FACTORS AFFECTING GROWTH OF CONSTRUCTION
ORGANISATIONS IN NAIROBI
BY
MOHAMED EYAAZ ESMAIL JIN
UNITED STATES INTERNATIONAL UNIVERSITY -
AFRICA
SPRING 2018
FACTORS AFFECTING GROWTH OF CONSTRUCTION ORGANISATIONS IN NAIROBI
BY
MOHAMED EYAAZ ESMAIL JIN
A Project Report submitted to the Chandaria School of Business in
partial fulfilment of the requirement for the Degree of Masters in
Business Administration (MBA)
UNITED STATES INTERNATIONAL UNIVERSITY -
AFRICA
SPRING 2018
ii
DECLARATION
I, the undersigned, declare that this is my original work and has not been submitted to
any other college, institution or university other than the United States International
University – Africa for academic credit.
Signed: ___________________________ Date: ____________________________
Mohamed Eyaaz Esmail Jin
Student ID: 645336
This project report has been presented for examination with my approval as the
appointed Supervisor.
Signed: ___________________________ Date: ____________________________
Prof. M. Lewa
Signed: ___________________________ Date: ____________________________
Dean, Chandaria School of Business
iii
COPYRIGHT
©2018 by Mohamed Eyaaz Esmail Jin
All rights reserved. No part of this work may be reproduced, stored in a retrieval system
or transmitted in any form by any means, electronic, mechanical, photocopying,
recording or otherwise without the express written authorization from the writer.
iv
ABSTRACT
The study purposed to identify the factors affecting growth of construction companies in
Kenya. The research questions were as follows. What are the internal factors that affect
the growth of construction companies in Nairobi? What are the external factors that affect
the growth of construction companies in Nairobi? What Strategies are implemented by
the construction organizations to ensure success in a developing economy?
Descriptive research design was used. The population in this study was 5 companies in
the roads and bridges and 25 construction companies in Nairobi that are registered with
the National Construction Authority. The sample size was 13 construction companies in
the building sector in Nairobi and 2 companies from the rail and road industry in Nairobi.
The data was collected by structured questionnaires. Data was analyzed using descriptive
statistical techniques by generating frequencies, mean and standard deviations.
Inferences were made using Spearman’s rank correlation analysis techniques. The results
were presented in tables.
The study established that there was a statistically significant correlation between
internal factors and growth of construction organizations. Of high importance were:
technology in construction, client financial ability, and cost and revenue management. In
terms of external factors affecting growth of construction companies, all the factors were
highly important except social factors, but only two of the Political, Economical, Social,
Technological, Ecological and Legal (PESTEL) factors were statistically significant.
These are: economic factors and technological factors. There was a strong positive
correlation between growth of construction organization and expansion through
concentration, expansion through integration, expansion through diversification and
expansion through internal strategies.
The study concluded that growth of construction organizations was affected internal
factors such as technology used in construction, client’s financial ability, cost and
revenue management, profitability of projects, leadership and ownership, magnitude and
size of projects, and goals and objectives of the organization. All the external factors
except social factors potentially affected growth of construction companies although
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only the impact of economic factors and technological factors were significant to growth
of construction organizations in Kenya. Construction organizations in Kenya mainly
pursued internal strategies to ensure growth and success. This included sense of urgency
and timelines, cost control and entrepreneurial planning.
The study recommended that construction organizations should invest on new and
adequate technological equipment. They should undertake regular environmental
scanning with emphasis put on how emerging technology in the industry can be
leveraged to enhance growth. Constant attention should be paid to the economic
environment in order to provide timely information regarding investment decisions.
Construction organizations can consolidate their internal strategies with other expansion
strategies such as diversification, integration or concentration. Future researchers can
explore how construction organizations can pursue growth through backward integration
due to its high importance in the construction sector.
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AKNOWLEDGEMENT
I firstly thank the Almighty Allah for giving me the opportunity and ability to pursue and
complete this prestigious Masters in Business Administration (MBA) program.
I would also like to extend my gratitude to my parents; Mr. Ismail Jin, Mrs Zahida, My
Siblings; Ibtisam, Aaliya, Ayman and my Fiancee Dr. Sakina for their support and
encouragement to overcome the challenges swiftly throughout my journey.
To my Project Supervisor, Prof. Lewa, a good professor is the reason why a student with
an ordinary mindset can be transformed into extraordinary. I am grateful for your
dedication, patience and guidance to help me work towards efficiency and success.
viii
TABLE OF CONTENTS
DECLARATION............................................................................................................ ii
COPYRIGHT ................................................................................................................ iii
ABSTRACT ................................................................................................................... iv
AKNOWLEDGEMENT............................................................................................... vi
DEDICATION.............................................................................................................. vii
LIST OF TABLES ......................................................................................................... x
LIST OF FIGURES ...................................................................................................... xi
LIST OF ABBREVIATIONS ..................................................................................... xii
CHAPTER ONE ............................................................................................................ 1
1.0 INTRODUCTION ............................................................................................... 1
1.1 Background to the Study ....................................................................................... 1
1.2 Statement of the Problem ...................................................................................... 3
1.3 Purpose of the Study .............................................................................................. 5
1.4 Research Questions ............................................................................................... 5
1.5 Significance of the Study ...................................................................................... 5
1.6 Scope of the Study ................................................................................................. 6
1.7 Definition of Terms ............................................................................................... 7
1.8 Chapter Summary .................................................................................................. 7
CHAPTER TWO ........................................................................................................... 8
2.0 LITERATURE REVIEW ................................................................................... 8
2.1 Introduction ........................................................................................................... 8
2.2 Internal Factors affecting Growth of Construction Companies ............................ 8
2.3 External Factors affecting growth of Construction companies ........................... 13
2.4 Strategies used to ensure Growth of Construction Organizations ....................... 17
2.5 Chapter Summary ................................................................................................ 23
CHAPTER THREE ..................................................................................................... 24
3.0 RESEARCH METHODOLOGY ..................................................................... 24
3.1 Introduction ......................................................................................................... 24
3.2 Research Design .................................................................................................. 24
3.3 Population and Sampling Design ........................................................................ 24
ix
3.4 Data Collection Methods ..................................................................................... 26
3.5 Research Procedures ............................................................................................ 26
3.6 Data Analysis Methods ....................................................................................... 26
3.7 Chapter Summary ................................................................................................ 27
CHAPTER FOUR ........................................................................................................ 35
4.0 RESULTS AND FINDINGS............................................................................. 28
4.1 Introduction ......................................................................................................... 28
4.2 Demographic Profile ........................................................................................... 28
4.3 Internal Factors Affecting the Growth of Construction Organizations ............... 31
4.4 External Factors Affecting the Growth of Construction Organizations .............. 33
4.5 Strategies used to Ensure Growth ....................................................................... 39
4.6 Chapter Summary ................................................................................................ 45
CHAPTER FIVE ......................................................................................................... 46
5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS ................ 46
5.1 Introduction ......................................................................................................... 46
5.2 Summary ............................................................................................................. 46
5.3 Discussions .......................................................................................................... 47
5.4 Conclusions ......................................................................................................... 53
5.5 Recommendations ............................................................................................... 54
REFERENCES ............................................................................................................. 56
APPENDICES .............................................................................................................. 62
Appendix I: Questionnaire ............................................................................................ 69
x
LIST OF TABLES
Table 3.1: Population Distribution ................................................................................. 30
Table 3.2: Sample Size Distribution .............................................................................. 31
Table 4.1: Distribution of Organizations by Type ......................................................... 28
Table 4.2: Company Size (Number of Employees) ....................................................... 29
Table 4.3: Distribution of Respondents by Job Title ..................................................... 29
Table 4.4: Distribution of Respondents by Industry Experience ................................... 30
Table 4.5: Distribution of Organizations by Number of Projects Completed ............... 30
Table 4.6: Value of Projects Completed in US$ ............................................................ 31
Table 4.7: Ranking of Internal Factors by Order of Importance to Growth .................. 32
Table 4.8: Correlation of Internal Factors with Growth of Organizations .................... 33
Table 4.9: Importance of Political Factors to Growth ................................................... 33
Table 4.10: Importance of Economic Factors to Growth .............................................. 34
Table 4.11: Importance of Social Factors to Growth ..................................................... 35
Table 4.12: Importance of Technological Factors to Growth ........................................ 36
Table 4.13: Importance of Ecological Factors to Growth .............................................. 37
Table 4.14: Importance of Legal Factors to Growth...................................................... 37
Table 4.15: Ranking of Importance of PESTEL Factors to Growth.............................. 38
Table 4.16: Correlation between External Factors and Growth .................................... 39
Table 4.17: Importance of Expansion through Concentration ....................................... 40
Table 4.18: Importance of Expansion through Integration ............................................ 40
Table 4.19: Importance of Expansion through Diversification ..................................... 41
Table 4.20: Importance of Expansion through Cooperation .......................................... 41
Table 4.21: Importance of Expansion through Internationalization .............................. 42
Table 4.22: Importance of Expansion through Internal Strategies ................................ 42
Table 4.23: Composite Mean score of Importance of Strategies for Growth ................ 43
Table 4.24: Correlation between Various Strategies and Growth ................................. 44
xi
LIST OF FIGURES
Figure 2.1: Expansion Strategy ...................................................................................... 18
xii
LIST OF ABBREVIATIONS
GNP Gross National Product
GDP Gross Domestic Product
BOQ Bills of Quantities
KABCEC Kenya Association of Building and Civil Engineering Contractors.
PESTEL Political, Economical, Social, Technological, Ecological, Legal.
ECI Early Contractor Involvement
ESI Early Supplier Involvement
CO Construction Organizations
PPI Project Performance Indicators
NCA National Construction Authority
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CHAPTER ONE
1.0 INTRODUCTION
1.1 Background to the Study
Construction organizations play a major role in developing and achieving the aims and
objectives of a society. Their contribution to national development in developing
economies has received wide attention by governments, investors and practitioners (Ofori,
2015). Their activities are significant to the achievement of national goals of infrastructural
development, provision of shelter and job creation (Stasiak-Betlejewska & Potkany, 2015).
The construction sector is especially considered a crucial sector for of strategic economic
significance in developing nations due to the macroeconomic role it plays in fixed capital
formation and linkages across sectors (K’Akumu, 2007). Documented studies reveal that
the sector accounts for close to 10 percent of developed countries’ gross domestic product
(GDP) and over 4 percent of the GDP of emerging economies (Gwaya, Masu, & Oyawa,
2014). The importance of construction organizations in enhancing the prosperity of a nation
thus cannot be gainsaid (Tengan, Anzagira, Kissi, Balaara, & Anzagira, 2014).
The industry that construction organizations operate in is complex. This is because the
business of construction involve different stakeholders including clients, contractors,
consultants, shareholders and regulators (Ribeiro, Paiva, Varajao, & Domingez, 2013). The
business involves diverse sectors and attracts the interest of many stakeholders, from
environmentalists, to politicians and members of the public. Consequently, construction
organizations frequently face a myriad of challenges that affect their effectiveness in terms
of cost overruns and delays in project completions (Gwaya et al., 2014). In Kenya for
instance, Auma (2014) claims that construction organizations are characterized by poor
performance occasioned by time and cost escalations to the magnitude of over 50 percent.
The complexity of business environment of construction organizations calls for an
understanding of the factors affecting their growth, more so in a developing economy such
as Kenya which deliver suboptimal contribution to economic development in comparison
to developed nations. Kenya is on the verge of a development boom after an increased
investment by the government in the construction industry to provide better transport and
2
infrastructure such as expanded roads and railway networks for a more effective and
productive economy. In the last 5 years, the construction industry is the key driver of
Kenya’s economic growth. According to a recent industry survey, an accelerated growth of
13 percent was recorded in the year 2014 up from 5.8 percent in the pear 2013 (Kanjumba,
Njuguna & Achoki, 2016). The construction industry contributes about 7 Percent of the
GDP in Kenya (Oxford Business Group, 2018). The sector is recognized as a key
contributor to the achievement of Kenya’s vision 2030 which is the country’s development
roadmap. The Vision 2030 endeavors to guide the country towards a firm network of
transport infrastructure (Government of the Republic of Kenya, 2007).
The rapid growth in population has also led to an increased need for housing, and
developers are focusing to keep up with this demand. Population trends suggest that over
50 percent of the country’s people is likely to live in urban environments in the near future
(Government of the Republic of Kenya, 2007). Recent data suggest that there has been a
tremendous increase in demand for housing in Kenya over the past 10 years but
construction organizations are yet to keep up with this demand (Moko & Olima, 2014). In
addition, the increase in consumer affluence and ability to spend money has influenced
many developers to build retail markets and shopping malls such as Garden City and Two
Rivers mall. This increases employability and those employees require a place to live and
eventually a need for housing (Oxford Business Group, 2018).
According to a report published by the National Construction Authority (2014), there are
eight distinct categories of contractors. The report showed identified that the main classes
of work undertaken by construction organizations were roads, water, buildings, electrical
and mechanical construction works. In total, the authority has registered 13,700 contractors,
of which buildings works and road works account for the highest proportion at 43 percent
and 34 percent, respectively. The report revealed that nearly 80 percent of the organizations
were small and medium enterprises (SME) whereas large enterprises accounted for the rest.
The report suggest that most construction organizations do not grow beyond their SME
status.
In the city of Nairobi where demand for Construction and Infrastructure development is on
a rise, there is an equal rise in competition of construction organisations. The industry is an
3
attractive market for Foreign and International construction companies. Over the past ten
to fifteen years there have been reputable companies from China, India, Turkey, South
Africa, setting up base in Nairobi to acquire a market share of the ever potential market in
Nairobi. China Jiangsu, China Wu Yi are construction organisations from China doing
major construction projects in Nairobi and all around Kenya. China Road and Bridge
Company recently implemented and commissioned the Standard Gauge Railway which
will benefit Kenya’s economy on a large scale. Ceytun from Turkey have acquired tenders
for various projects and don’t fail to deliver not only in the period of construction but a
good quality product (Kiganda, 2016).
International organisations have brought in some stiff competition to the market which
affect the local companies that have been operating in Nairobi for up to 40 years.
Companies such as Cementers, Seyani Brothers, Kilimanjaro Construction, MuljiDevraj,
Parbat Siyanie are facing a battle of acquiring the top projects and eventually losing out to
the foreign organisations due to their cost, time duration of completing the project and
contractual agreements with the client. In addition, there have been growing concerns over
the quality of local contractors occasioned by increasing cases of collapsing buildings
(Muiruri & Were, 2016). Foreign organisations tend to be more flexible of negotiating with
the clients as they have the ability to manufacture and import their materials from their
home country. Their perceived quality of construction works is also high. This reduces their
costs and gives them a competitive edge over the local organisations in project tenders
(Kiganda, 2016).
1.2 Statement of the Problem
In many Kenyan construction companies, the systems used to manage resources are not
effective. Managing resources in companies involved in multiple projects is often
complicated to perform due to the environment in which they operate in. These
complications are caused by the several ongoing projects running concurrently and
therefore the resources that are available must be shared between different projects. In
addition, the irregular availability of new orders complicates the system for resource
management due to the various needs for resources in projects that are ongoing. This leads
to a great challenge in managing the employees and staff of the various projects.
4
Many construction companies are unsuccessful due to failure in time delivery, resource
management and cost management of the various projects. These projects are completed
poorly because various reasons including lack of materials, design change by the
Architects, Additional and Abortive works, variation orders and amendments in Bill of
Quantities (Shaban, 2008). In addition to that, other factors such as coordination between
the project team and leadership skills affect projects’ performance and eventually the
success and growth of construction organizations.
There have been previous studies that have highlighted on factors influencing construction
organizations’ performance both in developed and developing countries. An assessment of
the performance of construction projects in Niger state was done. This study focused on
experience and competence of personnel, quality of equipment and machinery and raw
materials utilized. The research also recommended further studies on continuous
relationships and coordination between the participants in order to develop the performance
of the company (Juliet & Ruth, 2014).
A study on antecedent factors to the performance of organizations in the construction sector
in the Gaza strip was done. Variables were found to be related to delays in projects due to
road closures, qualification of personnel and the availability of good quality raw materials.
It was recommended by the researchers that there should be further studies focusing on the
development of human resource through continuous professional development (Enhassi,
Mohmed, & Abushan, 2009).
A study on the performance indicators for successful construction organizations was done.
There were 3 variables on the performance indicators namely: safety, profitability and
productivity. It recommended further studies in developing a robust framework for bench
marking construction project development that considers the expectations and objectives
of the project and the organization (Takim, Akintoye, & Kelly, 2014).
Another study was done about the factors influencing the success of a construction
company. The focus of this study was five variables namely; procedures used to undertake
projects, factors related to humans and factors in the external environment. The
5
recommendation in this study was that there should be a further study directed to the
identification of the Key Performance Indicators (Chan, Scott, & Chan, 2004).
There have been many studies based on the factors affecting performance of construction
organizations. However, there are mixed results and discrimination regarding the types and
classification of the construction projects undertaken by the organizations. This study
focused on a broader approach to identifying the factors the influence the growth and
success of construction organizations. This research addressed factors that affected
construction companies internally and externally and strategies that can be implemented to
enable streamline their production and output.
1.3 Purpose of the Study
The purpose of the research was to identify the factors affecting the growth of construction
companies in Kenya.
1.4 Research Questions
1.4.1 What are the internal factors affecting growth of construction companies in Nairobi?
1.4.2 What are the external factors affecting growth of construction companies in Nairobi?
1.4.3 What Strategies are implemented by the construction organizations to ensure success
in a developing economy?
1.5 Significance of the Study
The study is of practical significance to a number of industry stakeholders as well as
academic researchers. The significance to respective stakeholders is discussed as follows;
1.5.1 Investors
The study findings might be of relevance to investors in the construction industry as it
provides empirical evidence of strategies that are important to growth of construction
organizations. This can be used to evaluate investment proposals based on their underlying
strategies.
6
1.5.2 Construction Organizations
Through this study, construction organization can learn the strategies successful
construction companies are using in order to overcome major challenges and factors that
affect their growth and success.
1.5.3 Construction Project Managers
The results of this study can inform decisions about how to navigate the complex
environment of construction projects. Further, the identification of the challenges that are
faced by the key drivers of the economy and the strategies that are being implemented to
overcome them to resolve major setbacks might expose pitfalls that project managers can
avoid.
1.5.4 Policymakers
Policy makers in the construction industry can refer to this report when developing
progressive policies that promote the growth and sustainability of this important sector.
Regulators can also draw from insights revealed in this study to establish standards of
compliance in order to protect the interest of various stakeholders.
1.5.5 Academia
The study identifies further research directions that future studies can explore with regards
to factors influencing growth and development of the sector. The report can also be used as
a reference point when extending studies on construction organizations in Kenya.
1.6 Scope of the Study
The study was restricted to major construction companies in Nairobi. Inferences were based
on self-reports of company directors, managers and engineers. The study was undertaken
on four selected construction organizations comprising of two local organizations and two
international organizations. The data was collected in March 2018.
7
1.7 Definition of Terms
The operational terms were as follows:
1.7.1 Construction Organizations
Construction organizations are defined as firms that undertake building and engineering
works related to housing, roads, rail, ports and related physical infrastructure
(Constructions Authority of Kenya, 2014).
1.7.2 Growth
Growth refers to construction organization’s ability to win construction contracts and is
thus measured by the number and value of contract awarded and successfully completed
(Deng & Smyth, 2013). Growth may also be measured in terms of assets and number of
employees (Yusof & Bakar, 2012).
1.7.3 Internal Factors
Internal factors refer to all the factors that the organization has control over. These can be
classified further into strengths or weaknesses of the organization (Alkhafaji & Nelson,
2013).
1.7.4 External Factors
External factors is an umbrella term for all factors outside of the organization and which
the organization cannot control (Alkhafaji & Nelson, 2013).
1.7.5 Strategy
Strategy refers to an overall plan of action embodying certain principles and objectives for
the achievement of organizational mission and vision (Allen, 2008).
1.8 Chapter Summary
This chapter has discussed the study background in which the importance of construction
organizations to economic development of a nation is discussed. The background has also
highlighted the issues confronting the construction industry and the market dynamics of the
construction sector in Kenya.
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CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Introduction
This chapter discusses the literature related to the internal factors and the external factors
that affect growth of construction companies and the strategies implemented to evaluate
project performance. The chapter gives the available literature on the concept of strategy.
It looks at the strategy implementation as a process in management and highlights on the
importance of the same in the management process. The chapter addresses the challenges
that organizations are faced with as they embark on action and ways in which they address
the challenges. The chapter also looks at project performance strategies and how the
organizations utilize them in creating sustainable competitive advantage over other players
in the industry. The chapter is divided into three sections. Section one discusses internal
factors affecting growth of construction companies. The second section reviews external
environmental factors based on PESTEL framework. The last section reviews strategies for
growth.
2.2 Internal Factors affecting Growth of Construction Companies
Internal factors encompass all the factors that the organization has control over. These can
be classified further into strengths or weaknesses of the organization (Alkhafaji & Nelson,
2013). Windapo (2017) examined the organization factors for growth and sustainability of
construction organizations in South Africa. Results showed that size of founding members,
their capabilities and their strategic choices as well as the organization’s adaptability and
responsiveness to emerging challenges were responsible for the organizations’
sustainability and growth. This section reviews organizational factors such as organization
culture, recruitment practice, size, age, location, leadership and ownership with the Kenyan
context in perspective.
2.2.1 Organizational culture
Organizational culture refers to basic assumptions and shared values that are apparent in
organizational behavior and practices (McShane & Von Glinow, 2009). Organisational
behavior comprises involve rituals, symbols, norms, rules, communication and power
9
dynamics (Mullins, 2005). Organization culture affects and is affected by its context and is
developed through attempts at solving problems of adaptation internally or externally
(McShane & Von Glinow, 2009). It is the factors in the organization’s context that make
organization cultures unique, thus the need investigate organization culture to provide
awareness into those contextual factors which influences organisational culture
development within construction companies.
Shahzad, Luqman and Khan (2012) measured organization culture and its impact on
organizational performance and found that it deeply impacts on processes, staff and its
results. Organization culture, with all the elements, is important because of its implication
on organizational performance. This is because it is a form of social control that influences
how employees behave and make decisions. It also bonds people together and make them
feel included in the organizational experience. It further offers a source of understanding
on the happenings in an organization why they happen the way they do. McShane and Von
Glinow (2009) argue that organization culture makes a positive contribution to performance
only when the culture is aligned to the organization’s environment.
2.2.2. Recruitment
Recruitment practices have been linked to the quality of workers and consequently, the
growth of organizations (Gatewood, Field & Barrick, 2010). The way in which prospective
candidates are interviewed and chosen to fill vacant positions brings in a lot of influence
on the kinds of staff who become a part of the organization, and the behaviour and values
they add. If the values aligns with the values espoused by the organisation, culture is
preserved, otherwise it could lead to conflicts. Therefore, recruitment process will be one
of the most important determinants of Organisational culture.
The construction sector is distinguished by the informal nature of the way hiring is
conducted at lower levels, and the hiring of staff who are more loyal to their boss than the
organization (Serpell & Rodriguez, 2002). This practice is counterproductive to
construction organizations and potentially affect their growth. In Kenya, recruitment is
typically characterized by casual labour force.
10
2.2.2. Size
Increasing size leads to splitting the organization into departments (Mullins, 2005).
Coordination difficulties typically accompany this departmentalisation. On the other hand,
Decreasing size also has an impact. Size may thus may be a leading factor influencing
organization culture. However, empirical studies yield conflicting evidence between
organization size and firm growth. Reichstein, Dahl, Ebersberger and Jensen (2009)
undertook a study of the influence of size of the organization on its growth among 9,000
Danish industrial, service and construction organizations. Results showed size of the firm
significantly impacted growth. This contradicts results of a study by Rasiah, Tong and Kim
(2014) which found that size of construction firms and their growth were independent of
each other.
2.2.3. History and Age
Any organisation with a long history has its culture. This defines how organizations are
formed and the extent of the organization’s flexibility, adaptability and sensitivity. History
and age also entails the record of leadership and changes in management that have
happened in the organization. Change in the organization’s culture during its past may have
been occasioned by reorganizations, new directions, geographical expansion or certain
events in the organization’s environment (Mullins, 2005).
The history of construction organizations depend very much on the life of projects. Cultural
changes can happen during significant events or changes in project management even for
short-duration projects. A culture characterized by lack of trust, where hostility is rife, and
disputes can arise can cause a crisis needed to change culture and lead to alterations and
variations in the way future projects are managed (Serpell & Rodriguez, 2002).
2.2.4. The Leader and ownership
In any organization, the leader’s ability to cause each individual member’s to behavior in
a desired way is critical for organizational effectiveness. Instigating change, garnering
support and executing fresh ideas all call for the power to inspire, guide, or mold the
behavior of organization’s constituents (Anderson, Flynn, & Spataro, 2008). Central to the
role of organizational leaders in their endeavor to shape individual behavior is motivation.
Motivation is the force that affect an individual’s path of effort, the size of effort they
11
allocate and the voluntary continuity of that effort over a time period (McShane & Von
Glinow, 2009). Lack of motivation has been found to explain incidences of
counterproductive work behaviors (Anjum & Parvez, 2013). Studies suggest that
unmotivated staff do not identify with organizational values and goals, has a weak desire
to belong to the organization and is unwilling to go the extra mile to help achieve the
organization’s goals (Ramshida & Manikandan, 2013).
Project managers and other key stakeholders are important constituents of relevance in a
construction project’s context. The emergence of dominant groups within the construction
organization may be witnessed. Subsequently, the dominant group’s approach to work may
become influential in the construction project. If, for instance, health and safety is taken
seriously by the dominant group, the organization is likely to follow suit by adopting
cultural orientation characterized by health and safety consciousness. Project managers can
therefore influence the cultural orientation of construction organizations.
2.2.5. Macro cultures
Organization culture can also be influenced by macro cultures. This is explained by the fact
that the construction organization is part and parcel of society and shares the culture of the
society wherein it is based. Each country is said to have its own cultural orientation that
influence organization cultures. Hofstede (2011) argued that the things that causes people
to act and the ability to motivate people is linked to the Individualism-Collectivism
Dimension. He gave an example, that in the US, people are mainly motivated by the need
to fulfill their individual self fulfilment (hence the terms “self-respect” and “self-
actualization”) as the leading motivational factors. However, in a highly Collectivist
society, people will try primarily to meet their obligation towards their in-group (e.g.
family, country, enterprise, etc.). Such people, he contends, neither seek to be self-
actualized or attain self-respect, but they seek to be recognized and appreciated by their in-
group members.
Hofstede’s (2011) findings are reinforced by Ariane’s (2009) research which set out to
assess the influence of national context on adoption and design of work-life practices in a
given country. The study found out that there were less work-life balance practiced among
French organizations than among British or American firms. The implication of Hofstede’s
12
research to leadership is that leaders need to appreciate the cultural context in their
endeavor to change individual behavior. An uninitiated leader will definitely be frustrated
attempting to modify individual behavior away from the cultural background of the
individual.
Nahir and Mohan (2017) argued that for a construction organization seeking to achieve
sustainable growth in the new business environment, workforce diversity should be
embraced. They however caution that conflict can also result from a diverse workforce due
to cultural differences. To overcome this, they recommend structural flexibility and
innovative organization structures that are responsive to emerging environmental demands.
Such a structure should allow for functional freedom to its divisions to match the cultural
context in which the organization operates.
2.2.6. Location
Location refers to the geographical place where the organization has its offices and the sites
where it conducts its operations (Young, 2008). Location is an important component of
construction business which answers the question of where demand is likely to be highest
(Wright & Race, 2004). Mazze (2013) suggests that choice of location plays a significant
role in organization growth and a wrong choice of geographical location can lead to failure.
Location is also referred to as place in general marketing parlance, in which the term is
construed to mean placing products and services within the reach of the consumer.
According to Wright and Race (2004), location alternatives are assessed in terms of
distance and transportation. It includes all the locations where construction resources are
distributed, stored and transported. Location has been found to account for 29 percent of
growth organizational growth (Jessie, 2002).
Geographical location of the construction organization can determine clientele and the
employees recruited by the organization, along with prospects for development. The
physical features of the geographical sites such as town centre or a remote rural place is a
critical consideration as they have effect on organization culture (Mullins, 2005).
Construction usually occurs throughout the country in different settings. The regional
variations are therefore significant as they have potential influences on how work is done.
13
2.3 External Factors affecting growth of Construction companies
External factors is an umbrella term for all factors outside of the organization and which
the organization cannot control (Alkhafaji & Nelson, 2013). Project managers, must come
up with a procedure for environmental scanning, threats and problems identification, and
foster power relationships which are beneficial for managing the primary actors and factors
that influence project implementation success. There are factors in the environment which
constrain projects, management and structure of the organization than others. Project
managers should focuses on these factors in order to manage various demand from the
project environment. Environmental analysis provide a rationale for the establishment of
project objectives that are reasonable besides providing early warning about potential risks.
Appropriate procedures, systems and structures as well as people should be in place to
counter the adverse effects of the environment.
External factors affecting growth of construction organizations constitutes a broad range
issues that have an impact on the organization (Donnelly & Harrison, 2012). The (PESTEL)
model provides a framework for analyzing the factors organizations have limited or no
control over (Botten & Harris, 2012). It offers a useful framework for scrutinizing factors
external to the organization such as political, economic, socio-cultural, technological,
ecological and legal factors and their potential impact on growth of the organization (Craig
& Campbell, 2012). These are reviewed in details as follows.
2.3.1. Political Factors
The Political environment involves government policies and the impact decisions made by
politicians have on construction projects. Government play multiple roles including
recipients of services, customer and regulators of the construction sector as well as the
larger national economy. They determine laws that regulate professional practice in the
sector and ethical practices that should be adhered to, among others. This means that
governments have a great influence on the fluctuation in demand for services provided by
construction organizations through budget measures and fiscal policies. As industry
regulators, have an influence on approval of building and development and can enforce
compliance of organizations with laid down laws. Construction projects can be started or
stopped by governments on political, environmental or social grounds. The political
stability of a nation, the unity of its people and right political leadership are central factors
14
underpinning growth and development of the construction sector (Kansal, 2015).
Construction projects are also susceptible to industrial action and thus, project managers
need to be well versed with the political environment and assess aspects of the environment
that can threaten the success of projects or contribution organizations such as political
instability, turbulent economy, and unpredicted demand shifts (Loosemore, 2003).
Kansal (2015) expound further that political factors are diverse and encompasses a broad
range of issues including revolutions, social unrests and protests, as well as armed
insurrections intended at destabilizing existing power structures. All these factors can have
implications on growth of construction organizations in Kenya. This stems from past
empirical studies that have associated political factors with company performance. For
instance, Bekr (2017) assessed the key factors influencing project performance in
construction organizations in Iraq, a country which continues to suffer unstable political
and economic circumstances. Results showed that project delays and cost overruns were
occasioned by political instability.
2.3.2. Economic Factors
Economic factors are varied and include factors such as the general state of the economy,
rate of unemployment, strength of trade unions, interest rates, exchange rate fluctuations,
level of government debt and monetary policy (Witcher & Chau, 2010). The relationship
between economic environment and organizational performance is well established in
literature. For instance, Antwi and McMillan’s (2017) investigation of the role of economic
conditions on firm performance revealed that firm performance was a function of both
macro and microeconomic variables. Windapo and Cattell (2013) also investigated the
development and growth challenges of South Africa’s construction sector. It was found
that escalating material costs, challenges in mortgage financing, runaway interest rates and
failure rates of contractors were the main issues.
In Kenya, industry analysis suggest that the growth of the construction sector is inhibited
by unaffordable financing and guarantee schemes to local contractors is recommended as
a government initiative (National Construction Authority, 2014). The economic/financial
factors are subject to the overall economic state of the nation and resource availability
needed to sustain construction projects. This includes the competitiveness of various actors
15
and the formation of the construction team that is involved in the construction project.
Construction projects are often affected by financial constraints. The Project manager has
to preserve the financial viability of projects even during low economic cycles. It is
important to accurately forecast economic trends both local and global.
2.3.3. Social Factors
Social factors refer challenges and opportunities that characterize a firm’s external
environment due to the impact of the firm’s activities on human welfare (Bekefi, Jenkins,
& Kytle, 2006). They include level of education in society, societal lifestyle, creativity,
population growth rates, gender distribution and role of religion and ethnicity. Social
factors of an organization also relate to issues such as health and safety, working conditions
and environmental concerns. These concerns means that stakeholders have an interest in
the way construction organizations conduct their affairs. These concerns have implications
on the credibility of the organization in the eyes of its stakeholders. A good image and
reputation is formed through serving the society with good quality and high standards of
work practices in the construction industry.
In Kenya, social trends are characterized by rapid population growth and urbanization. This
is acknowledged in statistical forecasts that predict that over half of the country’s
population will be within urban areas (Mumma & Smith, 2012). A recent study by Kimani
(2014) on socio-cultural forces in the housing construction sector revealed that safety and
security were key issues of stakeholder concerns, followed by environmental protection
and personal considerations. The study highlighted the need for proper policies and
planning of housing construction, especially with regards to residential estates. The sector
meanwhile, is grappling with shortage skilled labour. According to the 2014 construction
industry survey report published by the National Construction Authority, skilled workers
account for only a quarter of the labour force, with skill gaps found majorly in plumbing,
electrical works, welding, masonry, painting and carpentry.
2.3.4. Technological
To develop strategic plans, technology is an important factor that should be considered.
Construction technology that is appropriate is evaluated based on locally available
resources including plant and machinery, skilled labour resources, availability of local
16
material resources and the extent to which locally available resources are put to use.
Inadequate technological capacity and lack of management manpower constrain the
development of the construction sector (Oladapo & Olotuah, 2007).
Similar observations reported by Oladapo and Olotuah (2007) are reported in Kenya.
According to the National Construction Authority (2014) report, the industry is
inadequately equipped with construction equipment, especially road construction
equipment such as bulldozers and graders. The report also documented that other
equipment such as concrete mixers, cranes, vibrators and concrete pumps are similarly in
shortage. This has potential limitation on the scale of growth of construction organizations
in Kenya.
2.3.5. Ecological Factors
The physical environment may have a considerable impact on the development of
construction projects since such projects always susceptible to physical forces. The project
location, geographical and climatic conditions are among the dominant physical influences.
They are difficult to predict and managers can do very little to prevent or survive their
occurrence. This notwithstanding, construction works managers would consider physical
effects significantly during the planning stage in order to consider ways of mitigating
extreme effects and seizing opportunities of resource availability (Loosemore, 2003).
In addition, growing environmental concerns have led to the exploration of eco-efficient
approaches to building and construction. Stead and Stead (2009) identify four eco-
efficiency efforts in construction organizations. The first one is dematerialization which
entails designing products that use fewer and safer materials. The second one is closing
production loops by reducing or eliminating waste during construction. The third one is
customizing responses to client demand and the fourth one is functional extension – coming
up with smarter constructions that enhance functionality and durability. Detractors of this
school of thought however see eco-efficiency as concerned solely with ecological
sustainability without due attention to other aspects of environmental sustainability (Rankin
& Rankin, 2011).
17
2.3.6. Legal Factors
The legal environment influencing construction organizations are increasingly becoming
complicated, with significant implications on performance. It is difficult for construction
organizations to operate without encountering various regulations affecting every aspect of
the sector. There are always a myriad of regulations that construction organizations have
to comply with including regulations concerning the environment, professional codes of
practice, health and safety regulations, permits, tax and insurance laws. Changes in any of
these regulations are common and construction organizations usually face problems when
these arise during the life of construction projects (Loosemore, 2003). Laws affects the
project activities directly due to safety concerns, planning law, and building regulations as
which affect the relationships of the construction team within projects (Oladapo & Olotuah,
2007).
2.4 Strategies used to ensure Growth of Construction Organizations
A strategy is a plan of action for achieving organizational mission and vision (Allen, 2008).
Strategies are important because a successful construction organization is dependent on its
market position in relation to its competitors. A construction organization needs to build
something more than jobs. It should endeavor to realize above average profits and become
a sustainable organization in the construction market. That degree of performance requires
an understanding and application of strategic management concepts in the construction
organization. Time, energy, effort, and resources should be well channeled and this can be
e effective in the long term. The major reasons for construction organisations to advance
and adopt a strategic plan is for growth, expansion and gaining competitive advantage.
More often, construction managers assume that their organization functions only on price
(Shiner, 2013).
The expansion strategies are performed by organizations that attempt to achieve high
growth as compared to its past achievements. A company follows the expansion strategy
when it has an aim to grow rapidly by widening its business operations in the various
perspectives of the Clients, Clients functions and technology alternatives, either
individually or jointly (Robinson, 2003). There are many reasons a company would use this
strategy; survival, high profits, company standards and increased market share, among
others. The managers of the companies that use the expansion strategy usually have a high
18
degree of recognition and achievement. They have an aim to expand and grow regardless
of the obstacles and risks they would face. (Yoden, 2014). Different expansion strategies
have been proposed by practitioners as illustrated in Figure 2.1. These are: expansion
through concentration, integration, diversification, cooperation and internationalization.
These are reviewed in further details as follows;
Figure 2.1: Expansion Strategy
Source: Thompson (2001).
2.4.1. Expansion through Concentration
Expansion through Concentration involves focusing and investing resources in the current
line of production which caters to the needs of the market through tested and approved
technology (Robinson, 2003). The expansion through concentration strategy is appropriate
when an organization targets the customer needs and requirements, functions and
technological alternatives by coinciding its resources into its business operations. Various
concentration strategies discussed in literature include: market penetration, market
development, and product development (Peter & Donnelly, 2015).
Market penetration strategy: The construction company focuses intensely on the Existing
industry with its present technology and capabilities. If this construction company was
Expansion Strategy
Concentration
Integration
Diversification
Cooperation
Internationalization
19
building Houses and Residential estates, then it would intensely focus on that industry with
its present functions and technology.
Market Development type of concentration: This includes venturing into another sector of
the construction industry with present technology and functions. This would relate to a
Construction company who builds residential buildings only, ventures into the Road and
Bridges industry with the same functions and technology.
Product Development type of Concentration: This involves a Housing construction
organization venturing into the Road and Rail Industry by using new technology and
functions.
Firms have a preference towards expansion through concentration because they are
required to perform tasks that they have been doing previously. Since there familiarity with
the current industry, the construction firm would like to invest its resources in the known
area of expertise rather than a new one. When a firm implements the concentration strategy,
it wouldn’t have to make major changes in the organizational structure. However, the
expansion through concentration can be risky because it is dependent on the current
industry. If there are any conditions that occur adversely, it could affect the business
significantly. A construction organization investing in the current industry may experience
great losses due to cost of new technology and product obsolescence.
2.4.2 Expansion through Diversification
Expansion through diversification occurs when a firm changes what defines it. This
includes new product development or venturing into new markets. This strategy is mostly
used by construction organizations to avoid any adverse conditions on the current industry.
The Expansion through diversification strategy is usually implemented to recover the losses
that may have been affected by the adverse conditions of the market, using the profits of
the other business (Meierkond, 2017). The two types of Diversification implemented by an
organization are: concentric diversification and conglomerate diversification.
Concentric Diversification is where a construction organization develops a new product or
service which is similar or related to the organization’s existing services and products. In
20
the case of a construction organization for instance, the construction company can acquire
steel and cement manufacturing companies with a target to gain footage into the new
markets and increase sales.
Conglomerate Diversification: This occurs when a construction organization expands into
different areas. This may either be related or unrelated to its current core business. The
company follows conglomerate diversification either through a merger or takeover. It
could also perform this if it aims to expand and to cover the distinct market segments. An
example of this could be a construction company taking over a goods transporting company
in order to cover the transportation market.
2.4.3 Expansion through Cooperation
This is a strategy when a Company agrees mutually with its competitor to perform business
operations and continue to compete with each other simultaneously to target an increase in
the market potential. This can be done by the following strategies: merger, takeover, joint
venture and strategic alliance (Hyland, 2013).
Merger is when at least two organizations combine together where one acquires the assets
and liabilities of the other in at a price. Another form is that both construction organizations
are closed, and a new one is created. Connaughton, Meikle and Teerikangas (2015)
analyzed the growth patterns of 25 construction firms in the United Kingdom and found
that firms were growing with selective acquisition strategies.
Takeover is where one construction firm buys the other in a way that the buyer assumes
responsibility for all of the acquired company’s operations. These can either be friendly or
hostile. Friendly takeover is whereby both organizations mutually agree because it is
beneficial for both. This is opposed to hostile takeover where a stronger company tries to
take on the weaker one forcefully whether the target firm knows it or not.
In the joint venture, both the companies come to a mutual agreement undertake joint
business operations. This is usually to take advantage of the strengths of either company.
This is temporary, and lasts until the required task is accomplished.
21
Under the strategic alliance, the companies unite to perform a required task of business
operations. However they function independently and target their individual goals and
objectives. This strategic alliance occurs in order to capitalize on the technological
expertise and human resources of both the organizations.
2.4.4 Expansion through Integration
Vertical integration entails investing in supply chain operations such as raw material
supplies thus gaining control of its environment (Wahdan, 2014). This Expansion strategy
when there is a combination through a value chain of the present operations without a
change in the target customers (Risimic, 2007). This value chain consists of activities that
are interlinked from the point at which raw materials are purchased to the point at which
finished products are marketed. This may force a company to adjust upwards or downwards
on the value chain to be able to target the needs of the customers more intensively.
Vertical integration is further decomposed into forward integration and backward
integration. Forward integration is when the company attends closer and directly to the
existing customers. This can be by facilitating the sale of the goods and products. A
construction organization could do this by marketing directly to the developers and real
estate organizations in the area. Backward vertical integration is when a company goes
backward to the source of its raw materials. A construction company in this case could go
back towards processing its own cement.
Horizontal integration is a form of integration that occurs when a company takes over
another company which has produces the same type of product and uses similar functional
levels. This could be a rival or a competitor. A construction organization could take over a
competitor in the same industry to be able to acquire a greater market share.
2.4.5 Expansion through Internationalization
Globalization pressures have created opportunities for construction organizations to enter
the international markets (Loo, Abdul-Rahman, & Wang, 2013). This strategy is performed
when an organization aims to go beyond the national market and expand internationally.
This need occurs when a company utilizes all the potential in the current domestic market
and aims to expand internationally, therefore it performs Expansion through
22
Internationalization. This enables the company to identify greater opportunities beyond the
national boundaries (Qamar, 2008). Internationalization is not easy and the organization
has to achieve certain benchmarks in different countries in the form of quality, the timelines
of delivery and price. According to Dulaney (2006), adopting the following strategies could
assist a company to expand through internalization: multi-domestic, transnational,
international and global strategy.
Firms constantly jostle to for space in existing markets and also explore strategies of
developing less crowded markets that promise higher profits and more projects (Yankah &
Dadzie, 2015). In international strategy, the company creates value in foreign markets
where the products and services it offers aren’t available. This strategy could be performed
by having a tight control and providing products in the foreign markets that are not
differentiated and are standardized.
Multidomestic strategy is performed by multidomestic organizations, by customizing
product offerings to match the requirements and conditions of the locals that are operating
in the foreign markets. To meet the demands and satisfy the local conditions of the foreign
market, requires investing in Research and Development and marketing thus escalating the
costs of the organization.
In global strategy, this occurs when the firms operating on a global scale depend on a low
cost structure and sell standardized products in which they have the expertise to foreign
markets.
Transnational strategy is the combination of global and multi-domestic strategies. The
company performing this strategy depends on a low cost structure and adapt their
operations based on the local conditions of the market. The company in this case would
produce a standardized product and at the same time one which satisfies the local conditions
of the market it is operating in. A company should first assess the global environment in
order to globalize its products and then evaluate itself and implement the planned strategies
to suit the foreign markets (Dulaney, Newberry, Schmidt, Herring, & Arminana, 2006).
23
2.4.6 Cost Control
Successful contractors have a keen sense for money. They think in quantitative terms, and
the general business operation translates to costs. Contractors have instilled cost as their
culture in order to succeed. The general assumption is that construction is about production,
engineering, building, among others. Successful contractors need to possess a strong
understanding of finance and accounting in order to be successful. Construction is about
margins (Owens, 2007).
2.4.7 Sense of Urgency and Intensity
Successful construction organizations always foster a sense of urgency. Construction
requires people who act and know how deliver results. The sense of urgency translates into
implementation competencies (Buckshon, 2010). Urgency translates into intensity of
project management. Managers also have a high sense of accountability in financial terms
and they appreciate the value of time.
2.5 Chapter Summary
The review suggests that the factors affecting the growth of construction organisations
include age, history, recruitment process and organisation culture. These factors influence
the growth of construction organisations from an internal perspective. The external
environmental factors in the literature have been discussed using the PESTEL framework.
These include political, economical, social, legal, technological and ecological factors.
Construction companies implement various strategies that have been reviewed to enhance
growth. The next chapter describes the methodology that was used to undertake this study.
24
CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 Introduction
This chapter entails choice of research design, explanation of the study population, the
sampling design including sampling method and sample size used. The chapter includes
explanation of the methods used to collect data, research procedures followed and data
analysis technique.
3.2 Research Design
Descriptive research design was used. This is whereby data is collected without modifying
or manipulating the environment and subjects (Cooper & Schindler, 2014). It is a scientific
approach to the observation and description of the behavior research participants as they
naturally occur (Malhotra, 2007). It enables the gathering, summarizing, presentation and
interpretation of information to enhance clarification of phenomena (Mugenda & Mugenda,
2003). The purpose of adopting a descriptive research design was to specifically obtain an
in depth response so as to achieve a better understanding of the phenomenon being studied
and the relationship between the study variables. In the current study, this design was used
to determine the internal and external factors affecting growth of construction organizations
and the strategies being implemented to indicate project performance in Nairobi, Kenya.
3.3 Population and Sampling Design
3.3.1 Population
A population refers to all the elements from which inferences is drawn in a study, whereby
population element refers to the individual unit of measurement (Cooper & Schindler,
2014). A population is defined as all the units to be studied in a research undertaking
(Saunders, Lewis, & Thornhill, 2012). The population for this study was 5 companies in
the Roads and Bridges and 25 construction companies in Nairobi that are registered with
the NCA(National Construction Authority).These include companies categorized as A
(NCA 1), B (NCA 2), C (NCA 3), D (NCA 4) and E (NCA 5).
25
Table 3.1: Population Distribution
No. Categories Group Population Percentage
1 NCA 1 Contractors
(Director/Manager/Engineer) A 10 40%
2 NCA 2 Contractors
(Director/Manager/Engineer) B 5 20%
4 NCA 3 Contractors
(Director/Manager/Engineer) C 5 20%
5 NCA 4 Contractors
(Director/Manager/Engineer) D 3 12%
6 NCA 5 Contractors
(Director/Manager/Engineer) E 2 8%
TOTAL 25 100%
Source: National Construction Authority (2017).
3.3.2 Sampling Design
3.3.2.1 Sampling Frame
A sampling frame is a list of subjects from the sample is drawn (Cooper & Schindler, 2014;
Saunders et al., 2012). In this study, the criterion for selecting the companies was obtained
from Kenya Association of Building and Civil Engineering Contractors (KABCEC) report.
3.3.2.2 Sampling Technique
Stratified sampling technique was used. This was to increase reliability of the statistical
estimates of the sample (Cooper & Schindler, 2014). The population was divided among
Construction Organisations in Nairobi, Kenya. After stratified, every strata underwent
simple random sampling for further data analysis. This is whereby n elements of the
population is selected in a way that provide a chance for each element to be included in the
sample (Denscombe, 2007).
3.3.2.3 Sample Size
A sample size refers to a smaller proportion of the larger population (Cooper & Schindler,
2014). The perfect sample is reliable, efficient and flexible (Mugenda & Mugenda, 2003).
The sample size of this study was 13 Construction companies in the building sector in
Nairobi and 2 companies from the rail and road industry in Nairobi. This represented 50%
of the target population.
26
Table 3.2: Sample Size Distribution
Section Target population Sample Size
NCA 1 10 5
NCA 2 5 3
NCA 3 5 3
NCA 4 3 1
NCA 5 2 1
ROAD AND RAIL 5 2
Total 30 15
3.4 Data Collection Methods
Questionnaire method was used to collect data. A questionnaire is a set of written questions
with multiple choice answers from which the respondents simply ticks the most accurate
(Kothari, 2013). The questionnaire comprised of the following sections; Part 1 is the
general data of the Respondent, Part two acquired the respondent’s opinion of internal
factors affecting the success of the organization, part three entailed questions related to
external factors affecting construction organizations, and Part four was about the strategies
implemented by the organizations to grow. The questions was carefully designed and posed
in a language readily understood by the audience.
3.5 Research Procedures
The researcher developed a questionnaire and a pilot test on the questionnaire was
conducted with 3 respondent from the NCA 1, 2 and rail and road categories. This was to
establish its validity and reliability. A pilot test was conducted using random sampling
approach. The results from the pre-test were be analyzed using SPSS and the results used
to improve the accuracy of the instrument. The refined questionnaire was administered to
the target population of the sampling frame elements within the respective strata under
survey through self-administered questionnaire using either mail or self-dropping and
picking upon completion. This ensured confidentiality, anonymity and accuracy of the
respondents.
3.6 Data Analysis Methods
Data analysis entails reducing data to a more convenient size in order to patterns in the data
and employ statistical operations on the data (Cooper & Schindler, 2014). In this study,
data was analyzed using descriptive statistical techniques by generating frequencies, mean
and standard deviations. Inferences were made using Spearman’s rank correlation analysis
27
techniques. The Statistical Package for the Social Science (SPSS) was used as the data
analysis tool. The results were presented in tables.
3.7 Chapter Summary
Chapter three has been more concerned with the research methodology used in the study.
The chapter has explained the research design, the population and sampling design.
Additionally, the research instruments used have been highlighted. The research procedure,
as well as the analysis methods used have been discussed in detail. Chapter Four gives an
analysis as well as a summary of the findings of the research.
28
CHAPTER FOUR
4.0 RESULTS AND FINDINGS
4.1.Introduction
This chapter presents and interprets study findings. It comprises of four different sections.
The demographic profile of the respondents is present initially by a descriptive analysis.
The other data is presented as per the Research Questions. These were: What are the
Internal Factors affecting the Growth of Construction Organizations in Nairobi? What are
the External factors affecting construction organizations in Nairobi? What Strategies are
implemented by Construction Organizations to ensure success in a Developing economy?
The total number of respondents which were targeted were 15. All the 15 administered
questionnaires were successfully filled and returned.
4.2.Demographic Profile
This section analyzes general information such as type of organization, size of company,
job title, and respondents’ experience in the sector, number and value projects completed
by the organization.
4.2.1. Type of Projects of Organization
The study sought to classify organizations in this study by type of projects. The distribution
of the organization by type is presented in Table 4.1. It reveals that 86.7% (13) of the
organizations were undertaking building projects while 13.3% (2) of the organizations were
in roads and rail. Therefore, majority of the organizations in this study were in the buildings
subsector.
Table 4.1: Distribution of Organizations by Type
Classification Frequency Percent
Buildings 13 86.7
Roads and Rail 2 13.3
Total 15 100.0
29
4.2.2. Company Size
The study sought to establish the organizations’ sizes by number of staff. Table 4.2 shows
the distribution of the companies by number of staff. The table shows that most of the
companies (53.3%, 8) had 41-50 employees, followed by 20% with 10-20 employees,
13.3% (2) of the companies had 21-30 employees and another 13.3% (2) companies
employed 31-40 people.
Table 4.2: Company Size (Number of Employees)
Class interval Frequency Percent
10-20 employees 3 20.0
21-30 employees 2 13.3
31-40 employees 2 13.3
41-50 employees 8 53.3
Total 15 100.0
4.2.3. Job Title of Respondent
The distribution of respondents by job title is presented in Table 4.3. It shows that most of
the respondents were either project managers (46.7%, 7) or site engineers (40%, 6) while
some 13.3% (2) of the respondents were organization managers.
Table 4.3: Distribution of Respondents by Job Title
Job title Frequency Percent
Project Manager 7 46.7
Site Engineer 6 40.0
Organization Manager 2 13.3
Total 15 100.0
4.2.4. Experience of Respondents
Respondents were requested to disclose their years of experience working in the
construction sector. Table 4.4 shows that 26.7%(4) of the respondents had over 20 years of
experience, another 26.7% (4) of the respondents had 6-10 years of experience, 20%(3) of
the respondents had attained 16-20 years of experience, another 20% (3) of the respondents
had 5 or less years of experience and 6.7%(1) of the respondents had attained 11-15 years
of experience. The distribution suggests that most of the research participants had over 10
years of industry experience.
30
Table 4.4: Industry Experience
Years of experience Frequency Percent
0-5 years 3 20.0
6-10 years 4 26.7
11-15 years 1 6.7
16-20 years 3 20.0
21+ years 4 26.7
Total 15 100.0
4.2.5. Number of Projects Completed in the Last 5 Years
The study sought to determine how many projects the organizations had completed in the
last 5 years. The distribution of respondents’ organizations by number of projects is
presented in Table 4.5. The table shows that 46.7% (7) of the organizations had completed
1-10 projects, 13.3% (2) of the organizations had completed 11-20 projects, another
13.3%(2) of the respondents had completed 21-30 projects, 6.7%(1) one of the
organizations had completed 30-41 projects and 20% (3) of the organizations had
completed 41 projects and above.
Table 4.5: Distribution of Organizations by Number of Projects Completed
Class Interval Frequency Percent
1-10 7 46.7
11-20 2 13.3
21-30 2 13.3
31-40 1 6.7
41 and above 3 20.0
Total 15 100.0
4.2.6. Value of Projects Completed in the Last 5 Years
Respondents were also asked to indicate the value of projects their organization had
completed in the last 5 years. Table 4.6displays the value of the projects in $million. The
table reveals that 20%(3) of the organizations had completed projects worth 5-10$M,
33.3%(5) of the organizations had completed projects worth $10-20M, another 33.3%(5)
of the organizations had completed projects valued at more than $10M while 13.3%(2) of
the organizations had completed projects worth $1-2M. The results suggest that most of the
organizations had completed projects valued at over $10M.
31
Table 4.6: Value of Projects Completed in US$
Value of Projects ($M) Frequency Percent
1-2M 2 13.4
5-10M 3 20.0
10-20M 5 33.3
More than 10 M 5 33.3
Total 15 100.0
4.3.Internal Factors Affecting the Growth of Construction Organizations
This section analyzes the internal factors affecting the growth of construction
organizations. This comprises a descriptive analysis of the various internal factors and
inferential analysis of the effect of internal factors on growth.
4.3.1. Descriptive Analysis of the Internal Factors by Importance to Growth
The distribution of respondents views’ with regards to the level of importance of various
internal factors on growth of construction organizations is presented in Table 4.7. The table
displays the frequencies and percentage frequencies as well as mean (M) and standard
deviation (SD) of the dataset. The factors are ranked by order of mean importance on a
scale of 1 to 5 whereby 1=Very Low Importance (VLI); 2=Low Importance (LI);
3=Medium Importance (MI); 4=High Importance (HI); and 5=Very High Importance
(VHI).
The table shows that technology in construction (M=4.67, SD=0.62), client’s financial
ability (M=4.67, SD=0.82) and cost and revenue management (M=4.53, SD=0.74) were
the top three internal factors of very high importance to growth of construction companies.
These were followed by profitability of projects (M=4.40, SD=0.62), leadership and
ownership (M=4.27, SD=1.22), magnitude and size of projects (M=4.20, SD=1.08), goals
and objectives of the organization (M=4.07, SD=1.10), recruitment methods (M=3.87,
SD=1.25), investment trade-offs (M=3.80, SD=1.37) and design alterations (M=3.60,
SD=1.45). The mean scores suggest that these factors were of relatively high importance.
The next set of internal factors were geographical location of projects (M=3.20, SD=1.47),
marketing strategies (M=3.13, SD=1.77), macro-cultures (M=3.07, SD=1.10), history and
age of company (M=2.87, SD=1.81), and organization size (M=2.47, SD=1.60). The mean
scores imply that these latter factors were of medium to low importance.
32
Table 4.7: Ranking of Internal Factors by Order of Importance to Growth
Internal Factors VLI LI MI HI VHI Total M SD
Technology in
Construction
f 0 0 1 3 11 15 4.67 0.62
% 0.0% 0.0% 6.7% 20.0% 73.3% 100.0%
Client financial
ability
f 0 1 0 2 12 15 4.67 0.82
% 0.0% 6.7% 0.0% 13.3% 80.0% 100.0%
Cost and
Revenue
Management
f 0 0 2 3 10 15 4.53 0.74
% 0.0% 0.0% 13.3% 20.0% 66.7% 100.0%
Profitability of
Project
f 0 1 0 6 8 15 4.40 0.83
% 0.0% 6.7% 0.0% 40.0% 53.3% 100.0%
Leadership and
Ownership
f 1 1 0 4 9 15 4.27 1.22
% 6.7% 6.7% 0.0% 26.7% 60.0% 100.0%
Magnitude and
size of projects
f 0 2 1 4 8 15 4.20 1.08
% 0.0% 13.3% 6.7% 26.7% 53.3% 100.0%
Goals and
Objectives of
Organization
f 0 2 2 4 7 15 4.07 1.10
% 0.0% 13.3% 13.3% 26.7% 46.7% 100.0%
Recruitment
Methods
f 1 1 3 4 6 15 3.87 1.25
% 6.7% 6.7% 20.0% 26.7% 40.0% 100.0%
Investment
Tradeoff
f 2 0 3 4 6 15 3.80 1.37
% 13.3% 0.0% 20.0% 26.7% 40.0% 100.0%
Design
Alterations
f 2 2 1 5 5 15 3.60 1.45
% 13.3% 13.3% 6.7% 33.3% 33.3% 100.0%
Geographical
Location of
Projects
f 3 1 5 2 4 15 3.20 1.47
% 20.0% 6.7% 33.3% 13.3% 26.7% 100.0%
Marketing
Strategies
f 5 0 4 0 6 15 3.13 1.77
% 33.3% 0.0% 26.7% 0.0% 40.0% 100.0%
Macro-cultures f 2 1 7 4 1 15 3.07 1.10
% 13.3% 6.7% 46.7% 26.7% 6.7% 100.0%
History and Age
of Company
f 6 1 2 1 5 15 2.87 1.81
% 40.0% 6.7% 13.3% 6.7% 33.3% 100.0%
Organizational
Size
f 6 3 2 1 3 15 2.47 1.60
% 40.0% 20.0% 13.3% 6.7% 20.0% 100.0%
KEY: _
VLI = Very Low Importance;
LI = Low Importance;
MI = Medium Importance;
HI = High Importance;
VHI = Very High Importance;
4.3.2. Inferential Analysis of the Effect of Internal Factors on Growth
The study sought to establish whether there was a statistically significant correlation
between organization growth and internal factors. Spearman’s rank correlation analysis was
performed on a composite mean score of 13 internal factor items growth, whereby value of
33
completed projects in the last 5 years in US$ millions was used as a measure of growth.
Table 4.7 presents the results. The table shows that there was a statistically significant
correlation between internal factors and growth of construction organizations (r=.501,
p<.05). This means that the higher the importance attached to internal factors, the higher
the growth as measured by value of projects completed.
Table 4.8: Correlation of Internal Factors with Growth of Organizations
Spearman's rho 1 2
Growth (Value of Projects in US$)
Correlation Coefficient 1.000
Sig. (2-tailed) .
N 15
Importance of Internal factors
Correlation Coefficient .501* 1.000
Sig. (2-tailed) .047 .
N 15 15
* Correlation significant at 0.05 levels
4.4.External Factors Affecting the Growth of Construction Organizations
In this section, PESTEL factors are analyzed for their level of importance for growth. This
involves both descriptive and inferential analysis of the influence of each PESTEL factor
on growth of construction organizations.
4.4.1. Descriptive Analysis of the Importance of Political Factors on Growth
The frequencies (f), mean (M) and standard deviation (SD) scores of the various political
factors are ranked in order of importance to growth on a 5-point scale from 5=very high
importance (VHI) to 1=very low importance (VLI). The results are presented in Table 4.9.
Table 4.9: Importance of Political Factors to Growth
Political Factors VLI LI MI HI VHI Total M SD
Corruption
f 1 1 1 2 10 15 4.27 1.28
% 6.7% 6.7% 6.7% 13.3% 66.7% 100.0%
Political
Stability
f 0 0 2 5 8 15 4.40 0.74
% 0.0% 0.0% 13.4% 33.3% 53.3% 100.0%
Form of
Government
f 2 0 3 1 9 15 4.00 1.46
% 13.3% 0.0% 20.0% 6.7% 60.0% 100.0%
Government
Interference
f 0 2 3 4 6 15 3.93 1.10
% 0.0% 13.3% 20.0% 26.7% 40.0% 100.0%
Security, Safety f 0 3 1 6 5 15 3.87 1.13
% 0.0% 20.0% 6.7% 40.0% 33.3% 100.0%
Level of
Bureaucracy
f 1 2 9 2 1 15 3.00 0.93
% 6.7% 13.3% 60.0% 13.3% 6.7% 100.0%
34
Table 9 shows that political stability (M=4.40, SD=0.73), corruption (M=4.27, SD=1.28)
and form of government were the leading political factors of high importance to growth of
construction companies. These were followed by government interference (M=3.93,
SD=1.10) and security/safety while level of bureaucracy (M=3.00, SD=0.93) was of
medium importance to growth of construction organizations.
4.4.2. Descriptive Analysis of the Importance of Economic Factors on Growth
The frequencies (f), mean (M) and standard deviation (SD) scores of economic factors were
computed and results ranked on a 5-point scale from very high importance to very low
importance as shown in Table 4.10. The table indicates that economic factors leading in
high importance were general state of economy (M=4.13, SD=1.06), followed by exchange
rate fluctuations (M=3.73, SD=1.53) and level of government debt (M=3.67,
SD=1.29).Table 4 shows that of medium importance to growth were factors such as
monetary policy (M=3.27, SD=0.98), followed by unemployment rate (M=2.67, SD=1.59)
and interest rates (M=2.67, SD=1.92). Strength of trade union was of very low importance
(M=1.33, SD=0.82).
Table 4.10: Importance of Economic Factors to Growth
Economic Factors VLI LI MI HI VHI Total M SD
General State of
Economy
f 1 0 1 7 6 15 4.13 1.06
% 6.7% 0.0% 6.7% 46.6% 40.0 100.0%
Exchange Rate
Fluctuations
f 3 0 1 5 6 15 3.73 1.53
% 20.0% 0.0% 6.7% 33.3% 40.0% 100.0%
Level of
Government
Debt
f 1 2 3 4 5 15 3.67 1.29
% 6.7% 13.3% 20.0% 26.7% 33.3% 100.0%
Monetary
Policy
f 0 4 4 6 1 15 3.27 0.98
% 0.0% 26.7% 26.7% 40.0% 13.3% 100.0%
Unemployment
Rate
f 5 3 2 2 3 15 2.67 1.59
% 6.7% 20.0% 13.3% 13.3% 20.0% 100.0%
Interest rates f 8 0 1 1 5 15 2.67 1.92
% 53.3% 0.0% 6.7% 6.7% 33.3% 100.0%
Strength of
Trade Union
f 12 2 0 1 0 15 1.33 0.82
% 80.0% 13.3% 0.0% 6.7% 0.0% 100.0%
4.4.3. Descriptive Analysis of the Importance of Social Factors on Growth
The frequencies (f), mean (M) and standard deviation (SD) of the dataset for the importance
of various social factors on growth of construction companies is presented in rank order as
35
shown in Table 4.11. The table reveals that creativity in society (M=3.73, SD=0.88) and
level of education in society (M=3.67, SD=0.98) were the social factors of high importance
to growth of construction companies while population growth rate was of medium
importance (M=3.27, SD=1.34). Factors of low importance were: level of wealth in society
(M=2.40, SD=1.35), role of tribes (M=2.13, SD=1.51), lifestyle of society (M=2.07,
SD=1.49) and sex distribution (M=1.60, SD=1.83). The table shows that role of religion
was of very low importance to growth of construction companies (M=1.33, SD=0.72).
Table 4.11: Importance of Social Factors to Growth
Social Factors VLI LI MI HI VHI Total M SD
Creativity in
Society
f 0 1 5 6 3 15 3.73 0.88
% 0.0% 6.7% 33.3% 40.0% 20.0% 100.0%
Level of
Education in
Society
f 0 3 1 9 2 15 3.67 0.98
% 0.0% 20.0% 6.7% 60.0% 13.3% 100.0%
Population
Growth rate
f 2 2 4 4 3 15 3.27 1.34
% 13.3% 13.3% 26.7% 26.7% 20.0% 100.0%
Level of Wealth
in Society
f 6 1 5 2 1 15 2.40 1.35
% 40.0% 6.7% 33.3% 13.3% 6.7% 100.0%
Role of Tribes f 8 2 2 1 2 15 2.13 1.51
% 53.3% 13.3% 13.3% 6.7% 13.3% 100.0%
Lifestyle of
Society
f 8 3 1 1 2 15 2.07 1.49
% 53.3% 20.0% 6.7% 6.7% 13.3% 100.0%
Sex Distribution f 11 1 2 0 1 15 1.60 1.83
% 73.3% 6.7% 13.3% 0.0% 6.7% 100.0%
Role of
Religion
f 12 1 2 0 0 15 1.33 0.72
% 80.0% 6.7% 13.3% 0.0% 0.0% 100.0%
4.4.4. Descriptive Analysis of the Importance of Technological Factors on Growth
The frequencies (f), mean (M) and standard deviation (SD) of the dataset for the importance
of various technological factors to growth of construction companies is presented in Table
4.12. The table reveals technological factors with the highest mean scores on a 5-point scale
were: new machinery (M=4.87, SD=0.35), automation (M=4.67, SD=0.72) and transport
and communication (M=4.53, SD=0.52) suggesting that these three factors were of very
high importance to growth of construction companies. The table shows that communication
networks (M=4.33, SD=0.83), integrated IT systems (M=4.20, SD=1.15) and internet
infrastructure (M=4.00, SD=0.93) were of high importance, while computer literacy
(M=3.07, SD=1.49) was of medium importance to growth of construction organizations.
36
Table 4.12: Importance of Technological Factors to Growth
Technology Factors VLI LI MI HI VHI Total M SD
New Machinery f 0 0 0 2 13 15 4.87 0.35
% 0.0% 0.0% 0.0% 13.3% 86.7% 100.0%
Automation f 0 0 2 1 12 15 4.67 0.72
% 0.0% 0.0% 13.3% 6.7% 80.0% 100.0%
Transport &
Communication
f 0 0 0 7 8 15 4.53 0.52
% 0.0% 0.0% 0.0% 46.7% 53.3% 100.0%
Communication
Networks
f 0 1 0 7 7 15 4.33 0.82
% 0.0% 6.7% 0.0% 46.7% 46.7% 100.0%
Integrated IT
Systems
(ERP,MRP)
f 1 0 2 4 8 15 4.20 1.15
% 6.7% 0.0% 13.3% 26.7% 53.3% 100.0%
Internet
Infrastructure
f 0 1 3 6 5 15 4.00 0.93
% 0.0% 6.7% 20.0% 40.0% 33.3% 100.0%
Computer
Literacy
f 3 2 5 1 4 15 3.07 1.49
% 20.0% 13.3% 33.3% 6.7% 26.7% 100.0%
4.4.5. Descriptive Analysis of the Importance of Ecological Factors on Growth
The distribution of respondents’ views on the importance of various ecological factors on
growth of construction companies is presented in Table 4.13.The table displays the
frequencies, mean and standard deviation of the dataset on a 5-point scale and ranks them
in order of importance from highest to lowest mean score. The table reveals that a high
mean score was obtained in terms of climate change (M=4.27, SD=1.22), followed by
availability of natural resources (M=4.13, SD=1.06) and waste disposal regulations
(M=3.53, SD=1.25). This means that these three factors were of high importance to growth
of construction organizations.
The table indicates that the next set of ecological factors, with moderate mean scores were
in rank order; pollution (M=3.20, SD=1.26), followed by environmental barriers (M=3.07,
SD=1.49) and lastly, carbon emissions regulations (M=2.93, SD=1.16). This means that
these set of factors were of medium importance to the growth of construction organizations.
37
Table 4.13: Importance of Ecological Factors to Growth
Ecological Factors VLI LI MI HI VHI Total M SD
Climate Change f 0 2 1 5 7 15 4.27 1.22
% 0.0% 13.3% 6.7% 33.3% 46.7% 100.0%
Availability of
natural
resources
f 0 0 2 4 9 15 4.13 1.06
% 0.0% 0.0% 13.3% 26.7% 60.0% 100.0%
Waste disposal
regulations
f 1 5 5 2 2 15 3.53 1.25
% 6.7% 33.3% 33.3% 13.3% 13.3% 100.0%
Pollution f 1 1 0 4 9 15 3.20 1.26
% 6.7% 6.7% 0.0% 26.7% 60.0% 100.0%
Environmental
Barriers
f 0 4 4 2 5 15 3.07 1.49
% 0.0% 26.7% 26.7% 13.3% 33.3% 100.0%
Carbon
Emission
Regulations
f 2 2 4 5 2 15 2.93 1.16
% 13.3% 13.3% 26.7% 33.3% 13.3% 100.0%
4.4.6. Descriptive Analysis of the Importance of Legal Factors on Growth
The study sought to establish respondent’s perception of the importance of various factors
in the legal environment to the growth of construction organizations. The frequencies, mean
and standard deviation of the findings is shown in Table 4.14. The table reveals that the
legal factor with the highest mean score was health and safety acts (M=4.20, SD=0.78),
followed by working environment regulations (M=4.07, SD=1.34) and government control
(M=4.00, SD=0.66). Subsequent factors with relatively high mean scores were import
restrictions (M=3.80, SD=1.61) and taxes and fiscal policy (M=3.80, SD=1.37). A low
mean score was obtained for trade union regulations (M=2.27, SD=1.58) suggesting that
this factor was of low importance to growth.
Table 4.14 Importance of Legal Factors to Growth
Legal Factors VLI LI MI HI VHI Total M SD
Health and
Safety Acts
f 0 0 3 6 6 15 4.20 0.78
% 0.0% 0.0% 20.0% 40.0% 40.0% 100.0%
Working
Environment
Regulations
f 1 2 0 4 8 15 4.07 1.34
% 6.7% 13.3% 0.0% 26.7% 53.3% 100.0%
Government
Control
f 0 0 3 9 3 15 4.00 0.66
% 0.0% 0.0% 20.0% 60.0% 20.0% 100.0%
Import
Restrictions
f 3 0 2 2 8 15 3.80 1.61
% 20.0% 0.0% 13.3% 13.3% 53.3% 100.0%
Taxes and
Fiscal Policy
f 2 0 3 4 6 15 3.80 1.37
% 13.3% 0.0% 20.0% 26.7% 40.0% 100.0%
Trade Union
Regulations
f 7 3 2 0 3 15 2.27 1.58
% 46.7% 20.0% 13.3% 0.0% 20.0% 100.0%
38
4.4.7. Composite Analysis of Importance of PESTEL Factors to Growth
A composite mean score was computed for each PESTEL factor and ranked in order of
importance on a 5-point scale as presented in Table 4.15. The table reveals that,
collectively, the highest mean score was obtained for technological factors (M=4.24,
SD=0.42), followed by political factors (M=3.91, SD=0.65), ecological factors (M=3.76,
SD=0.68) and legal factors (M=3.69, SD=0.60). A moderate mean score was obtained
concerning the importance of economic factors (M=3.07, SD=0.63) while the factors with
the lowest mean score was social factors (M=2.53, SD= 0.55). The finding suggests that
technological, political, ecological and legal factors were of high importance to growth of
construction companies while economic and social factors were of medium importance.
Table 4.15: Ranking of Importance of PESTEL Factors to Growth
PESTEL Composite Factors M SD
Technological factors 4.24 0.42
Political factors 3.91 0.65
Ecological factors 3.76 0.68
Legal factors 3.69 0.60
Economic factors 3.07 0.63
Social factors 2.53 0.55
4.4.8. Inferential Analysis of the Influence of External Factors on Growth
The relationship between external factors and growth of construction organizations was
tested using Spearman’s rank correlation coefficient at p<.05. The findings are displayed
in Table 4.16. The table reveals that only two of the PESTEL factors were statistically
significant. These are: economic factors (r=.490, p<.05) and technological factors (r=.425,
p<.049). This means that as the economy grew and as technology advanced, growth was
realized in construction organizations in terms of value of projects completed. However,
there was no statistically significant correlation between the growth of construction
organizations and; political factors (r=.095, p>.05), social factors (r=-.178, p>.05),
ecological factors (r=-.067, p>.05) and legal factors (r=.034, p>.05). This implies that these
four environmental factors had no significant influence on growth of construction
organizations in Kenya.
39
Table 4.16: Correlation between External Factors and Growth
Spearman's rho 1 2 3 4 5 6 7
1. Growth
Correlation Coefficient 1.000
Sig. (2-tailed) .
N 15
2. Political
Factors
Correlation Coefficient .095 1.000
Sig. (2-tailed) .735 .
N 15 15
3. Economic
Factors
Correlation Coefficient .490* .529* 1.000
Sig. (2-tailed) .044 .042 .
N 15 15 15
4. Social Factors
Correlation Coefficient -.178 .227 .331 1.000
Sig. (2-tailed) .525 .416 .228 .
N 15 15 15 15
5. Ecological
Factors
Correlation Coefficient -.067 -.073 .003 -.371 1.000
Sig. (2-tailed) .814 .795 .992 .174 .
N 15 15 15 15 15
6. Legal Factors
Correlation Coefficient .034 .587* .648** .247 .225 1.000
Sig. (2-tailed) .903 .021 .009 .375 .419 .
N 15 15 15 15 15 15
7. Technological
Factors
Correlation Coefficient .425* .289 .327 .155 -.129 .505* 1.000
Sig. (2-tailed) .049 .297 .234 .582 .647 .055 .
N 15 15 15 15 15 15 15
*. Correlation is significant at the 0.05 level (2-tailed).
**. Correlation is significant at the 0.01 level (2-tailed).
4.5.Strategies used to Ensure Growth
The third objective was to determine the strategies used to ensure growth of construction
organizations. This section presents the descriptive analysis of the importance respondents
attached to various strategies and inferential analysis of the relationship with organizational
growth. The mean scores were ranked on a 5-point scale whereby 1=Very Low (VL),
2=Low (L), 3=Medium (M), 4=High (H) and 5=Very High (VH).
4.5.1. Expansion through Concentration
Respondents were asked to express their opinion based on the level of importance of
expansion through concentration on growth of construction organizations. The frequencies,
mean and standard deviation scores are presented in Table 4.17. The table reveals that
medium mean score was obtained for market development (M=3.33, SD=1.29), market
40
penetration (M=3.20, SD=1.52) and product development (M=2.93, SD=1.58). The
findings suggest that all the three strategies were of moderate importance to growth and
success of construction organizations.
Table 4.17: Importance of Expansion through Concentration
Expansion through
concentration
VL
L
M
H
VH
Total
M
SD
Market
Development
f 2 1 5 4 3 15 3.33 1.29
% 13.3% 5.6% 33.3% 26.7% 20.0% 100.0%
Market
Penetration
f 3 2 3 3 4 15 3.20 1.52
% 20.0% 13.3% 20.0% 20.0% 26.7% 100.0%
Product
Development
f 4 3 1 4 3 15 2.93 1.58
% 26.7% 20.0% 6.7% 26.7% 20.0% 100.0%
4.5.2. Expansion through Integration
Respondents were asked to express their opinion based on the level of importance they
attached to expansion through integration as a strategy for growth and success in the
construction business. Table 4.18 presents the frequencies, mean and standard deviation of
the dataset. The tables shows that a very high mean score was obtained on backward
integration (M=4.67, SD=0.82), implying that backward integration was of very high
importance to growth of construction organizations. A moderate mean score was obtained
on horizontal integration (M=3.27, SD=1.75) and forward integration (M=2.93, SD=1.58)
which means that two dimensions of expansion strategies were of medium importance to
growth.
Table 4.18 Importance of Expansion through Integration
Expansion through
integration
VL
L
M
H
VH
Total
M
SD
Backward
Integration
f 4 2 1 2 6 15 4.67 0.82
% 26.7% 13.3% 6.7% 13.3% 40.0% 100.0%
Horizontal
Integration
f 7 2 2 1 3 15 3.27 1.75
% 46.7% 13.3% 13.3% 6.7% 20.0% 100.0%
Forward
Integration
f 0 1 0 2 12 15 2.93 1.58
% 0.0% 6.7% 0.0% 13.3% 80.0% 100.0%
4.5.3. Expansion through Diversification
The study sought establish the importance respondents attached to concentric
diversification and conglomerate diversification strategies for growth of construction
41
organizations. The results are presented in Table 4.19. The table reveals that on a scale of
1 to 5, a moderate mean score was obtained on both concentric diversification (M=3.20,
SD=1.66) and conglomerate diversification (M=3.00, SD=1.56). The findings imply that
the two diversification strategies were perceived to be of medium importance to growth of
construction organizations.
Table 4.19 Importance of Expansion through Diversification
Expansion through
diversification
VL
L
M
H
VH
Total
M
SD
Concentric
diversification
f 4 1 3 2 5 15 3.20 1.66
% 26.7% 6.7% 20.0% 13.3% 33.3% 100.0%
Conglomerate
diversification
f 4 1 5 1 4 15 3.00 1.56
% 26.7% 6.7% 33.3% 6.7% 26.7% 100.0%
4.5.4. Expansion through Cooperation
Respondents were asked whether expansion through cooperation was important for growth
of construction organizations in Kenya. Table 4.20 shows the findings. As per the table, a
moderate mean score was obtained on merger (M=3.40, SD=1.24), followed by joint
venture (M=3.13, SD=1.36) and lastly, takeover (M=2.67, SD=1.76). The results suggest
that expansion through diversification strategies were of medium importance to growth and
success of construction organizations.
Table 4.20: Importance of Expansion through Cooperation
Expansion through
cooperation
VL
L
M
H
VH
Total
M
SD
Merger f 2 0 6 4 3 15 3.40 1.24
% 13.3% 0.0% 40.0% 26.7% 20.0% 100.0%
Joint venture f 3 1 4 5 2 15 3.13 1.36
% 20.0% 6.7% 26.7% 33.3% 13.3% 100.0%
Takeover f 6 3 0 2 4 15 2.67 1.76
% 40.0% 20.0% 0.0% 13.3% 26.7% 100.0%
4.5.5. Expansion through Internationalization
The views of the respondents were sought with regards to the level of importance they
attached to expansion through internationalization as a strategy for growth of construction
organizations. Table 4.21 shows that a low mean score was obtained on a scale of 1 to 5
with regards to transnational strategies (M=2.07, SD=1.39), multi-domestic expansion
(M=2.00, SD=1.56) and global expansion (M=1.87, SD=1.25). The low mean scores imply
42
that expansion through internationalization was perceived to be of low importance to
growth of construction organizations in Kenya.
Table 4.21 Importance of Expansion through Internationalization
Expansion through
internationalization
VL
L
M
H
VH
Total
M
SD
Transnational f 8 2 2 2 1 15 2.07 1.39
% 53.3% 13.3% 13.3% 13.3% 6.7% 100.0%
Multi-domestic f 10 0 2 1 2 15 2.00 1.56
% 66.7% 0.0% 13.3% 6.7% 13.3% 100.0%
Global f 9 2 1 3 0 15 1.87 1.25
% 60.0% 13.3% 6.7% 20.0% 0.0% 100.0%
4.5.6. Expansion through Internal Strategies
The study sought to establish whether internal strategies such as cost control,
entrepreneurial planning and sense of urgency and timelines were important for growth of
construction organizations. The frequency distribution of respondents as well as the mean
and standard deviation scores on a 5-point scale is shown in Table 4.22. The table reveals
that very high mean scores were obtained in terms of sense of urgency and timelines
(M=4.93, SD=0.26), cost control (M=4.80, SD=0.78) and entrepreneurial planning
(M=4.40, SD= 0.91). The data suggests that sense of urgency and cost control were very
important internal strategies for growth of construction organizations while entrepreneurial
planning was of relatively high importance too.
Table 4.22: Importance of Expansion through Internal Strategies
Internal Strategies
VL
L
M
H
VH
Total
M
SD
Sense of
urgency and
timelines
f 0 0 0 1 14 15 4.93 0.26
% 0.0% 0.0% 0.0%
6.7%
93.3% 100.0%
Cost control f 0 1 0 0 14 15 4.80 0.78
% 0.0% 6.7% 0.0% 0.0% 93.3% 100.0%
Entrepreneurial
planning
f 0 0 4 1 10 15 4.40 0.91
% 0.0% 0.0% 26.7% 6.7% 66.7% 100.0%
43
4.5.7. Composite Analysis of Strategies used to Ensure Growth
A composite analysis of strategies used to ensure growth was performed by computing
mean scores for each growth strategy on a scale of 1 to 5. Results were ranked from very
high to very low composite mean scores as shown in table 4.23. The table reveals that
expansion through internal strategies was rated highest (M=4.71, SD=0.35), followed by
integration (M=3.44, SD=0.99), concentration (M=3.16, SD=1.22), diversification
(M=3.10, SD=1.44) and cooperation (M=3.07, SD=1.12). However, a low composite mean
score was obtained with respect to expansion through internationalization (M=1.98,
SD=1.26). The results suggest that internal strategies were of very high importance to
growth of construction companies while integration, concentration, diversification and
cooperation were all of relatively medium importance. However, internationalization
strategies were of low importance to growth of construction organizations represented in
this study.
Table 4.23: Composite Mean score of Importance of Strategies for Growth
Strategies M SD
Expansion through internal strategies 4.71 0.35
Expansion through integration 3.44 0.99
Expansion through concentration 3.16 1.22
Expansion through diversification 3.10 1.44
Expansion through cooperation 3.07 1.12
Expansion through internationalization 1.98 1.26
4.5.8. Inferential Analysis of the Influence of Internal Strategies on Growth
Spearman’s rank correlation analysis was used to analyze the relationship between growth
as measured by value of projects completed and composite measures of the importance of
internal growth strategies. Table 4.24 presents the results at p<.01 and p<.05 levels. The
table reveals that there was a strong positive correlation between growth of construction
organization and expansion through concentration (r=.608, p<.05), expansion through
integration (r=.650, p<.01), expansion through diversification (r=.675, p<.01) and
expansion through internal strategies (r=.454, p<.05). The finding suggests that growth in
construction organizations increased with increased expansion through concentration,
integration, diversification and internal strategies. However, there was no statistically
44
significant correlation between growth and expansion through cooperation (r=.121, p>.05)
or internationalization (r=.208, p>.05) implying that these two strategies were not important
for growth of construction organizations in Kenya.
Table 4.24: Correlation between Various Strategies and Growth
Spearman's rho 1 2 3 4 5 6 7
1. Growth
Correlation
Coefficient 1.000
Sig. (2-tailed) .
N 15
2. Concentration
Correlation
Coefficient .608* 1.000
Sig. (2-tailed) .016 .
N 15 15
3. Integration
Correlation
Coefficient .650** .614* 1.000
Sig. (2-tailed) .009 .015 .
N 15 15 15
4. Diversification
Correlation
Coefficient .675** .680** .924** 1.000
Sig. (2-tailed) .006 .005 .000 .
N 15 15 15 15
5. Cooperation
Correlation
Coefficient .121 .457 .519* .572* 1.000
Sig. (2-tailed) .668 .087 .047 .026 .
N 15 15 15 15 15
6. Internationalizat
ion
Correlation
Coefficient .208 .479 .165 .257 .000 1.000
Sig. (2-tailed) .456 .071 .557 .355 1.000 .
N 15 15 15 15 15 15
7. Internal
Strategies
Correlation
Coefficient .454* -.057 .430 .408 -.008 .089 1.000
Sig. (2-tailed) .049 .841 .109 .131 .978 .753 .
N 15 15 15 15 15 15 15
*. Correlation is significant at the 0.05 level (2-tailed).
**. Correlation is significant at the 0.01 level (2-tailed).
45
4.6.Chapter Summary
This chapter has presented the analysis and interpretation of data. Results showed that there
was a statistically significant correlation between internal factors and growth of
construction organizations. In terms of external factors affecting growth of construction
companies, only two of the PESTEL factors were statistically significant. These are:
economic factors and technological factors. Concerning strategies that ensures growth,
there was a strong positive correlation between growth of construction organization and
expansion through concentration, expansion through integration, expansion through
diversification and expansion through internal strategies. The next chapter summarizes and
discusses the study findings and also draws conclusions and recommendations.
46
CHAPTER FIVE
5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
This chapter summarizes the research and highlights the key findings of the study, draws
conclusions and makes recommendations. The summary is presented thematically
according to the study objectives and research questions. Subsequently, the findings are
discussed in view of the theoretical and empirical literature. The chapter then draws
conclusion based on the study findings. Subsequently, recommendations for practice and
suggestions for future studies are made.
5.2 Summary
The research purposed to identify the factors affecting the growth of construction
companies in Kenya. The research questions were as follows. What are the internal factors
that affect the growth of construction companies in Nairobi? What are the external factors
that affect the growth of construction companies in Nairobi? What Strategies are
implemented by the construction organizations to ensure success in a developing economy?
Descriptive research design was used. The population in this study was 5 companies in the
roads and bridges and 25 construction companies in Nairobi that are registered with the
National Construction Authority. The sample size was 13 construction companies in the
building sector in Nairobi and 2 companies from the rail and road industry in Nairobi. The
data was collected by structured questionnaires. Data was analyzed using descriptive
statistical techniques by generating frequencies, mean and standard deviations. Inferences
were made using Spearman’s rank correlation analysis techniques. SPSS was used as a tool.
The results were presented in tables.
The first research question sought to establish the internal factors that affect the growth of
construction companies in Nairobi. As per the major findings, technology in construction
(M=4.67), client’s financial ability (M=4.67, SD=0.82) and cost and revenue management
(M=4.53, SD=0.74) were the top three internal factors of very high importance to growth
of construction companies. There was a statistically significant correlation between
internal factors and growth of construction organizations (r=.501, p<.05).
47
The second research question was to investigate the external factors that affect the growth
of construction companies in Nairobi. In terms of external factors affecting growth of
construction companies, the highest mean score was obtained for technological factors
(M=4.24, SD=0.42), followed by political factors (M=3.91, SD=0.65), ecological factors
(M=3.76, SD=0.68) and legal factors (M=3.69, SD=0.60). However, only two of the
PESTEL factors were statistically significant. These are: economic factors (r=.490, p<.05)
and technological factors (r=.425, p<.049).
The third research question was about strategies implemented by the construction
organizations to ensure success in a developing economy. Concerning strategies that
ensures growth, expansion through internal strategies was rated highest (M=4.71,
SD=0.35), followed by integration (M=3.44, SD=0.99), concentration (M=3.16, SD=1.22),
diversification (M=3.10, SD=1.44) and cooperation (M=3.07, SD=1.12). However, there
was a strong positive correlation between growth of construction organization and
expansion through concentration (r=.608, p<.05), expansion through integration (r=.650,
p<.01), expansion through diversification (r=.675, p<.01) and expansion through internal
strategies (r=.454, p<.05).
5.3 Discussions
5.3.1 Internal Factors affecting Growth of Construction Companies
The results of the study revealed that there was a positive and statistically significant
relationship between internal factors and growth of construction organizations (r=.501,
p<.05). This means that internal factors played a collective role determining growth of the
construction organizations as measured by value of projects completed over the last five
years. Improvements in internal factors were directly associated with value of construction
projects. This finding is in contrast to a study by Adiputra (2016) which reported mixed
effects of internal factors on organization performance as measured by value of firms listed
on the stock exchange of Southeast Asian countries. This difference in research findings
may be explained by country differences as the study by Adiputra (2016) established
significant effect of internal factors of firm value in some countries and not in others.
When considered on a case by case basis, different factors varied by effect size in the
current study which is in line with the findings by Adiputra (2016). For example,
48
technology in construction scored the highest mean rating in terms of importance to growth
(M=4.67, SD=0.62). This agrees with Mullin’s (2005) assertion that technology utilized by
respective construction organizations was an important determinant of growth, not just at
firm level, but the entire industry. It means that technology deployed by construction
organizations determine the value of construction bids won and completed. Therefore, it
can be inferred that the technological assets that were within the control of the organizations
were sources of competitive advantage, whose quality and capability directly influenced
growth.
The study established that the next most important internal consideration for organization
growth after technological assets was client’s financial ability (M=4.67, SD=0.82). This is
potentially so because financial ability of clients determine their ability to pay for
construction projects, which has direct implications on the construction organization’s
operations. Most construction organizations are profit-making enterprises and their going-
concern takes precedence as it forms a foundation for business growth. Since client’s ability
to pay affects cash-flow, which in turn, affect going-concern, it is expected that client’s
ability to pay ranks high among factors perceived to be critical for growth.
The study established that cost and revenue management was the third leading internal
factors of very high importance to growth of construction companies (M=4.53, SD=0.74).
This may be due to the direct correlation inherent between cost and revenue management
and value of projects. Cost and revenue management were highly rated as influential to
organizational growth because of the complex nature of construction projects. This is in
line with past studies that highlight the incidences of cost overruns and delays in project
completions that cause further cost overruns (Gwaya et al., 2014). Cost and revenue
management are critical to growth of construction organizations considering the
documented evidence construction projects in Kenya incur escalating costs that can exceed
50 percent of the project’s value (Auma, 2014). In this case, it can be argued that improved
cost and revenue management leads to associated rise in value of construction projects
undertaken by the organizations. This is implied in subsequent findings which revealed that
respondents rated profitability of projects as highly important to growth of construction
organizations (M=4.40, SD=0.62).
49
The study also established that in varying degrees, a high rating was obtained with respect
to various internal factors such as leadership and ownership (M=4.27, SD=1.22),
magnitude and size of projects (M=4.20, SD=1.08), goals and objectives of the organization
(M=4.07, SD=1.10), recruitment methods (M=3.87, SD=1.25). These factors relate to
management capabilities, suggesting that such internal capabilities determined growth of
construction organizations. This is consistent with results of a study by Windapo (2017)
which identified management capabilities, including ability to adapt and respond
effectively to challenges, were responsible for growth of construction organizations in
South Africa. This means that project management competence were critical determinants
of performance in the construction industry and warrant close attention.
The study however established contrary to expectation that culture was of medium
importance to growth of construction organizations as reflected in a moderate mean score
obtained on a 5-point scale (M=3.07, SD=1.10). This is contrary to the claim by Shahzad
et al. (2012) that organizational culture deeply impacts the performance and growth. This
implies that culture played a little role in determining growth of construction organizations
in Kenya.
5.3.2 External Factors affecting Growth of Construction Companies
The study showed that economic factors together emerged as one of the two PESTEL
factors that had statistically significant positive influence on growth of construction
organizations (r=.490, p<.05) although obtained a relatively low mean ranking in order of
perceived importance to growth compared to other PESTEL factors (M=3.07, SD=0.63).
The inferential results suggest that construction organizations grew with improved
economic conditions in Kenya. The finding agrees with Antwi and McMillan’s (2017)
whose investigation of the role of economic conditions on firm performance indicated that
growth performance was a function of both macro and microeconomic variables. From the
results of the study, inference can be drawn that a reciprocal relationship subsisted between
economic factors and growth of construction organizations.
The study found that there was a positive and statistically significant correlation between
technological factors and growth of construction organizations (r=.425, p<.05), meaning
that the value of construction projects increased with advancement in technology. This
50
means that construction organizations in Kenya achieved more growth, potentially due to
access to more efficient technologies. This was reinforced by the findings which indicated
that new machinery was rated very high on a 5-point scale of importance to growth of
construction organization (M=4.87, SD=0.35).
Subsequent findings also revealed that automation was rated very highly important
(M=4.67, SD=0.72). The implication of this finding is that construction organizations need
to keep abreast with new technological development in the sector. This finding agrees with
Ahmad (2014) whose study linked technological factors to growth of organizations. This
means that technological advancement made a positive contribution to growth in terms of
value of construction contracts. The lack of new technological equipment and lack of
automation found among construction organizations in Keya as reported by the National
Construction Authority (2014) is seen as a constraint to growth, both at organizational level
and at national level.
The results indicated that although political factors did not have statistically significant
influence on growth of construction organizations, a high mean score was obtained,
(M=3.91, SD=0.65), meaning that political factors were perceived to affect growth.
Political factors that obtained high mean scores were: corruption (M=4.27, SD=1.28),
political stability (M=4.40, SD= 0.74), form of government (M=4.00, SD=1.46) and
government interference (M=3.93, SD=3.93). These political factors are arguably highly
interrelated and are all potentially anchored on the level of political ability. The findings
are in line with Bekr’s (2017) study in Iraq whereby it was found that projects were delayed
and the actual cost of projects was much more than their values because of the country’s
unstable political environment. The high mean score obtained lends support to the
perspective of Loosemore (2003) that construction projects are susceptible to unstable
political environments and assets of construction organizations can be vandalized during
political unrests and the projects themselves may be derailed.
The study established that a relatively high composite means score was obtained on a 5-
point scale for ecological factors (M=3.76, SD=0.68); implying that respondents rated
ecological factors to be important for growth. Specifically, the results revealed that climate
change (M=4.27, SD=1.22) and availability of natural resources (M=4.13, SD=1.06) were
51
the two ecological factors which were ranked of high importance to growth of construction
companies. This may be due to the construction organization’s heavy reliance on natural
resources in undertaking construction projects as revealed by the construction industry
survey report which showed that 89 percent of contractors used locally available
construction materials (National Construction Authority, 2014). However, that the
composite importance was not statistically significant in terms of influence on growth (r=-
.067, p>.05) suggest that ecological factors were necessary but not sufficient determinants
of growth of construction organizations.
The study established that legal factors were also relatively highly ranked on a 5-point scale
in terms of their importance to growth (M=3.69, SD=0.60). The findings indicated that the
specific legal factors perceived to be of high importance to growth were in rank-order;
health and safety acts (M=4.20, SD=0.78), work environment regulations (M=4.07,
SD=1.34) and government control (M=4.00, SD=0.66). However, correlation coefficient
was not statistically significant (r=.034, p>.05). This means that compliance with the legal
environment were necessary for the existence of construction organizations but compliance
alone did not influence their growth. This perspective is in line with the emphasis made by
Oladapo and Olotuah (2007) who pointed that project managers of construction works have
a responsibility to become aware and comply with construction regulations in order to
mitigate legal risks.
5.3.3 Strategies Factors affecting Growth of Construction Companies
The study found that there was a strong positive correlation between expansion through
diversification and growth of construction organizations as measured by value of projects
completed in the last 5 years (r=.675, p<.01). This indicates that diversification strategies
such as concentric diversification and conglomerate had a direct influence on company
growth. This contradicts the results of a study by Iqbal, Hameed and Qadeer (2012) which
found no impact of diversification strategy on firm performance. This disparity in research
results may be explained by variations in performance indicators as their study evaluated
risk and return dimensions while the current study used value of projects completed as a
growth indicator. However, the composite mean ranking of diversification strategies in
terms of importance to growth was medium (M=3.10, SD=1.44), which means that there
was a mismatch between its influence on growth and its perceived importance. It can be
52
inferred from this mismatch that respondents were ignorant of the potential impact of
diversification strategies on the growth of their companies.
The research findings showed that there was a strong positive correlation between
expansion through concentration and growth of construction organization (r=.608, p<.05),
suggesting that concentration strategies had a positive influence on growth of construction
organizations. However, expansion through concentration was rated of medium importance
to growth (M=3.16, SD=1.22) suggesting that on aggregate, respondents did not highly
regard this strategy as important for growth. This means that concentration strategies such
as market development, market penetration and product development were not accorded
the attention corresponding to their significance for organizational growth. The finding
agrees with the conclusion made by Jin, Deng, Li, and Skitmore (2013) that the adoption
of concentration strategies such as market development in the construction organizations is
weak.
The findings revealed that a strong and statistically significant positive correlation was
found between expansion through integration and growth of construction organizations in
terms of value of projects completed (r=.650, p<.01). This means that growth of
construction organizations was realized with pursuit of integration strategies. In terms of
rating of its importance, a medium mean composite score was obtained (M=3.44, SD=0.99)
suggesting that this strategy was considered to be of medium importance to growth. This
implies that respondents did not highly value the contribution of this expansion strategy to
value of completed projects, except backward integration which had a very high mean score
(M=4.67, SD=0.82) probably due to anticipated cost savings and efficiency gains of setting
up own facility or acquiring suppliers.
The study showed that of the various expansion strategies to ensure growth, expansion
through internal strategies was rated highest in terms of importance (M=4.71, SD=0.35),
which means that more attention was paid to this expansion strategy. Specifically, very
high mean scores were obtained for sense of urgency and timelines (M=4.93, SD=0.26)
and cost control (M=4.80, SD=0.78) suggesting that these two strategies were perceived to
be of very high importance to growth. This is in line with Buckshon’s (2010) observation
that a sense of urgency is critical to the success of construction organizations and this goes
beyond just building projects as competency in implementing new ideas and controlling
costs are required. In the current study, a positive and statistically significant correlation
53
was found between expansion through internal strategies and growth of construction
organizations using value of completed projects as a proxy for growth (r=.454, p<.05). This
means that organizations that pursued internal strategies for growth realized more growth.
In line with the high mean scores, it can be inferred that internal strategies were being used
by construction organizations in Kenya for expansion and growth.
5.4 Conclusions
5.4.1 Internal Factors affecting Growth of Construction Companies
Growth of construction organizations was affected by a number of internal factors. These
were: in order of high importance; technology used in construction, client’s financial
ability, cost and revenue management, profitability of projects, leadership and ownership,
magnitude and size of projects, and goals and objectives of the organization. In addition,
recruitment methods, investment tradeoffs and design alterations were also of relatively
high importance.
5.4.2 External Factors affecting Growth of Construction Companies
All the external factors except social factors potentially affected growth of construction
companies. In order of importance, technological factors ranked highest, followed by
political factors, ecological factors, legal factors and economic factors. However, of these
factors, only the impact of economic factors and technological factors were significant to
growth of construction organizations in Kenya. The specific technological factors of very
high implications on growth were new machinery, automation and transport and
communication whereas the specific economic factors were: general state of the economy,
exchange rate fluctuations and level of government debt.
5.4.3 Strategies used to Ensure Growth of Construction Companies
Construction organizations in Kenya pursued internal strategies to ensure growth and
success. This included sense of urgency and timelines, cost control and entrepreneurial
planning. Other less prioritized strategies which had strong positive impact on growth of
construction organizations were expansion though diversification, expansion through
integration and expansion through concentration. The strategy of least importance to
54
growth of construction companies in Kenya were internationalization perhaps due to size
constraints as the sector is dominated by SMEs.
5.5 Recommendations
5.5.1 Recommendations for Improvement
5.5.1.1 Internal Factors affecting Growth of Construction Companies
Construction organizations should invest on new and adequate technological equipment.
Cost and revenue management can also be enhanced by utilizing management information
systems such as Enterprise Resource Systems and Office Systems. Construction projects
also require proper leadership and management and as such, the leadership and
management competencies of project managers and engineers should be developed. The
magnitude and size of projects as well as the goals and objectives of the organizations
should also be taken into consideration when pursuing growth.
5.5.1.2 External Factors affecting Growth of Construction Companies
Construction organizations should undertake regular environmental scanning with
emphasis put on how emerging technology in the construction industry can be leveraged to
enhance growth. Depending on anticipated return on investments, research and
development should be undertaken on automation of construction operations, transport and
communication networks and how avenues of collaboration with related sectors can
explored to achieve better value. Constant attention should be paid to the economic
environment in order to provide timely information regarding investment decisions.
Although not a sufficient condition for growth, compliance with government regulations
must be adhered to.
5.5.1.3 Strategies used to Ensure Growth of Construction Companies
Construction organizations can consolidate their internal strategies with other expansion
strategies such as diversification, integration or concentration. Specifically, the following
priority order can be considered because of their perceived importance to growth: backward
integration, horizontal integration, market development, market penetration and concentric
diversification.
55
5.5.2 Recommendations for Further Studies
Future researchers can explore how construction organizations can pursue growth through
backward integration due to its high importance in the construction sector. In addition, this
study used a modest sample of construction organizations in Nairobi, most of which were
large construction firms. Therefore, another study can be undertaken among small
construction firms in order to establish the internal and external factors antecedent to their
growth and how they can navigate the industry dynamics to outgrow their smallness.
56
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APPENDICES
APPENDIX I: QUESTIONNAIRES
A Study to Identify Factors Affecting the Growth of Construction Organizations in
Nairobi and the Strategies Implemented by Organizations to ensure continuous
success.
This Study is Voluntary. Feedback received will be anonymous and confidential.
Section 1: General Information
Please add (√) as required:
1. Type of Projects of Organization:
o Buildings o Roads and Rail
2. Company Size ( Number of Employees):
o 10 - 20 o 21 - 30 o 31 - 40 o 41- 50
3. Job Title of Respondent:
o Project Manager o Site Engineer o Organization Manager
4. Years of experience of the respondent working in the Construction Industry:
o 0 -5 Years o 6 – 10 Years o 11-15 Years o 16- 20 Years o 21 + Years
5. Number of Projects Completed in the last 5 years.
o 1 to 10 o 11 to 20 o 21 to 30 o 30 to 40 o 41 and above
6. Value of Projects Completed in the last 5 Years ( Million USD)
o 1 - 2 M o 2 – 5 M o 5 – 10M o 10 – 20M o More than or
Equal to 10 M
63
Section Two: Internal Factors affecting the Growth of Construction Organizations
Below are Internal factors affecting the growth of construction organizations. From your
experience, kindly express your opinions on the factors that affect the growth of
Construction Companies based on the level of importance.
Internal Factors Very Low
Importance
Low
Importance
Medium
Importance
High
Importance
Very High
Importance
Recruitment Methods
Organisational Size
History and Age of Company
Technology in Construction
Leadership and Ownership
Goals and Objectives of Organization
Macrocultures
Geographical Location of Projects
Cost and Revenue Management
Design Alterations
Client financial ability
Marketing Strategies
Magnitude and size of projects
Profitability of Project
Investment Tradeoff
64
Section Three: External Factors affecting the Growth of Construction Organization.
Below are external factors affecting the growth of construction organizations. From your
experience, kindly express your opinions on the environmental factors that affect the
growth of Construction Companies based on the level of importance using the various
group factors.
Factors Very Low
Importance
Low
Importance
Medium
Importance
High
Importance
Very High
Importance
1. Political
Corruption
Political Stability
Form of Government
Security, Safety
Government Interference
Level of Bureaucracy
2. Economical
General State of Economy
Unemployment Rate
Strength of Trade Union
Interest rates
Exchange Rate Fluctuations
Level of Government Debt
Monetary Policy
3. Social
Level of Education in Society
Level of Wealth in Society
Lifestyle of Society
Creativity in Society
Population Growth rate
Sex Distribution
65
Role of Religion
Role of Tribes
Factors Very Low
Importance
Low
Importance
Medium
Importance
High
Importance
Very High
Importance
4. Technological
Communication Networks
Internet Infrastructure
New Machinary
Automation
Integrated IT Systems
(ERP,MRP)
Transport & Communication
Computer Literacy
5. Ecological
Environmental Barriers
Waste disposal regulations
Carbon Emission Regulations
Pollution
Climate Change
Availability of natural resources
6. Legal
Import Restrictions
Taxes and Fiscal Policy
Government Control
Health and Safety Acts
Trade Union Regulations
Working Environment Regulations
66
Section Four: Strategies used to ensure Growth and Success of Construction
Organizations.
Below are a list of various Strategies that construction organization use to ensure success
and continuous growth in Nairobi. Kindly express your opinions based on the level of
importance using the various group factors.
Very Low Low Medium High Very High
1. Expansion through Concentration
Market Penetration – Have you Focused to
Increase your Market Share in your Existing
Market?
Market Development – Have you ventured into a new Industry with your current
resources?
Product Development – Have you ventured
into a New investment/acquisition outside the existing Business?
2. Expansion through Integration
Vertical ; Forward Integration – Do you
Approach your Clients and Developers directly?
Vertical ; Backward Integration - Do you
manufacture / process your own Resources ( Cement, Steel, e.t.c.)?
Horizontal Integration – Have you taken over
any of your competitors in a merger or acquisition?
3. Expansion Through
Diversification
Concentric Diversification – Do you manufacture any of your Raw Materials?
Conglomerate Diversification – Do you own
any other company in another industry other
than construction?
4. Expansion through Cooperation
Merger: have you combined with another company to work towards a goal or objective?
Takeover – Have you taken over another
company?
Joint Venture – Have you ever come to a
mutual agreement temporarily with another
company to achieve an objective?
5. Expansion through
Internationalization
Multi-domestic – Have you customized your
operations in the foreign countries you operate in?
Global – Do you use the same system of
operations but with a low cost structure in
foreign countries?
Transnational – Do you have a low cost
structure while customizing your operations in
the foreign countries?