Strategic Management in Construction Management

Strategic management concepts, nature of strategic decisions and the necessity of strategy in the construction industry to make it secure from surprises.

. What is strategy?

Strategy is a subject that has exercised the minds of political, military and business leaders for centuries. The earliest recorded attempts to define strategy emanate from Roman military commanders who sought to document the strategic options available on the battlefield. The acceptance of the need for strategic behavior in business is evidenced by the volume of literature dedicated to the subject. Much of the knowledge base has been developed by researchers and theorists; practitioners have had to apply critical judgments on how such theories can be applied to their own industry. This is particularly so in the construction industry where little material in the strategic management field has been available despite the efforts of authors such as Newcombe, Channon and Grinyer who have done much to bring strategic management theories to the attention of construction management practitioners.

. What is strategic management?

Strategic management is a systematic approach to major and increasingly important responsibility of general management to position and relate the firm to its environment in a way which will ensure its continued success and make it secure from surprises.
Strategic management is concerned with deciding on strategy, and planning how that strategy is to be put into effect. It can be thought of as having three main elements within it. There is strategic analysis, in which the strategist seeks to understand the strategic position of the organization. There is strategic choice which is to do with the formulation of possible courses of action, their evaluation and choice between them. Finally there is strategic implementation which is concerned with planning how the choice of strategy can be put into effect. The three elements of the the strategic management are often seen as sequential in traditional texts, but actually they overlap and interact so that partial implementation may modify strategic choices for example.

. The concept of strategy and the nature of strategic decisions

There are common themes in the definition of strategy. Strategy is concerned with the means to meet ends, that is it is concerned with achieving objectives. A strategy is also a set of rules for guiding decisions about organizational behavior. Strategies may be explicit or implicit., kept within the senior management team or pervading the organization to produce a sense of common direction

Two views have emerged on the nature of strategy:

• The first perspective views strategy as planning mod. A strategy is worked out in advance, is explicit and managers develop a systematic and structured plan to meet objectives.
• The second perspective sees strategy as an evolutionary mode. From this viewpoint strategy evolves over time, is not thought out and planned but is a stream of significant decisions.

. Characteristics of strategic decisions

• They are concerned with the scope of the organization's activities and the interface with the environment.
• They seek to match the strengths and weaknesses of the firm to the opportunities and threats in the market place
• They seek to match the firm's activities to the capabilities of of the organization and its resources.
• They commit the organization to changes in the use of its existing resources or to obtaining additional resources
• They affect operational and administrative decisions
• They are complex because there is always a high degree of uncertainty about environmental forces and outcomes.
• They affect the long term direction of the firm.

. Why is strategic management necessary?

• A rapidly changing environment requires greater corporate awareness of changes and their implications for the organization.
• There is need for companies to have stability as far as possible and avoid the crises brought about by strategic surprises.
• The systematic appraisal of the strengths and weaknesses of the organization and matching these to the opportunities and threats in the environment is crucial for survival in a competitive market.
• the larger the organization the more difficult is to change quickly - hence the need to anticipate change that much earlier in order to develop an appropriate response.
• Corporate harmony is enhanced if the organization is seen to have a clear strategy. People then know where the organization is going and can tailor their contribution accordingly.
• Consistent financial performance is likely if the organization's activities are systematically thought through with realistic forecasting of the results.

. Who should do it?

The strategic management role can be filled by an internal individual or team or an external consultant or executive director. A combination of both internal and external modes is sometimes used.

. When should it be done?

The timing of the strategic management is crucial to its success. Finding time time to do it is also vital.

. What strategies are best?

There is no "best" strategy which is applicable in all circumstances. A contingency approach to strategic management is essential, based on the objectives of strategic managers.

. Levels of Strategy

• The corporate level: Which businesses or markets the company should be in
• The business level: How to compete in a particular market
• The operational level: Decisions by heads of functional departments - estimating, buying, plant, etc, and decisions by managers of construction projects often impact on the whole business since individual projects represent a large proportion of a building contractor's turnover and therefore profit.

References: 

• - Newcomb, R, Langford D and fellows, R Construction Management, volume I
• - Fellows R et al, Construction management in practice

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