Factors Leading To Success of Indian Construction Companies.
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The study investigates critical success factors for Indian construction companies, identifying cash flow management as the most vital aspect for success. Interviews conducted with top-level managers from seven construction firms in Aurangabad, Maharashtra, provide insights into various factors influencing success, including management systems and financial practices. The results highlight a surprising lack of emphasis on advanced project management techniques, indicating a shift in focus towards cash flow and organizational planning.
![IOSR Journal of Mechanical and Civil Engineering (IOSR-JMCE)
e-ISSN: 2278-1684,p-ISSN: 2320-334X, Volume 10, Issue 1 (Nov. - Dec. 2013), PP 52-54
www.iosrjournals.org
www.iosrjournals.org 52 | Page
Factors Leading To Success of Indian Construction Companies.
Mr. Abhijeet Gadekar1
, Dr.S.S.Pimplikar2
1
(Student M.E(Construction & Management), civil engg dept, Maharashtra Institute of Technology, Pune, India)
2
(Prof & Head ,Civil Engg Dept, Maharashtra Institute of Technology, Pune University, India)
Abstract: Achieving success is a highly critical issue for the companies to survive in a competitive business
environment. The construction industry is also an area where there is strong competition due to a large number
of construction contractors. There have been many factors such as qualified employees, quality workmanship
and financial management that can lead to company success in the construction industry. The aim of this study
was to investigate the critical factors leading to construction company success. Within this context, a survey was
carried out among 7 Indian construction companies which are located in the Aurangabad district of
Maharashtra region of India. In this survey, top-level managers and owners of the companies were interviewed.
The interviews took place over a three month period between August and October 2013. Finally, the ranking of
the critical success factors has been determined by using the Point Rating Technique. Based on the results,
Cash flow management characteristics was determined as the most important factor to company success
Keywords : Construction company, Entrepreneurship, Failure factors, Indian construction ,Success factors.
I. INTRODUCTION
Success has been the ultimate goal of every business activity [1]. It is highly important for the
organizations to be successful in their businesses in order to survive in competitive business environments such
as construction. The construction industry is changing constantly with the developments of new business
methods and technologies [2]. Thus, construction companies have to adopt these applications and develop
appropriate strategies to be more competitive in this industry and get success in their businesses. There are many
definitions of success. Traditionally, it is defined as the degree to which goals and expectations are met. On the
other hand, one of the definitions of failure is the inability of a firm to pay its obligations when they are due [3].
In recent years, there has been an increase in the studies of critical success/failure factors especially in project
management subject [4]. The traditional approach to success in the construction industry is to focus on the
ability to plan and execute projects [5]. Traditionally, the success parameters for projects in this industry are
cost, time and quality [6] However, due to the changing business environment it is crucial to focus on corporate
success in order to be competitive in this environment. Some of the researches related to success factors showed
that the most important factors contributing to success are company's management systems and practices [7],
[8]. Implementation of accounting systems and regular review of financial statements [9], control of job-site
safety [10], and ongoing training and education [11] are some other factors contributing to construction
company success addressed in the literature. In the study of Hutchings and Christofferson [12], carried out
among small-volume residential construction companies in the United States, the most important factors to
company success were found as quality workmanship, honesty, having good subcontractors, customer
communications, reputation, having good employees, and completing projects on time, respectively. In a survey
carried out among Germany's largest construction companies, the most important success factors were identified
as employee development, effective risk management, innovation, partnerships with customers, and lean
organizational structure [13]. As construction is a risky business and the possibility of business failure always
exists, companies have to consider the parameters that can have a direct effect to their success in business. In
this study, the critical factors leading to construction company success have been investigated. Within this
context, a survey was carried out among 7 Indian construction companies which are located in the Aurangabad
district of Maharashtra region of India. Point Rating Scale method is used to determine the ranking of the
critical success factors.
II. INDIAN CONSTRUCTION INDUSTRY
The construction industry is one of the major industries in India. The Construction industry of India is
an important indicator of the development as it creates investment opportunities across various related sectors.
The construction industry has contributed an estimated 670,778 crore to the national GDP in 2011-12 (a share
of around 8%). The industry is fragmented, with a handful of major companies involved in the construction
activities across all segments; medium sized companies specializing in niche activities; and small and medium
contractors who work on the subcontractor basis and carry out the work in the field. In 2011, there were slightly
over 500 construction equipment manufacturing companies in all of India. The sector is labor-intensive and,](https://image.slidesharecdn.com/j01015254-150120223720-conversion-gate02/85/Factors-Leading-To-Success-of-Indian-Construction-Companies-1-320.jpg)
![Factors Leading To Success of Indian Construction Companies
www.iosrjournals.org 54 | Page
Table : Ranking & Average Rating of Factors
V. CONCLUSION
This study presented the survey carried out among Indian construction companies. The critical factors leading to
construction company success have been investigated through interviews among top-level managers and owners of the
companies. According to the results cash flow management characteristic was identified as the most important main factors
to success..
Organizing and planning was perceived to be the most important item contributing to company success when
considering the importance of the factors. According to the literature review, this result might be expected since planning
was addressed as one of the most important items of all the management practices. Moreover, it was interesting to note that
managers/owners did not consider project management technique usage as a highly essential item for company success.
The findings in the study should be interpreted with caution since the research was limited with only 7 medium
sized firms. Future researches involving managers/owners of top construction companies can provide a comparison of the
results of studies conducted in same or other region.
REFERENCES
[1] A. P. C. Chan, D. Scott, and E. W. M. Lam, ‘‘Framework of success criteria for design/build projects’’, Journal of Management in
Engineering, 18(3), 120-128, 2002.
[2] J. Koota, ‘‘Market review and study of success characteristics in construction companies - Case: United States’’, VTT Research Notes
2195, ESPOO 2003.
[3] R. A. I. Frederikslust, ‘‘'Predictability of Corporate Failure’’, Martinus Nijhoff Social Sciences Division,Leiden, The Netherlands, 1978.
[4] I. Hyvari, ‘‘Success of projects in different organizational conditions’’, Project Management Journal, 37(4), 31-41, 2006.
[5] G. L. Abraham, ‘‘Critical success factors for the construction industry’’, In: Moleenar, K R and Chinowsky, P S (Ed.), Proceedings of
Construction Research Congress, March 19-21, Honolulu, Hawaii, 2003.
[6] S. W. Hughes, D. D. Tippett, and W. K. Thomas, ‘‘Measuring project success in the construction industry’’, Engineering Management
Journal, 16(3), 31-37, 2004.
[7] R. N. Lussier, ‘‘A nonfinancial business success versus failure prediction model for young firms’’, Journal of Small Business Management,
January, 8-20, 1995.
[8] D. Strischek, ‘‘Red warning flags of contractor failure’’, Journal of Lending & Credit Risk Management, 80(11), 40-47, 1998.
[9] D. Gerstel, ‘‘'The Builder's Guide to Running a Successful Construction Company’’, Newton, CT: The Taunton Press, 1991.
[10] M. Gordon, ‘‘Safety saves money’’, Contract Journal, 19(3), 1997.
[11] T. F. Bednarz, ‘‘Winning strategy: the nine laws of business success’’, Air Conditioning, Heating & Refrigeration News, 32-33, 1997.
[12] M. Hutchings, and J. Christofferson, ‘‘Factors leading to construction company success: perceptions of small-volume residential
contractors’’, ASC Proceedings of the 37th Annual Conference, University of Denver, Colorado, 263-270, 2001.
[13] Roland Berger Strategy Consultants, ‘‘Success factors in the construction industry in 2004’’, Industry radar - findings of the trend survey,
Munich, June 2004.
Ranking Factors Scale Rating
1 Cash flow management 10 9.12
2 Inadequate sales 10 9
3 Lack of managerial experience 10 8.75
4 Industry weakness 10 8.5
4 Insufficient capital 10 8.5
4 Fluctuation in material cost 10 8.5
4 Lack of business knowledge 10 8.5
5 Poor accounting system 10 7.75
6 Heavy operating expenses 10 7.5
6 Use of documentation system 10 7.5
6 Over expansion 10 7.5
7 Insufficient profit 10 7.37
7 Estimating practices 10 7.37
7 High employee turnover 10 7.37
8 Bank policy 10 7.25
9 Lack of experience in line of work 10 6.75
9 Use of project management techniques 10 6.75
9 General economic conditions 10 6.75
9 Government policy 10 6.75
9 Obtaining work in new region 10 6.75
10 Organization structure 10 5.62
11 Owner involvement in construction phase 10 5.5
11 Lack of early warning measures 10 5.5](https://image.slidesharecdn.com/j01015254-150120223720-conversion-gate02/85/Factors-Leading-To-Success-of-Indian-Construction-Companies-3-320.jpg)
Factors Leading To Success of Indian Construction Companies.
- 1. IOSR Journal of Mechanical and Civil Engineering (IOSR-JMCE) e-ISSN: 2278-1684,p-ISSN: 2320-334X, Volume 10, Issue 1 (Nov. - Dec. 2013), PP 52-54 www.iosrjournals.org www.iosrjournals.org 52 | Page Factors Leading To Success of Indian Construction Companies. Mr. Abhijeet Gadekar1 , Dr.S.S.Pimplikar2 1 (Student M.E(Construction & Management), civil engg dept, Maharashtra Institute of Technology, Pune, India) 2 (Prof & Head ,Civil Engg Dept, Maharashtra Institute of Technology, Pune University, India) Abstract: Achieving success is a highly critical issue for the companies to survive in a competitive business environment. The construction industry is also an area where there is strong competition due to a large number of construction contractors. There have been many factors such as qualified employees, quality workmanship and financial management that can lead to company success in the construction industry. The aim of this study was to investigate the critical factors leading to construction company success. Within this context, a survey was carried out among 7 Indian construction companies which are located in the Aurangabad district of Maharashtra region of India. In this survey, top-level managers and owners of the companies were interviewed. The interviews took place over a three month period between August and October 2013. Finally, the ranking of the critical success factors has been determined by using the Point Rating Technique. Based on the results, Cash flow management characteristics was determined as the most important factor to company success Keywords : Construction company, Entrepreneurship, Failure factors, Indian construction ,Success factors. I. INTRODUCTION Success has been the ultimate goal of every business activity [1]. It is highly important for the organizations to be successful in their businesses in order to survive in competitive business environments such as construction. The construction industry is changing constantly with the developments of new business methods and technologies [2]. Thus, construction companies have to adopt these applications and develop appropriate strategies to be more competitive in this industry and get success in their businesses. There are many definitions of success. Traditionally, it is defined as the degree to which goals and expectations are met. On the other hand, one of the definitions of failure is the inability of a firm to pay its obligations when they are due [3]. In recent years, there has been an increase in the studies of critical success/failure factors especially in project management subject [4]. The traditional approach to success in the construction industry is to focus on the ability to plan and execute projects [5]. Traditionally, the success parameters for projects in this industry are cost, time and quality [6] However, due to the changing business environment it is crucial to focus on corporate success in order to be competitive in this environment. Some of the researches related to success factors showed that the most important factors contributing to success are company's management systems and practices [7], [8]. Implementation of accounting systems and regular review of financial statements [9], control of job-site safety [10], and ongoing training and education [11] are some other factors contributing to construction company success addressed in the literature. In the study of Hutchings and Christofferson [12], carried out among small-volume residential construction companies in the United States, the most important factors to company success were found as quality workmanship, honesty, having good subcontractors, customer communications, reputation, having good employees, and completing projects on time, respectively. In a survey carried out among Germany's largest construction companies, the most important success factors were identified as employee development, effective risk management, innovation, partnerships with customers, and lean organizational structure [13]. As construction is a risky business and the possibility of business failure always exists, companies have to consider the parameters that can have a direct effect to their success in business. In this study, the critical factors leading to construction company success have been investigated. Within this context, a survey was carried out among 7 Indian construction companies which are located in the Aurangabad district of Maharashtra region of India. Point Rating Scale method is used to determine the ranking of the critical success factors. II. INDIAN CONSTRUCTION INDUSTRY The construction industry is one of the major industries in India. The Construction industry of India is an important indicator of the development as it creates investment opportunities across various related sectors. The construction industry has contributed an estimated 670,778 crore to the national GDP in 2011-12 (a share of around 8%). The industry is fragmented, with a handful of major companies involved in the construction activities across all segments; medium sized companies specializing in niche activities; and small and medium contractors who work on the subcontractor basis and carry out the work in the field. In 2011, there were slightly over 500 construction equipment manufacturing companies in all of India. The sector is labor-intensive and,
- 2. Factors Leading To Success of Indian Construction Companies www.iosrjournals.org 53 | Page including indirect jobs, provides employment to more than 35 million people. They are using the most advanced technologies in the market and are able to design, erect, build and operate almost all kinds of civil and industrial projects. Indian contracting services can be divided into two parts as lower-quality domestic-only set of firms and the higher quality international firms. India will become the world's third largest construction market by 2025, adding 11.5 million homes a year to become a $1 trillion a year market, finds a new study by Global construction perspectives and Oxford Economics. India’s infrastructure market is expected to grow at around 8 %, the fastest amongst its sector. The Indian construction industry comprises of numerous firms in the corporate sector. In addition to these firms, there are about 1,20,000 class A contractors registered with various government construction bodies. There are thousands of small contractors, which compete for small jobs or work as sub-contractors of prime or other contractors. III. SURVEY The aim of this research is to find out the critical factors leading to construction company success. The survey was carried out among 7 Indian construction companies which are located in the Aurangabad district of Maharashtra region of India and operate in the local market. Construction firms registered with the Confederation of Real Estate Developers’ Associations of India (CREDAI) at this region were considered in the study. All of these firms are operating in building and housing sectors. In this survey, semi-structured interviews were carried out among top-level managers and owners of the companies. Top-level managers and owners were selected for the interviews because they are assumed to have enough knowledge about the organizational structure, culture and strategies. The 7 interviews took place over a 3 month period between August and October 2013 and each lasted approximately 1 hr. The survey questionnaire was administered during face-to-face interviews and it consisted of 23 questions including both closed and open-ended questions. It is divided into two main sections. Section I covered general information about the companies. Section II dealt with factors leading to company success. Although survey results reflect the opinions of experts from 7 firms, it is believed that they can give an idea about the critical success factors leading to company success in the Indian construction industry. Point Rating Scale method is used to determine the ranking of the critical success factors. The decision maker is asked to rate each of the attributes out of 10.. The factors considered in the study were identified based on a literature review. A total of possible factors that were felt to have an effect on the construction business success of companies in India were determined. The factors were rated according to their importance and an average ranking of factors was calculated according to the responses. IV. SURVEY RESULTS The respondents were asked to evaluate the importance level of the factors. Table below shows the ranking of the factors according to their importance as perceived by the respondents. Cash flow management was considered as the most important factor to company success. Surprisingly, project management techniques usage was not considered as an important factor for company success. Although the majority of the respondents considered the advanced project management techniques as important tools, it was not seen as a highly essential parameter for company success. The following are the ranking and average rating of the factors that were calculated after obtaining the data from 7 construction companies.
- 3. Factors Leading To Success of Indian Construction Companies www.iosrjournals.org 54 | Page Table : Ranking & Average Rating of Factors V. CONCLUSION This study presented the survey carried out among Indian construction companies. The critical factors leading to construction company success have been investigated through interviews among top-level managers and owners of the companies. According to the results cash flow management characteristic was identified as the most important main factors to success.. Organizing and planning was perceived to be the most important item contributing to company success when considering the importance of the factors. According to the literature review, this result might be expected since planning was addressed as one of the most important items of all the management practices. Moreover, it was interesting to note that managers/owners did not consider project management technique usage as a highly essential item for company success. The findings in the study should be interpreted with caution since the research was limited with only 7 medium sized firms. Future researches involving managers/owners of top construction companies can provide a comparison of the results of studies conducted in same or other region. REFERENCES [1] A. P. C. Chan, D. Scott, and E. W. M. Lam, ‘‘Framework of success criteria for design/build projects’’, Journal of Management in Engineering, 18(3), 120-128, 2002. [2] J. Koota, ‘‘Market review and study of success characteristics in construction companies - Case: United States’’, VTT Research Notes 2195, ESPOO 2003. [3] R. A. I. Frederikslust, ‘‘'Predictability of Corporate Failure’’, Martinus Nijhoff Social Sciences Division,Leiden, The Netherlands, 1978. [4] I. Hyvari, ‘‘Success of projects in different organizational conditions’’, Project Management Journal, 37(4), 31-41, 2006. [5] G. L. Abraham, ‘‘Critical success factors for the construction industry’’, In: Moleenar, K R and Chinowsky, P S (Ed.), Proceedings of Construction Research Congress, March 19-21, Honolulu, Hawaii, 2003. [6] S. W. Hughes, D. D. Tippett, and W. K. Thomas, ‘‘Measuring project success in the construction industry’’, Engineering Management Journal, 16(3), 31-37, 2004. [7] R. N. Lussier, ‘‘A nonfinancial business success versus failure prediction model for young firms’’, Journal of Small Business Management, January, 8-20, 1995. [8] D. Strischek, ‘‘Red warning flags of contractor failure’’, Journal of Lending & Credit Risk Management, 80(11), 40-47, 1998. [9] D. Gerstel, ‘‘'The Builder's Guide to Running a Successful Construction Company’’, Newton, CT: The Taunton Press, 1991. [10] M. Gordon, ‘‘Safety saves money’’, Contract Journal, 19(3), 1997. [11] T. F. Bednarz, ‘‘Winning strategy: the nine laws of business success’’, Air Conditioning, Heating & Refrigeration News, 32-33, 1997. [12] M. Hutchings, and J. Christofferson, ‘‘Factors leading to construction company success: perceptions of small-volume residential contractors’’, ASC Proceedings of the 37th Annual Conference, University of Denver, Colorado, 263-270, 2001. [13] Roland Berger Strategy Consultants, ‘‘Success factors in the construction industry in 2004’’, Industry radar - findings of the trend survey, Munich, June 2004. Ranking Factors Scale Rating 1 Cash flow management 10 9.12 2 Inadequate sales 10 9 3 Lack of managerial experience 10 8.75 4 Industry weakness 10 8.5 4 Insufficient capital 10 8.5 4 Fluctuation in material cost 10 8.5 4 Lack of business knowledge 10 8.5 5 Poor accounting system 10 7.75 6 Heavy operating expenses 10 7.5 6 Use of documentation system 10 7.5 6 Over expansion 10 7.5 7 Insufficient profit 10 7.37 7 Estimating practices 10 7.37 7 High employee turnover 10 7.37 8 Bank policy 10 7.25 9 Lack of experience in line of work 10 6.75 9 Use of project management techniques 10 6.75 9 General economic conditions 10 6.75 9 Government policy 10 6.75 9 Obtaining work in new region 10 6.75 10 Organization structure 10 5.62 11 Owner involvement in construction phase 10 5.5 11 Lack of early warning measures 10 5.5