Survival strategies of services subcontracting firms in an economic downturn

Abstract

The construction industry is extremely responsive to the pressures of the economic conditions of the wider economy. Between 2007 and 2008 a major economic downturn affected economies around the world. New Zealand was one of these economies and as a result of this downturn the New Zealand’s economy was pushed into a recession. The construction industry in New Zealand has subsequently suffered from a downturn as a result of this. There is a small amount research available which focuses on how firms within the construction industry adapt to cope with these external changes. However there is very little research available on how subcontracting firms adapt to survive such times. This is particularly evident of the New Zealand market. The research therefore has the objective to discover what strategies are used by subcontractors, particularly of the services trades, to survive these times. The research has been based off previous research on an earlier downturn in the Singaporean main contractor’s market by Lim, Oo & Ling (2010). The survey method was a semi-structured questionnaire of eight participants who were senior managers of subcontracting firms from the services markets. The participants were first asked demographic questions on themselves and their company followed by questions on the utilisation and importance of a list of strategies. The list of strategies was based on the findings from a literature review. Findings of the paper were that there are various strategies which are most important to the survival of these firms increasing the focus on forming relationships with main contractors’, ‘implementing stricter financial management on company cash flow’ and ‘implementing stricter site management to reduce material and time wastage’. A strategy which was also highly utilised but found to be of lesser importance as the strategies above was ‘trying to break into new sources of work (i.e. different main contractors)’. Further studies around this topic could investigate how companies implement these strategies. Research could also be undertaken into how employment in subcontracting firms is affected by economic downturns, as there was a very low response recorded by the participants to any change in employment strategy.