Critical success factors determining economic health of firms producing wooden single-family houses

Firms in the Swedish industry for wooden single-family houses operate on a highly competitive market. Products are relatively homogenous, easily substitutional and firms mainly compete by prices. Since 2005, the accumulated market share for the five largest firms decreased from 53 % to 39 %, whilst the number of firms in the industry increased by almost 60 %. In addition to these internal issues on industry structure, construction firms are generally sensitive to external impacts, like the current changes in bank loan policy for the customer. Nonetheless, the number of produced single-family houses in Sweden increased by almost 130 % since 2012. Contributing to reducing the existing housing shortage in Sweden, wooden single-family house producers play an important role. However, earlier studies show that around 40 % of these firms are economically distressed, or in a situation, where they need to take appropriate strategic action to avoid economic distress in the near future. Yet, what actions are appropriate? This study is aiming at identifying current critical success factors determining economic health of Swedish firms producing wooden single-family houses. By means of these factors, conclusions about appropriate strategic actions might be drawn to avoid economic distress. Data from the 2015 annual reports of 50 relevant firms were collected and processed by means of the Altman’s Z´-score model and regression analysis. The results show that two factors accumulate to 99 % explanatory power (adj. R2) of financial health: (1) the manufacturing capacity of the firms’ assets and (2) the firms’ equity ratio. These are the current critical success factors for economic health of Swedish firms producing single-family houses. (1) matches todays’ debate about automated prefabrication and (2) can be seen as the way of financing such assets. Thus, these issues should guide the strategic agenda of firms in the industry