the panel's observations of Japanese construction firms' field operations and fielded technologies, and will briefly discuss the development of automated equipment by and for the larger construction firms in Japan. Recognizing that one week is far too short a time to visit even a small percentage of the construction projects underway by the major Japanese contractors' firms, this paper includes information gathered from selected presentations and papers delivered by others: Japanese, US, and European. Panel members of the JTEC visited high-rise buildings and heavy civil projects such as airport and bridge construction on this visit to Japan. There were no visits to electric power production or process facilities under construction. Likewise, the corporate research centers visited were sponsored by firms which emphasized engineering and construction in the high-rise and heavy civil areas. However, the research certainly has applicability to other areas of design and construction. Throughout this chapter references will be made to six major Japanese construction firms known as the Big Six. This group consists of Shimizu, Kajima, Taisei, Takenaka, Ohbayashi, and Kumagai Gumi. These six firms have been ranked among the largest construction firms in Japan, with the 1989 contract volumes listed in Table 1 (Ref. [3]). These firms were also the prime contacts in Japan for project site and contractor laboratory visits and have had previous contacts with many of the panel members.

Safety Programs in Large Construction Firms

The safety programs of forty-nine of the largest construction companies in the United States were studied, showing which safety practices are most prevalent in large construction companies. Results revealed that although the safety programs tend to be fairly consistent, some companies are more formalized. These more formal programs were associated with better safety performances. Particularly safe records were evidenced in those firms that: (1) Provided a formal orientation for new workers; (2) had field safety personnel that were hired by the corporate safety director; and (3) placed the field safety director in charge of training other safety personnel.

CPM Use in Top 400 Construction Firms

The results of a 1972 survey of top executives of the 400 largest construction firms are presented. The objectives of the survey were to establish the scope and nature of use of network planning and scheduling methods among large construction firms and to obtain top management views on the benefits and problems associated with use of these methods, as well as their importance to the firm. The data presented show that not all large construction firms are using network methods, the primary use is for project planning rather than control, and only a small percentage of user firms feel they are successful in achieving the numerous benefits attributed to use of these procedures.