The Construction as a Revolutionised Industry - Research Paper Example

?Introduction Construction industry is one of the industries that have revolutionised the world we live in. Through its constant innovation and creativity the world has evolved over the years in terms of buildings and civil engineering projects. Construction firms have in turn faced numerous challenges from governments, environment and nature in general. Organisations in the construction industry however are not unique in respect to the various fundamentals regarding management and industry competitiveness. This industry has intense competition, requires huge capital outlay, highly skilled manpower and up-to-date strategies in operations and management in order to survive the stiff competition. It is important to note that nations depend on their construction industry for their infrastructural developments making them quite important in facilitating national development. In this regard organisations offering construction work tend to be well regarded while certification requirements and procedures prove to be rigorous. In many countries like the US and UK among others, there are definite rules and oversight bodies set to regulate the actions of construction firms. This paper aims to consider the construction industry and its various facets in developing the premise that there is no single ideal organisation. PESTEL analysis of the construction industry Political/legal factors Government involvement entails the various interventions in regards to set laws and standards in the construction industry. As mentioned earlier governments have established regulations and standards for construction organisations to follow. Most of them are in regards to safety and health of workers since construction entails risks that result in many accidents and fatalities in some cases (BIS 2011). In case of failure to adhere to them stiff remedial actions like fines are imposed after inspections or when an accident occurs. Taxation is another aspect where governments exert pressure in the construction industry. This is an industry whose taxation is high mostly due to their heavy-duty kind of work (Liebing 2001). The contracts also attract hefty sums of money which the governments are quite willing to tax. Regional Norms In regards to the European organisations the EU laws also affect how these construction firms operate. Regional trading blocks have become quite influential with time as the world becomes a global market place. EU for example aims at establishing common standards not only for the construction industry but to all (Dalby 1998). In this line firms are being forced to follow alien laws that are not necessarily desirable for business. Economic Global factors like the 2008/09 Global Economic Crisis came to shutter many companies in the construction industry while others are struggling to remain afloat. This crisis led to lower developments in the housing sector especially in the affluent nations with high debts owed to the construction firms. This and more turbulent market conditions are increasing and firms are being forced to adapt to these situations through change management strategies. When dealing in the global market there is also a risk of losing on currency fluctuations mostly the dollar (Finkel 1997). Social factors Population growth acts as a leading factor as growth in population almost always results in need for housing. Looking at the Asian giants and the emerging market economies in Africa and South America, there is a great deal of construction going on since population is also increasing both from within and that of immigrants from neighbouring countries (Kazi 2005). Such situations lead to development of niche markets for construction industries. Development of infrastructure like roads and railway networks are also on the increase so as to ease mobility of the increasing population. Technological factors Internet since 1990s has come to revolutionise how construction firms do business. They have taken the advantage by using it as a selling medium and to gain a wider market base while improving their competitive advantage. Information technology in general has enabled construction firms to develop software that suit their needs thereby reducing on cost of operations and time taken to design and complete a project (Betts 1999). Document Management System has also facilitated record keeping as construction involves use of many records some of which are confidential. Radio Frequency Identification is the other innovation that has of late been incorporated in operations of construction firms. These factors affect construction firms differently. Therefore, they react to them differently. This shows that firms even if they are in the same industry tend to have individualised internal operations. Change and the construction industry As mentioned earlier construction firms are known to embrace change strategies so as to keep up with emerging trends. Those firms that initiate changes in their operations usually gain some competitive advantage over their rivals. Changes should be initiated both in the work tasks and organisational culture. Construction firms make changes depending on the resources available, management’s knowledge of need to change and the expected outcomes of the change process (Coutts 1997). Construction firms therefore follow different paths towards changing their operations as the aforementioned variables are unique to individual organisations. Construction firms depend a great deal on the changes in the needs of their clients. In this regard it is important to highlight the Porter’s 5 Forces in order to analyse some aspects that affect the change processes in the industry as a whole. Porter’s 5 Forces of the construction industry Consumer power Clients of the construction industry have relatively low information regarding many aspects relating to their projects. The basic reason for this is the technicalities and complexities associated with construction projects. However, the same consumers are the ones who put forth desires to have certain projects initiated. It is therefore the role of the construction firm to be acquainted with the consumer needs e.g. new structural design and this has been the key driving force towards change in designs in construction (Liebing 2001). Supplier power Supplier power is high since materials used in construction have few substitutes. Looking into concrete and steel, the two are used together but steel is becoming more prominent. The steel industry especially in Europe has a strong muscle in this market. These dynamics result to changes in construction in turn changing the construction industry. Rivalry There are many firms that are competent in the construction industry which forces them to capitalise on pricing strategies to gain competitive advantage. This scenario although not unique to the construction industry is quite important to individual companies. This initiates many change processes within the company over a long period of time for example on cost reduction strategies for the company to offer lower project quotations (Liebing 2001). Threat of entrants There are many entrants in the market nowadays who are coming up with new approaches to service delivery. They are driving veteran companies to being more creative and innovative. Threats of substitutes A wider variety of materials used for construction is in the offing. Steel has taken centre stage with other wood products for building. Construction firms are required to have adequate knowledge on each new product in the market so as to embrace any kind of project. This also requires change strategies within individual organisations so as to keep up with the trend. Organisational culture and structure As mentioned earlier culture is also a fundamental aspect in an organisation and it can either lead to success or failure. Organisational cultural confirms the values, behaviours and the vision of a firm. It also tends to show the firm’s capacity to change and offers the general strategic message to everyone (Elsmore 2001). Culture is therefore quite important in defining the direction a firm is taking. Individual firms have different cultures within them which cannot necessarily be adopted by others to succeed. Organisational culture can simply be termed as the organisation’s personality. In order for a firm to change, its employees need to change as well as the various work tasks. This will require the management to align a firm’s various strengths and values thereby showing the importance of culture. Organisational structure on the other hand tends to outline the level of tasks within an organisation and who is to conduct them (Cunneen 2008). Structures can be copied from other firms but it is difficult to make them operate as effective as they do elsewhere. It is therefore necessary to customise them to suit the firm in question. It is through alignment of organisation culture with structure that goals can be effectively met more so those regarding change (BIS 2011). In doing this an organisation needs to look into its strengths, weaknesses, opportunities and threats (SWOT) so as to gain overall competitive advantage. Change processes are difficult to initiate as they face a great deal of rejection across the board. SWOT analysis Strengths Currently there is abundance of raw materials in many regions necessary for construction. This increases a firm’s concentration on innovation to come up with better quality materials for construction. Real estate is also on the rise in many parts of the world; a trend that will continue in decades to come. Construction industry attracts low cost labour which is in many cases well qualified for the various tasks. Weaknesses There are high costs involved especially the capital outlay. Expensive training is also required and there is risk of natural disasters which adversely affecting business. These may initiate change processes in some companies while in others they may not. Opportunities There are more Public-Private Partnerships that are to increase the number of projects thereby opening up new revenue avenues. Renewable energy initiatives are bringing new business line to construction firms while the house boom in many parts of the world will result in increased earnings. Threats The economic situation in the world has never been more volatile and unpredictable and some like the Global Economic Crisis can cripple the industry within a short time. Safety is a challenge in the industry for workers while natural calamities pose huge threat e.g. earthquakes. Types of Organisational Culture As mentioned earlier organisational culture results in many changes in the firm over time. Depending on a firm’s line of business and goals, a type of organisational culture is adopted (Elsmore 2001). Examples are as follows; Normative culture This is one culture that depicts high standards of ethics in a company since defined regulations and procedures are followed as the norms. It emphasises in correctness in all operations. Pragmatic culture This culture is developed with the client’s needs in mind. It is aimed at pleasing the client and where clients are many, the culture becomes more complex. Tough guy culture This culture suits more where quick thinking is involved and it results in high stress therefore requiring high tolerant employees. Process culture This is ideal for construction companies as it requires the firm to be cautious of the laid down rules and regulations. Types of organisational structures Organisations adopt different structures depending on how they wish to have their authority aligned (IWF 2011). This structure can also be used to gain competitive advantage (Cunneen 2008). Some structures are as follows; Traditional structures or functional structures These structures are quite strict in regards to following laid down rules and procedures and they follow a specific line of authority. Divisional structures These are structures that are bases on various divisions within a firm and are further divided into product, market and geographic structures depending on the size of the organisation (IWF 2011). Matrix structures These tend to combine functional and product structures where the best model from the earlier two is adopted to suit the uniqueness of a firm. Conclusion With the above analysis of various aspects that surround construction firms and companies in general, it is clear to see that there is no ideal organisation. Organisations are quite different basing this on their management practices, environment, culture and structures. These aspects act towards shaping a firm’s identity which distinguishes it in the market environment. These aspects can either present a competitive advantage or disadvantage whereas in the latter corrective changes are enacted. Each organisation adopts a structure that best suits its purpose since not all structures are effective depending on line of business, size of the firm among other variables. It is therefore important to stress that for an organisation to remain afloat in the construction industry is has to be sensitive and flexible to change. This change entails that of management practices, culture and structure to reflect changing times and market trends. References Betts, M 1999, Strategic management of IT in construction, Wiley-Blackwell. Coutts, AW 1997, Change management in the construction industry: A client's mechanism for control, Heriot-Watt University. Cunneen, P 2008, Organisational structure: An essential lever in managing change, Blackhall Publishing. Dalby, J 1998, EU law for the construction industry, Wiley-Blackwell. Department for Business Innovation & Skills (BIS), 2011, Sustainable construction, viewed 24 Jan 2011 from . Elsmore, P 2001, Organisational culture: Organisational change? Gower. Finkel, G 1997, The economics of the construction industry, M.E. Sharpe. Kazi, AS 2005, Knowledge management in the construction industry: A socio-technical perspective, Idea Group Inc (IGI). Liebing, RW 2001, The construction industry: Processes, players, and practices, Prentice Hall. The Institute for Working Futures (IWF), 2011, Types of organisation structures, viewed 24 Jan 2011 from . Read More