The Relationship between Family-Owned Business and the Success of SMEs in the Construction Industry
Strategies for Competitive Advantage in Small Construction Businesses
Small and medium enterprises (SMEs) play a crucial role in the construction industry, contributing significantly to economic growth and job creation. However, these businesses often face unique challenges in maintaining a competitive edge. The strategic planning process framework (SPPF) provides a valuable lens for understanding how small construction business owners can develop and implement effective strategies to gain a competitive advantage.
Leveraging the Strategic Planning Process Framework
The SPPF, as outlined by Cohen and Cyert (1973), encompasses nine steps: (1) developing goals, (2) environmental analysis, (3) quantifying targets, (4) strategy formulation, (5) analyzing the gap between the present situation and objectives, (6) searching for strategies to bridge the gap, (7) selecting strategic alternatives, (8) implementation, and (9) measurement, feedback, and control. This framework offers a structured approach for small construction businesses to identify, evaluate, and execute strategies that can give them a competitive edge.
Environmental Analysis and Competitive Advantage
A critical component of the SPPF is the environmental analysis (step 2), which involves understanding the broader industry context and the factors that can impact a firm’s success. In the construction industry, this may include staying abreast of emerging trends, such as the growing emphasis on green building and sustainability, as well as monitoring the competitive landscape.
Participants in the current study highlighted the importance of understanding their work environment and competitive landscape as a key strategy for gaining a competitive advantage. One participant noted, “The biggest thing that we’re working on right now is scaling, and we’re scaling at a very rapid pace and hired over 25 maybe 30 employees in the last like four months, so we’re scaling and managing it carefully.” By closely monitoring the market and their position within it, small construction businesses can identify opportunities to differentiate themselves and better serve their target customers.
Measuring and Evaluating Strategies
Another crucial aspect of the SPPF is the measurement, feedback, and control phase (step 9), which involves assessing the effectiveness of the implemented strategies. Participants in the study shared various methods they use to measure the success of their business strategies, such as tracking growth over time and monitoring customer satisfaction and referrals.
As one participant explained, “Measurement for me really comes down to the profit on a per project basis as opposed to the typical measurement of monetary gain or monitoring the bottom line. My construction business looks closely at how we get to a completed project.” By carefully evaluating the impact of their strategies, small construction businesses can make informed decisions about which approaches to maintain, modify, or abandon to ensure their long-term competitive advantage.
Overcoming Barriers to Implementation
The SPPF also acknowledges the potential barriers that can arise during the implementation phase (step 8). Participants in the study identified several challenges they faced, including financial costs and environmental factors, such as competition and regulations.
One participant noted the challenge of managing costs: “Entry cost to the level of construction I am doing It’s astronomical, so first thing is your insurance cost. On a lot of these larger jobs, they have AAA insurance behind you, travelers, or principle. Companies such as that you’re not going to get on the job.” By anticipating and addressing these obstacles, small construction businesses can increase the likelihood of successfully executing their competitive strategies.
Aligning Strategies with Industry Trends
In addition to the SPPF, small construction businesses can also draw on industry-specific insights to inform their strategies. For example, the growing focus on green building and sustainability presents opportunities for small firms to differentiate themselves by specializing in these areas.
Participant 5 in the study described how their company has “met with some of the largest businesses, management groups, and property firms in the tri-state area and we are uniquely certified. Basically, outline our specialty. Which is interior finishes.” By identifying and capitalizing on emerging industry trends, small construction businesses can position themselves as leaders in their respective markets.
Fostering Customer Relationships and Adaptability
Successful small construction businesses also emphasize the importance of maintaining strong relationships with their customers and being adaptable to changing market conditions. Participants in the study highlighted strategies such as offering discounts, providing excellent customer service, and creating new business relationships to sustain their competitive advantage.
As one participant shared, “Just being good with the people. Be very nice, go the extra mile to satisfy your customer, being very relevant. Try to help out by doing things that you’re not supposed to be doing. If they ask for a favor and it’s not part of the contract, you just do it for him. That extra effort might cost you some time, but that person will be happy. Happy people tell more people about your business, and referrals are the best business leads you can ask for.”
By prioritizing customer relationships and maintaining the flexibility to adapt to changing market conditions, small construction businesses can enhance their long-term competitiveness and resilience.
Conclusion
The SPPF provides a comprehensive framework for small construction businesses to develop and implement effective strategies for gaining a competitive advantage. By understanding their industry environment, measuring the success of their strategies, and overcoming implementation barriers, small construction firms can position themselves for sustained success in the dynamic construction market.
Additionally, aligning their strategies with emerging industry trends, fostering strong customer relationships, and demonstrating adaptability can further enhance the competitive edge of small construction SMEs. By embracing these principles, small construction businesses can thrive and contribute to the overall growth and vitality of the construction industry.
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