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.

vii

DEDICATION

I dedicate this to my parents, siblings and fiancée for being my pillar of support.

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

1

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.

8

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.

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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.

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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.

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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

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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?

67

Very Low Low Medium High Very High

Internal Strategy

Cost Control

Entrepreneurial Planning

Sense of Urgency and Timelines

Thank you. Your Response is appreciated.