International Expansion Decision For Construction Companies: Suat Gunhan, A.M.ASCE, and David Arditi, M.ASCE
International Expansion Decision For Construction Companies: Suat Gunhan, A.M.ASCE, and David Arditi, M.ASCE
International Expansion Decision For Construction Companies: Suat Gunhan, A.M.ASCE, and David Arditi, M.ASCE
Companies
Suat Gunhan, A.M.ASCE,1 and David Arditi, M.ASCE2
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Abstract: There exist several reasons for construction firms to expand their business into international markets. But the complex
international environment is affected by diverse factors and creates risks that are not well understood by companies that are active mostly
in domestic markets. It is therefore essential for construction companies to follow a disciplined and well-informed strategy when deciding
whether to enter international markets. Company strengths relative to conducting business in international markets, the threats and
opportunities associated with overseas work, and the costs and benefits of undertaking construction projects in specific countries need to
be considered in this decision. The interactions between the complex factors can be structured in a model that can help one to make a
rational judgment. The International Expansion Decision Model developed in this study is based on the Analytic Hierarchy Process 共AHP兲
improved by the addition of a Delphi survey. The main objective of this research study is to facilitate the entry decision into foreign
markets and to highlight the importance of the factors involved in this decision. This study is of relevance to practitioners as it allows
executives of construction companies to test if their company is ready for expansion into international markets in general and into a
specific country in particular. It is also of relevance to researchers as it demonstrates the successful use of the combined Delphi and AHP
methods.
DOI: 10.1061/共ASCE兲0733-9364共2005兲131:8共928兲
CE Database subject headings: Construction industry; Risk management; Engineering firms; Foreign countries.
Internal Readiness than the 0.10 threshold recommended by Saaty 共1999兲 and indi-
The first step of the model tests whether a construction company cates that all judgments are logically consistent. Therefore, the
is strong enough to expand into international markets. The top relative weights 共WSi兲 assigned by the program to each factor
part of Fig. 2 shows the tasks performed in developing the inter- were used in the subsequent steps of the model. They are pre-
nal readiness test. First, a two-round Delphi process was used to sented in Table 3.
collect the differences in importance between pairs of company In addition to the pairwise comparison of the company
strength factors. These strength factors are presented in Table 1 strength factors, the respondents were asked to rate each factor in
and are not country specific. They were determined after an ex- a Delphi process by using a 1–5 scale, where 1 denotes no im-
tensive literature survey. A detailed discussion of these factors can portance and 5 very high importance in the current economic,
be found in Gunhan and Arditi 共2005兲. The mean standard devia- social, and political environment. The median value obtained for
tions of company strengths were computed for each Delphi round each factor at the end of the Delphi process is called the “mean
and compared with each other. Most of the differences in the
universal rating 共URSi兲” and was used to calculate a threshold
standard deviations were in the expected direction, such that con-
vergence occurred between the first two rounds in 20 pairwise value. The threshold value represents the minimum rating that a
comparisons out of 21 共Table 2兲. company should have to pass the internal readiness test. The
The median values obtained in the second round from pairwise mean universal ratings 共URSi兲 for each factor are multiplied with
comparisons of company strengths were plugged into EXPERT the factors’ respective relative weights 共WSi兲 obtained in the pre-
CHOICE 共AHP-based computer program兲. An overall consistency ceding step. The sum of these weighted ratings constitutes the
ratio of 0.06 was obtained 共Table 2兲. This consistency ratio is less threshold value 共TS兲.
Fig. 4. Tasks involved in the calculation of the benefit/cost ratio in a specific country
Fig. 5. Tasks involved in the calculation of the International Expansion Mode weights