Strategic management: An Eastern Cape construction SME case study

Small and Medium-size Enterprises (SMEs) fulfil an important role in the long-term growth and development of the economy of the country. The development and growth of construction SMEs are important for all countries, as a strong SME base has the capacity to produce a high-quality infrastructure for the country. However, research has revealed the high failure rate of small businesses within the first five years of their existence in South Africa. In addition, research also indicated that lack of long-term planning and lack of strategic thinking are major contributing factors to the failure of most SMEs. For instance, despite the considerable growth in the industry in the past decade due to government’s considerable infrastructural spending occasioned by the 2010 FIFA World Cup, the majority of construction SMEs failed to use the opportunities gained in this period to develop into established construction entities. This study investigates how strategic management can be applied to address the problems faced by construction SMEs, and to explore techniques and tools of strategic management that can make a significant contribution to their growth and development. The research findings, based on a literature review and a qualitative research approach, suggest that, although many construction SMEs perform poorly, some have the potential to grow and develop into more established entities by proactively managing their firms strategically. In addition, the findings indicate that SMEs that practise strategic management perform better, and that there are many advantages for SMEs that adopt strategic management principles at the organisational level

Strategic management guidelines for construction SMEs in the Eastern Cape

SMEs fulfil an important role in the long-term growth and development of the economy of the country. The development and growth of construction SMEs are important for all countries, as a strong SME base has the capacity to produce a high-quality infrastructure for the country. Construction SMEs also stimulate economic activity in other sectors of the economy. Research has, however, shown that the failure rate of small businesses within the first five years is high in South Africa. Reseatch has also indicated that the lack of long-term planning and the lack of strategic thinking are major contributing factors to the business failure of SMEs. SMEs operating in the construction industry are faced with the same challenges as their counterparts in other sectors of the economy, but in addition to those difficulties, construction SMEs also have to deal with the unique characteristics of the industry that have adverse implications for them. The construction industry has experienced considerable growth and success, in the past decade, particularly as a result of the government's considerable infrastructural spending, especially in the run-up to the 2010 FIFA World Cup. The growth in the construction industry has, however, not resulted in similar results for Construction SMEs; and research has shown that most of them have not developed into more established entities. In fact, in the Eastern Cape, 91 per cent of all registered contractors fall within the lowest level of the Construction Industry Development Board's classification system. Many construction SMEs perform poorly, but among them there are those that have the potential to grow and develop into larger more established entities. Research has shown that contractor development programmes aimed at assisting the growth and development of construction companies have been successful in increasing participation in the industry, but not in ensuring that small enterprises grow into self-sustainable established enterprises. In contrast, the research has shown that SMEs that practice strategic management perform better, and that there are many advantages for SMEs in applying strategic management principles. This study, therefore, investigates how strategic management can be applied to address the problems faced by construction SMEs, and to exploire techniques and tools of strategic management that can make a significant contribution to their growth and development