This report aims to create an understanding about the relations of business environment and the management in construction and property. It is also aimed at examining the critical analysis necessary on implementing the innovative management strategy and structure which enables the construction organisation to be prepared for sustainable growth.
While the global economy is recovering from the recent recession, the construction and property industry are made to make a quick and sudden change that is necessary to evaluate the business environment and create a more sustainable business management. There are some business management strategies for obtaining specified goals or result; which are in place to help assist the construction and property organisation to be an in position to positively sustain growth during its running process and time of uncertainty.
Business environment is a set of environmental issues that may influence the route of a business organisation through some forces known as the PEST. These forces are political, economical, socio-cultural and technological. These forces impact on the business structure and management system of a business organisation. These forces are predominantly outside the control of a business, they can potentially influence how business is run and impact on the managerial structure both positively and negatively.
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Fryer (1997) states that a business survival is largely about understanding the external environment and how it affects the organisations performance.
Management is the controlling and directing of affairs of a business. It is an organisations activity, objectives and the act of working together to accomplish desired goals through the efficient and effective use of available resources. Management requires the working relationship of individuals in an organisation to enable them in their decision making process during difficult times such as recession, low production or sales. Management of a business is well beyond its internal affairs, it is a knowledge and understanding of a business environment. These understanding of a business's external factors will enable the prevention or minimization of loss of the organisation's revenue, and will ensure the organisation will solidify itself from going into administration and staff redundancy.
The business environment which is a set of political, economical, socio-cultural and technological forces (PEST) that are outside the control and influence of a business is one that creates a very high level of uncertainty in a rapidly changing environment but could be dealt with under the right management strategy. These business environment factors have an individual effect on every organisations business activity and management process.
A political factor of the business environment has a huge impact in the construction and property industry because they are governed by the government in forms of employment laws, health and safety, monopolies legislation, foreign trade regulations, protection laws and taxation policy. The government uses these factors to create a balance in the economy; the most important political factor will be Tax law and legislation in terms of employees. This can be either positive or negative, if reduced it will mean that most businesses are more likely to see a boost in their output; because clients will have more disposable income which can be used in the construction of more buildings, plant hire or employing of more labour.
But if Tax is to be increased, the construction and property industry will go through a slow period of production and there will be commercial exploitation on required resources such as fuel prices, sand, gravel and rocks. There will be fewer sales generated to fund the necessary resources even if the construction industry raises the prices for every project. Though, it does not have a complete negative effect on the industry; it may fundamentally influence the way it is managed in generating growth and development through encouraging foreign investment which will see rise in competitive productivity.
An economical factor of the business environment also has an effect in the construction and property industry through the aspect of the GNP trends, unemployment, inflation, disposable income, interest rates, energy cost, and money supply, etc.
These economic factors will create change in the business strategy and review on expenditures in order to look at ways to reduce cost so as not to be influenced by the current economic state.
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The two main factors that will disturb any future plans are the GNP trends and interest rates because organisations may find it difficult to borrow large capital if bank interest are high, this will have an adverse effect on rent of premises, mortgages may become difficult to acquire and maintain, companies might not have substantial amount for the required plant and machineries for construction projects.
With the GNP trends, the total amounts of goods and services produced by the construction industry in the UK and abroad will have to be high in order to be at the top place in the market.
A low GNP will determine that the UK economy in terms of production is slow and this will lead to recession, low output means fewer jobs are generated; consumers won't be spending much due to weakness in the pound sterling. But with the right management system, organisations will be able to work within budget and make sure they do not incur any loss, manage and encourage employees, utilise its resources, e.g. capital equipment and employees.
Socio-cultural factors that affect the business environment are a study of how society and culture changes the thoughts and feelings of an organisation or individuals. A huge change has been seen in the lifestyle of people, income distribution and the population demographics. This is a huge change in the construction and property industry because a change in the lives of an average family, this aspect of the business environment focuses on the income distribution around families and social mobility, amount of buildings and infrastructure being built. Management could easily adapt to this factor as it is recognising the needs of consumer and perhaps changing the direction of the organisation. An example would be an organisation that does not offer consumers the option of a sustainable environment such as energy saving light bulbs, will have less clients. That organisation will have a carry out market research to understand consumer needs, the result will be a change organisation that will create an appealing change on their products and services that are delivered to carry a new look from their previous products.
Technology is a driving force in the running of all business especially in the UK construction and property industry today. With the rapid growth of technology, the quality of work can be improved and made a lot easier. With the appropriate use of technology, the development process and time it takes to carry out tasks will be reduced drastically; and this will be spread across the board in order to reduce project time and complete task efficiently.
With the current economic state; management might be in doubt about investing in technology, but if seen as to improve the quality of work and to cut down production time. In the long run, more units can be produced and the amount of labour required to carry out a task will be reduced.
In the construction industry; technology is not just about plants and machineries used on sites, it also involves products such as quicker printers or operating systems that will save time is a crucial element in any organisation especially in construction such as web conferencing to enable all parties involved in any given project to communicate amongst themselves, this will in turn lead to achieving what is required. Time is imperative in the construction and property industry; if a project is late it will cost a lot of money. With technology organisations can work more efficiently, it enables professionals to access information in their offices, from the comfort of their home, paper based information can be sent to other professional bodies across the world within seconds.
Technology has done a lot of things to aid the construction and property industry, the introduction of photocopying has been around since the 60's, computers and fax machines has been around from the 80's. since the introduction of these technologies, a lot of time and money has been saved in creating copies of documents and access to the internet has been made a lot easier to send information from one party to the other, it has made the individual and management process of an organisation easier for advertising, sales, research, job search, etc.
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There are three main managerial systems that can assist a construction and property organisation in other to maintain sustainable growth during periods of uncertainty and these are:
Scientific Management Theory - Frederick Taylor (1856-1915)
The scientific theory analyses the structure of the task to achieve the maximum output with the minimum input. These principles include the development of a true science of management, the scientific selection and training of workers, proper remuneration for fast and high quality work; and equal division of work and responsibility between staff and manager.
Administrative Theory - Henri Fayol (1841-1925)
The primary element for the administrative theory was the authority was delegated downwards with management at the top and employees at the bottom. These principles include specialisation of labour, unity of command, chain of authority, subordination of individual interest and discipline.
Bureaucracy Theory - Max Webber (1864-1920)
This theory analyses a clear system of authority with complete rules and regulations so that employees are fully aware of what is expected by them, it is based on staff ability to grow and develop in their various roles.
According to this report, it's been established that business environment is a set of environmental issues that may influence the route of a business organisation through some forces known as the PEST. These forces impact on the business structure and management system of a business organisation; and these forces are predominantly outside the control of a business and can positively or negatively influence on the day to day running of a business organisation and also impact on the business management structure.
From analysing the aspects of management theories, management is the controlling and directing of affairs of a business organisation, its objectives towards achieving desired goals through the efficient and effective use of available resources; it also requires the working relationship of individuals in an organisation to enable them in their decision making processes.
These understanding of a business's external factors will enable the prevention or minimization of loss of the organisation's revenue, and will ensure the organisation will solidify itself from going into administration and staff redundancy.
Fryer, B., (1997). The Practice of Construction Management. 3rd ed. Blackwell Publishing.
Rees, W. D., Porter, C., (1996). Skills of Management. 5th ed. Thomson Learning.
Harris, F., McCaffer, R., Edum-Fotwe, F., (2006). Modern Construction Management. 6th ed. Blackwell.