Establishment of Growth Strategies for International Construction Firms by Exploring Diversification-Related Determinants and Their Effects

Sung, Yoo Kyung; Lee, Jeehee; Yi, June Seong; Son, JeongWook

doi:10.1061/(asce)me.1943-5479.0000529

Cited by 29 publications

(12 citation statements)

References 17 publications

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“…The strategy process includes the following three key elements: (1) corporate strategy, which describes the direction of the company, influences the profitability and stability of the company and how the management of the business units or lines will be organised (Rumelt, 1980;Stiles, 2001;Sung et al 2017); (2) business strategy outlines workflows and processes within certain business units or product lines and also identifies improvements for actions described in the business strategy (Rumelt, 1980;Smith and Reece, 1999); and (3) functional strategy deals with managing certain functions, maximising productivity and improving competitive advantage (Fine and Hax, 1985;Rajarathinam et al, 2015;Rumelt, 1980). These strategy processes have dependencies linked to hierarchy, where the top-down model is the standard execution model of the strategy process (Varadarajan, 1994;Wheelen and Hunger, 2006).…”

Section: Company Strategymentioning

confidence: 99%

Defining one product data for a product

Silvola

Tolonen

Härkönen

et al. 2019

IJBIS

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The growing importance of product data management and master data necessitate companies to have practices for deriving product master data from their corporate strategy. Business drivers need to be understood from the perspective of corporate strategy to capture product master data in relevant systems in a straightforward manner. Ideally master data is created only once and used through the life-cycle of the product. This study clarifies the foundations for determining one product data from corporate strategy. Data definitions are analysed to understand its linkages to business drivers, whereas main business processes are used to support categorisation. The practices of three companies are analysed to understand how business drivers for new products impact product data requirements. The results highlight the importance of business drivers in defining one product data based on the product master data, business-process related product data and IT systems over the product life-cycle.

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Section: Company Strategymentioning

confidence: 99%

Defining one product data for a product

Silvola

Tolonen

Härkönen

et al. 2019

IJBIS

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“…Industrial organisation (I/O) theory suggests that UD in different industries reduces the industry's congenital association with low profits (Horta et al, 2016;Lee et al, 2016a;Sung et al, 2017). Meanwhile, traditional mean-variance modern portfolio theory suggests that the level of PD is important to reduce risks and maintain stable growth (Kim and Reinschmidt, 2011;Lee et al, 2016b).…”

Section: Literature Reviewmentioning

confidence: 99%

“…In contrast, a new study of US LCFs indicates that an increased level of PD entails a reduction in firm growth rate and revenue (Kim and Reinschmidt, 2011). Sung et al (2017) found that, although high PD international LCFs may ECAM 28,4 experience a growth in assets, they can simultaneously have reduced profits and increased risks. Therefore, at present, a change in industry conditions may not entail the high level of PD for LCFs that was formerly the case in the past.…”

Section: Literature Reviewmentioning

confidence: 99%

“…RD denotes diversification in products related to construction business (Aghimien et al, 2018) and includes property development, civil engineering building construction and speciality construction trades, whereas UD denotes diversification in products unrelated to construction business, such as utilities, manufacturing and retail businesses (Ye et al, 2018). The decision to embark on one type of PD instead of another, or a combination of both, is risky, as inappropriate PD can increase the insolvency risks of LCFs (Sung et al, 2017). This strategy caused the 2018 collapse of the UK construction giant, Carillion, for exampleincreasing the complexity of the firm's internal management structure to oversee its diversified portfolio rendered it inefficient and unable to control and coordinate the multiple subsidiaries of the different product segments involved (Qamar and Collinson, 2018).…”

Section: Introductionmentioning

confidence: 99%

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Product diversification and large construction firm productivity: the effect of institutional environments in Malaysia

Azman

Hon

Xia

et al. 2020

ECAM

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PurposeMany large construction firms (LCFs) adopt product diversification (PD) to counter downturns and spread risks. However, no detailed information is available concerning the type of PD that improves their performance. In addition, it is still uncertain how much changes in institutional dimensions influence the effectiveness of PD. Therefore, the aim is to resolve this issue by establishing a model that shows the extent of this influence.Design/methodology/approachThe generalised method of moments (GMM) estimator is used to model the PD strategies of 86 LCFs in Malaysia over 14 years (2003–2016) and its impact on productivity and profitability performance.FindingsUnrelated diversification (UD) decreased firm performance in 2003–2016, while related diversification (RD) had a positive impact during the more liberal 2010–2016 phase. The models show that the impact of PD is highly dependent on changes in institutional dimensions.Practical implicationsFirstly, managers may adjust the type of PD and its level of diversification to improve firm performance. Secondly, they may devise PD strategies based on changes in institutional dimensions to maximise their effectiveness.Originality/valueThe study contributes to the literature by determining the optimal amount of PD (including RD and UD) and its impact on performance. Secondly, the study is the first to investigate the moderating relationship of the institutional dimensions of economic and regulatory institutions on PD-firm performance. Thirdly, the study is the first to explore the components of technical-scale-scope economies (movement towards and around the production frontier), this being crucial to the strategy that was only conjectured in previous studies.

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“…For example, Gabaix and Landier (2008) and Gabaix et al (2014) observed the effect of the size of a company on the differences in salaries of managers according to their competence, concluding that larger companies tend to have more qualified managers (Himmelberg and Hubbard 2000). In the construction sector, Sung et al (2017) considered the size of a company as one of the factors that influence the relationship between the diversification of activities and the business performance of international contractors. Finally, Panibratov (2009) observed the influence of the international experience of companies on the degree of control over the choice of entry mode into the host country.…”

Section: Characteristicmentioning

confidence: 99%

Risk Management as a Success Factor in the International Activity of Spanish Engineering

Lozano-Torró

García-Segura

Montalbán-Domingo

et al. 2019

Administrative Sciences

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During the period between 2008-2013, the internal market in Spain was characterized by economic crisis, the contraction of the demand experienced in a turbulent business environment, and strong competition among companies. This situation forced many of these companies to work abroad. One of the success factors for Spanish engineering companies abroad has been effective risk management, which avoids compromising the company's objectives, market share, or survival. This article examines the importance of risk management in the success of Spanish engineering consulting firms in the international construction market. Ten executives of Spanish engineering companies with international experience were interviewed, analyzing the importance of risk management for them in the success of internationalization compared with other success factors. The results show that the size of the companies interviewed has no influence on the importance that they gave to risk management, but international experience does relate to the assessment of risk identification and management as a success factor. In addition, companies considered risk management a key factor for optimizing their performance in foreign markets.

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Establishment of Growth Strategies for International Construction Firms by Exploring Diversification-Related Determinants and Their Effects

Cited by 29 publications

References 17 publications

Defining one product data for a product

Defining one product data for a product

Product diversification and large construction firm productivity: the effect of institutional environments in Malaysia

Risk Management as a Success Factor in the International Activity of Spanish Engineering

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