Internal Analysis and Strategic Options for Expansion in the Construction Industry

Introduction

In an ever-globalizing economy, where companies look forward to Strategy, the entities are
designed to boost competitiveness, drive economic growth, and eventually, Profitability. Low
amongst the abundance of tactics existing right now, Geographical Diversification and
Internationalisation prove to be the two vital strategies for private and public companies
regardless of the industry such as the construction one. The initial segment, designed for
readers to form a good understanding of Geographical Diversification and
Internationalisation concepts as corporate strategies, especially within the construction sector,
intends to clearly state that. It will be also the introduction for the study that will clearly show
the reasons for conducting the internal analysis of the construction company, and which will
be presented with upcoming discussion.

Significance of Geographical Diversification and Internationalisation

Business spatial diversity involves jumping on business operation the process of which is
entering into new geographic areas which may be in one country or abroad. Hereby, the
strategy helps organizations to cut back the risk levels implicated by economic downturns in
different regions with the distribution of operations to many regions. On the one hand,
Geographical Diversification can make companies more able to seize new opportunities in
quickly growing areas while cutting risks related to revenue streams of the only market. In
comparison, Internationalisation involves the process of expanding economic activities
beyond the territorial borders of independent countries as is typically by means of Foreign
Direct Investments, partnerships, or acquisitions. Through expanding their operations towards
the international arena, enterprises can exploit new business locations and economies of scale
embracing the local availability of firms as resource endowments, expertise and market
insight.

The Construction Industry: A Global Perspective

The industrial sector acts as an integral part of the world economy development which is
made out of a wide variety of activities including infrastructure development, town
construction, industrial collaboration as well as urban management. In the face of the global
construction market that is expected to grow to unprecedented levels in the next years driven
by urbanization, population growth and infrastructure investments, construction companies
are obliged to reshape the perception of products or services that will lure businesses from
different geographical regions beyond the existing territory by devising strategic imperatives
of geographical diversification and internationalization to sustain growth and profitability.
Also, the sensitivity of the construction sector to local economic fluctuations, law changes,
and political risks highlights the necessity of operating beyond the borders of one country,
which allows spreading the construction activity to other regions and signing contracts with
other parties.

Rationale for Internal Analysis

As the company goes out to venture into the geographies beyond its borders, an in-depth
internal analysis project for the construction company must be regarded as a key component
of the process to allow the identification of its various capabilities, constraints, and how
susceptible it will be to changes in the external environment. Internal failures are one
component that allows the company to better understand the core competencies, efficiency of
production operations, financial effectiveness, organization structure, and allocation of
resources. Through judicious examination of these internal factors, organizations can pinpoint
whether they are prepared for internationalization or not, develop crucial point spots of
required improvements, and start on the road of formulating unique strategies for optimal
competitiveness and risk minimization. Internal analysis of an organization also needs to be
before foreign roadmap development which is in harmony with the business objectives of the
organization.

Structure of the Discussion

This study will commence with an analysis of the theoretical pool of Geographical
Diversification and Internationalization as corporate strategies. The results will be based on
the renowned works of academics, and evidence from the broader world. Subsequently, it will
investigate the internal analysis of the construction company, which is in the process of
expanding internationally; strengths, weaknesses, opportunities, and threats, will be taken
into consideration in the process. Also, from the internal analysis outcomes, specific
suggestions will be provided to aid the company’s further internationalization including key
strategic initiatives to take and operational improvements to implement as well as risk
mitigation measures to undertake. This plan-driven manner thus targets the reader's
comprehension issues and gives them superior and tangible knowledge concerning the
diverse Geographical Diversification and Internationalisation in the construction sector and
the industry players' journey to global expansion.

Literature Review

Spatialisation and externalization of business activities as the main corporate strategies for
gaining increased profitability, growth, and competitive edge in the modern international
economy. This section outlines the systematic study and appraisals of the reference sources
investigating the core principles, research findings, and site practices, with an emphasis on
the area of construction business.

Theoretical Foundations

Based on Rugman and Verbeke (2004), international diversification logic and an

internationalization strategy stem from the location-specific twinning strategy brought
forward by the eclectic international business paradigm, which entails that firms invest
abroad mainly to utilization the location and ownership advantages, and internalization
advantages. The diverse location strategy, wherein firms operate in several geographic areas
to allow risk mitigation and capture a wide range of market opportunities (Dow et al., 2006),
can be adopted by companies. Internationalization on the other side of international business
activities to spread beyond national boundaries to the other hand to new markets, resources,
and capabilities (Dunning,1988).

Empirical Evidence

Empirical studies have been certain sources that assisted in understanding the nexus of
Geographical Diversification, Internationalisation, and company performance. For example,
the effect of Geographical Diversification on the business profit performance was proven by
Hitt, Y. B. et al. 2006. It was also discovered that the greatest impact of this diversification
can be observed in industries that are commonly characterized by significant levels of market
uncertainty. Internationalization through research by Contractor et al (2003), and Cuervo
Cazurra et al (2008) has a positive impact on firm development and competitive advantage
encouraged by market accessibility, the economy of scale factors, and knowledge transfer.

Practical Implications
Diversification and Internationalisation strategies have intrinsic significance and drawbacks
in the construction business. For the construction companies that work for a long time in
matured markets, it means that Geographical Diversification brings the possibility to build
another company in emerging markets which are also quickly developed with a lot of
infrastructure development projects. Nevertheless, other Internationalisation gives the
possibility to participate in local firms in large-scale projects abroad, application of local
wisdom and access to resources, and consequently, will be better in the market of different
countries (Loosemore et al., 2006). While one can applaud the efforts to adopt these
strategies, proper investigation of elements like regulations, cultural norms, political stability,
and project risk management is often needed (Chan et al., 2018).

Critical Analysis

However Geographical Diversification and Internationalisation are specific fields that have
many advantages for organizations aiming at global growth but when taking into account
their drawbacks and obstacles as well, these issues should be considered. The success of these
strategies is however up to the ability of the firm to manage the complexities of operation in
culturally and politically diverse platforms. Additionally, numerous empirical studies have
demonstrated the possible hazards that may be associated with the disproportional relation
with international markets that involve viewers to currency fluctuations, international
conflicts, and economic downturns (Henisz & Delios, 2001). Furthermore, the complex
(sophisticated) nature of the international expansion procedure heavily requires market study
(research), talent acquisition, and other strategic partnerships that may rapidly exhaust the
firm's financial resources and leadership skills (Peng, 2001).

In short, both Geographical Diversification and Internationalisation offer constructors

alternative means of increasing their profitability by exploiting the synergies of the global
markets, nonetheless, a practical knowledge of their theoretical fundamentals, empirical
support, and practical application must form the basis of that understanding to be able to
perform effectively. Through a sound analysis of the literature, construction enterprises will
be able to extract profound ideas and eventually use them as tools to support their strategic
decision-making process. They will be able to identify risks and explore the opportunities that
successful internationalization brings about.
Construction Industry: Critical Analysis of Internal Organisational Factors and Their
Alignment with Relevant Strategic Concepts

The construction industry is a business domain that is fast-paced and constantly changing;
and because of this, it is critical to conduct a comprehensive appraisal of internal
organizational factors for the strategic plans to be effectively infused with strategic concepts.
This core object of examination explores the core essentials for proper construction
organization management and analyzes the congruity of these key factors with the relevant
strategic concepts, based on the literature supportive.

Organisational Structure and Strategy

The organizational structure of the construction industry is possibly one of the most
fundamental determinants that influence the alignment of the strategic axis. According to the
work done by Turner and Müller (2005), organizational structure has a great tilt on the
decision-making, communication channels, and resource allocation mechanisms in
construction firms. In the construction industry’s complexity and competition, organizations
are quick to adopt decentralization as the business structure to meet emerging market
conditions and regulatory regimes (Chan et al., 2016). On the contrary, forward-looking
strategies such as differentiation, and cost leadership provide pull in favor of organizational
structures that not only favor for efficiency of project delivery but also ensure the overall
satisfaction of the client (Ofori, 2000).

Human Resources and Talent Management

Human capital is a vital stock of construction organizations, and it can assist them in attaining
long-term sustainability and competitive edge (Loosemore et al., 2015). The success of a
transnational company boils down to its capability to develop, retain, and attract talents
across the globe while addressing cultural diversity (Chen et al., 2019). Also, they are about
activities, which are recruitment on the basis competency, continuing training and
development, and the reward system, which is based on performance (Ahmed et al., 2013). In
addition, promoting a culture involving teamwork, innovation, and sharing of ideas helps
construction companies to fully utilize employee expertise or experience, and adjust quickly
as the market conditions change (Loosemore et al., 2003).
Financial Management and Risk Mitigation

Financial resources and risk management solutions are the prime determinants that impact the
sustainability of a construction company's performance and whether the outcomes of strategic
endeavors will be successful (Hatush& Skitmore, 1997). In most cases, geographical
diversification or internationalization can require the organization to make a huge investment
of funds and have the organization exposed to several dangers such as fluctuation in
exchange rates, political unpredictability, and legal complexities (Li et al.,2020). In this
regard, construction firms have to undertake intensive and careful financial analyses such as
cost-benefit analyses and, further, scenario planning to establish if the business objectives of
expansion and risk mitigation are viable (Yip & Madsen, 2017). In addition to this, risk
mitigation must be taken into account to prevent potential threats and to capture the available
opportunities through insurance, contracts, and strategic alliances. (El-Sayegh had written
this sentence in 2008).

Technological Innovation and Digitalisation

The age of fast scientific progress demands construction companies to take their part in the
introduction of innovation and digitalization to improve their productivity, and efficiency and
make their business, ecologically friendly(Khalfan, & McDermott, 2015). The
implementation of strategic ideas like innovation that separates or technology adoption that
makes for operational excellence requires the construction firms to invest in the most
advanced technologies, for instance, Building Information Modelling (BIM), Drone, and
robotics (Doloi et al., 2012). Moreover, the incorporation of digital tools and data analytics
into project management experience enables construction companies to automate work
procedures, allocate resources rationally, and minimize risk during construction (Tezel and
Aziz, 2017). Creating an environment that upholds innovation, welcoming technological
developments, and remaining open, construction companies can ensure a competitive edge
and win all around in domestic as well as international markets (Fernie & Sparks, 2014).

In the end, it is emphasized that strategic orientation per pivotal industry concepts, e.g.
contextual and international diversification, plays a crucial role within the construction
industry. Construction companies can exploit their organizational structure, human resources,
financial principles, and technological capability to have a better chance at steering clear of
the inherent complexities of global markets, managing risks, and benefiting from the
emergence of new frontiers. It becomes easier to develop sustainable growth and competitive
advantage as a result.

Conclusions and Recommendations

Following the evaluation of the main context/situation in which the construction industry
exists and its compatibility with the fundamental concepts of strategic management, a few
noticeable outcomes arise from the research process. These conclusions which mean
construction companies can assess their strategic performance in the international
environment are very useful and give some well-grounded advice for successful
internationalisation.

Conclusions:

Organizational Agility: Construction companies should develop incorporation of structures

and processes into the enterprise architecture aimed at strengthening adaptability and
flexibility to various market situations and peculiarities of the regulatory environment.
Decentralized structures together with decision-making based on streamlined processes help
multinational corporations to respond quickly to changes in customer expectations and/or the
advent of new business opportunities.

Human Capital Management: The human resources of a construction organization are a

resource that is of vital importance in addition to the fact that the right systems of talent
management should be put in place to acquire, develop, and retain skilled employees.
Employee capacity is a tool that can be cultivated in a workforce through investing in
continuous training and development programs that not only promote innovation and
collaboration but also allow for the development of a culture of innovation and collaboration.

Financial Resilience: Spatial diversification abroad or involving companies in international

projects refers businesses to the diversity of financial risks such as currency instability,
political unrest, and legal complications. Thus, financial governance requiring detailed cost-
benefit analysis, risk assessment, as well as proactive contingency planning is a crucial
prerequisite for the financial stability and continuity of construction firms.

Technological Innovation: Integrating technology innovations and digitalization processes is

necessary for getting higher productivity, efficiency, and laid-back construction services. By
employing novel ways of technology like BIM, drones, and data analytics, construction
organizations can upgrade the project delivery processes, spending less, and more positively
finishing the overall project outturn.

Strategic Alliances: Strategic partnerships and joint ventures can give construction companies
an uncontested leverage point for gaining roots and establishing themselves in new or
unfamiliar markets. Partnering with local companies, trade associations, and government
bodies will assist construction firms in overcoming the problems of bureaucratic records
tapes and cultural barriers in foreign markets.

Recommendations:

Develop a Comprehensive Internationalisation Strategy: Companies in construction should

create a comprehensive strategy of internationalization that will satisfy the long-term
planning of the firm’s development and its market positioning. This entails a market analysis
to assess market potential and risks; then, a choice of the most optimal entry mode for
realizing both long and short international markets.

Invest in Talent Development: Development of human resources should at all costs be the
first step for construction firms that want to act internationally. Developing training and
development programs that emphasize employees' multicultural competencies, language, and
technical mastery, can time and again serve as the cement that glues market entry and
successful operation of the business in foreign markets together.

Enhance Financial Planning and Risk Management: Many construction firms need to
elaborate their financial plans, especially when dealing with risks of internationalization. It
entails a full-blown financial audit and the buildup of strong risk management systems with
effective hedging strategies employed to conquer different kinds of exchange rate volatility
and any market uncertainties that may be prevalent.

Embrace Technological Innovation: Besides innovation and digitalization, the world

construction industry has to be open for technologies to be more competitive on the global
stage. Construction companies will be the companies that will be able to adapt to the state-of-
the-art technologies as well as invest in the digital tools that improve the project efficiency,
collaboration, and decision-making processes and therefore have the competitive edge over
others and well position in the market.

Form Strategic Partnerships: A strategic relationship or agreement can offer construction

companies access not only to local insight but also to local networks and resources which are
a means of a smoother penetration and expansion on the local or regional market. Teaming
with the local key players, including market associations and public agencies, can enable
construction companies to cope with the entry hurdles and speed up the resultant growth
curves in international-level fields.

In the end, the right international business strategy for the construction business necessarily
involves a broad scope of capabilities, including organizational agility, a qualified workforce,
financial adaptability, technology integration, and strategic relations. Through combining the
internal organizational factors with the right strategic concepts into their strategic model and
implementing the foresight strategies, construction companies will be able to handle global
business environment and can lead the way to sustainable growth and gaining the competitive
advantage.
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