1. Why are most construction companies small in size?
Based on the explanation given in previous lectures of COSC 620 course. The size of construction companies is based on the theory of ‘Economies of Scale’. The concept of ‘Economies of Scale’ is originated from microeconomics, which states that there are more advantages for organizations/enterprises to run at a larger scale to minimize the impact of risk and spread out overheads/cost overruns. For example a smaller company handling less projects and which acts competitive to expand by bidding with less profit margin is at a high risk of running out of business. Therefore most of the companies remain small in size, because any attempt to grow big will keep the company’s survival at stake!
Based on the explanation given in previous lectures of COSC 620 course. The size of construction companies is based on the theory of ‘Economies of Scale’. The concept of ‘Economies of Scale’ is originated from microeconomics, which states that there are more advantages for organizations/enterprises to run at a larger scale to minimize the impact of risk and spread out overheads/cost overruns. For example a smaller company handling less projects and which acts competitive to expand by bidding with less profit margin is at a high risk of running out of business. Therefore most of the companies remain small in size, because any attempt to grow big will keep the company’s survival at stake!