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The Economics of the Modern Construction Firm

verfasst von: Stephen L. Gruneberg, Graham J. Ive

Verlag: Palgrave Macmillan UK

Enthalten in: Professional Book Archive

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Über dieses Buch

This is a book about the whole diverse range of firms that are found in the construction sector, about their decision-making and the economic environments in which they operate. The authors aim to provide a new and coherent perspective on these firms and the choices they have to make - both for their managers and for all who have a stake in these firms and their industry. This book offers some new and important perspectives for research and teaching about construction firms.

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Inhaltsverzeichnis

Frontmatter

Social Structure of Accumulation

Frontmatter

1. Social Structures of Organisation

Abstract

This chapter introduces the concept of social structures applied to various aspects of the organisation of the construction process. These social structures relate to the economic institutions which determine the working arrangements for undertaking construction.

Stephen L. Gruneberg, Graham J. Ive

2. Social Structures Applied to the Provision of the Built Environment

Abstract

This chapter applies the concepts of social structures developed in Chapter 1. In particular the chapter investigates the implications of social structures in the production and provision of housing. We will divide economic actors qua decision makers into:

the behaviourally most calculative or ‘economic’ (such as speculators),
the lexical (such as consumers), and
the most habitual (such as workers, subcontractors).

Stephen L. Gruneberg, Graham J. Ive

3. Size Distributions and Polarisation of Construction Firms and Markets

Abstract

The belief of many casual users of statistical data is that statistical distributions always show a central tendency, so that the average figure provides the best summary of the data. This is, however, not always the case in construction. The proposition of this chapter is that in fact, if anything, there are often spreads in the data which lead to bi-modal distributions. In other words, in some areas there are tendencies towards polarisation. These tendencies can be explained to some extent by the social, political, and cultural environment in which firms trade, the social structure of accumulation (see Chapter 1, social structure of the economy; social structure of production).

Stephen L. Gruneberg, Graham J. Ive

Construction Markets

Frontmatter

4. Towards Usable Concepts of Construction Market Structure

Abstract

Having looked in detail at housebuilding markets in Chapter 2, we now expand the discussion to construction markets in general. We begin by elaborating on some aspects of the conventional industrial economics model of the market, such as market structure, concentration, and barriers to entry. From a seller’s point of view we discuss price elasticity of demand applied in a construction market context, and we conclude the chapter by discussing market segmentation and marker specialisation by construction firms.

Stephen L. Gruneberg, Graham J. Ive

5. Construction Markets and Transaction Costs

Abstract

This chapter discusses the way all the construction activities that go into the production of a finished product are co-ordinated. Coordination may be achieved either by command or by market exchange. If all activities are carried out by workers directly employed by one firm, co-ordination is achieved by command within an hierarchy. The hierarchical power of employers enables them to give orders to all their different employees, who therefore may be envisaged as the many hands of a single controlling brain.

Stephen L. Gruneberg, Graham J. Ive

6. The Nature of Construction Markets

Abstract

In this chapter we apply a variety of approaches to understand the differences in operation of different markets. We begin with a critical appraisal of the neoclassical approach to the price mechanism, and propose to follow the line of argument given by Morishima (1984), who defines flexprice and fixprice markets. We find this approach altogether more realistic, because it enables an individual analysis of particular markets to take into account both specific features of the market and the way the market responds to changes in economic conditions over time. We apply this approach to various markets in property and construction.

Stephen L. Gruneberg, Graham J. Ive

Capacity

Frontmatter

7. Capacity of the Construction Industry

Abstract

In order to plan and co-ordinate the physical activities and output of industries, planners require volume data, such as technical input per unit of output. For instance, will there be enough bricks to permit a particular volume of construction? If not, can brick industry capacity be increased, or can construction industry demand for bricks be reduced? Even in a capitalist market economy, the need to ask this kind of question is clear, particularly in a relatively closed sector like construction.

Stephen L. Gruneberg, Graham J. Ive

8. Capacity of the Firm and the Economics of the Growth of Firms

Abstract

In the preceding chapter we discussed the meaning of capacity for industries in general and for construction sector industries in particular. The meaning of excess capacity in firms in the building materials industry is clear, and refers to under-utilisation of capital intensive plant. Its meaning and existence in construction industry firms is less clear. If it exists, it will be largely a matter of under-utilisation of the firm’s core staff. ‘For the most part, “excess capacity” is externalised by the contracting firm, appearing as unemployment of construction labour, under utilisation of hire firms’ plant; increased stocks, or reduced output, in the industries producing building inputs; (money) capital held liquid e.g. cash or short term deposits; and a flow of money-capital from construction to other sectors, channelled through both the banks and multi-industry firms’ (Ive, 1983, pp. 72–3)

Stephen L. Gruneberg, Graham J. Ive

Pricing and Investment Strategies

Frontmatter

9. Pricing and Investment

Abstract

In this chapter we model the pricing and investment decisions of firms, using the Eichner — Wood model (Eichner, 1980; Wood, 1975). This model will bring together the concepts of pricing, output, finance, profit margins, and gross operating profits, but it is the inclusion of growth which introduces a dynamic element, allowing for change and uncertainty. We shall use the Eichner model to demonstrate the tradeoff between the need for internal funding for investment and the constraint of the market on a firm’s ability to raise these funds by increasing its pricing mark-up. We adopt Wood’s approach to determining the maximum rate of sales growth and profit margin and suggest that this model can be applied to firms working in the construction industry.

Stephen L. Gruneberg, Graham J. Ive

10. Marketing and Production Decisions of Speculative Builders and Contractors

Abstract

This chapter discusses the marketing, output and pricing decisions of speculative builders and contractors. We look at the marketing and production considerations which speculative builders need to take into account in planning their production. These include the relationship between their fixed cost purchases of land and their variable costs of building using specialist contractors. We also look at the marketing and production considerations of contractors, who are involved in tendering procedures, and note how contracts are let sequentially throughout the year. This enables contractors to adjust their tender prices in response to uncertainty and evolving conditions.

Stephen L. Gruneberg, Graham J. Ive

Capital Circuits

Frontmatter

11. The Industrial Capital Circuit and Cash Flows in Construction Firms

Abstract

This chapter begins with a discussion about the economic implications of management in a firm. We look at the organisational and accounting concepts used to define and measure a firm. We then go on to discuss the industrial capital circuit and the social structures of accumulation, which form the preconditions necessary for capital accumulation by firms to take place. This approach using capital circuits enables both organisational and accounting approaches to be used in the same model. We then compare and contrast profits and cash flows.

Stephen L. Gruneberg, Graham J. Ive

12. Capital Circuits, Conflicts and Strategies

Abstract

In this last chapter we continue our discussion of capital circuits by describing the capital accumulation of merchant, banking and property capitalists. We look at the different strategies adopted by these different capitalist firms. This approach provides an understanding of the underlying nature of the conflicting interests of the various participants in the production process of the built environment. This is not to say that construction is more prone to conflict than any other sector, though it would appear to be more litigious than many. We argue that construction is more prone to expressions of explicit conflicts of economic interest than many other sectors, precisely because of the complexity of its organisation, its fragmentation and thus the number of interests existing.

Stephen L. Gruneberg, Graham J. Ive

Backmatter

Titel: The Economics of the Modern Construction Firm
verfasst von: Stephen L. Gruneberg
Graham J. Ive
Copyright-Jahr: 2000
Verlag: Palgrave Macmillan UK
Electronic ISBN: 978-0-230-51043-2
Print ISBN: 978-0-333-91995-8
DOI: https://doi.org/10.1057/9780230510432

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