The article presents the state of the art and perspectives of the Finnish builders’ carpentry Industry and the role of the small firms. It is identified that firms producing prefabricated components to BtoC markets do not supply their products to BtoB markets and vice versa. Domestic markets of single dwelling house construction have been growing during the recent years. There is a large demand potential opening up by the replacment of concrete by wood in the frame construction for multi storey dwelling buildings. The competitive structure of the industry as one determinant of business performance is evaluated with respect to suppliers (supply chain), entrants (entry barriers), buyers, rivals and substitutes. Despite of high cost, differentiation is used by firms in the industry as the major competitive strategy. Lack of knowledge and skills in strategic management, low innovativeness and low marketing competencies are common. Exports do not show any positive impact on business performance. Human capital rather than technology is a strategic but scarce resource. Subcontracting is common but partnerships in production and procurement are rare. There is large variation in the degree of process integration. Differentiation strategy, i.e. broadening competitive scope, implies flexible manufacturing systems with sufficient manufacturing capacity and a sufficient number of product variants. Small firms encounter restrictions with respect to the endowment of human and financial capital. At the end the article presents some factors of success for small firms in the Finnish builders’ carpentry industry. Differentiation strategy hardly does provide a competitive advantage for small firms without extended networking. Business networking can allow small firms to compensate scale disadvantages when focusing into narrow demand segments. The preconditions for small firms to enter a BtoB partnership with a construction company are process automation and exploitation of IT-technologies, integrated information management and the implementation of an open construction system.