426
DEVELOPMENT OF ENTRY LOCATION ASSESSMENT CRITERIA (ELAC) MODEL FOR MALAYSIAN CONSTRUCTION FIRMS IN
INTERNATIONAL MARKETS
Norizzati Ibrahim1 and Che Maznah Mat Isa2
1Faculty of Civil Engineering, Universiti Teknologi MARA Cawangan Pasir Gudang, Johor
Email: [email protected]
2Faculty of Civil Engineering, Universiti Teknologi MARA, MALAYSIA
ABSTRACT
The construction industry plays a major and important role in transforming the Malaysian construction industry to the international level apart from the domestic level. However, only 0.74% Malaysian construction firms have been involved in international market. Hence, this research focuses on development of Entry Location Assessment Criteria (ELAC) Model based on Malaysian construction firms sustained in international markets. The ELAC formula was derived through a development of taxonomy criteria from previous studies. The construction firms’ performance was analyzed and ranked using a weightage score characterized under three (3) dimensions of country with the taxonomy criteria. The ELAC score shows that three (3) construction firms score 66%, 53% and 50% have sustained international operations in various locations by obtaining an ELAC score of more than 50% by venturing to ASEAN countries, developing countries and developed countries. Even though his study is limited to Malaysian construction firms, it provides significant information and contributes to the current knowledge in international market expansion. This ELAC model is useful especially for construction firms that are just beginning to explore foreign business opportunities or for the global players that are expanding geographically to new international markets.
Keywords: assessment criteria, construction firms, entry location, international markets, model
1. INTRODUCTION
International construction is generally defined as where a firm, executes construction work in another country, and has traditionally implied companies from least developed countries and advanced industrialised company. However, globalisation defined as an ongoing process, which generates new ideas, practices, competition, values, identities and movement [2]. According to [3], globalization has provided an enormous opportunities and demand of development worldwide such as the charting the strategic and future planning of the Malaysian construction industry; and Construction Industry Transformation Programme (CITP 2016-2020). However, these efforts made by the industry to increase the involvement of local contractors to foreign market have been futile. In the primary stage of the current study, according to [1], Malaysia statistical record indicates that out of 8023, Grade 7 construction firms, only 59 (0.74%) firms have been involved in international market. That amount was reducing about 1.5% compare to data recorded in 2013 [4]. Therefore, the purpose of this research is to identify the market selection and entry- location strategies by firms in international markets.
427 2. METHODOLOGY
Previous study shows there have been many articles published on international entry decision strategies, which makes reviewing all of the empirical studies very difficult work. Owing to this, this study focused on the sampling frame based on (CIDB, 2020) which recorded that 59 firms registered as International players. The target population is from Malaysian construction firms who are undertaken and completed projects in international market in various fields including buildings; power transmission and plant; oil and gas and also mechanical and electrical basic. However, out of 59 firms, only 12 firms were found still actively operating construction projects in international market in 2020. After classifying the secondary data derived from CIDB record, assessment of the level of ELAC from all finalized 12 active firms were generated. The value of the decisional framework will be measured based on “decision location quality‟.
Decision quality is a function of the independent variable decision tools for each company and then calculated by using the 5 point scale as separated into different type of location category.
3. ANALYSIS AND DISCUSSIONS
The ELAC score as shown in Table 1 is the summation of the weighted dimensions; where the coefficient is the individual weighting calculated based on data provided by the selected firms. An example of the ELAC score for Firm A is as follows:
ELAC (Firm A) = 2Wn+3Wl+4Wy+5Wd+6Wh = 2(1)+3(1)+4(2)+5(2)+6(2)=35
ELAC scores formula generates ranking for 12 firms based on weightage scale. Result also shows the descriptive statistics presented by the mean values for each indicator contributing ELAC scores through identifying the key player of international Malaysian contractors as to increase number of involvements for other company in international level. Hence, top firm’s position can be determined based on the set assessment criteria in order to improve and increase performance in foreign projects.
Table 1. ELAC Score for Year 2019 (N=12) with Mean Assessment Criteria
Weightage for each location assessment ELAC Score (%)
Ranking EL
Decision
2Wn 3Wl 4Wy 5Wd 6Wh
Firm A 1 1 2 2 2 35 - 2
Firm B 2 1 5 3 4 66 1 2
Firm C 3 3 2 3 2 50 3 2
Firm D 1 1 1 1 2 26 - 1
Firm E 2 3 3 2 3 53 2 2
Firm F 2 2 3 2 2 44 - 2
Firm G 2 1 3 2 3 47 - 2
Firm H 1 1 2 1 3 36 - 2
Firm I 1 1 2 1 3 36 - 1
Firm J 1 1 1 1 2 26 - 1
Firm K 1 2 1 1 1 23 - 0
Firm L 2 1 1 2 2 33 - 2
Mean 1.58 1.50 2.17 1.75 2.42 39.58 - -
428 Table 2 shows only three (3) firms have scored more than 50% which are Firm B (66%), Firm E (53%) and Firm C (50%) which means the company is heavily involved in projects in highly developed company. The findings also show the lack of firms’ involvement in project located in highly developed country. However, results found that the top 3 higher ranking firms run their project in both region countries. In addition, the findings in Table 4 found the readings are below three (3) out of five (5) based on Likert Scale which it meant the poor involvement of Malaysian firms in international project.
Table 2. Mean Score for Each Dimension Based on ELAC Scores for Year 2019 Dimension Coefficient
(corresponding weighting)
Weighted Mean Score
Mean for each dimension
Wn 2 31.6 1.58
Wl 3 30 1.50
Wy 4 43.4 2.17
Wd 5 35 1.75
Wh 6 48.4 2.42
4. CONCLUSION
This study has established a few dimensions related to location using measurement scales to assess the contractor success in international market by conducting analysis based on secondary data provided by CIDB Malaysia. The assessment criteria have enabled the identification and ranking of the most experienced and sustained international contractor in Malaysia. Hence, the development of the assessment scales will help local contractors and CIDB to assess the level of contractors’ sustained in international level as well as to improve performance in international markets. The outstanding achievements by world- class firms winning project contracts globally will show a good value to local Malaysian construction firms in the construction industry.
REFERENCES
1. Construction Industry Development Board Malaysia Report (2020). Construction Industry Development Board Malaysia Record. Available at http://international.cidb.gov.my/international/
(accessed January 2020).
2. Gunnarson, A. (2011). The Selection of Entry Modes when Penetrating a Foreign Market. Linnaeus University. Published Master Thesis.
3. Mat Isa, C. M., Mustaffa, N. K., Mohd Saman, H., Mohd Nasir, S. R., & Che Ibrahim, Che Khairilngineering, C. (2012). Factor Influencing Malaysian Construction Firms in Venturing into International Markets. In International Conference on Innovation, Management and Technology Research (ICIMTR2012) (pp. 168–173). IEEE explore.
4. Mat Isa, C. M. (2016). An Integrated Model for Intenational Market Entry Location, Entry Timing and Entry Modes (ELETEM) Decisions of Malaysian Construction Firms. Universiti Teknologi MARA. PHD Thesis.
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