Many construction firms have promoted diversification as an important growth strategy. However, previous studies on diversification performance show conflicting results on the correlation between diversification and business performance. Although this is partly because of the different theoretical perspectives of researchers, it is mainly derived from the differences between the various industries and their market environments. Thus, this study considers the influencing factors, such as construction market environment, company size, and business segment, which affect the relationship between diversification and business performance to analyze the relationship between international business diversification and the business performance of international contractors. Based on the data released in the Engineering News Record and financial reports, varied statistical exploration including correlation and clustering analysis were performed to derive effective strategies grounded in the relationship between diversification level and business performance. According to the analysis results, the international business diversification levels showed a clear positive correlation with sales revenue, whereas business diversification, profit margin, and current ratio did not show a strong correlation; rather, a higher level of diversification tended to weaken the profit margin and current ratio. From the result showing the correlation between diversification and business performance derived from the clustering analysis, it was found that although diversification is essential to facilitate growth in the size of the company, it can reduce the profitability and stability of a diversified company. Ultimately, this study will provide appropriate and effective business strategy guidelines for international contractors endeavoring to expand their international markets.
|Journal||Journal of Management in Engineering|
|State||Published - 1 Sep 2017|
Bibliographical noteFunding Information:
This research was supported by Basic Science Research Program through the National Research Foundation of Korea (NRF) funded by the Ministry of Education (NRF-2015R1D1A1A02061864).
© 2017 American Society of Civil Engineers.
- Business performance
- Construction strategy