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CHAPTER  II

 

 

 

REVIEW OF RELATED LITERATURE

            This discussion presents the literature covering  some issues of the small and  medium enterprise (SME) in general and on construction firms in particular. Construction business is like any other enterprises, therefore many of business theories, methods and management are similar.  Starting on the firm itself and its  manager, owner and/or entrepreneur   then focusing closer to the research domain, the levels “of  knowledge and access to” business parameters, practices and skills, capability and projects. Management and entrepreneurship are then highlighted. Literatures or stories of entrepreneurs and other documented literatures are presented  first then the related studies.  Some references are having links  (CTRL +  click to follow the link or click reference if in website), if you are reading this with  internet ready  for instant access to additional information on the topic or subject.   

2.1       The SME in Construction and its Manager, Owner,  and/or Entrepreneur

            PESTG -  Political, Economic,   Socio – Cultural,   Technological, Geography-  all of these environment seemed to be present in the Lito Banal’s story.  In addition,  his educational background, experience, age and affiliations the environment were so right for him. He is a building contractor  while in his early twenties as a civil engineering graduate of  Mapua Institute of Technology in Manila, creating a flourishing home-based business. Were it not for the political instability (Marcos out and Cory Aquino in numerous coup d’etat attempts, etc.),  Lito heeded to his mother’s prompting to leave his native Floridablanca, Pampanga and join his sister in New Zealand.

Determined to succeed; hard work, self-confidence, determination, and dedication to chosen field as the key points to professional success. He become partner to a  commercial roofing contractors, both partners expanded through successful negotiations and acquisitions of major commercial and industrial contracts despite the competitive construction industry. There is always a church or an organization you can contact and from there, move on. The intangible rewards of friendship and sharing are boundless. http://www.migrantnews.co.nz/Achivers.htm  (M.Z. Coupe,  Migrant News, 2005)

Shinryo (Philippines) Company, Inc.,  (SPCI), was first established in the Philippines in 1990. Although the Shinryo  is a multinational, it started relatively modest in the Philippines.  It is an electro-mechanical contractor (not even a general contractor). In the early 90’s it had a contract in Bureau of Plant Industry (BPI) in Iloilo City. It won projects in the Technopark, Sta. Rosa, Laguna. Most of the employees and engineers are Filipinos.  Shinryo in its construction in the Philippines is truly entrepreneurial and managerial. Following is extracted  from Shinryo’s Mission in the words of  its chairman:  “ We at Shinryo are proud to be Asia’s preeminent building services engineering company, and we are continually renewing our commitment to provide cutting-edge technology to the region and to the rest of the world.  Shinryo is dedicated to total customer satisfaction through a total service approach.  At Shinryo we are committed to develop technologies to address these issues while creating environments that prioritize human needs, and we are looking forward to the challenge of perfecting the next generation of systems - in Asia and around the world.” (Go Kagami, Chairman, 2005) http://www.shinryo-international.com/president.htm  

 

This story,   the “Successful Microenterprise: Balderama Story”  is  construction in nature, we can call the man “Ang Panday”. In 1990, a neighbor who wanted to give Mr. Balderama some business asked him to make a simple cabinet for him. He saved enough money to buy the plywood and he would then go to construction sites to look for nails that he could use for the cabinet. He sold the finished cabinet for PhP 200.00. Out of this income, they bought another piece of plywood and made another cabinet. ( http://www.microfinance.com.ph/stories/ )

This is one story where there is no need of higher education, only a firm grip on vision, risk taker and big, hairy audacious goals (BHAG).  His vision is to be “ FedEx”  ( see Section 2.4, Entrepreneurship & Entrepreneurial Skills ) of junk removal. Brian Scudamore started his company 1-800-GOT-JUNK? in 1989 straight out of high school with $700 and a beat-up old pick-up truck. Today they have 95 franchise partners across North America with a true national presence — they are in 47 of North America's top 50 cities. Scudamore was a risk-taker, but firm in his vision. "With a vision of creating the 'FedEx' of junk removal.  On the other hand, he's a big believer in letting other people share some of the risk. His choice of franchising as a business model allowed him rapid growth without having to turn to outside investors or other funding sources.. Taking a low tech business and putting a high tech spin on it allowed them to rapidly distinguish themselves from their competition. 1-800-GOT-JUNK? will do about $32 Million in 2004 — not a bad return on a $700.00 investment! Brian's BHAG (Big Hairy Audacious Goal) is $100 million and 250 franchise partners by Dec 31st, 2006. He says confidently, "We will get there."  (Scott Allen , 2005), http://entrepreneurs.about.com/mbiopage.htm

 

2.2       Level of Knowledge of

Strategic Plan                                           

          As a pre-requisite  to developing a strategic plan, it is desirable to clearly identify the current status, objectives and strategies of an existing business or the latest thinking in respect of a new venture. Correctly defined, these can be used as the basis for a critical examination of  existing or perceived Strengths, Weaknesses, Threats and Opportunities (SWOT). This then leads to strategy development covering the following issues:  vision, mission, values,  objectives,  strategies, goals and programs.

Peter  Drucker set a “classic” definition of strategic planning in his  1973  book  in mamagement.  He  indicated that planning was nothing new – it was simply the organized performance of an old task. His definition was simple – planning was the continuous process of making entrepreneurial (risk taking) decisions systematically and with the best possible sense of “futurity”, systematically organizing the efforts required to carry out the decisions and then measuring the results of those decisions against expectations (systematic feedback). His  basic thesis was that organizations needed to treat management (and therefore planning) as a disciplined science. With discipline came the opportunity to learn from previous experience and to share those experiences throughout an organization.  Peter Drucker said that if you don’t know where you’re going, any plan will do, and   when preparing the mission statement, it is time to ask some fundamental questions. What is our business? Who is the customer? What is value to the customer? What will our business be? What should our business be? ( http://www.beaconproject.org/strategi.htm#Definition)

Porter (1980) spearheaded the push to planning based on  nature of external, competitive forces in an industry or business sector. Porter defined a planning model and process that was based on gaining an understanding of the competitive forces that define an industry and it’s  attractiveness from a business perspective. Porter’s Five Forces model (see Fig. 2.1) is a  planning framework based on the relationship between industry competitors, potential entrants, suppliers, buyers and substitutes,  was ultimately created to help companies achieve profitability objectives.

 

 

            Porter’s Five Forces model (see Fig. 2.1)

          click:

          (http://www.quickmba.com/strategy/porter.shtml )

         

 

 

Nevertheless, the underlying theory suggested that the concept or practice of better understanding of external environments could be transferred to other sectors, including not-for-profit and government organizations.  Michael Porter described a concept that has become known as the "five forces model" (http://www.quickmba.com/strategy/porter.shtml ). This concept involves a relationship between competitors within an industry, potential competitors, suppliers, buyers and alternative solutions to the problem being addressed.

One of the early “modern” conceptual frameworks for business planning  was developed by Igor Ansoff.  The Ansoff Matrix,  Source: H. Igor Ansoff, “Strategic Diversification” , Harvard Business Review, September-October 1957; http://homepages.wmich.edu/~mmccardle/Files/Strategy/Strategy%20Intro%20Fall05%20-%20net.ppt ) an approach based on the concept that there were only four ways an organization could expand it’s markets or overall business performance, was also sited by Woyzburn. These were:  selling more of the same products to existing customers; selling new products to existing customers; selling existing products to new customers; and  selling new products to new customers. The inherent risk of each approach increased as the organization moved away from familiar products and clients to unfamiliar clients and new products.

The picture shown below (Fig. 2.2)  is the most strategic rhyme more than a hundred years ago.

 

 

 

            (Fig. 2.2)   

            See site add-on  Power Point Presentation

 

 

 

 

The concept of strategic planning had been with us since man has to get from “point A” to “point B”.  Most planning organizations are very familiar with the teachings of Sun Tzu who wrote of warfare and the strategic underpinnings of success in 500BC. In fact the word strategy stems from the Greek strategos which means the art of the General or Commander-in-Chief. It was even alluded to by Lewis Carol in Through The Looking Glass (Robert Woyzburn, 2002). http://www.the-marketing-works.com/pdf/planning.pdf

A critical review of past performance by the owners and management of a business and the preparation of a plan beyond normal budgetary horizons require a certain attitude of mind and predisposition. Some essential points which should to be observed during the review and planning process include the following: relate to the medium term i.e. 5 years or even more,  be undertaken by owners/directors, focus on matters of strategic importance, be separated from day-to-day work, be realistic, detached and critical, distinguish between cause and effect, be reviewed periodically and write it down. If you don't know where your business is going, any road will get you there (Planware, 2005). http://www.planware.net/pressreleases/article.php?c=1-4-05_Wethersfield.txt

Marketing Plan

            Many of the parts and contents are similar to the strategic plan but it must be included. These discussions here, business and financial plans are taken  from Planware (2005).   The executive summary must not be more than two pages. It should be very easy to understand and clear. It should contain all the most salient points of the plan. The following are the content of a conceptual marketing plan ( the target reader should also be considered):  Company Description - This part should highlight the recent company history and successes of the organization.; Strategic Focus and Plan - This section should cover aspects of corporate strategy  that influence the marketing plan. are  (a) Mission/Vision, (b) goals, and (c) core competencies/ sustainable competitive advantage; Situation Analysis - The situation analysis focuses on the “where are we now”, the SWOT in the strategic plan; Situation Analysis - This section describes the five-year marketing and product objective for company and the target markets in the area of operation, points of difference, position of its line of products and services; Marketing Program - The four marketing mix elements are detailed here,  product, price, promotion, place. (product include services);  Financial and Data Projections; A mathematical model of  the company ---- 5 year projection; Organization - Organizational chart and breakdown of jobs; Implementation Plan - Timetable, benchmarks , bar chart with an S-curve is recommended. This includes budgeting; and Evaluation and Control - Comptrollership,  measurements of actual results against actual results and balance scorecards.

There are many of the items here that are practically a part of  other plans, for example projections are part of financial plan.

Business Plan

A business plan is a plan that enables a business to look ahead, allocate resources, focus on key points and prepare for problems and opportunities presented by changing business environment. Generally people think of business plans, first for starting a new business or applying for business loans. However, business plans are also vital for managing an existing business, whether or not the business needs new loans or new investments. Businesses need plans to optimize growth and development according to plans and priorities.

A business plan acts as a communication tool, which can be used to attract investment capital, secure loans, and assist in attracting strategic business partners. As a management tool, a business plan helps in tracking, monitoring and evaluating the progress of a business. As a planning tool, the business plan guides an entrepreneur through the various phases of the business, which helps in identifying roadblocks and obstacles that can be avoided (Planware, 2005)..

 

Financial Plan

 

            Many of the financial plan concepts had been discussed in the marketing plan. A very important part  which almost all, specially SME, businessman forget about is the cash flow  in addition to the balance sheet and the income statement. A 5-year projection will be sufficient for many uses as in loans. A project with a longer life or payback period will need a longer projection. Financial statements are commonly done only when filing a BIR returns or tax purposes or for complying only a requirement of a loan. But a financial plan is much more than that.( DTI,  http://www.dti.gov.ph/contentment/66/69/555.jsp ) 

Engineering  Construction Technology

The SME in construction sector is important as it  is a major employer, and one with reasonable equity benefits in terms of distribution of income. A strong SME in construction sector is critical in terms of the goods (materials) and relatively cheap services it provides to large enterprises and to informal, micro-enterprises. It is suggested that a technologically strong SME in construction system in developing areas  will also be necessary to develop, attract and work with large enterprises.

Here is a company that emphasizes and give importance to mission, vision, environment and health and safety. The mission state that  “ Engineering never runs out of room for improvement.  With the ever-changing construction technology man has continuously formulated innumerable impeccable ways of building exquisite structures.  In like manner, Monolith Construction & Development Corporation (MCDC, 2005) believes that the ultimate goal of construction is high quality attained through workable means without laying on the line the preservation of the health and safety of MCDC staff and employees and the general public, as well as, the protection of the environment”  while its vision is     to become a living instrument of high quality creation and be of ultimate service to the construction world” . It must be worth noting that the construction is relatively large, but the sub-contractors are well within SME level. (http://www.monolithconstruction.com/)

In the Philippines, many of the larger companies are working with and hiring many sub-contractors that are   SME in construction and some of these companies are  First Philippine Holdings Corporation (http://www.fphc.com)  whose businesses are Businesses in banking, finance & leasing, construction & construction materials, electronics & technology telecommunication and other manufacturing;  Jardine Davies, Inc. (http://www.jardinedavies.com)  who are involved in the distribution of building and industrial materials and agricultural chemicals; and PHINMA Group (http://www.phinma.com)  involved in services include property and shelter, energy, education, financial services and foundations

 

2.3       Level of Access to

Marketing  Facilities

Myrna Rodriguez-Co , Contributor, UP ISSI  and Inquirer News Service posted this short write-up which is very important in marketing a construction business be it SME or bigger in the Philippines. Many big institutions--public and private--have their own contractor accreditation schemes. Ask how you might be able to break in. Usually, they would require you to submit your own portfolio of accomplished construction projects. Better if you have pictures to show. Best of all, the edifices you've built--no matter how few--should be able to stand close scrutiny, as they now stand.

How are you as a networker?   It seems to me that aggressive and patient networking is the way to go for "struggling" contractors. Of course, putting up a network is not a simple as it sounds. You have to patiently, constantly, and deliberately meet people and approach institutions. It means developing contacts that would lead you to more contacts.  Myrna Rodriguez – Co wrote further  that  the obvious place to network is your own social circle. Start with your community. If it is a growing village or barangay, so much the better. Are you active in your homeowners association? What about civic associations like the Jaycees or the Rotarians? Are you with religious communities like Couples for Christ and Marriage Encounter? Members of the Iglesia ni Kristo church, for example, are well known for taking care of their own.

While you're at it, start tracing your school chums, your fraternity brothers, your barkada (gang) during your heydays. They have grown up, like you, with their own families, affiliations and networks. Join reunions. If you are not yet with a group, consider joining some, the better to disseminate your business card and reputation around. It will also help to join contractor's associations. Make the acquaintance of your local congressman; look for a go-between. In the Philippines, the "padrino" (patron) system still works, you know. Subtly, let your congressman know that you support him; just as subtly ask him to give you a chance to be of help in the infrastructure projects he is sponsoring for your community. Then build up the relationship. In the same way, find bridges to your mayor, your municipal/city engineer. All of these can be wellsprings of prospective construction projects. (Co, Myrna Rodriguez, Oct. 26, 2003).

http://money.inq7.net/features/view_features.php?yyyy=2003&mon=10&...&file=2

Objectives of Department of Trade and Industry (DTI) are the marketing development programs of the National SME Development Agenda seek to increase exposure of SME products in domestic and foreign markets. They also seek to improve distribution of SME products among and between the local manufacturing and trade sectors. Although on this documentation construction is not a priority, it is included on many of its programs.  The marketing programs include  Trade Fairs - Virtual & Physical, Buying & Selling Missions, Permanent Mini-Philippines SME Trade Houses, Buyer-Supplier Matching, Tradeline Philippines. Institutions involved in marketing are Bureau of Small and Medium Enterprise Development (BSMED) , Bureau of Domestic Trade (BDT), Bureau of Export Trade  Promotion (BETP) and Center for International Trade Expositions and Missions (CITEM). (http://www.dti.gov.ph/contentment/66/69/556.jsp)

DTI has already been able to assist thousands of SMEs nationwide in their endeavor to take their enterprises to a higher level. Targeted and collaborative interventions in financing, marketing, training, product development/technology intervention, and advocacy have resulted in higher business performance for many of these companies, as measured in their assets, employment, and sales.

Financial Facilities

            One of the many banks that provides for the SME in construction is the Planters Development Bank (http://www.fao.org/ag/ags/agsm/Banks/banks/philipp3.htm).  The term loan whose  program objectives are to  provide loans for fixed asset acquisition and permanent working capital requirements.  Eligible borrowers are  individuals, partnerships and corporations having an asset size of not less than P1.5 Million;  companies engaged in the business for at least three years; and companies operating profitably for the last three years.  The loan purpose  is for  permanent working capital;  fixed Asset Acquisition such as purchase of machines, construction/ renovation of building/plant facilities. The terms and/or requirements  are  amount  minimum of P5.0 Million and  maximum of P30.0 Million. 

Interest charges are prevailing bank lending rate available at variable or fixed rate options. 

The maturity/repayment  is  maximum of ten years, payable monthly or quarterly.  The  security of loan is Real Estate Mortgage (REM) or a combination of REM/ Chattel Mortgage.  This program is certainly good for SME in construction.  (http://www.aaadir.com/banks/bank_detail.jsp?ID=9794 or http://www.plantersbank.com.ph/sme-news-02152006-01.html)

            Looking back at the requirements of this type of loans, security is the hardest to be satisfied if not properly qualified SME in construction owners. A real estate or residential and commercial properties that are easily marketable. The chattel mortgage, especially machineries are not so readily acceptable, it is written there but banks seldom approves it as collateral. The amount of loan will be about 60% of the property valuation. Interest rates  are dependent on the risk of the bank in evaluating the borrower.  The repayment period  depends on the type of loan but banks normally offers 5 – 10  years for a long term loan. A very careful study of these bank loans, it suggest normal treatment on construction SME, that is like that of non-SME borrowers.

Financing assistance, (http://www.dti.gov.ph/contentment/66/69/555.jsp ), are available in the DTI supported programs and some information are extracted  in the following explanations.  This financing assistance is more accessible to construction SME as they are really programs geared towards helping them.  There are additional requirements which are listed on the website of DTI.

In support of the National SME Development Plan, the government financial institutions (GFIs) collaborated to design a uniform lending program, tailored fit to meet the funding needs of SMEs. Under the unified lending program, the participating GFIs shall apply simplified and standardized lending procedures and guidelines, e.g., loan purpose, fee structures, interest rates, application forms, financial ratios, and other lending parameters, for evaluating the loan applications of SMEs.  To adopt to the financing needs of SMEs, two types of loans are available under the program are short term loans payable in one year, and  long term loans that are payable up  to five years.

The unified lending scheme is in addition to the existing financial services of the participating GFIs. The long term of up to 5 years is not really long enough, but these are the available terms. The  type of loans may be funded are  for short-term loans,  the entrepreneur may tap the program either for export financing (export packing credit) or a credit line for temporary working capital. and  for long term loans, SMEs may apply for loans for permanent working capital, or to purchase equipment, a lot or to construct a building or warehouse.

Interested entrepreneurs may approach the head office or branches of  any of the following GFIs :  Development Bank of the Philippines (http://www.devbankphil.com.ph/), Land Bank of the Philippines (http://www.landbank.com/), National Livelihood Support Fund (http://www.ops.gov.ph/records/eo_no362.htm), Small Business Guarantee and Finance Corp. (http://www.sbgfc.org.ph/), Philippine Export-Import Credit Agency (http://zeus.philexim.gov.ph/).

Engineering Construction Technology Facilities

          Design and construction of advanced technology facilities requires a significant investment in both money and personnel resources. To add to the challenge, time-to-market is often a primary driver. Design and construction schedules for larger projects have been compressed . This presents several key challenges to the designer, most notably, how to

define criteria and make key technical decisions quickly, in a manner that can be communicated and coordinated with many parties simultaneously. Often, decisions must

be made based on assumptions regarding the requirements of manufacturing technologies and tools that are still in development. Application of systems engineering concepts to a complex facilities design problem offers many advantages to the design team, constructor, and owner. It allows the team  to clearly define the requirements and criteria (or make

necessary assumptions) before significant design effort is expended, and allows different design elements to progress at different schedules to suit the availability of information while still maintaining pre-defined system interrelationships. (INOCOSE, 2001), http://www.incose.org/sfbac

            ILOILO City's flooding woes will hopefully be solved with the implementation of the Iloilo Flood Control Project II.  P4-billion mega floodway project is partly funded by the Japan Bank for International Cooperation (JBIC) from 2003 to 2006, with the component projects to be provided by the local government units. A floodway will be constructed to redirect the waters from the Aganan and the Tigum Rivers to prevent flooding of Iloilo City districts. Package 1 involves the construction of Jaro Floodway and the improvements of Tigum and Agananan Rivers. Package 2 includes the improvement of Jaro River mouth, Upper-Ticud-Ingore Creek and Iloilo River while Package 3 involves the development of Sooc Relocation Site in Mandurriao and the upgrading of access road to Kasadyahan Relocation site in Barangay Balabag, Pavia, Iloilo. Package 4 includes the development of the 25 to 30 hectare land that the Iloilo City government will purchase as a relocation site and the consultancy and technical assistance.  The  more than 2,000 families that will be affected by the project will be provided a relocation site. This project will involve a lot of contractor with engineering facilities for the packages of work There will be  contractors local, national and international in scope. (Sun Star, 2 June 05, 2003), http://www.sunstar.com.ph/static/ilo/2003/06/05/news/iloilo.flood.control.project.underway.html

Another project in Iloilo is the construction of the Iloilo international airport. Department of Transportation and Communication (DOTC) and the Taisei-Shimizu Joint Venture signed the contract for the construction of the 6.2-billion-peso airport. On Friday, the Japan Bank for International Cooperation (JBIC) signed its concurrence to the contract. JBIC is putting in 5.2 billion pesos for the project from its Special Yen Loan Package.  Iloilo City airport is the fourth busiest in the country in terms of the number of passengers next to the Ninoy Aquino International Airport and the Mactan (Cebu) and Davao international airports. The new airport will be constructed in a 188-hectare area straddling the towns of Sta. Barbara and Cabatuan, which is around 24 km west of Iloilo City. It will have state-of-the-art facilities including a modern terminal, control tower buildings, and landing and navigation systems. It will have a runway 2.5 km long and 45 meters wide, a passenger terminal with 12,000 sq m of space and a 1,281 sq m-cargo terminal. Again, although the general contractor is Japanese, it will involve lot of SME in construction.  (Burgos Jr,  Nestor, PDI, 2004), http://www.inq7.net/reg/2004/mar/23/text/reg_4-1-p.htm 

A construction facility that poses hazards and  long-term construction can undermine a school's goal of providing a comfortable and attractive campus experience. Construction sites can pose safety risks for students and staff who have to pass by heavy equipment and other construction elements on their way around campus. And safety is even more of a concern during weekends, when partying students may be less aware of potential hazards. One potential solution to these challenges that university officials generally overlook is modular housing. Modular — or manufactured — housing has been around for more than a century. With modular, individual modules are built off-campus in a factory to the specifications of campus planners or architects. When complete, the newly constructed residences are transported to campus and put in place. (Cardenas, Alberto and Domenech, Fernando, Dec 1, 2005), http://asumag.com/Construction/university_assembly_required/

More discussion  on engineering construction facilities an the following sources:  A Project Primer , Aug 1, 2004, by  John E. Osborn, (http://asumag.com/Construction/university_project_primer/);  Smooth Operations, Nov 1, 2004, by Jeffrey M. Paul, (http://asumag.com/Construction/university_smooth_operations/); Building Green, May 1, 2004, by Mike Kennedy, (http://asumag.com/Construction/university_building_green/);  and Facility Planing: What is Flexibility? Apr 1, 2004, by James E. Rydeen, (http://asumag.com/Construction/university_flexibility/).

 

Training and Networking  facilities

Training Facilities

            Training programs are available for construction people and they are quite accessible in Metro Manila.   The Construction Manpower Development Foundation (CMDF) comes up with relevant strategies and an overall construction manpower development plan. It also develops and implements manpower training and certification programs. Human resources development covers  skilled craftsmen, engineers, supervisors, managers, and contractors.

The CDMF conducts training and certification on Construction Management Series: for supervisors and managers, Construction Technology Awareness and Improvement Series: for engineers and other technical personnel, Trainers' Training on Occupational Safety and Health: for safety and health officers, Basic Construction Technology Series: for skilled construction craftsmen, Construction Managers' Training and Certification Program (CTF): to train, evaluate and certify engineers at supervisory and managerial level and provides information on productivity and management for continuing technology and management upgrading. (http://www.mydestiny.net/~cmdf/)

There are other agencies providing training to entrepreneurs and their respective personnel.  It mostly handled by government agencies and they are on most cases in Metro Manila with very few of these facilities in the provinces.  There is another training facilities, the training and entrepreneurship development programs of the National SME Agenda seek to provide existing and potential entrepreneurs with the necessary skills and knowledge to become competitive players in the local or global market. It also seeks to create a pool of SME trainers, advisors and counselors who can effectively assist SMEs nationwide.

The training programs are Entrepreneurship & Skills Training for Potential Entrepreneurs, Training on Specific Skills and Knowledge,      Skills Upgrading for SME Service Providers and Business Management Competency Courses and the training agencies are Philippine Trade Training Center, DTI (PTTC), (http://www.dti.gov.ph/contentment/37/index.jsp or at www.dti.gov.ph/contentment/7/8/754.jsp);  Cottage Industry Technology Center (CITC), (see the http://www.coa.gov.ph/COA_htm/2000_AAR/GOCCs/CITC/CITC_es00.htm);   UP Institute for Small-Scale Industries (UP-ISSI), (http://www.upd.edu.ph/~issi/aboutus.htm);  Technology Livelihood & Resource Center (TLRC),( http://www.tlrc.gov.ph/ ); Technical Education & Skills Development Authority (TESDA), (http://www.tesda.gov.ph/ );  and DOST Technology Training Center, ( http://www.dost.gov.ph/media/article.php?sid=35 );   Technology Application and Promotion Institute (TAPI), ( http:// www.tapi.dost.gov.ph )

            Many of these agencies are not specifically for construction but certainly TESDA and DOST caters the construction industry.  The programs are certainly good for the SME in construction.             The compendium of 2004 HRD and Entrepreneurship Training Programs for SMEs being offered by government training institutions is done in support of the National SME Development Agenda, a priority program of H.E. President Gloria Macapagal Arroyo. The Department of  Trade and Industry is the lead government agency tasked to implement the Agenda and provide SMEs with seamless access to government agencies.

 HRD and Entrepreneurship Training is one of five core elements of the Agenda including financing, marketing, product development and technological intervention, advocacy for an enabling environment. Management, and Construction Safety & Health. The training and entrepreneurship development programs of the National SME Agenda seek to provide existing and potential entrepreneurs with the necessary skills and knowledge to become competitive players in the local or global market. It also seeks to create a pool of SME trainers, advisors and counselors who can effectively assist SMEs nationwide. Some of the training available in construction are Construction Project Management, Construction Project Contract, Construction Project Quality, Construction Project Time, Construction Cost

Networking  Facilities

There are two linkage facilities described here, the CMDF a government organization and “Globalpinoy” an NGO.    The Construction Manpower Development Foundation (CMDF) comes up with relevant strategies and an overall construction manpower development plan. It also develops and implements manpower training and certification programs. The CMDF establishes network linkages with industry and professional associations, universities, government intra-agencies and local government units in the implementation of its key programs. 

Contracting & Managing Construction Business contacts and linkages  can  also be made possible by the GLOBALPINOY CHAMBER OF SMALL AND MEDIUM ENTERPRISES, Inc.  is a non-profit, dynamic, vision and program oriented NGO based in Quezon City, Philippines. Globalpinoy Chamber of Small and Medium Enterprises. Inc. believes that a principal reason why the Philippines continues to lag behind its Asian neighbors in economic development is because of the lamentable absence of a wide-spread entrepreneurial orientation and a woeful lack of entrepreneurial skills among Filipinos. Even today, our youth are still brought up on the principle that the key to success is to get a good education preferably with impressive grades to be able to find good employment in big multinational companies. One look at our more successful Asian brothers will easily reveal that their economies were founded on local entrepreneurships, not employment.

            There is therefore an urgent need to correct this anomaly that has left our country behind in economic development. This is most crucial as the whole world economy now faces the onslaught of globalization, a trend which cannot be stopped and will not be stopped . Our country drastically requires the development of a mass-based entrepreneurial class if we are to survive globalization. A country of employees such as ours will always have a government that is beholden to multinational companies. (http://www.geocities.com/pinoyvip/entrepinoy.htm)

 

2.4       Practices and Skills

Management

Construction management has encountered a number of schools of thought. Succeeding schools of thought about management modify and extend existing ones but not supersede them as they still continue to exercise sway over ways in which organizations operate. ( http://www.misronet.com/construction_management.htm ). By tracing the evolution of management as a discipline, four major schools of thought can be recognized; Classical approach (1900), Human relations approach (1925), Systems approach (1950) and contingency approach (1975). The system approach is used at the theoretical framework of this study (Sec. 1.4). After presenting the evolution of management, then some of the practices  of  construction management is discussed.

Evolution of Management

1- Classical Approach to Management: 

Scientific management: Introduced by Fredrick Winslow Taylor (1856-1917).

By scientific management Taylor meant the systematic observation and  measurement of work which was intended to replace the traditional approaches to work based on rule-of-thumb, intuition, precedent, guesswork and personal opinion. Taylor's objective was to improve efficiency and his quest was to identify the "best way" of doing any job. Taylor argues that having established the best way of doing the job then management should select a 'first-class' man who has physical and intellectual qualities to achieve the required output and then systematically train him to use only the 'best way'. Taylor sought to separate the role of managing the work; i.e., planning and organizing, from the actual execution of the work.

Administrative management: Introduced by Henri Fayol (1841-1925)

            Fayol's definition of management was in terms of five functions: To forecast and plan: "Examining the future and drawing up the plan of action" ;             To organize: "building the structure, material, and human of the undertaking";      To command: "marinating activity among personnel";  To coordinate: "binding together, unifying and harmonizing all activity and effort";  To control: "seeing that everything occurs in conformity with established rule and expressed command"

Bureaucratic Model: Introduced by Max Weber (1864-1920).

Weber was concerned with the way in which authority was exercised within organizations. Authority, where orders are voluntarily obeyed by those receiving them, was distinguished from power, which is the ability to force people to obey. Weber describes three types of organizations based on the way in which authority is legitimized. Charismatic form of organization in which authority is based on the personal qualities of the leader, traditional organizations in which the bases of authority are precedent and usage, and rational-legal in which authority stems from holding a particular position in the organization.

 

2- Human Relations Approach

The founder of the Human relations approach is widely recognized to be Elton Mayo, who undertook what became known as Hawthorne investigations that took place at Western Electric Company in Chicago. Mayo concluded the following: Man is basically motivated by social needs; Satisfaction at work derives from social relationships at work rather than from the work itself;  The work group itself exerts more influence on a worker than do incentives and controls used by management; A manager will be effective only to the extent that he can satisfy his subordinate social needs; Though Mayo's research methods were heavily criticized, the impact of the Hawthorne investigations on management thinking was considerable particularly the realization of the "Human factor" and the "Informal group"

3- Systems Approach (was discussed in Sec. 1.4)

The key concepts of the systems approach evolved in response to a rapidly changing environment. It expanded on the previous schools of thought in two ways:      The focus of the systems theory is the whole organization comprising a set of interacting sub-systems; and The relationship between the organization and its environment is a central concern of the systems theory.

4- Contingency Approach

The most recent school of thought about management. It combines the other three approaches and states management actions cannot always relate either to general or unique circumstances but depend on contingency factors and circumstances. In other words, the way in which an organization organizes and manages its tasks is contingent on the circumstances in which it operates.

 

Management Practices &  Managerial  Skills

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

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

( Misronet, Inc, 2005). ( http://www.misronet.com/strategic_management.htm ).  A mission statement of   Strategic Construction Management, Inc.  (SCMI, 2005), ( http://strategic-cm.com/main/firmoverview.htm  ) will continually strive to provide superior service with the highest level of integrity. We will make a difference to our clients and community. Our focus remains firmly on our clients through pro-active communication, collaboration, leading edge technology, and good old-fashioned hard work. We succeed through pro-active communication, close collaboration, extraordinary attention to detail, field-proven techniques, and an unsurpassed work ethic. The following also discussed the practice of  strategic management and other business elements as marketing and financing: Langford, D and Male, S (2000), ( http://www.blackwellpublishing.com/book.asp?ref=0632049995  );  U.S. Small Business Administration,  ( www.sba.gov/library/pubs/mp-5.doc  ).           

The above literatures are business management in a construction firm, safety and health is another important aspect of managing a (small) construction firm. Lauren Pinch (2005?), tells about  TerWisscha Construction, Inc., Willmar, Minn. experience.  After 150,000 volts of electricity nearly killed one of his employees, Kelly TerWisscha, president of TerWisscha Construction, Inc., Willmar, Minn., knew he never wanted to experience another serious safety incident on his watch. While operating a boom truck near a high-voltage power line in a storage yard, the employee mistakenly raised the boom up to the line, sending a jolt through the truck, into his hands and then through his toes. The employee lived, but lost his toes as a result of the accident  Safety Makes Small-Business Sense. A near-fatal accident can be the wake-up call a company needs to reevaluate its safety training and enforcement. But ideally, it shouldn’t take a serious accident to motivate a company to make safety an ongoing priority. Contractors agree safety management should be preventative rather than reactive. It should be integrated with every aspect of business, as a part of everyday life on the job. Managing a successful safety program - on a small budget and without a safety department can be a challenge.( Pinch, L,  2005?), (  http://www.abc.org/wmspage.cfm?parm1=2760 ). 

Other sources of safety literatures in construction are  Associated Builders and Contractors of Western Washington,   http://www.abcwestwa.org/safety.htm  (2005) ;

Debra Sharpe  discusses  and  presented OSHA at  http://www.auburn.edu/administration/safety/constclass/constsafetysessionf4.ppt ;  and the Philippines ratified the Safety and Health in Mines Convention (No. 176, 1995) http://www.itcilo.it/actrav/english/calendar/2001/a3_2387/resource/thiesson/machida_article.htm, (1998 ).

 

 

Entrepreneurship (practice) and Entrepreneurial Skills

Federal Express (Fedex) is now one of the largest in the world in air delivery system owning fleets of Boeing and Airbus aircraft today.  It is practically everywhere, the Pacific Hub is in Subic Industrial Estate, Olongapo. It has a branch in Iloilo City where it is operated as an SME. It started SME type of business in USA, Frederick Smith the founder, has undergone so many ups and down. Learn more about FedEx, from the early history of Federal Express to the contemporary business story of FedEx Corporation. Or, view the FedEx historical timeline. (http://fedex.com/us/about/today/history/timeline.html)

 Federal Express  Corp is the premier global provider of    transportation, e-commerce and supply chain management services.  The company offers integrated business solutions thru a network of subsidiaries that operate independently yet compete collectively.  Founded by Frederick W Smith, Chairman and President. Born in 1944 in Marks, Miss., Smith attended Yale University, where he earned a B.A. in 1966. Smith served as an officer in the U.S. Marine Corps from 1966-1970. 

Based in Memphis, Tennessee it  began its operation on April 17, 1973  by  starting out with 14 small aircraft from Memphis. Delivered only 186 packages to 25 cities from Rochester, NY to Miami, Florida. Fedex  did not show a profit until July 1995. Fedex did the following:  first company dedicated to overnight package delivery; first express company to introduce the overnight letter; first to offer 10:30am next day delivery; first to offer Saturday delivery; first to offer money back guarantees and first company to win the Malcolm Baldridge award for excellence in 1990. Frederick W. Smith was really losing, but on his insistence and determination he was able to find financing (US Government) and go on.

Robert Francisco, 39 BOYD COFFEE:  “ What sets us apart from the competition is that we choose whom to supply coffee to. It's not niche marketing; it's customizing a market for those who want to be special. The special attention we give to coffee is what makes us special.  We're also a one-stop shop selling coffee machines.”  Rowena Galang, 34 ETC. CARTS:  I invested P600,000 in Etc. Carts Inc.  Rowena recouped her investment in two years. With Etc. her  time is her own. Rowena has this to say “as an entrepreneur you have to be creative and have lots of stamina and guts. You must work hard. You must know your market and give it the best quality, price, and service. You must make your customers feel good so they'll keep coming back 

( http://www.entrepreneur.com.ph/cover/inspiring_stories_18_entreps2.html ).

Born in 1916, Ewing Marion Kauffman was an entrepreneur, Major League Baseball team owner and philanthropist. He believed his success was a direct result of one fundamental philosophy:   Treat others as you would like to be treated. The people in the company were called associates, not employees, all are stockholders. Two basic philosophies of the company:  a)     those who produce should share in the results or profits and b) treat others as you would like to be treated.  There were 3400 associates, 360 become millionaires. As of 1993, it has over 9000 associates and sold over US$ 3 billion,  (Hisrich and Peters, 2002), ( http://www.kauffman.org/ewingkauffman.cfm ).

            With a belt and a purse, Lillian Vernon launched a business that is now the only woman-owned firm on the American Stock Exchange.  At  23, Vernon found herself pregnant, poor and desperate to help her family. But at the time, women rarely worked outside the home.  So Vernon, who read magazines voraciously, used $2,000 of wedding money to start her own mail-order business. She took out a small ad in Seventeen for a monogrammed belt-handbag set and filled the orders from her kitchen table. That ad alone generated $32,000 in sales. (Hisrich and Peters, 2002), http://www.ailf.org/notable/iaa/ny2000/vernon.htm

Challenges facing entrepreneurs are:  businesses are run with relatively high losses and inefficiencies without knowing actual figures!; major decisions are not prepared and evaluated in necessary detail, compared by consequences, optimized and monitored in implementation; and the potential is underutilized, developments are risky, results may be unpredictable and unexpected. Entrepreneurs & management of SMEs need assistance in bringing up:  culture in business planning, monitoring and measurement; understanding and using Total Quality Management principles; structured practical management in Continuous Improvement; resources and knowledge to introduce and effectively use IT tools for business monitoring, measurement and decision preparation; obtaining know-how and training in performance management (lack of time and funds for training, its well targeting, etc); and assistance by Regional Governments, Associations, Chambers, etc. in building capacity to improve the situation. (Enterprise Performance Improvement Centre,  GOLEM IMS GMBH, Vienna, Austria, 2001), ( www.win2biz.com/eng/Download/SME_Program_intro.ppt );  see also (Serge Golovanov, 2001) at ( www.unido.org/userfiles/TasnadiB/Golovanov.ppt ).

2.5       Related Studies

The traditional theories explaining strategy focus on the more deliberate mechanistic and structured approaches and view strategy development as a systematic and linear process emphasizing the final output, which is the strategic plan. The more recent approaches focus on the ability of the firm to adjust to their competitive environment and the need for a less structured more emergent approach emphasizing the process of strategy development. This emphasizes the importance of a strategic thinking culture in the firm. Strategy and strategic management literature is characterized by a number of different definitions which emphasize and prioritize the planning element in the context of the larger firm. This bias towards the large firm context poses difficulties not only for the researcher but also for the practitioner in the small firm who is grappling with many theoretical concepts, which are not relevant or realistic to their specific situation   (Briga Hynes, 2000), www.sbaer.uca.edu/research/icsb/2003/papers/335.doc

Ian Fillis (2003), said that barriers to small firm growth traditionally relate to severe resource limitations, ranging from the financial to the human resource and managerial competency dimensions  Existing marketing theory can only go so far in its usefulness and applicability. Fillis further  offers some thoughts about alternative approaches to researching the smaller firm in general, while also offering some insights into particular small firm situations in the arts and within the process of internationalization. Research at the marketing and entrepreneurship interface is offered as a refreshing alternative and more viable paradigm of small firm marketing. Within this overlapping research discipline, creativity is a potential answer to overcoming severe resource constraints and the ineffectiveness of current marketing principles to account for actual small firm behavior. Within the context of the owner/manager and the smaller firm, incremental creativity, both in terms of developing new products and services within niche markets, and in terms of providing the necessary environment for the stimulation of new ideas and knowledge is a better alternative to existing ineffective prescriptions.   

( http://www.stir.ac.uk/Departments/management/ent/resmark.htm )

 

Baharun, Rohaizat, et. al, (2005)  examine the existing practice in managerial strategic and tools being used and problems faced by local Small Medium Enterprises (SMEs). Most SMEs operates with limited resources. With today’s arduous competition, it requires the SMEs to tune its current business practice to cope with the rapid changes in the business environment. Due to the rapid changes, it requires the SMEs managers to be equipped with new knowledge and ideas to promote effective managerial practices. In other word, SMEs need to have better trained managers, knowledgeable in managerial activities. Focus should be on the knowledge on financial management, human resource management and marketing management technique. This study empirically investigates the differences in the managerial practices of SMEs in the Malaysian Manufacturing sector. The most important findings of the study on managerial practices are that the SMEs appear to have a very limited knowledge of the overall spectrum of managerial practices. The purpose of this paper has been to provide some evidence regarding the SMEs’ managerial practices and problems. With respect to the practices, the findings suggest that SMEs are generally not aware and most likely will not utilize the various managerial practices. Perhaps the most important findings of the study on managerial practices is that the SMEs appears to have a very limited knowledge of the overall spectrum of managerial practices. (Baharun, Rohaizat, et. al, 2005)  www.sbaer.uca.edu/research/icsb/2004/Papers pdf/014.pdf

Krech, O’Brien, Muller and Wass (KOMW) is a unique collaboration of architects, structural engineers, interior designers and construction managers established in 1985. KOMW specializes in community and educational facilities, churches and faith-based buildings, multi- and high-end single family homes, clinics, offices and interiors, veterinary hospitals, production and industrial facilities, agricultural buildings and greenhouses. Through collaboration with professional consultants, they can provide for every requirement for new projects, adaptive reuse, alterations and additions. Their projects have construction budgets ranging from $1,000 to $25 million

Formatting was not the only area where KOMW saw time savings. They also saw it in initial project set-up. DiGiorno credits this to the way the linking works, “Any documents referenced in our Master always have a link to the related standards section and referenced documents.” (Krech, O, et. al, 2005).

http://www.bsdsoftlink.com/linkline/current/2005fall/fall05_komw.htm

            In Singapore, about seventy-one percent of small and newly registered companies fail within the first five years of incorporation. Lack of entrepreneurial and managerial skills have been identified as the major causes of SMEs' failures. External professional advisers to SMEs could supplement their lack of managerial skills by providing management advisory services to enhance SMEs' effectiveness. Many professionals provide advice to SMEs but until now there was no understanding as to which advisory group had the greater impact on business performance and what services SME owners want and need.

A conceptual framework was postulated that Chinese CPA intervention, centred on microlevel organizational change, could have a positive impact on business performance of Singaporean Chinese SMEs. The study explored the impact of CPA intervention on business performance of SMEs. It was further postulated that CP As have a greater impact on SME performance that other external advisers. To test these propositions, a survey was undertaken of SMEs and CPAs.

The research findings indicate that SMEs that used CP As extensively out-performed those SMEs that did not use any external advisers. Amongst SMEs that used external advisers moderately to extensively, those Chinese SME that used CP As scored the best business performance growth, measured by net profit plus owner's remuneration over the ten-year period 1987 to 1997. Thus CPA interventions are associated with higher performing Chinese SMEs and in addition outperform other advisers. The outcome has important implications for professional advisers and SME owners as to the sources and types of services they provide to their clients. (Ho, Ngiap Kum and Mula, Joseph M). http://www.sbaer.uca.edu/research/icsb/2004/Papers pdf/093.pdf

            The procedures currently used by most municipal governments in developing countries do not lend themselves to the efficient management of small contracts for works, such as municipal/road maintenance contracts. Those procedures were not originally intended to apply to small works, which in the past were usually performed by direct labor (force account teams). The procedures regarding the procurement of works and management of works contracts were generally based on the industrial countries' regulations governing the management of large contracts for new construction work. The use of such inappropriate procedures in the case of small works executed by small and medium-sized enterprises (SME) can have dire consequences in terms of contract management (or administrative) costs, completion time, and cost of the works, while also having a serious impact on the health of the SMEs concerned.  Now, most countries have decided to entrust a large share of their road maintenance works to their SMEs, and, more generally, to develop their national private sector; it thus becomes imperative to reform the procurement and contract management procedures for small works and to adapt the owners' organization accordingly.  ( Lantran, J. M., 1994,   http://www.worldbank.org/html/fpd/urban/publicat/rd-ou9.htm ).