World Academy of Science, Engineering and Technology

International Journal of Mechanical and Industrial Engineering

Vol:2, No:9, 2008

Critical Factors to Company Success in the

Construction Industry
G. Arslan, and S. Kivrak

However, due to the changing business environment it is

Abstract—Achieving success is a highly critical issue for the crucial to focus on corporate success in order to be
companies to survive in a competitive business environment. The competitive in this environment.
construction industry is also an area where there is strong Some of the researches related to success factors showed
competition due to a large number of construction contractors. There
that the most important factors contributing to success are
have been many factors such as qualified employees, quality
workmanship and financial management that can lead to company company's management systems and practices [7], [8].
Implementation of accounting systems and regular review of
Open Science Index, Mechanical and Industrial Engineering Vol:2, No:9, 2008 publications.waset.org/6786.pdf

success in the construction industry. The aim of this study was to

investigate the critical factors leading to construction company financial statements [9], control of job-site safety [10], and
success. Within this context, a survey was carried out among 40 ongoing training and education [11] are some other factors
Turkish construction companies which are located in the Northwest contributing to construction company success addressed in the
region of Turkey. In this survey, top-level managers and owners of
literature. In the study of Hutchings and Christofferson [12],
the companies were interviewed. The interviews took place over a
five month period between January and May 2007. Finally, the carried out among small-volume residential construction
ranking of the critical success factors has been determined by using companies in the United States, the most important factors to
the Simple Multi Attribute Rating Technique (SMART). Based on company success were found as quality workmanship,
the results, business management, financial conditions and honesty, having good subcontractors, customer
owner/manager characteristics were determined as the most communications, reputation, having good employees, and
important factors to company success.
completing projects on time, respectively. In a survey carried
out among Germany's largest construction companies, the
Keywords—Company success, construction, organization,
most important success factors were identified as employee
success factors.
development, effective risk management, innovation,
I. INTRODUCTION partnerships with customers, and lean organizational structure
[13].
S UCCESS has been the ultimate goal of every business
activity [1]. It is highly important for the organizations to
be successful in their businesses in order to survive in
As construction is a risky business and the possibility of
business failure always exists, companies have to consider the
parameters that can have a direct effect to their success in
competitive business environments such as construction. The business. In this study, the critical factors leading to
construction industry is changing constantly with the construction company success have been investigated. Within
developments of new business methods and technologies [2]. this context, a survey was carried out among 40 Turkish
Thus, construction companies have to adopt these applications construction companies which are located in the North-West
and develop appropriate strategies to be more competitive in region of Turkey. SMART is used to determine the ranking of
this industry and get success in their businesses. the critical success factors.
There are many definitions of success. Traditionally, it is
defined as the degree to which goals and expectations are met. II. TURKISH CONTRACTING SERVICES
On the other hand, one of the definitions of failure is the
inability of a firm to pay its obligations when they are due [3]. The construction industry is one of the major industries in
In recent years, there has been an increase in the studies of Turkey. It represents approximately 6% of Turkey's Gross
critical success/failure factors especially in project National Product (GNP). Turkey started to export contracting
management subject [4]. The traditional approach to success services in the first half of the 1970s. Currently, many Turkish
in the construction industry is to focus on the ability to plan contractors have been operating within the international
and execute projects [5]. Traditionally, the success parameters market. They have carried out $65 billion worth of projects
for projects in this industry are cost, time and quality [6]. internationally so far [14]. The majority of them have been
operating in the Russian Federation, Middle East Republics,
Northern Africa and Far East regions. Turkish contractors
G. Arslan is with the Civil Engineering Department, Anadolu University, gain the competitive advantage by rapid construction and high
Eskisehir, 26555 Turkey (e-mail: gokhana@anadolu.edu.tr).
S. Kivrak is with the Civil Engineering Department, Anadolu University, risk-taking ability. They are using the most advanced
Eskisehir, 26555 Turkey (corresponding author to provide phone: +90-222- technologies in the market and are able to design, erect, build
3213550; fax: +90-222-3239501; e-mail: serkankivrak@anadolu.edu.tr).

International Scholarly and Scientific Research & Innovation 2(9) 2008 997 ISNI:0000000091950263
 World Academy of Science, Engineering and Technology
International Journal of Mechanical and Industrial Engineering
Vol:2, No:9, 2008

and operate almost all kinds of civil and industrial projects. IV. SURVEY RESULTS
Turkish contracting services can be divided into two parts The respondents were asked to evaluate the importance
as lower-quality domestic-only set of firms and the higher level of the main factors. Table I shows the ranking of the
quality international firms. There are more than 30,000 active factors according to their importance as perceived by the
local firms and approximately 130 firms operating respondents. Business management, financial conditions and
internationally. Additionally, there are about 70,000 owner-manager characteristics were considered as the most
companies that are not registered but constitute the informal important factors to company success. Surprisingly,
construction industry and most of them carry out small and technology usage was not considered as an important factor
irregular projects [15]. for company success. Although the majority of the
respondents considered the advanced technologies as
III. SURVEY important tools, it was not seen as a highly essential parameter
The aim of this research is to find out the critical factors for company success.
leading to construction company success. The survey was TABLE I
ANALYSIS OF MAIN FACTORS TO COMPANY SUCCESS
carried out among 40 Turkish construction companies which
Factors Score Weight
are located in the North-West region of Turkey and operate in Business management 97.50 0.1659
the local market. Construction firms registered with the Financial conditions 96.25 0.1638
Chamber of Commerce at this region were considered in the Owner-manager characteristics 92.75 0.1578
Open Science Index, Mechanical and Industrial Engineering Vol:2, No:9, 2008 publications.waset.org/6786.pdf

Quality of work and workmanship 89.25 0.1519

study. The majority of these firms are operating in building Sales and marketing 81.00 0.1378
and housing sectors. In this survey, semi-structured interviews Market selection 66.75 0.1135
were carried out among top-level managers and owners of the Use of technology 64.25 0.1093
Total 587.75 1.0000
companies. Top-level managers and owners were selected for
the interviews because they are assumed to have enough
knowledge about the organizational structure, culture and A. Business Management
strategies. The 40 interviews took place over a 5 month period Based on the literature review, planning was addressed as
between January and May 2007 and each lasted approximately one of the most important management practices. According
1 hr. to the evaluation of the sub-factors of business management,
The survey questionnaire was administered during face-to- organizing and planning was also considered as the most
face interviews and it consisted of 23 questions including both important success factor. The results obtained in this study are
closed and open-ended questions. It is divided into two main quite different from the survey performed in the United States
sections. Section I covered general information about the in which strategic planning was ranked only twenty-first out
companies. Section II dealt with factors leading to company of seventy-eight different responses [12]. Job cost control and
success. Although survey results reflect the opinions of quality control were determined as the following important
experts from 40 firms, it is believed that they can give an idea factors (Table II). However, risk management was reported to
about the critical success factors leading to company success be less significant than expected.
in the Turkish construction industry.
SMART is used to determine the ranking of the critical TABLE II
success factors. This technique is originally introduced by FACTORS OF BUSINESS MANAGEMENT
Edwards [16]. It is an extension of direct rating techniques. In Factors Score Weight Importance
Weight
SMART, ratings of alternatives are assigned directly. The (0.1659*weight)
decision maker is asked to rank each of the attributes, Organizing and planning 97.00 0.2411 0.0400
assigning the first ranked attribute to a score of 100. Then the Job cost control 89.50 0.2225 0.0369
Quality control 83.00 0.2063 0.0342
performance values with relative weights for all attributes are
Risk management 68.25 0.1697 0.0282
determined and a utility value for each alternative is Good record keeping 64.50 0.1604 0.0266
calculated. One of the limitations of this technique is that it Total 402.25 1.0000 0.1659
ignores the interrelationships between parameters.
The factors considered in the study were identified based on B. Financial Conditions
a literature review. A total of 7 possible factors that were felt Availability of cash flow is highly essential for the
to have an effect on the construction business success of companies in order to continue their businesses. Generally,
companies in Turkey were determined. These main factors are Turkish contractors face with difficulties with cash flow due
business management, financial conditions, quality of work to delays in progress payments when they operate in public
and workmanship, sales and marketing, use of technology, construction works. This condition is due to lack of funds to
market selection and owner-manager characteristics. finance public construction works in Turkey [17]. The
Similarly, the sub-factors of these main factors were
majority of the respondents considered control of cash flow as
determined and the importance weights of them are calculated
the most important sub-factor of financial conditions as might
according to the responses.
be expected. Capital/financial strength and country's

International Scholarly and Scientific Research & Innovation 2(9) 2008 998 ISNI:0000000091950263
 World Academy of Science, Engineering and Technology
International Journal of Mechanical and Industrial Engineering
Vol:2, No:9, 2008

economical conditions were considered as the following TABLE V

FACTORS OF QUALITY OF WORK AND WORKMANSHIP
important factors (Table III).
Factors Score Weight Importance Weight
(0.1519*weight)
TABLE III Client satisfaction 97.80 0.1551 0.0236
FACTORS OF FINANCIALCONDITIONS Use of good quality materials 92.50 0.1468 0.0223
Factors Score Weight Importance Teamwork and harmony 92.30 0.1464 0.0222
Weight Completion of job on time 88.30 0.1400 0.0212
(0.1638*weight) Qualified consultants 88.30 0.1400 0.0212
Control of cash flow 97.30 0.1954 0.0320 Qualified personnel 86.30 0.1369 0.0207
Capital/financial strength 84.30 0.1693 0.0277 Good subcontractors 85.00 0.1348 0.0205
Country's economical 83.80 0.1683 0.0276 Total 630.50 1.0000 0.1519
conditions
Profit margins 82.30 0.1652 0.0271 TABLE VI
Timely payment of bills 81.80 0.1642 0.0269 FACTORS OF SALES AND MARKETING
Low interest rates 68.50 0.1376 0.0225 Factors Score Weight Importance Weight
Total 498.0 1.0000 0.1638 (0.1378*weight)
Company image 82.80 0.1808 0.0249
C. Owner-Manager Characteristics Good advertisement 74.80 0.1633 0.0225
In this study, owner-manager characteristics were Competitive pricing 70.50 0.1540 0.0212
Fair pricing 69.50 0.1518 0.0209
considered as one of the main important factors to company
Sales offices 63.00 0.1376 0.0190
Open Science Index, Mechanical and Industrial Engineering Vol:2, No:9, 2008 publications.waset.org/6786.pdf

success. It is highly essential that owners also have some Innovative products 52.00 0.1136 0.0157
managerial experience. It is critical by dealing with their E-marketing 45.30 0.0989 0.0136
employees and motivating them [18]. Leadership was Total 457.90 1.0000 0.1378
considered as the most important factor (Table IV). F. Market Selection
Communication is also an essential subject in today's business The respondents were asked to evaluate the sub-factors of
environment. Lack of communication skills can cause serious market selection. Based on the responses, the most important
problems in coordination of works. factor was identified as doing business in markets where the
company has adequate experience (Table VII). Kangari [19]
TABLE IV
FACTORS OF OWNER-MANAGER CHARACTERISTICS stated that lack of experience in the company's line of work
Factors Score Weight Importance Weight accounts for 18.2% of all failures. Therefore, experience is a
(0.1578*weight) critical issue in market entry decision and source of
Leadership 95.50 0.1750 0.0276
competitive advantage.
Experience 94.75 0.1736 0.0274
Communication skills 92.50 0.1695 0.0268
TABLE VII
Honesty 92.25 0.1690 0.0267
FACTORS OF MARKET SELECTION
Education level 87.75 0.1608 0.0253
Political connections 83.00 0.1521 0.0240 Factors Score Weight Importance Weight
Total 545.75 1.0000 0.1578 (0.1135*weight)
Company experience in the 76.25 0.3498 0.0397
market
D. Quality of Work and Workmanship Determine public needs 73.50 0.3372 0.0383
Level of competition 68.25 0.3130 0.0355
Based on the analysis of the sub-factors of quality of work Total 218.00 1.0000 0.1135
and workmanship, the most important factors are determined
as client satisfaction, use of good quality materials, and
G. Technology Usage
teamwork and harmony (Table V). The majority of the
respondents considered client satisfaction as the most essential Technology usage was not considered as a highly important
item. They indicated that it is highly important for winning factor for company success. Companies considered this factor
future projects in this industry. Having good subcontractors as an essential element for success but not as important as the
were considered as relatively less important than the other other factors such as owner-manager characteristics. The sub-
items. factors of technology usage are listed in Table VIII.

E. Sales and Marketing TABLE VIII

FACTORS OF TECHNOLOGY USAGE
The respondents were asked to evaluate the sub-factors of Factors Score Weight Importance Weight
sales and marketing. Based on the responses, company image, (0.1093*weight)
good advertisement and competitive pricing were considered Follow and adopt new 71.25 0.2751 0.0301
as the most important factors (Table VI). As mentioned technologies
Qualified technical staff 71.00 0.2741 0.0300
before, the use of technology was not considered as a major Usage of software 58.50 0.2259 0.0247
factor to company success. Similarly, using latest programmes
technologies, such as e-marketing, was considered less Having a web-site 58.25 0.2249 0.0245
Total 259.00 1.0000 0.1093
significant than might be expected.

International Scholarly and Scientific Research & Innovation 2(9) 2008 999 ISNI:0000000091950263
 World Academy of Science, Engineering and Technology
International Journal of Mechanical and Industrial Engineering
Vol:2, No:9, 2008

V. CONCLUSION [17] I. Dikmen, and M. T. Birgonul, ‘‘Strategic perspective of Turkish

construction companies’’, Journal of Management in Engineering,
This study presented the survey carried out among Turkish 19(1), 33-40, 2003.
construction companies. The critical factors leading to [18] J. M. Osama, ‘‘Reasons for construction business failures in Saudi
Arabia’’, Project Management Journal, 28(2), 32-36, 1997.
construction company success have been investigated through [19] R. Kangari, ‘‘Business failure in construction industry’’, Journal of
interviews among top-level managers and owners of the Construction Engineering and Management, 114(2), 172-190, 1988.
companies. According to the results business management,
financial conditions and owner-manager characteristics were
identified as the most important main factors to success.
Organizing and planning was perceived to be the most
important factor contributing to company success when
considering the importance weights of the factors. According
to the literature review, this result might be expected since
planning was addressed as one of the most important items of
all the management practices. Moreover, it was interesting to
note that managers/owners did not consider technology usage
as a highly essential item for company success.
The findings from the study should be interpreted with
Open Science Index, Mechanical and Industrial Engineering Vol:2, No:9, 2008 publications.waset.org/6786.pdf

caution since the research was limited with only 40 small-

medium sized firms. Future researches involving
managers/owners of top construction contractors can provide
a comparison of the results of studies conducted in other
countries.

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