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

Yoo Kyung Sung, Jeehee Lee, June Seong Yi, Jeongwook Son

Research output: Contribution to journalArticlepeer-review

23 Scopus citations

Abstract

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.

Original languageEnglish
Article number04017018
JournalJournal of Management in Engineering
Volume33
Issue number5
DOIs
StatePublished - 1 Sep 2017

Keywords

  • Business performance
  • Clustering
  • Construction strategy
  • Diversification

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