http://highered.mcgraw-hill.com/sites/0072408596/student_view0/chapter1/powerpoint_presentations.html

http://www.yuni.com/library/suntzu.htm

1.3       Objectives and  Hypotheses

General Objective

            To determine the managerial and entrepreneurial needs  of  SME in construction industry in Iloilo (City and province).

Specific Objectives

             Specifically, the study aims to:

1.   describe the characteristics of SME in  construction industry in terms of  type (general or specialty), ownership (single proprietorship, corporation, cooperative or partnership),   size of  capitalization, on whether or not they are affiliated with national or international companies , and number of employees; and  the level  of  knowledge   on the following:

      (a)  strategic, marketing,  business  and financial planning.

(b)   determine the level  of  knowledge construction technology.

(c)   training & networking.

2.   describe the qualifications of  the  manager, owner, and/or entrepreneur   of   SME in construction industry in  terms of  educational background, number of years in business, gender, age and affiliation;

 3.    determine SMEs in  construction industry’s  level of access to:

      (a)  marketing and   financial  facilities

      (b)  engineering construction technology facilities

     (c)  training and network facilities

4.  describe SMEs in construction industry’s  practices in  terms of  business management and entrepreneurship.

5.   analyze the construction industry’s  input, throughput or processes and output as well as feedback.

Hypotheses

1.   The characteristics of SME in  construction industry is not significantly related to their  level of access to:

     (a)  marketing and   financial  facilities

     (b)  engineering construction technology facilities

     (c)  training and network facilities

2.  SMEs in  construction industry’s the level of access to 

     (a)  marketing and   financial  facilities

     (b)  engineering construction technology facilities

     (c)  training and network facilities

      are not significantly related to their practices in  terms of  business management and  entrepreneurship.

3.  The characteristics of SME in  construction industry are not significantly related  to their practices in   terms of  business management and  entrepreneurship.

4.  The qualifications of  the  manager, owner, and/or entrepreneur  of   SME in construction industry are not significantly related to their practices in   terms of  business management and  entrepreneurship. 

1.4       Theoretical and Conceptual Framework of Study

1.4.1    Theoretical  Framework of  Study

            Engineers appear to disagree as to the exact nature of construction industry, economist,  businessmen, and builders have competing theories on construction,  proponents of different theories of construction tend to see each other as rivals who disagree as to which theory of  is correct.  Competing theories of construction (and management) have existed alongside of each other for many years, with no sign of any single theory pulling ahead of the others. Typically, competing paradigms or theories are the center of active debates, yet articles on  Construction Industry Management Theories occupy little space in leading the scholarly journals. Management theories selected are all encompassing, may it purely business or in construction enterprise.

            Some of the theories discussed here tend  to support the study conceptual and  theoretical framework ( Fig. 1.01 – Research Paradigm). The theories  are summarized as follows:  The theories (and practice) that were written by:   Koskela, et.al. (

http://www.worldscinet.com/jcr/03/0301/S1609945102000035.html,

2001),  Koskela (www.ce.berkeley.edu/~tommelein/IGLC-7/PDF/Koskela.pdf ,2002) – he himself have written many that were sources of debates;  Bennett  (

www.apnet.com/companions/0750630930/pdfs/constructionManual.pdf,

1991) believed  to  have clarified  the theory by describing it in terms of a simple  model of construction project organizations,  the model has five main elements: products, processes, skills, information systems and decision  systems.  Then of management theories,  classical approach (1900), human relations approach (1925), systems approach (1950) and contingency approach (1975).http://www.misronet.com/construction_management.htm The systems approach is specially mentioned here as it appears to cover  all angles in the study framework, this is extensively used in input – processes (transformation) – output of construction of construction industry.  Then we have Lean Construction (Lean Production, Toyota) by Howell (

http://www.leanconstruction.org/readings.htm#Safety

1990).

The above mentioned are construction and management theories which are all encompassing  and are as discussed below.  Koskela, et. al., (2001) conceptualized these fundamental management functions in three different ways:

1)         as a process of transforming inputs into outputs,

2)         as a flow of information through time and space, and

3)         as a process for generating value for customers.

Findings to date indicate that business management in construction industry is deficient in all of these three  points of view.  Koskela, et. al., (2001) conducted  a series of experiments aiming at creating clarity and introducing systematic management principles from these three perspectives. The results of these experiments suggest that the use of relatively simple, albeit theory-driven, tools can achieve major improvements in  construction processes and  argued that only when these processes  based on suitable conceptualizations, and  empirical data, can effective methods be devised to ameliorate effective construction management.

Koskela (2002) writes further of two construction theories:  the transformation  view and the flow view.  transformation view  is described as  a transformation of inputs into outputs;  hierarchical decomposition; control and optimization of decomposed activities; work breakdown structure,  organizational responsibility chart; taking care of what has to be done; task management while flow view is described as  a flow of material, composed of transformation, inspection, moving and waiting; elimination of waste (non-transformation activities); time reduction; variability reduction; continuous flow, pull production control, continuous improvement; taking care that what is unnecessary is done as little as possible; flow management.

It can conceptualize production simultaneously from these two points of view. In the transformation view, the basic thrust is  to define the task (work) to be done, and to get it done efficiently. In the flow view, the basic thrust is to eliminate waste from flow processes. Next, it is analyzed how such a simultaneous consideration of  the transformation view and the flow view can be ensured in construction.  The transformation view and the flow view are two major conceptualizations of production. The current practice in construction is based on the transformation view.      However, the transformation view is an idealization, and in a complex production situation the associated idealization error may become large. This is exactly what  happens in practice. Task management, based on the transformation view, assumes that certainty prevails in production. However, it is widely observed that, due to the inherent variability of production in construction, intended task management degenerates into mutual adjustment by teams on site. It is argued that the transformation view and the flow view should be synthesized into a new theoretical view on construction. The inherent causes of variability in construction can be explained and the countermeasures for eliminating variability or stemming its impact can be pinpointed by this new theoretical view. (Koskela, 2002)

            The general theory of  construction project management as described by Bennett

(1991). This has served to clarify the theory by describing it in terms of a simple  model of construction project organizations. The model has five main elements: products, processes, skills, information systems and decision  systems. These are the things that managers have to make choices about in devising strategies for individual projects. So the model helps construction project managers by directing their attention to the key strategic decisions. 

            The logical starting point in using the model is to begin with products, the

intended outputs of projects. They usually comprise new or altered physical

facilities plus services provided for customers. The second element of the model is processes which means the series of coordinated actions needed to produce an organization’s product. Construction includes many different types of actions which have become the basis of specialized professions and crafts. The picture is more complicated than this because some products result from processes that comprise highly standardized actions and interactions.

            The concept of skills within the model means the practiced  actions needed to

undertake basic work. They are provided by a multitude of professional, craft and other workers. The workers bring more that practiced actions to their work, they have knowledge more or less relevant to the work and values which help determine their motivation and influence their decisions.  The model relates to a strategic level of thinking about project organizations and so the concept of skills relates to teams rather than individuals. Some teams may comprise just one individual but most activities in construction are undertaken by small teams. Strategic thinking about construction projects necessarily deals with teams and their composite skills.

            The fourth element is information systems. They provide organizations’  formal memories and their communication, control and feedback channels.  They are equivalent to the nervous system that determines the automatic  behavior of the human body. The decision systems element of the model includes all the arrangements by  which decisions about work are made. This includes everything required to undertake the processes to produce the products that is not provided by the skills or information systems elements. One consequence of this definition is that decisions which are made within the normal competence of professionals, craftsman or other workers are part of the skills not the

decision systems element (.Bennett, 1991)

            Construction management is a discipline comprising systematic approaches to control time, cost and quality of a construction project based on recorded research and experience( http://www.misronet.com/construction_management.htm )  Though construction management must have been applied in the construction of  pyramids in Egypt,  Greek and Roman architectural, and the landscape of Mayan civilization.  The discipline of management is not  new, and origins of modern management can be traced to the beginning of last century.  Moreover, there is no comprehensive construction management theory to date  but  theories on business management  While management was described and re-conceptualized   the functions for the new era as delivering strategic value (planning), building a dynamic organization (organizing), mobilizing people (leading), and learning and changing (controlling).  These are now the new fundamental functions of management. The new era management discuss changes like the internet and many others.  (Bateman and Snell,  2001)

Tracing the development of management as a discipline, there are  four major schools of thought noted; the classical approach (1900), human relations approach (1925), systems approach (1950) and contingency approach (1975). These theories  are further discussed  in Chapter 2.  The  systems theory approach is  mentioned here as its concepts is very applicable in construction business ( Refer to page 7,  answer to Objective No. 5 ).  The key concepts of the systems approach evolve in response to a rapidly changing environment. It expanded  based on the previous schools of thought   in two ways: ( http://www.misronet.com/construction_management.htm )  

·                    The focus of the systems theory is the whole organization comprising a set of interacting sub-systems

·                    The relationship between the organization and its environment is a central concern of the systems theory

Systems theory focuses on complexity and interdependence of relationships. A system is composed of regularly interacting or interdependent groups of activities/parts that form the emergent whole. Part of systems theory, system dynamics is a method for understanding the dynamic behavior of complex systems. The basis of the method is the recognition that the structure of any system — the many circular, interlocking, sometimes time-delayed relationships among its components — is often just as important in determining its behavior as the individual components themselves  Systems theory is an interdisciplinary field which studies relationships of systems as a whole. Modern systems theory was founded by Nicolai Hartmann followed by Ludwig von Bertalanffy, William Ross Ashby and others between the 1940s and the 1970s

Managing construction under Lean Construction (Howell, 1999)  is different from typical contemporary practice because it;

v     has a clear set of objectives for the delivery process,

v     is aimed at maximizing performance for the customer at the project level,

v     designs concurrently product and process, and

v    applies production control throughout the life of the project.

Lean production was developed by Toyota led by Engineer Ohno.  He was a smart if difficult person dedicated to eliminating waste. The term “lean” was coined by the research team working on international auto production to reflect both the waste reduction nature of the Toyota production system and to contrast it with craft and mass forms of production (see http://www.cycleforums.com/forums/showthread.php?threadid=114121 ).

Lean construction results from the application of a new form of production management to construction. Essential features of lean construction include a clear set of objectives for the  delivery process, aimed at maximizing performance for the customer at the project level, concurrent design of product and process, and the application of production control throughout the life of the product from design to delivery. Significant research remains to complete the translation to construction of lean thinking. Where current practice attacks point speed, lean construction attacks variation system wide.

Under lean, labor and work flow are closely matched when variation is under control and

activities de-coupled through capacity or resource buffers when variation is not under control and work content unbalanced. In lean construction as in much of manufacturing, planning and control are two sides of a coin that keeps revolving throughout a project:.

v     Planning: defining criteria for success and producing strategies for achieving

objectives.

v     Control: causing events to conform to plan and triggering learning and re-planning.

Lean construction much like current practice has the goal of better meeting customer needs while using less of everything. But unlike current practice, lean construction rests on production management principles, the “physics” of construction. The result is a new project delivery system that can be applied to any kind of construction but is particularly suited for complex, uncertain, and quick projects (Howell).

1.4.2    Entrepreneurship and “Access to”  Theories

Sun Tzu ( Giles translation, 1910)  said that in battle,  “ there are not more than two methods of attack – the direct and indirect;  yet these two combination rise to an endless series of maneuver and that  the direct and the indirect attacks  lead to each other in turn. He likened it as like moving in a circle – you never come to an end. Who can exhaust the possibilities of their combination?”  –  Academician always reviled that  entrepreneur must have sufficient knowledge,  access to facilities and should clearly identify and recognize business  weaknesses and strength. In his classic book, The Art of  War,  Sun Tzu ( Giles translation, 1910  )  says that:   “For should the enemy strengthen his van, he will weaken his rear; should he strengthen his rear; he will weaken his van; should he strengthen his left; he will weaken his right; should he strengthen his right; he will weaken his left. If he sends reinforcements everywhere, he will everywhere be weak”

Entrepreneurship  is the process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence. Entrepreneurial decision process   refers to the decision to leave a  present career or lifestyle (to pursue that ‘big idea’) due to  unpleasant work environment, disruption, completion of educational degree. ( Peters and  Hisrich , 2002).

 Given that entrepreneurs can gather relevant knowledge regarding opportunities for profit and use this calculate the expected returns on alternative ventures, they must then implement their plans if they are ever to realize any of the expected profits associated with their plans  Profits serve as the motivation for Entrepreneurs to undertake acts of will in assigning higher order goods to productive processes.  Entrepreneurs as residual claimants- as those who lay claim to any excess revenue over cost. Entrepreneurship relates to time in ways that no other agent does. Entrepreneurs change the extent to which and the way that all agents, including themselves, must deal with time. Also, entrepreneurs take into account the dealings of others with and in time in a manner that requires special talents. Entrepreneurship requires particular abilities that aim towards the estimation of value, not only in the future, but to and from others. As the ones who carry out imputation, Entrepreneurs earn profit, not as a type of labor, not only as uncertainty bearers, but also as those whose special talents enable them to imagine alternative future states of the world that involve value to and the abilities and plans of others (MacKenzie, www.kean.edu/~dmackenz/classes/TCE.doc ).

1.4.3    Financing, Marketing and Entrepreneurship  Theories

The conventional view on entrepreneurship and its financing looks, (Johnson, 2005)  grossly simplified, the following somewhat paradoxical way:  On the one hand, there is an empirically established fact that self-finance plays an important role, yet, on the other hand, the theoretical support  for this fact is vague. Indeed, there seems to be more theoretical support in favor of the opposite conclusion; it is not of major importance if entrepreneurship is financed by external  means (by venture capitalists, banks, the government etc) or  by self-finance, i.e. self-finance is of no particular importance

Johnson (2005) continue to speak of  self-finance and privately held wealth, of large or small magnitude, will always play an important role when people decide whether to explore entrepreneurial opportunities or not, and hence also be important for the overall extent of  entrepreneurship in society. Privately held wealth often is a direct requirement for obtaining external financing.. Thus, by the existence of  privately held wealth, also the market for external financing improves. Such private wealth might also serve as a cushion against unforeseen negative events.  But  even if the entrepreneur actually would have the possibility of convincing external financers, there often are reasons not to reveal the ideas before they are saleable because of the risk that such financers should copy the idea themselves. There are ways of circumventing problems like these, but they can never ever fully disappear. Self-finance is the natural solution.

Barriers to self-finance existing today are largely created by political means and can therefore – here they differ from the problems related to external financing – also be alleviated by political means. The barriers to self-finance falls into two wide categories, (1) barriers to the building up of privately held wealth, regardless of the magnitude, and (2) barriers to the preservation of privately held wealth. Studies of how  various taxes and regulations affect decisions about saving, consuming, investing are indeed  nothing new, but nevertheless seem to be so from the perspective of judgmental decision making. See also Foss, N. & Klein, P. ( 2004 ).

While there is considerable discussion about marketing in entrepreneurship and small  business literature, very little is on the relevance of marketing science to this area.

Empirical generalizations and theory close to this level of substance are at the core of

marketing theory  By virtue of its nature such high level theory should apply across all marketing  situations, including those addressed by small business and entrepreneurs. Yet there is an apparent absence in literature of discussion and research linking marketing science, small business and entrepreneurship  A market/firm direct interface model, which explains how management, markets and the firm interface, maintaining customer relevance without direct reference to many of the information pieces considered  critical by marketing theory ( Geursen, 1998)

The Marketing and Entrepreneurship interface paradigm can be utilized in assisting in the explanation of small firm marketing, given that many firms compete unequally in terms of factors such as business and marketing skills, available resources, creativity and identification of opportunities. The smaller firm tends to carry out business via highly informal, unstructured, reactive mechanisms while others develop, over time, a proactive and skilled approach where innovation and identification of opportunities give the firm a competitive edge. At the two ends of the continuum, formal marketing involves highly structured, sequential decision making while entrepreneurial decisions tend to be haphazard and opportunistic. The Marketing and Entrepreneurship interface deals with the overlap, or areas of commonality, such as analytical skills, judgment, positive thinking, innovation and creativity. In following the Marketing and Entrepreneurship paradigm of research, a more creative approach to the  research process can result in an enriched understanding of key issues. (http://www.stir.ac.uk/Departments/management/ent/resmark.htm )

            The following three propositions demonstrate how conventional marketing theory fails to adequately account for small firm behavior generally, and more specifically within the remit of internationalization and in the arts and crafts sector: 1.   Small Firm Marketing is essentially different from its Larger Firm Counterpart;  2.  Small Firm Internationalization is essentially different from conventional modeling of the process; and   3.  There is little degree of fit between conventional marketing theory and Arts Marketing practice ( Fillis, 2002 ). Marketing and entrepreneurship share common conceptual and practical ground and that this commonality can be made sense of in the context of a conceptual framework which emphasizes the applied creative problem solving dimension of each field. Thus to the extent that creative (or innovative) behavior is a significant feature of radical marketing success, it might also be said to lie at the heart of much successful entrepreneurial endeavor (Hackley and Mumby-Croft , 1998:505, as cited by Fillis ).

Dr. Ian Fillis had written lot marketing theories and concepts but the next one is too important  to the SME in terms of marketing ( and entrepreneurship interface). The art organization today utilize marketing concepts and practices. Much of what is actually practiced is at best an inefficient form of marketing, and at worst an inappropriate way of securing visitor numbers, making profit from merchandising and encouraging repeat visits. The art organization exhibits similar characteristics to the small and medium sized enterprise (SME). Contemporary research, from the Marketing and Entrepreneurship Interface shows that conventional forms of marketing are inappropriate when attempting to practice and theorize marketing from a smaller firm context. A more creative entrepreneurial form of marketing is called for. A conceptual model of entrepreneurial marketing is developed before focusing on how the art organization can learn from creative practitioners and businesses in industry in general and in the artworld in particular. The methodology ( of Fillis, www.fuel4arts.com/content/files/fillis.pdf ) adopted focuses on the examination of published biographies and related sources of creative individual and organizational behavior in order to elicit a framework of creative art marketing.

1.4.4    Engineering Construction (Management)  and Entrepreneurship

Although theories which are construction related ( Bennett, 1991 page 8). In construction, an endeavor or anything that is built is called a project     Generally, project management is distinguished from the general management of corporations by the mission-oriented nature of a project. A project organization will generally be terminated when the mission is accomplished. According to the Project Management Institute, ( See http://www.ce.cmu.edu/pmbook/02_Organizing_For_Project_Management.html#tofn1 )  the discipline of project management can be defined as follows:  Project management is the art of directing and coordinating human and material resources throughout the life of a project by using modern management techniques to achieve predetermined objectives of scope, cost, time, quality and participation satisfaction. By contrast, the general management of business and industrial corporations assumes a broader outlook with greater continuity of operations. Nevertheless, there are sufficient similarities as well as differences between the two so that modern management techniques developed for general management may be adapted for project management. 

In recent years, major developments in management reflect the acceptance to various degrees of the following elements: (1) the management process approach, (2) the management science and decision support approach, and (3) the behavioral science approach for human resource development. These three approaches complement each other in current practice, and provide a useful framework theoretically and in practice  for project (or construction) management. (Hendrickson, C. and  Au, T. , 1988,  http://www.andrew.cmu.edu/user/cpy/ )

The management process approach emphasizes the systematic study of management by identifying management functions in an organization and then examining each in detail. There is general agreement regarding the functions of planning, organizing and controlling. A major tenet is that by analyzing management along functional lines, a framework can be constructed into which all new management activities can be placed. Thus, the manager's job is regarded as coordinating a process of interrelated functions, which are neither totally random nor rigidly predetermined, but are dynamic as the process evolves.

The management science and decision support approach contributes to the development of a body of quantitative methods designed to aid managers in making complex decisions related to operations and production. In decision support systems, emphasis is placed on providing managers with relevant information. In management science, a great deal of attention is given to defining objectives and constraints, and to constructing mathematical analysis models in solving complex problems of inventory, materials and production control. These are purely mathematical and are needed in construction quantitative discipline both in theory and practice.

The major contributions made by the behavioral scientists to the field of management include: (1) the formulation of concepts and explanations about individual and group behavior in the organization, (2) the empirical testing of these concepts methodically in many different experimental and field settings, and (3) the establishment of actual managerial policies and decisions for operation based on the conceptual and methodical frameworks  The above literatures are on construction management theory and there are more of it on the business portion but there are so few relating it to construction entrepreneurship on the SME level.

1.4.5        Access  to Training and Network and Entrepreneurship  Theories

An entrepreneur is the organizer, the vital spark of any new business venture. Land, labor and capital are usually thought of as the factors of production, they need an individual with an idea and the energy and vision to put them together and make the business work. That's the entrepreneur. In  going  into business for yourself, you have to  get plenty of entrepreneurship training.

            In entrepreneurship training , one will learn the essentials of running a business,  learn how to plan, and how to assemble a team, motivate it, and assign tasks. Entrepreneurship training will also teaches  about the various types of financing and how to check for the details, permits, licenses, and registrations you will need. The true value of entrepreneurship training is the learning  of the many things you need to know to run a business effectively (http://www.entrepreneurshipweb.com/education/educationid/1.htm )

Again, theory in training, networking and other entrepreneurship processes  –theory of  modeling financial, human, and social capital.   The entrepreneurial process is an investment period for tangible and non-tangible assets, which are captured by the concepts financial, human and social capital. It is often assumed that the access to financial, human, and social capital is critical for entrepreneurial success. Human capital includes all aspects of the personality, experience and competence available to the entrepreneur. This means that we include his personal values, motivation and skills, as well as the external competence he can access and mobilize for his own purpose.

Social capital is created in the interaction between people and it increases the return of a person’s human capital such as intelligence, education, and work experience. Social capital  consists of knowledge and information, which is spread and exchanged through social networks thereby enhancing the human capital. It increases trust in relationships and reduces  information search costs, and therefore reduces transaction costs. Social capital is also  constituted by norms and rules for behavior ( www.tukkk.fi/pki/rentpapers/havnes.pdf ).