Responses by Kenyan construction firms facing changing environment conditions

Abstract

There are many changes that have rapidly taken place in the environment that business organizations are operating in Kenya. In the last ten years the GDP growth rate has fluctuated from 5.8 percent in 2005 to negative 0.3 per cent in 2000. All business firms are open system and therefore dependent on their environment for survival. It therefore becomes mandatory for organizations to prepare themselves by formulating strategies that will enable them to exploit opportunities in the environment, and eliminate or minimize the threats that affect their performance.

The construction industry in Kenya has not been spared by this rapidly changing and complex business environment. The industry is highly responsive to changes in the external environment. In 2002, the value of building plans approved in Nairobi City was Kshs. 4.3 billion. In 2005, this figure had increased by more than 5 times to Kshs. 23.8 billion.

The main purpose of the study was to establish how construction companies in Kenya have responded to changes in the environment within which they operated. The changes that have taken place in Kenya are mainly political, economic, socio-cultural, technological, legal and industry environment. The target population was 700 registered general building construction companies based in Nairobi, from which a sample of 60 companies was randomly drawn.

The main fmdings emanating from the study were that economic challenges were of most influence to the construction industry (mean of 4.0). Political challenges were also ranked highly (mean of 3.2) in terms of their influence on the sector while information technology (IT) was reported to have the lowest influence on the construction firms.

It was also found that majority of the construction companies (72.1%) had initiated some kind of response to the environmental changes experienced. The responses instituted by the construction firms were diversification (62.8%), restructuring (44.2%) and enhanced marketing (23.3%).

The study recommended that construction companies recruit top managers charged with the responsibility of strategic management. The strategy managers would continuously scan the environment to identify threats and opportunities. The managers then need to craft the strategies that will ensure that a fit exists with the environment.