Construction plays a vital role in economic growth and development. It is also important in terms of satisfying basic physical and social needs for a greater standard of living. ILO (1987) stated that construction is one of the few industries that is of common importance in all countries and is recognized as a great contributor to the national economies of all countries. Construction stimulates a sizeable amount of economic growth because the development of the construction industry supports other considerable industries such as manufacturing and real estate.
The construction industry, through the products that it creates, its size, and its ability to create employment, is likely to influence an economy’s gross domestic product (GDP) more than any other service industry (Love et al., 2004). In Thailand, the construction industry is a major component and greatly influences the economic growth. It is interesting to note that even though being an enormous industry, construction relies much on small and medium-sized construction enterprises or “construction SMEs”. Construction SMEs are not only the grass-roots of Thailand’s construction industry; they also play a significant role to drive the construction business which has the potential to develop the country. Office of SMEs promotion in Thailand (2001) promoted that small and medium-sized enterprises (SMEs) have been accepted as significant players and are the majority of business enterprises and comprise an important component for developing the economy and society of all nations. The information from National Statistic Office of Thailand (NSO, 2004), using the number of employees as the measure of size, reports that SMEs represent 98 percent of construction enterprises. In addition, construction SMEs have the financial volume approximately three times that of large construction enterprises. These distinguish how SMEs are important for construction but most construction firms are classified as SMEs.
Ms. Chanagarn Watanantachai made a study which aimed to investigate factors influencing the financial crisis that is affecting construction SMEs in Thailand so that the effective recommendations for financial crisis management could be proposed for minimize and prevent them from getting into a crisis. To achieve her objective, her sub-objectives were identified as follows: (1) to identify the key factors that lead to financial crisis and classify the importance level of each factor; (2) to explore and gain in-depth understanding how key factors influencing the financial crisis base on the practices of construction SMEs; and (3) to propose recommendations for financial crisis management that are appropriate for construction SMEs in handling with key factors influencing the financial crisis.
Results
In achieving the first objective, the analysis framework consists of 6 analysis processes. The first process is to identify the definition of factors influencing the financial crisis that is affecting construction SMEs in Thailand by using literature review and interview the managing directors. The researcher gets 33 factors that influence the financial crisis from interview expert compound with internal factors and external factors. The internal factors are included with the analysis of factors from Business Management, Financial and Accounting, Marketing, and Construction. The external factors are included with the analysis of factors from Financial Institute, Client, Supplier, Sub-contractor, and Environment .
The first objective was accomplished by using two statistic methods: 1) descriptive analysis (mean and ranking) for classifying the importance level of each factor and 2) hypothesis testing (T-test) for test the perception difference between construction SMEs with financial problem and construction SMEs without financial problem.
According to a descriptive analysis of the sample results, the main factors (the first top 10 ranked) influencing the financial crisis that is affecting construction SMEs in Thailand are Economic downturn, Payment delay from client, Increasing in construction costs, Politic instability, High competition, Unable to access sources of funds, Insufficient funds and limited capital, Low price bidding to get projects, Under-table expense for client, and Cash flow shortage. All top 10 factors are classified as a high importance level for influencing the financial crisis. There are 7 factors (out of top ten) from external factors which are difficult to control. The others 3 factors (out of top ten) are from internal factors. The groups of external factors and internal factors are shown below:
External factor
· From environment: Economic downturn, Politic instability and High competition
· From client: Payment delay from client and Under-table expense for client
· From supplier: Increasing in construction costs
· From financial institute: Unable to access sources of funds
Internal factor
From finance: Insufficient funds and limited capital and Cash flow shortage
From marketing: Low price bidding to get projects
In order to achieve the second objective of this study, factor analysis was used to explore and gain in-depth understanding how key factors influencing the financial crisis from the practices of construction SMEs. From factor analysis, the 33 factors influencing the financial crisis were classified into 7 groups of key factors: Adverse Effects of the Nation’s Situation, Less Profit or Making Loss, Low Cash Liquidity, Poor Credit Potential, Deficiency in Knowledge and Experience, Improper Contract Administration, , and construction project problems. The relationship and logical framework for summer of key factors that is influencing the financial crisis was illustrated in figure 1.
Figure 1. Logical Framework for Summer of Key Factors that is Influencing the Financial Crisis
Finally, the summary of interrelationship frameworks that demonstrate how key factors influencing the financial crisis are developed as illustrated in figure 2.
Figure 2. Summary of Interrelationship Framework of Key Factors that is Influencing the
Financial Crisis
Recommendations for Improvement
For achieving the final objective of this study, the last research objective is completed by proposing the recommendation for financial crisis management that are appropriate for construction SMEs. The causes, consequences, and recommendation for handling with the 10 key factors were discussed in table 1.
The construction industry, through the products that it creates, its size, and its ability to create employment, is likely to influence an economy’s gross domestic product (GDP) more than any other service industry (Love et al., 2004). In Thailand, the construction industry is a major component and greatly influences the economic growth. It is interesting to note that even though being an enormous industry, construction relies much on small and medium-sized construction enterprises or “construction SMEs”. Construction SMEs are not only the grass-roots of Thailand’s construction industry; they also play a significant role to drive the construction business which has the potential to develop the country. Office of SMEs promotion in Thailand (2001) promoted that small and medium-sized enterprises (SMEs) have been accepted as significant players and are the majority of business enterprises and comprise an important component for developing the economy and society of all nations. The information from National Statistic Office of Thailand (NSO, 2004), using the number of employees as the measure of size, reports that SMEs represent 98 percent of construction enterprises. In addition, construction SMEs have the financial volume approximately three times that of large construction enterprises. These distinguish how SMEs are important for construction but most construction firms are classified as SMEs.
Ms. Chanagarn Watanantachai made a study which aimed to investigate factors influencing the financial crisis that is affecting construction SMEs in Thailand so that the effective recommendations for financial crisis management could be proposed for minimize and prevent them from getting into a crisis. To achieve her objective, her sub-objectives were identified as follows: (1) to identify the key factors that lead to financial crisis and classify the importance level of each factor; (2) to explore and gain in-depth understanding how key factors influencing the financial crisis base on the practices of construction SMEs; and (3) to propose recommendations for financial crisis management that are appropriate for construction SMEs in handling with key factors influencing the financial crisis.
Results
In achieving the first objective, the analysis framework consists of 6 analysis processes. The first process is to identify the definition of factors influencing the financial crisis that is affecting construction SMEs in Thailand by using literature review and interview the managing directors. The researcher gets 33 factors that influence the financial crisis from interview expert compound with internal factors and external factors. The internal factors are included with the analysis of factors from Business Management, Financial and Accounting, Marketing, and Construction. The external factors are included with the analysis of factors from Financial Institute, Client, Supplier, Sub-contractor, and Environment .
The first objective was accomplished by using two statistic methods: 1) descriptive analysis (mean and ranking) for classifying the importance level of each factor and 2) hypothesis testing (T-test) for test the perception difference between construction SMEs with financial problem and construction SMEs without financial problem.
According to a descriptive analysis of the sample results, the main factors (the first top 10 ranked) influencing the financial crisis that is affecting construction SMEs in Thailand are Economic downturn, Payment delay from client, Increasing in construction costs, Politic instability, High competition, Unable to access sources of funds, Insufficient funds and limited capital, Low price bidding to get projects, Under-table expense for client, and Cash flow shortage. All top 10 factors are classified as a high importance level for influencing the financial crisis. There are 7 factors (out of top ten) from external factors which are difficult to control. The others 3 factors (out of top ten) are from internal factors. The groups of external factors and internal factors are shown below:
External factor
· From environment: Economic downturn, Politic instability and High competition
· From client: Payment delay from client and Under-table expense for client
· From supplier: Increasing in construction costs
· From financial institute: Unable to access sources of funds
Internal factor
From finance: Insufficient funds and limited capital and Cash flow shortage
From marketing: Low price bidding to get projects
In order to achieve the second objective of this study, factor analysis was used to explore and gain in-depth understanding how key factors influencing the financial crisis from the practices of construction SMEs. From factor analysis, the 33 factors influencing the financial crisis were classified into 7 groups of key factors: Adverse Effects of the Nation’s Situation, Less Profit or Making Loss, Low Cash Liquidity, Poor Credit Potential, Deficiency in Knowledge and Experience, Improper Contract Administration, , and construction project problems. The relationship and logical framework for summer of key factors that is influencing the financial crisis was illustrated in figure 1.
Figure 1. Logical Framework for Summer of Key Factors that is Influencing the Financial Crisis
Finally, the summary of interrelationship frameworks that demonstrate how key factors influencing the financial crisis are developed as illustrated in figure 2.
Figure 2. Summary of Interrelationship Framework of Key Factors that is Influencing the
Financial Crisis
Recommendations for Improvement
For achieving the final objective of this study, the last research objective is completed by proposing the recommendation for financial crisis management that are appropriate for construction SMEs. The causes, consequences, and recommendation for handling with the 10 key factors were discussed in table 1.
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Her thesis abstract is copied and posted.
ABSTRACT
Construction SMEs are a backbone of the construction industry in Thailand. Unfortunately, construction SMEs have extremely high uncertainty and risk that lead them face with financial crisis and business failure easily and they can lead to failure of the Thai construction industry. Therefore, it is necessary to have a study concerned with financial crisis in order to know what factors lead construction SMEs to get into a financial crisis. This study aims to investigate key factors that influencing the financial crisis that is affecting construction SMEs in Thailand and recommend the effective method for financial crisis management.
The researcher decided to use 2 types of research design: 1) quantitative research by using survey design and 2) qualitative research by using case study. There are 3 statistic methods were used to analyze data from questionnaire surveys: 1) descriptive analysis (mean and ranking) for classifying the importance level of each factor, 2) hypothesis testing (T-test) for test the perception difference between construction SMEs with financial problem and construction SMEs without financial problem, and 3) factor analysis for reducing set of factors. For qualitative study, the case study was used to gain in-depth understanding how key factors influencing the financial crisis base on the practices of construction SMEs.
Results were found that there are 10 key factors that influencing the financial crisis: Economic downturn, Payment delay from client, Increasing in construction costs, Politic instability, High competition, Unable to access sources of funds, Insufficient funds and limited capital, Low price bidding to get projects, Under-table expense for client, and Cash flow shortage. The causes, consequences, and recommendation for handling with the 10 key factors were discussed in this study.
