Factors Affecting Growth of Construction Organizations in Nairobi

Abstract

The study purposed to identify the factors affecting growth of construction companies in Kenya. The research questions were as follows. What are the internal factors that affect the growth of construction companies in Nairobi? What are the external factors that affect the growth of construction companies in Nairobi? What Strategies are implemented by the construction organizations to ensure success in a developing economy?

Descriptive research design was used. The population in this study was 5 companies in the roads and bridges and 25 construction companies in Nairobi that are registered with the National Construction Authority. The sample size was 13 construction companies in the building sector in Nairobi and 2 companies from the rail and road industry in Nairobi. The data was collected by structured questionnaires. Data was analyzed using descriptive statistical techniques by generating frequencies, mean and standard deviations. Inferences were made using Spearman’s rank correlation analysis techniques. The results were presented in tables.

The study established that there was a statistically significant correlation between internal factors and growth of construction organizations. Of high importance were: technology in construction, client financial ability, and cost and revenue management. In terms of external factors affecting growth of construction companies, all the factors were highly important except social factors, but only two of the Political, Economical, Social, Technological, Ecological and Legal (PESTEL) factors were statistically significant. These are: economic factors and technological factors. There was a strong positive correlation between growth of construction organization and expansion through concentration, expansion through integration, expansion through diversification and expansion through internal strategies.

The study concluded that growth of construction organizations was affected internal factors such as technology used in construction, client’s financial ability, cost and revenue management, profitability of projects, leadership and ownership, magnitude and size of projects, and goals and objectives of the organization. All the external factors except social factors potentially affected growth of construction companies although only the impact of economic factors and technological factors were significant to growth of construction organizations in Kenya. Construction organizations in Kenya mainly pursued internal strategies to ensure growth and success. This included sense of urgency and timelines, cost control and entrepreneurial planning.

The study recommended that construction organizations should invest on new and adequate technological equipment. They should undertake regular environmental scanning with emphasis put on how emerging technology in the industry can be leveraged to enhance growth. Constant attention should be paid to the economic environment in order to provide timely information regarding investment decisions. Construction organizations can consolidate their internal strategies with other expansion strategies such as diversification, integration or concentration. Future researchers can explore how construction organizations can pursue growth through backward integration due to its high importance in the construction sector.