SECTOR OF TRNC
A Master's Thesis
Presented by
Sevda BA YRAMOGLU
to
The Institute of Research and Graduate Studies
of Eastern Mediterranean
University
in Partial Fulfillment for the Degree of
MASTER OF ARCHITECTURE
in
ARCHITECTURE
(CONSTRUCTION MANAGEMENT)
EASTERN MEDITERRANEAN
UNIVERSITY
Gazimagosa
by
AN ANALYSIS OF CONTRACTOR ORGANIZATIONS IN THE
CONSTRUCTION SECTOR OF TRNC
A Master's Thesis
Sevda BAYRAMOGLU
for the degree Öf Master of Architecture in
ARCHITECTURE
(Construction Management)
Gazimagosa
Assoc. Prof. Dr. Zeka Mazhar Director
I certify that this thesis satisfies all the requirements as a thesis for the degree of Master of Architecture.
Prof. Dr. İbrahim Numan
Chairman of the Department of Architecture
We certify that we have read this thesis and that in our opinion it is fully
O
adequate, in scope and quality,
.
_ ~
.
as a thesis for the degree of Master of
Architecture in Architecture (Construction Management).
Asst. Prof. Dr. Attila Dikbaş
ii
who
insptred
me lo pursue [arlber education,
and
who will hopefully forgive me for no! being
able
lo
spend
tJ.s much
iii
I would like to thank, first and foremost, my mother and father who brought me up constantly stressing the values of education; who encouraged every attempt I made in pursuing education, and supported my efforts in every way possible.
I would like to thank my 'Abi', Cemal, who is my mentor in life and probably the most sensible person I know.
I want to be like
youwhen I grow up!
(Thanks for introducing me to the Toshiba, my loyal friend, without which I'd still be struggling).I would like to thank each and every person who took the time to answer the questionnaires, without which the survey study would have not been possible; my uncle Ahmet Gazioğlu who enlightened me with his vast knowledge on the history of Cyprus and the 'Cyprus Problem'; my colleague Mr. Ayer Kaşif, who gave me valuable information on the 'History of the Construction Sector', who knows all the right people and took time to introduce me to them; and all the people in the public offices who tried to assist me in gathering information vital to this thesis.
I would like to extend my gratification to the members of the Eastern Mediterranean University
Construction Management
Research
and
Practice Center
(CMR&PC) for the valuable and essential research conductedby them. '"
... And last but not least, (I didn't forget) I would like to thank my supervisor Dr.
Attila Dikbaş, Mr. 'in
pursuit
of
enlightenment',
for his guidance,encouragement and support during my studies at EMU.
iv DEDICATION••••••..••,...•.•...••.•••...••..•...•.••.•.•..••.••.•...••...•.•.•. ii ACKNOWLEDGMENTS ...•... iii Lıs·r OF TABLES •...••••...•...•••..•...•...••....•••...•..••...•... viii LIST OF FIGURES •...••.••••.••••..••••••••••..••••.•••..••.•••••.••..•..•.••••.•..•....•••.••
x
PREFACE ••••••....•••...••••••...•.••••.••••..••.•••••••••••••••••••..••••••••••••...••.• xivChapter One
INTRODUCTION 11.1. Background of the Problem 2
1.2. Problem Statement & Importance of the Problem 3
1.3. Literature Review/ Previous Studies 3
1.4. Objectives of the Thesis 5
1.5. Limitations of the Thesis 6
1.6. Method of Study 7
Chapter Two
GENERAL OVERVIEW OF THE CONSTRUCTION SECTOR &
CONTRACTOR ORGANIZATIONS •••...•••••.•••..•..••••...•.•...••••.•..•.•..••• 8
2. 1. Background 8
2.2. The Construction Environment 1O
2.3. How the Construction Firm Differs From Other Firms 17
2.4.
Types of Construction Firms 21V
FACTORS ON THE CONSTRUCTION INDUSTRY ••....••••••..••••••••..•..••••• 31
3.1 A Brief History of the Construction Sector 32
3. 1. 1 The Construction Sector Before 197 4 32
3. 1.2 The Construction Sector After 197 4 35
3.2 The Current State of the Construction Sector 37
3.2. 1 Quantitative Analysis 38
3.2.2 Qualitative Observations 47
3.2.3 Sub-Conclusion ...•... 51
Chapter Four
AN ANALYSIS OF THE TRNC CONTRACTOR
ORGANIZATIONS 52
4.1. Research Methodology 52
4.2. Survey Findings 56
4.2. 1 General Characteristics of the Organizations 56
4.2.2 Classification of the Organizations 66
4.2.3 Evaluation of the Factors .71
4.3.
Problems Faced by the TRNC Contractor Organizations 934.3. 1 External Problems 93
4.3.2 Internal Problems 97
Construction Projects Completed in 199 4 133 5. 1 Results of Studies Concerning the Construction Sector and
Contractor Organizations in Turkey l 06
5.2 Results of Studies Concerning the Construction Sector and
Contractor Organizations in Other Developing Countries 115
5.3 General Conclusions and Suggestions 123
REFERENCES •.•••••••...••..••••••••••••••••...•.••.•••••••••..••.•••..•••••••••...•••••••.. 130 APPENDIXES •••••••••...••••••••.•.••••....••...••••••••••.•••.•...•••••.•••.•••••••• 132 APPENDIX I. Table I. 1 Table 1.2 Table 1.3 Table 1.4 Table 1.5 Table 1.6 APPENDIX II. APPENDIX Ill. Table 111.3 APPENDIX IV. APPENDIX V. APPENDIX VI Table Vl.1 Table Vl.2
Nicosia Urban Construction 134
Nicosia Rural Construction 136
Famagusta Urban Construction 140
Famagusta Rural Construction 142
Kyrenia Urban Construction 144
Kyrenia Rural Construction 146
Law Proposal For Contractor Association 148 Law Proposal For Contractor Registration &
Certification 153
Classification ;f Contractors by Permissible Types
of Work 155
List of TRNC Contractors 156
Questionnaire Used in the Survey Study 161 Tables Compiled From Responses to the
Questionnaire 170
Responses to Questions Pertaining to the
Bid
Phase 17lResponses to Questions Pertaining to the
Construction Phase 172
vii
APPENDIXVII. Tables Compiled From Responses to the Questionnaire
Based on Size of the Organization 17 4
Table Vll.1 Responses to Questions Pertaining to the Bid Phase ... 175 Table Vll.2 Responses to Questions Pertaining to the Construction
Phase 176
Table Vll.3 Responses to Questions Pertaining to the Quality of
Construction 177
APPENDIXVIII. Method of Study 178
viii
Table 2.1 27
Factors Considered While Performing a SWOT Analysis
Table 3.1 39
Square Meter Areas of the Total Urban and Rural Building Construction Completed in Nicosia, Famagusta and Kyrenia Per Year ( 1982-1994)
Table 3.2 A,B and C ... 42
Total Building Construction Projects By City
Table 3.3 45
Private Building Construction Projects Completed in 1994 in the TRNC
Table
4.1
69Classification of Firms by Size Based on Average Business Volume
Table 4.2 70
Classification of Firms by Size Based on Current Business Volume
Table
4.3
72Statistical Analysis of the Factors in the Bid Phase
Table
4.4
73Statistical Analysis of the Factors in the Construction Phase
Table
4.5
74Statistical Analysis of the Factors in Terms of Quality of Construction
Table 4.6 76
Comparison of the Level of Importance of the Factors in Terms of Sum, Index and Rank of lmportonce in the Bid Phase, Construction Phase and in the Quality of Construction
Table 4.7 78
Comparison of Importance Indexes of Factors in Descending Order of Importance in the Bid Phase, Construction Phase and in the Quality of Construction
Table
4.8
81List of Factors in the Bid Phase, Construction Phase and in Quality of Construction in Descending Order of Average Index Values
Table 4.9
87
Level of Importance and Indexes of Factors Based on the Size of Organizations (Bid Phase)
ix
Table 4.11 91
Level of Importance and Indexes of Factors Based on the Size of Organizations (Quality of Construction)
Table 5.1 117
Ranking and Severity Indexes of Factors in the Nigerian Construction Sector
Table 5.2 119
Average Index Values on a Scale of 100 and Severity Index on a Scale of 5 for the Factors Analyzed for This Thesis
Figure 2. 1 1O Traditional Building Process
Figure 2.2 11
Overview of The Provision of Construction & Main Groupings of Human Resources
Figure
2.3
24
Strategy Flowchart of a Firm
Figure
2.4
25Factors That Determine Strategic Planning at an External Level
Figure 3.1 39
Total Urban and Rural Building Construction Completed Per Year ( 1982-1994)
Figure
3.2
43
Comparison of Monetary Volume by Type of Construction (Nicosia)
Figure
3.3
43Comparison of Monetary Volume by Type of Construction (Famagusta)
Figure
3.4
43
Comparison of Monetary Volume by Type of Construction (Kyrenia)
Figure
3.5
44
Comparison of Commercial Construction by City
Figure
3.6
44
Comparison of Residential Construction by City
Figure
3.7
44
Comparison of Industrial Construction by City
Figure
3.8
45
Comparison of Monetary Volume by Type of Building Construction
Figure
3.9
46Comparison of Monetary Volume by Type of Construction (TRNC Total)
Figure 3.1 O 46
xi
Figure 4.2 58
Number of Permanent Employees
Figure 4.3 58
Machinery &Equipment
Figure 4.4 : 58
Main Goals
Figure
4.5
59Methods of Obtaining Work
Figure 4.6 59
Preferred Type of Contract
Figure 4.7 59
Type of Contract used for Subcontracted Work
Figure 4.8 60
Phases Covered by the Contract of Construction
Figure 4.9 60
Type of Work Undertaken by General Contractor Type of Organizations
Figure 4.1 O
62
Type of Work Undertaken by Subcontractor Type of Organizations
Figure 4.11-a,b,c,d and e 63
Percentages of Work Undertaken for each Client Group in Terms of Percentages of Organizations Performing the Work
1"
Figure 4.12 64
Rate at which Subcontractors are used for Each Work Item
Figure 4.13 ~
65
Intervals at which Organizations Make Revisions to Their Work Programs
Figure 4.14
69
Average Business Volumes of Firms
Figure
4.15
70xii
Construction Phaseand in the Quality of Construction
Figure 4.17 82
Variations in the Importance Indexes of Factorsin the Bid Phase Compared to Average Index Values
Figure 4.18 , 83
Variations in the Importance Indexes of Factorsin the Construction PhaseCompared to Average Index Values
Figure 4.19 84
Variations in the Indexes of Factorsin Quality of Construction Compared to Average Index Values
Figure 4.20 85
Variations in the Indexes of Factorsin All PhasesBasedon Average Index Values in DescendingOrder
Figure
4.21
88Variations in the Level of Importance Indexes of the Factors Based on the Size of FirmsDuring the Bid Phase
Figure 4.22 90
Variations in the Level of Importance Indexes of the Factors Based on the Size of FirmsDuring the Construction Phase
Figure 4.23 92
Variations in the Level of Importance Indexes of the Factors Based on the Size of Firmsin the Quality of Construction
Figure 4.24 99
Variations in the Level of Importance Indexes of Factorsin the Bid Phase,Construction Phaseand the Quality of Construction
••
Figure 4.25 100
Comparison of the Index Values of Factorsin the Bid Phaseto the Average Index Values
Figure 4.26 100
Comparison of the Index Values of Factors in the Construction Phase to the Average Index Values
Figure
4.27
1 O 1Comparison of the Index Values of Factorsin the Quality of Construction to the Average Index Values
xiii
Figure 4.29 l04
Variation in the Indexes of Factors for Small, Medium and Large Firms During the Construction Phase
Figure 4.30 105
Variation in the Indexes of Factors for Small, Medium and Large Firms in the Quality of Construction
Figure 5.1 11 O
Type of Client (Turkey)
Figure 5.2 111
Type of Construction Work Undertaken by Contractors Working for the Public Sector (Turkey)
Figure
5.3
111Type of Construction Work Undertaken by Contractors Working for the Private Sector (Turkey)
Figure 5.4 111
Meter Square Volume of Work Per Year (Turkey)
Figure 5.5 112
Monetary Volume of Work Per Year (Turkey)
Figure 5.6 112
Value of Machinery and Equipment Owned by Turkish Contractors
Figure 5.7
ı..··· .. ···
112Percentage of Work for Which Subcontractors are Used (Turkey)
Figure
5.8
127Current Structure of Construction Related Offices and their Links to Respective Ministries
Figure
5.9
127Proposed Structure of Construction Related Offices and their Links to One Ministry
xiv
The aim of this thesis is to analyze the contractor organizations in the construction sector of the TRNC. The main aspect of this analysis entails o survey study which identifies factors that affect the operations of the contractor organizations during the bid phase and the construction phase and in terms of the quality of construction. As o result of this survey, the contractor organizations ore also classified by size, and the problems faced by these organizations ore discussed.
The thesis consists of five chapters in which the first chapters include theoretical backgrounds to consolidate the matters discussed in the sections pertaining to the survey study.
Chapter One
is on introduction section which includes the identification of the problem, the objectives and limitations of the thesis, and the method of study.Chapter, Two
gives o general overview of the construction sector and the construction firms. This chapter defines the construction firms / contractor firms, identifies the differences of construction firms to other firms, and discusses the mission, objectives and strategies of these organizations.Chapter Three
discusses the effects that historical events hove hod on the construction activities and the development of the sector. It also includes o discussion on the current state of the construction sector.Chapter Four
explains the survey study and the steps that were token i"n conducting the survey. A questionnaire, which was administered to 21 contractor organizations, was used in conducting the survey. The analyses performed from the responses given in these questionnaires and the results drown by these analyses ore discussed in this chapter. This chapter also identifies and discusses problems faced by TRNC contractor organizations.••
Chapter Five
is the conclusion section where o comparison is made between the TRNC contractor organizations and the problems they face and contractor organizations in other countries. This final chapter also suggests possible solutions to some of the problems faced by contractor organizations.Introduction
Construction has, in one form or another, been practiced since the earliest days of history. Because it provides one of the basic needs of survival in providing shelter, construction can be traced back to the earliest times of mankind. Initially, every man built for himself. Through the years, construction has become an industry where suppliers, designers, construction firms in unison provide this service to their clients. With the many sub-sectors included in this industry together with the large number of legal and accounting firms that practice solely construction matters, it is easy to understand why the construction industry is the largest industry in most countries.
The construction industry is one of the most critical sectors that has a direct effect on a country's economy. In return, it is an industry affected immensely by variations in a country's economy. In developing countries, such as the Turkish Republic of Northern Cyprus, especially during a rapid growth in population, the construction industry becomes the most critical sector. Throughout the history of Cyprus, political and economic variations have proven to have tremendous effects on its construction industry.
Contractor organizations are one of the main participants operating within the construction sector. They are affected directly by many factors and events that take place in their environment. The environment referred to here is not only the construction sector, but also at a more external level, the environment created by the general climate of the country in which they operate. These environmental factors may
il
directly lead to the rise or fall of contractor organizations. Examples of the scale at which contractor organizations are affected by their environment can also be clearly observed in the analysis of these organizations in Cyprus.
Apart from the effects of these environmental factors, with the continual technological developments and the trend towards subcontracting, contractor organizations are also faced with the necessity to keep up with developments and organize to accommodate these changes in the sector in order to maintain their existence.
1.1
Background of the Problem
One of the main concerns of any organization is to maintain an existence. Success or failure of achieving this basic principle depends not only on the technical, organizational and managerial principles and decisions on an internal level, but also on many external factors that the organizations have little or no control over. These external factors include government policy, laws and regulations administered by local governing bodies, requirements of financial institutions, and the general nature and climate of the sector in which the organization operates.
It is a known fact that by nature, the construction sector operates in a very competitive environment. Due to an ever-growing demand in construction and the possibility of attaining vast profits, the number of firms operating in the construction sector is continually increasing leading to an even more competitive environment.
There have been continual political and legal conflicts throughout the history of Cyprus which have reflected on the structure of the construction industry and the trends in construction. In its present state, the TRNC has yet to resolve many of its political and economic problems. As mentioned above construction is an industry affected by variations in a country's economy. The construction sector in the TRNC suffers immensely from such economic problems.
"Clearly the operation of an industry is highly dependent upon the interactions between the human groups which are involved with the project directly. However, a variety of other groups are influential, if only by exerting major influences upon the project environment. In such a context, the government is the most important: it acts as direct client, as indirect client and as the primary influencor of the business I social environment" [1.p.6]. ~
Being a relatively new state, certain laws and regulations concerning contractors have not yet been established. The lack of such laws and regulations have created an uncontrolled competitive environment for the contractors. The technical and organizational inefficiencies of many organizations, the difficulties faced in attaining qualified workers together with these negative external factors have created critical circumstances for contractor organizations.
Although there have been no previous studies done on this subject in the TRNC, its importance has been recognized in many other countries throughout the world. There
have been many publications written on the analysis of the construction sectors of other countries and the problems faced by their participants. References are made to these studies in Section 1.3.
1.2
Problem Statement & Importance of the Problem
Even though the construction industry is one of the most important sectors in the TRNC, there have been no detailed scientific analyses done on this subject. The industry and contractor organizations have also suffered from a lack of interest and encouragement from the state. These two factors alone have led to many of the problems within the construction industry that have a direct negative effect on contractor organizations.
The contractor organizations, along with other participating organizations of the industry, face many problems. Viable solutions must be found to these problems if the construction sector is to enjoy a healthy development [2]. It would be impossible to find solutions to the problems faced in the construction industry, particularly by the contractor organizations, without first determining the nature and the source of them. This thesis aims to analyze TRNC contractor organizations and identify the problems faced by them. Some of the problems that contractor firms currently have to tackle are as follows [2):
0 Public contracts are written to protect just one party-the state
0 Large contracts are bid out to Turkish companies, discouraging the growth and possibly leading to the bankruptcy of local contractor firms.
0 Local contractor firms cannot enter the foreign market as they do not have the required certification.
0 There is no current state law that stipulates regulations regarding contractors. 0 There is no contractors' certification to classify contractors based on qualification. 0 The construction workforce, in general, is under-qualified.
1.3
Literature Review
I
Previous Studies
Although there has been no such study done in the TRNC, there have been many studies conducted regarding construction industries and contractor organizations in other countries. There are many such publications written regarding the construction
sectors of the UK, USA, Turkey, Japan, many developing countries, and etc. It is possible to classify these studies under two main topics: (1) Analyses of the Construction Sector; and (2) Analyses of Contractor Organizations (including behavioral and o_rganizationaltheories of these firms).
Previous Studies on the Analysis of the Construction Sector
Raj discusses the gap between supply and. demand in the construction industry and suggests an open system model for the building approach in order to overcome this problem [3, pp.27-32]. Similarly, Herbst discusses a shortage in housing in Poland. In this research paper a model is presented for the Polish building organization aiming to bring a solution to the building deficit [3, pp.17-33]. This paper also shows a strong link between many of the current problems in the Polish construction industry with environmental factors.
Bon and Yashiro analyzed the changes in the economic role of the construction sector in the Japanese economy [4, pp.319-323]. This study shows that construction is declining in its contribution to the GNP of Japan while service industries are rapidly rising. Aniekwu performed a scientific investigation of the problems of the construction industry in Nigeria and identified factors that could adversely affect the construction industry [5, pp.445-455]. Most of these factors were found to be environmental factors.
Previous Studies on the Analysis of Contractor Organizations
Shirazi, Langford and Rowlinson discuss theoretical issues influencing the structure of construction project organizations [6, pp199-212]. In this research, the impact of the environment of a construction project and the technological sophistication of the project are considered in terms of how these factors shape project organizations. Handa and Adas illustrate a methodology for predicting the level of organizational
'-effectiveness for construction firms [7, pp.341-352].
Sozen discusses the relationship between strategic orientations and make/buy decisions pertaining to design/construction services for firms operating in the construction sector [8, pp.43-49]. Hillebrandt and Cannon conducted a detailed analysis of construction firms in the U.K. [9]. This study also includes concepts such as mission, objectives, goals and strategies of construction firms and how construction firms differ from other firms in implementing these issues. These concepts will be discussed in Chapter Two.
Sommerville conducted an analysis of recruitment sources and employee turnover in Scottish construction organizations [10, pp.147-154). This research tests the hypothesis that particular recruitment sources are associated within certain construction organizations.
Arditi and Mochtar explore avenues in improving productivity in the rapidly growing Indonesian construction sector [11, pp.13-24). In this research Indonesian contractor organizations were analyzed, and their general characteristics were identified.
A similar survey study of randomly selected contractors, consultants and government agencies was administered by Assaf and Barhamain [12, pp.27-30]. This study identifies factors affecting construction practices in Makkah AI-Mukkaramah in Saudi Arabia.
Gunes conducted a comprehensive analysis of the construction sector in Turkey, and identified problems faced by Turkish contractors [13]. Dikbas analyzes Turkish contractor organizations, identifies factors affecting them in their operations and classifies them based on size in this analysis of factors affecting decision behavior of Turkish contractors in the bidding process [14, pp.83-127].
Giritli, Sozen, Flanagan and Lansley discuss the positive effects of international contracting on the Turkish construction sector [15, pp.415-430]. This paper also defines the domestic market for construction in Turkey and Turkish contractor organizations. It is stated in this study that by undertaking international construction work, contractor organizations gain experience, thereby enriching their domestic construction industries. Reference will be made to this study while discussing the problems of the TRNC contractor organizations.
••
1.4
Objectives of the Thesis
The aim of this thesis is to analyze the contractor organizations in the construction sector of the TRNC and identify the problems faced by these organizations. The main aspect of this analysis entails a survey study which identifies factors that affect the operations of contractor organizations and determines the varying levels at which these factors affect the bid phase the construction phase and the quality of construction.
The objectives of this survey include the following:
1. To present an overview of the TRNC construction industry and the external factors that have affected it through political and economic changes and historic events.
2. To evaluate surveys administered to a group of TRNC contractor firms in order to determine their general company characteristics, the structure of the organizations, and the factors that most affect their operations. Then based on these evaluations;
• to identify problems within the TRNC, and how they effect the contractor organizations (classified as external problems),
• to identify problems within the construction sector, particularly those concerning the contractor organizations, and the source of these problems (classified as external problems),
• to identify problems within the contractor firms (classified as internal problems).
As the TRNC construction sector has not previously been researched, there is a lack of written material on this subject. In providing an analysis of the construction sector in the TRNC, this thesis also aims to open new avenues for research on various related topics within this area.
1.5
Limitations of the Thesis
This thesis aims to analyze the TRNC construction sector mainly in terms of contractor organizations. Any documentation included in this thesis aims to define or explain certain factors that have a direct ••.or indirect effect on contractor organizations. Although the political and economic standing of the TRNC was touched on in order to clarify some of the resulting problems in the construction sector, this thesis does not claim to include a complete history or detailed analysis of the Cyprus problem.
In aims of defining the construction environment, brief references were made to other participants within the sector (such as designers and material suppliers). However, as this thesis focuses on contractor organizations, these references and definitions were meant to aid the reader in understanding the construction context, but are not meant to be comprehensive. Many of these organizations face similar problems due to the political and economic standing of the TRNC and present avenues for further research. For an overview of these other participants and the problems that they face, reference
should be made to An Analysis of the TRNC Construction Sector and the Problems in the Sector which was an ongoing research at the time this thesis was written . This thesis is in fact a module of the above mentioned research which is due to be published by the Eastern Mediterranean University Construction Management and Research Center.
1.6
Method of Study
The steps that were followed in achieving the objectives set for this thesis are as follows1. A detailed methodology explaining the survey study, data collection, and the method whereby a sample was selected is included in Chapter Four.
• Theoretical Survey
• Designing the Questionnaire • Administering the Questionnaire
• Accumulating Information Concerning the TRNC Construction Sector • Analyzing the Questionnaire& Drawing Conclusions
1
events taking place nationally, and sometimes internationally. Because the
General Overview of the Construction Sector &
Contractor Organizations
The purpose of this chapter is to present an overview of the construction industry and the construction firms I contractor organizations. It includes a brief summary of the development of the construction industry and the role it plays in today's society. It then goes into the discussion of the construction firm and how it differs from other firms in its operation, organization, and behavior. The main aim of this section is to define the construction firm and to explain how the construction firm operates within the industry and the relationship it has with other disciplines in the industry.
2. 1
Background
The construction sector includes a large number of individuals and organizations operating within its sub-sectors. The construction industry supplies the basic requirements of shelter, water, sanitation, roads, bridges, dams, schools and hospitals, as well as, building mechanical and electrical systems, and plumbing requirements.
Decisions concerning any aspect of the construction industry has a direct or indirect effect on all of its sub-sectors and participants operating within this industry: developers, owners, designers, contractors, construction workers, suppliers of equipment and materials, lenders, marketers, accountants, insurance companies, and so forth. It is common for conflicting benefits in any one of these organizations to have an adverse effect on any one or several of the others.
"Construction is a labor-intensive industry. The degree of labor intensity varies from sector to sector, project to project, country to country but usually with quite narrow boundaries" [1, p.1 ]. Construction exists to satisfy human needs and wants; it is organized by people; it is operated by the people it employs. Proper identification of these needs and wants, and management of the human factors affecting the organizations constitute important issues in the sector.
construction sector is constituted of many sub-sectors and the construction process is a network of numerous sub-processes, construction trends in any country are affected immensely by many socio-cultural, economic, political and legal factors. The effects of such factors are highly visible in the trends in TRNC construction activities.
The advancement in building processes, and development in building technology, in general, have led to changes in the use of resources and the management of these resources. These changes have deemed it necessary to make adaptations in the employment of workforce and processes used in construction. The complex nature of the construction industry, and constant advancements in technology make management a critical function in all phases of construction. Managerial decisions regarding what kind of workforce to employ becomes equally important.
In recent years, the rapid change in technology and the rapid growth in the building services element in the building process, has led to a shift away from direct employment towards specialist subcontracting. This shift has taken place in primarily three ways. First, there has been an extension into supply-and-fix contractors (who supply both labor & materials), for works such as electrical installations, and heating and ventilating systems. Second, there has been a more extensive shift towards labor only subcontracting. Third, there has been a recognition for the concept of management subcontracting due to the change in contractual agreements, putting even large contracting firms in the position of becoming subcontractors. The vast use of subcontractors has made it difficult to measure the size of firms in the industry, as the actual work done cannot be represented by the number of employees.
" The increase in management contracting, is but part of a move towards a greater variety of ways of organizing the process of construction including the roles assumed by contractors: of designers in design andpuild (D&B) or design and construct (D&C) where they may either use their own in-house design staff or contract with an architect or engineer to undertake the design; of managers on behalf of the client of the whole process of procurement of buildings or works or of the construction part of it alone, of the principals in putting together of a project including finance, design, construction and often commissioning and management of the finished project" [9. P.11 ]. These changes have led to the contractor moving closer to the client, and the client becoming more knowledgeable and involved in the actual decisions made.
Since the construction industry is highly affected by its environment, the specific circumstances in each county must be analyzed in determining the most appropriate model for its construction sector.
2.2
The Construction Environment
The major participants in the construction industry involved directly with the project are the owner, designer and contractor. Until recent years, the owner would retain the services of an architect or engineer for a project and then put the project out for competitive bidding to choose a contractor. Nowadays, the owner may seek the services of a project manager to fulfill these tasks at a more knowledgeable level.
Figure 2.1 displays the traditional building process for the construction sector [3,p.31
J.
C u
s
To
M E R Accept Negotiate & Award ContractInitiative Objectives Approve Design Tendering ~ A o R C C
-s H s I T E C ;:, C ~o
o C N E T s R s A & C p T Ro
o R D u C Ts
D u E p V p E L L I o p E M R E N T Design & Specification Commence Work Initiative Quote Manufacture DeliverInitiative Specifications Product data & Price Concept Product Development Figure 2.1 Project Unspecific
Client Group client financiers,
tenants, etc.
Brief
Figure 2.2 provides a classification of human groups directly involved in the
construction process. The three main classifications identified in this figure are: • Clients: public I private; large I small; individuals I corporate
• Consultants: architects; engineers; surveyors
• Constructors: building I civil engineering; main contractors, etc.
Consultants Group architects, engineers, surveyors, etc.
.:
Construction Documents Constructors Group main contractor, subcontractors, suppliers, managers, ooeratives P.tr.Performance - occupation& use
I
Disposal I transfer of ownership, etc.
I
.
Final disposal - demolition
Figure 2.2 Overview Of The Provision Of Construction And Main Groupings Of Human Resources1·
1 Source: Langford, D., Hancock, M.R., Fellows, R. and Gale, A.W. Human Resources Management in
Keeping in mind that the construction industry operates under circumstances that are quite different than the conditions faced by any other industry, a brief definition of the construction project, and an overview of the participants in the construction industry including the owner, the designer, the prime contractor, the subcontractor, and other participants are presented below.
The Construction Project
Projects are temporary and unique endeavors undertaken to achieve a goal. They are temporary in that they have a definite starting point and ending point; and they are unique in that they have distinguishing differences compared to other projects that may be similar in nature. Construction projects, besides being temporary and unique, are also complex and time-consuming. Each structure must be designed to be in compliance with applicable codes and standards, and be described in-depth and documented fully as working drawings and specifications so that they can be accurately executed in the field. Even the simplest construction projects require an array of operations, skills and materials. The construction process must follow a natural sequence of events that are integrated with each other with time requirements and sequential relationships.
Each design project is unique in certain aspects. Whether it be a difference in structural requirements to suit its environment and its particular function, or the differences reflecting personal tastes and preferences, each individual construction site and the vast possibilities for creative variation makes a construction project a new and different experience that must be custom-built.
"The Construction process is subject to the influence of highly variable and often unpredictable factors. The construction team -- which includes various combinations of contractors, owners, architects, engineers, workers, sureties, lending agencies, governmental bodies, insurance companies, material dealers, and others -- changes from one job to the next. All of the complexities inherent to different construction sites, such as subsoil conditions, surface topography, weather, transportation, material supply, utilities and services, local subcontractors, and labor conditions, are an innate part of the construction project:" [16, p.2].
The Owner I Client
"The. owner, public or private, is the instigating party for whose purposes the construction project is designed and built" [16, p.3]. Owner organizations can be
differentiated as private or public. The public organizations are ones such as federal agencies, governmental organizations and municipalities. Private companies are responsible for a large amount of the construction work that is awarded, but the amount of work they let out is directly affected by the climate in their own industry. When economic expansion slows down in a country, the negative effects are reflected immediately in the construction industry.
Most owners retain the services of architect/engineering firms for the design of the project and award the construction phase to construction contractors. However, some owners prefer to take an active role in the design and I or construction of their projects. For example, some owners perform their own design, or at least a major portion of it; and some prefer to act as their own construction managers in the construction phase.
"Broadly, clients are either experienced and I or expert (sophisticated) or naive. Expert clients build often and, commonly, employ construction professionals in-house, know what performance can be demanded and how to obtain the required performance; such clients 'drive' projects. However, the majority of clients are naive, they build very infrequently, know little of the industry (except via image) and may be influenced easily - by advertising or I and advice of the first contact with construction personnel (usually an architect). Hence, for naive clients, those who obtain first contract with them regarding a project are in a significantly advantageous position" [1, p.2].
The Design Consultants I Architect & Engineer
The second participant involved in the construction industry is the designer. The designer can be defined as "the party, organization, or firm that designs the project" (16, p.3]. The designer may be an archltect, who is usually hired to lead the design team in building work, or an engineer in most other kinds of construction such as highways, bridges, dams, industrial facilities, and so on. In the past, engineering firms were specialized mostly in one of these fields of design. Nowadays, engineering firms have become larger in size and become more diversified. Many of them have become design-build companies and they offer both design and construction services.
"In project chronology, the design phase shows the first major manifestation of functional fragmentation typifying the construction industry. The interface problems between separate design organizations are subject to the over-riding factor of the major interface with the client - usually the responsibility of the 'lead consultant' (architect in building, civil engineer in civil engineering)" [1. p.3].
In a study of architectural practice, Mackinder and Marvin (1982) found that most clients (the majority being naıve) do not know what information should be provided to constitute a (good) brief but much more alarming, most architects do not know what briefing information is necessary.2
Initial decisions made by the consultant and the owner during the briefing phase of a project have a wide range of effects in the other phases of design and construction. "About 80 percent of the cost of a building is committed by around 20 percent of elapsed design time. Hence, attention to early decision making is of great importance" [17, pp.115-125]. After meeting with the client, the architect usually produces preliminary design aspect _with little or no external guidance. In seeking to overcome design problems, Mackinder and Marvin (1982) found that architects seek solutions in the following sequence:3
• own experience
• immediate colleagues' experience • product leaflets
• practice library
• research findings and own research
Due to the heavy reliance in experience, the consultant's knowledge, past design experiences, and his ability to make correct judgments reflect heavily on the construction process.
The design process is sequential by nature. Receiving the required input from other consulting firms, and obtaining the required permits are achieved in a sequential manner, protracting the design phase. The sequential nature of the design phase often leads to 'stockpiling' during the finalization activities of design. This approach is beneficial to the consultant as it ensures a constant employment of resources; however, the elongation of the design" phase ties up a significant portion of the contractors' funds for unnecessarily long periods.
"It is apparent that the desire for full and continuous employment of their resources amongst consultants (an imperative under fee bidding and during recession) has consequences detrimental to clients and constructors: to clients through protracted
2Study by Mackinder, M. and Marvin, H. (1982), "Design Desision Making in Architectural Practice", Institute of
AdvancedArchitectural Studies, Research Paper 19, Universityof York.
3Study by Mackinder, M. and Marvin, H. (1982), "Design Desision Making in Architectural Practice", Institute of
ign periods and conservative design tendencies; to constructors through extended periods of financial 'lock-up" [1.p.4].
The Constructors
e constructors group includes organizations such as main contractors, subcontractors, management contractors, design and build contractors, and other parties that are actively involved in the construction process. The construction rganization has been transformed over the recent years, mainly since the late 1970's. The fragmentation of activities has escalated to a point where the main contractor often acts solely as the construction manager for the execution of construction work which is performed by subcontractors. "A casualty of the return to fragmented, more casual employment has been operative training; de-skilling remains a highly contentious issue.... Due to their metamorphosis into management contractors, the general contractors have, to a significant degree, relinquished their control of project price determination (if ever it was within their real control); such power now rests in major subcontractors and suppliers. In the long period, in a capitalist economy, all businesses must earn normal profit as the minimum return on investment for survival. However, in the short period - such as forms consideration of an individual construction project - much more pricing freedom exists in order to bid keenly, to buy work, to 'take cover', etc. Thus, for an individual project, the main contractor retains the position of arbiter of the price to be bid (and the primary consequence-bearer thereof)" [1, p.5].
Construction firms undertake construction projects by contractual agreements. These firms refer to "individuals or organizations that are paid a fee to undertake a job or project and complete it to the clients acceptance under the supervision of the client and at a specific cost and technique stipulated in the contract" [18, p.11
J.
Based on this definition, it is possible to compare contractual construction jobs to other production jobs done to order. A construction company cannot build according to its own wishes. Production possibilities are pre-defined. They are forced to complete the job according to their client's requirements.• The Prime Contractor
The third major participant in' the construction industry is the prime contractor, also known as the general contractor or the main contractor, who undertakes the responsibility of actually constructing the project. "The prime contractor, also known as the general contractor, is the business firm that is in contract with the owner for the construction of the project, either in its entirety or for some specialized portion thereof"
16, p.4]. The main function of the prime contractor is close management control of e entire construction process. He is responsible for all field operations including the procurement of all construction materials and equipment in a timely fashion. "The chief contribution of the prime contractor to the construction process is the ability to marshal and allocate the resources of manpower, equipment, and materials to the project in order to achieve completion at maximum efficiency of time and cost. A construction project presents the contractor with many difficult management problems. The skill with which these problems are met determines, in large measure, how favorably the contractor's efforts serve its own interests as well as those of the project owner" [16, p.4].
Over time, contractors have also grown in size and become more diversified to provide a set of other services. This growth has created the need for subcontractors, who now play a major role in the construction industry. Most general contractors will perform some of the construction work but hire specialist subcontractors for work such as mechanical work, electrical work, elevator work and reinforcing steel installation.
• The Subcontractor
The subcontractor is the party that enters a contract with the prime contractor to execute a particular portion of the overall construction work. Depending on the nature of the project, prime contractors may subcontract a portion of the work . There are some construction projects where the prime contractor subcontracts all the work. On the other end of the spectrum, there are some instances where the prime contractor subcontracts none of the work and relies solely on its own forces. In the majority of projects, though, the prime contractor will perform the standard operations and arrange for subcontractors to undertake the specialty work.
I'
When the specialty firm agrees to undertake a certain portion of a project, it enters an agreement with the prime contractor. This agreement is called a subcontract. Since the subcontractor and the owner have no legally binding obligations towards each other, the prime contractor remains completely responsible to the owner for the full scope of the project, including the subcontracted portions. The prime contractor must realize this responsibility _by directing and controlling the entire construction process, and by coordinating and supervising the work done by the subcontractors.
The concept of subcontracting is efficient and economical for both the prime contractor and the subcontractors. The prime contractors are at an advantage because by depending on the services of specialty subcontractors, they are spared the burden of
hiring a full-time labor force skilled in all the various trade classifications needed in the field. They also enjoy the benefit of utilizing subcontractors for portions of the project that they do not have the required equipment for. It is economically more feasible, in terms of both time and cost, for the prime contractor to subcontract those portions of the project rather than try to acquire the necessary equipment. Subcontractors are at an advantage because with regular subcontracting work, they can afford to retain a full time labor force of the most skilled and productive tradesmen in their field of specialty.
Other Participants
Other major participants in the construction industry are the material supply companies who provide the cement, aggregate, ready mix concrete, reinforcing steel, conduit, and other materials without which there could be no construction.
With continual advancements in technology, equipment companies have become an important participant in the industry also. They manufacture cranes, excavation equipment such as bulldozers, transportation equipment, and many other small items of equipment.
Considering the large number of legal and accounting firms that practice solely construction matters, in addition to all the above mentioned participants, it is easy to understand how the construction industry involves a network of complicated matters that, if not handled correctly, may lead to unsuccessful projects, overrun costs, and even bankruptcy for the firms involved.
2.3
How the Construction Firm Differs From Other Firms
Construction firms differ from other firms in their objectives, strategies, behavior patterns, operation and marketing poltcies. These differences exist due to the general characteristics of the construction industry, variations in the environmental conditions, and variation in project conditions.
"The products of the construction industry have well-known characteristics, which differentiate them strongly from most other industries. Their location is fixed, their geographical distribution widespread, they are large, heavy, one-off and custom built, generally long lived and expensive. Those characteristics go a long way to explain methods of production, and organization, price determination, payment methods, financial decisions and controls, and an industrial structure unlike those met in other sectors. Hence the construction process generates management problems and opportunities at the level of the firm which may differ in scope, in scale, in time and in
the type of appropriate solutions from those met in firms of other industries" [21,p.xviii].
It is difficult to define all enterprises involved in the construction industry due to the number of different activities undertaken by each of these organizations. Construction firms I contractor organizations, however, can be differentiated from other types of organizations based on the following characteristics [14, pp.9-13]:
In the following list, the term construction firm is used synonymously with the term
contractor organization for the sake of avoiding redundant repetition.
• The existence of construction firms is determined by the project(s) they undertake. In this industry where there are many ever-changing variables, the ability to accurately estimate what the cost of a project to other firms would be, and thereby determine the profitability to each firm is critical to construction firms as they are dependent solely on client financing [19, p.13]. Because construction firms have to work with limited funds, it is crucial that they determine their financial needs and profitability for the duration of the project beforehand. Even a small mistake in these estimations will not only lead to a reduction in their target profit but may also lead to bankruptcy.
• An exclusive characteristic of a construction firm is that each project undertaken is unique and cannot be repeated. Characteristics of each project, construction site and local conditions (soil, climate, manpower, etc.), technology, topography, site plan, materials and equipment, and many other factors vary from one project to another [19,p.16]. These variables differentiate construction firms from other production firms that have stable and repetitive production methods.
• For construction firms, the site of production varies from one project to the next, while the product components are at a fixed location. Some problems arising from an ever-changing construction site are obtaining , transporting, and storing equipment and materials, establishing work crews and manpower considerations, and handling the cost created by all these factors.
• Construction firms usually set up the site with an advance payment from the client, and are paid throughout the project based on the percentage of work completed. They have to document the amount of work completed at the end of each month to get paid for that portion of work. These funds are usually used in the completion of work during the following month.
• It is very easy to enter the construction industry because it is not necessary to have a large initial investment, and it does not require a great deal of education and experience. It is very common to enter joint ventures for a project and liquidate immediately after; therefore, there are many companies of all sizes active in this industry. The large number of firms active in the construction industry creates a very competitive climate where some construction firms, for the sake of maintaining their existence in the market, are forced to accept projects at a lower profit margin [20,p.13]. A slight miscalculation in such instances can easily lead to the bankruptcy of these construction firms.
• The long duration of projects undertaken by construction firms lead to miscalculations in the initial estimation of duration and cost. Unlike other organizations, construction firms do not have large investments; therefore, they are affected very easily by uncertainties and risks concerning the construction industry [19,p.15]. They are continually affected by not only political decisions but also by climatic conditions, the timely payment of fees, changes in material prices, and other factors that may lead to the project not being executed and completed as planned. These factors will reflect on the cost, duration and quality of the project. As an end result, these factors may lead to changes in the agreed duration and the costs stipulated in the contract, reduce the profit margin, and may even lead to bankruptcy.
• It is very difficult, if not impossible, for a construction firm to predetermine manpower, material, and equipment needs. Each project will determine a specific need in these areas. Marketing research and bidding procedures for each project will lead to re-organization for each project which is both time consuming and
costly. ,
• In production industries, the work site is usually within the production site or near to it. This proximity gives the advantage of finding immediate solutions to problems arising, and immediately applying new regulations and decisions. In the construction industry, due to variable site locations, the production site is usually not close to the work site. This requires a management team for each site, leading to high managerial costs [19,p.16].
• It is complicated for a construction firm to have long term activities other than the projects they are committed to. In the construction industry, production starts with the acceptance of the bid, and continues for a certain duration depending on the
size and type of work. For this reason, it is complicated to make futuristic financial plans, production plans and marketing decisions [14,p.11].
• There are more risk factors involved in the construction industry. These risks become more prominent because of the fixed cost. These may be external risks caused by climatic conditions, problems in obtaining materials, delays in subcontracted works; or internal risks created by technological inefficiencies, inexperience, and overloading of the construction firm.
• Competition in the construction industry is more limiting than competition in other industries. This is caused by unfair competition by the not-so-qualified (in terms of technical capabilities and. organizational strength) construction firms. A construction firm can lower the bid price only by sacrificing from profit or by putting itself further at risk. A poor selective process becomes obvious in the construction industry when large construction firms go bankrupt because they are forced to submit lower bids than their competitors in order to win the bid. The fact that these competitors may include construction firms that would perform the work at a much lower quality standard shows a weakness in the bidding system. Clients who are not aware of this weakness in the construction industry may accept the lowest bid, as they would in the production industry. There are other serious implications when the lowest bid is the only measure taken in the selection of the construction firm. For example, in order not to suffer a loss, the firms may have to compromise the quality of construction materials used for the project. This method threatens the existence of large construction firms, lessens the quality of the work, or leaves the construction firm in a position where it is forced to request additional payments from its client [19,p.18].
• Construction firms wishing to enter a bid are required to prepare an offer in accordance to contractual conditions. Estimates, productivity of the machinery, qualifications of the workforce, work site, work conditions and climatic conditions have to be taken into consideration while bidding due to varying conditions of each individual project. Even if there is only a small possibility of being awarded the bid, the firm has to take these matters into serious consideration while preparing for the bid. If they are not awarded the bid, these costs acquired during the preparation period are viewed as a financial loss. Never-the-less, construction firms must be prepared to accept such financial losses.
• "Any contracting firm has to respond to the changing environment of the market place for projects and of the market for resources every time it tenders for a job"
(21,p.xix]. The firm's success or failure is determined by the nature of its response.
• Construction firms that intend on entering the bid must also provide performance and surety bonds as required by bidding regulations.
• "The competitive advantage of contracting firms cannot be linked to a standard product as in manufacturing industries because there is no standard product" [9,p.24].
• Due to the unique nature of each construction project and the lack of dependable routine procedures due to various external effects that cannot be pre-determined, site managers are required to have both specialist and managerial qualifications. "Adequate numbers of high quality managers are thus the most important assets of a contracting firm. What the contracting firm is really selling is its management skills" (21,p.xviii].
• "Low fixed capital assets mean that financial capital requirements for a contracting firm are low and, because of the peculiar pricing and payment system, the contractor is able to have a high positive cash flow. This factor, together with the importance of managers, has a profound influence on the strategy of the construction firms" (21,p.xviii].
2.4
Types of Construction Firms
Initially, construction companies were simply organized and consisted of contractors and subcontractors alone. As construcflon companies grew and developed design capabilities, they started to perform design-construct work. This growth and diversification brought about the need for construction management. Design-construct work is a method chosen when the owner wishes to have the project completed in a shorter time period than the traditional design-bid process would make possible. One aim of project management is the same--to complete the project in a shorter time frame.
In summary, construction firms can be categorized under three groups:
1. The General Contractor-- is a company that performs construction work on a fixed price basis and therefore, must have sufficient funds to secure performance and payment bonds and finance the work during the project. Building general contractors subcontract a large amount of the work which takes some of the financial burden off their shoulders and allows them to work with less capital.
2. The Design-Construct contractor--is a company that performs both the design and construction of a project. Some general contractors enter this category by subcontracting an engineering or architectural firm to undertake the design work.
3. The Construction Manager-is a company that provides purely the service of construction management. Some engineering, general contractor, and design construct companies also provide construction management services.
2.5
Mission, Objectives and Strategies of the Construction
Firm
Based on their size, firms differ in decision making periods, goals, products or services, competitive advantage, and other such matters. Yet, regardless of size, they have certain similarities: they all require manpower, material and equipment; they have general expenses in providing products and services; they must all resort to some form of financial arrangement; they all have to set a price for the services/products they provide; they must make decisions regarding their goals and determine how to achieve these goals.
il
In general, all firms plan and execute their operations in order to fulfill their goals. The most important concept concerning goals is profit maximization. Some firms may prioritize profit maximization second to the long or short term operations required for the survival and growth of the firm, or encountering interesting projects [22,p.54]. Firms are usually more con~erned with profitability or return on investment rather than direct profit maximization.
Ramsay differentiates between a firm's mission, objectives and strategy. "The mission (or vision) of a business is its long-term ambition, what it ideally wants to become over time. This is usually expressed in qualitative terms and is probably never achieved
exactly or totally. Objectives are finite in time, shorter term and mainly quantitative " [21,p.1
OJ.
The time-frame involved in objectives is limited and usually extends up to five years."Strategy does not include objectives. It is about the means of meeting these, objectives. It needs to be formulated in such a way that those responsible for implementing it are clear as to what they have to achieve, and that progress can be easily assessed" [9,p.17].
Many firms in the construction industry as well as other industries cannot make a clear differentiation between these three concepts. Furthermore, managers of many firms may have a clear outline in their minds on what their business is all about and where it is heading, and not realize that this outline is, in fact, their strategy. "The essence of business strategy is to try to arrange things so that you are in control of the situation" [21,p.1O].
"Strategy has to be placed in its proper context for the business firm. Effectively, objectives come before strategy. Strategy is about meeting these objectives which, in turn, are determined by the mission of the business itself. These factors: mission, objectives and strategy are clearly interrelated, and each loops back on the others to form a complete and meaningful entity" [21,p.1
OJ.
In many construction companies, the differences between mission, objectives and strategy are not clearly recognized. The mission is somewhat stated in terms of objectives or goals, but they are imprecise and because there is no time frame set, it is difficult to establish a clear strategy. This leads to inaccurate planning. An important function of the management team is to understand, determine, and take progressive action in executing the mission, objectlves and strategy of the firm in achieving its goals. Figure 2.3 shows a model of the relationship of factors that constitute the
strategy of a firm. Strengths and weaknesses of a firm are the factors that must be analyzed in detail in establishing strategy [23, p.56].
Figure 2.4 represents a model displaying the factors that determine strategic planning
at an external level [24,p.219J.
Another term that is frequently used in discussions of objectives, strategy and mission is strategic planning. "Strategic planning is the process by which strategy is agreed or defined. Planning is the formalized process by which the agreed strategy is translated into more detailed targets and required action within a time-frame. It will normally
extend to a period not exceeding three years and in the very short term of six months to one year. Planning also includes budgeting" [9,p.17].
Mission
ı
Objectives·~
External Analysis
-
Analysis of strengths&weaknesseswithin the firm
STRATEGY OF THE FIRM
Production Strategy
.., _., --·-· -· _ sub-structural decisions Profitability
Figure 2.3. Strategy Flowchart of a Firm4
In most construction firms there is not
a
clear understanding of the true meanings and differences between mission and objectives, and a larger confusion in the differentiation of objectives, strategy and planning. "With the exception of very few companies, objectives are imprecise and lack a time-frame which prevents the development of coherent strategy. There is thus often a missing link between objectives and planning" [9,p.18].4Source: Stocks, R. (1991) 'Strategic Marketing Management' Competitive Advantage in Construction,
....
DemandConditions Strategy&Structure of the... • ı Firm Competition Factor Conditions . •.
~-
....: .. Related& Supporting ~: ~:: :·:· ~ Industries • ~Figure 2.4 Factors That Determine Strategic Planning At An Externalı.evef
Even though the model of strategic management will vary depending of the size and complexity of the firm being analyzed, Ramsay identifies seven steps for strategic management [21,p.13]:
1. Establishing the basic mission of the business 2. Determining specific objectives
3. Analyzing strengths, weaknesses, opportunities and threats (SWOT) 4. Identifying strategic options !O
5. Deciding on the strategy and plan 6. Implementing the strategic plan 7. Evaluating progress and control
