The presence of large numbers of small and medium sized firms may result in inefficiencies due to duplication of efforts and a lack of economies of scale. The range of services that can be offered to potential clients are also constrained by the limited technological and financial capacities that the small and medium sized firms possess. Formation of strategic alliances is seen as necessary because a smaller construction firm cannot be expected to have all that is required to be competitive. Strategic alliances would be an effective way of overcoming weaknesses or drawbacks of a firm. Collaboration, partnership or even merger is a route towards enhancing technological and financial strengths and hence competitive advantages.
Strategic alliances require a change of mindset.
Local construction firms should preferably move away with the traditional family-controlled business structures towards formation of business alliances that are geared for competition at international level. This would enable them to offer a full range of services that would include design, construction and financing for clients. This will result in a consolidation of a large number of small and medium-sized construction firms into a smaller number of large entities with enhanced competitive advantages. According to the findings of the Centre for Performance Improvement in Construction of the Building Research Establishment in the UK, competitive advantage derived from human resource is the most difficult to be copied, unlike technology or hardware which could be purchased. Similarly, the C21 report of Singapore recognised the importance of professionalism in developing a world class construction industry.