Timing of International Construction Market Entry by Malaysian

Construction Firms

C. K. I. Ibrahim
Faculty of Civil Engineering, MARA University of Technology, Pulau Pinang, Malaysia
C. M. Mat Isa & A. M. Baki
Faculty of Civil Engineering, MARA University of Technology, Shah Alam, Malaysia
M. K. Ghani
Construction Research Institute of Malaysia (CREAM), CIDB Malaysia

ABSTRACT: Globalization by definition involves trans-boundary activities. Globalization frequently

translates into creation of new construction markets. Focusing on the entry timing is one of the important
dimensions of the process of internationalization of Malaysian construction firms. In securing the position in
the international market, Malaysian construction companies need to consider the influence of numerous fac-
tors both internal and external to the company in deciding when to enter a market. The main objective of this
paper is to explain the timing of entry and factors involved in the entry timing decision making in internation-
alization process of Malaysian construction companies. Questionnaires were sent to 95 Class A and Grade 7
contractors based on the Construction Industry Development Board of Malaysia list to enquire about their
opinions on the strategic entry timing in penetrating foreign markets. Empirical result on the entry informa-
tion of Malaysian construction firms show that firms with medium level of internalization capabilities and re-
sources are likely to enter this new market with late entry as their entry timing decision. However, construc-
tion firms with many experience, huge resources and great capability and expertise will decide to enter a
foreign market earlier. The findings also indicate that firm’s capabilities, firm’s resources availability and
market environment are the most influential factors involved in market entry decision making. Increasing
firm’s performance, firm’s relationship with host country and increasing success rate are the most important
criteria’s in firm’s capabilities. Whilst satisfying capital requirement, lowering risk and more flexibility in
decision making are the important factor in firm’s resources availability. Moreover, political stability of host
country, status competitor in host country and economic system in host country are the most important factor
in market environment. This study is of relevance to Malaysian companies as it systematically highlights
the factors that affect entry timing decision making for the benefits of Malaysian construction companies who
are considering expanding into foreign construction market. This study has shown that the possibility of
Malaysian construction firms to be recognised as global players are expected to increase near the future if
they can plan an excellent entry timing decision making and get involve in international construction industry
that flourishing in every part of the world today.

KEYWORDS: International Construction, Entry Timing, Malaysian Construction Firms

INTRODUCTIONS organizations and countries closer [1]. At the same

The trend of internationalization of construction
companies has been rising throughout the world.
Going international can be viewed as a process of
foreign market entry decisions through which a firm
moves from operating solely in its domestic place to
international markets.
Internationalization has accelerated the flow of
information and resource allocation, bringing people,
time, it has also resulted in intensified competition.
Businesses no longer compete locally, or even
regionally. The globalize economy has brought about
intense competition that has pushed nations to
compete for higher standard of efficiency and quality.
Nowadays, the very competitive and saturated
Malaysian construction market for civil engineering
services has led many domestic companies to con-
sider going international. With fewer projects avail-
able locally, the bigger construction companies are
penetrating international construction market. Taking
advantage of global opportunities will allow the
Malaysian construction industry to reduce the effects
of domestic market conditions and have greater
control over its own development.
However, in international business, it is important to
know when foreign firms enter a newly opened
country market. Selecting when to enter is a critical
strategic decision that requires extensive
environmental scanning, determination of strengths
and weaknesses and matching international market
opportunities with company strengths [2]. Scott [3]
claimed that companies face a particularly difficult
decision of planning when it is best to enter a market
especially foreign market.
Timing of foreign direct investment plays a critical
role in multinational corporations’ international
market entry strategy [4]. Therefore, it is essential
that Malaysian companies to identify entry timing
involved in internationalization process and obtain an
appropriate technique of entering projects in foreign
markets.
The objective of this paper is to identify the entry
timing in internationalization entry strategy and to
analyze the factors influenced entry timing of
international construction market decision by
Malaysian construction companies.
PREVIOUS STUDIES
According to Gaba et al. [5], companies face three
interlocking questions with regard to international
expansion: what market to enter (entry location), how
to enter (mode of entry), and when to enter (timing of
entry).
The process of internationalization has been de-
scribed in term of the cumulative decisions made
about foreign markets and entry modes [6]. One
important dimension of the process of internationali-
zation is the timing of entry. In international busi-
ness, it is important to know when foreign firms
enter a newly opened country market. Timing of for-
eign direct investment plays a critical role in mul-
tinational corporations’ international market entry
strategy [4].
In many previous studies, the order of entry
represents an ordinal ranking that assesses market
entry in terms of first entrants, second entrant (early
follower), and late entrants [5]. Green et al. [7] stated
that the timing of entry affects competitive position,
specifically the ability and competencies of a firm to
realize its objectives in attaining or sustaining a
competitive advantage.
Firms that have a significant overseas commitment
can benefit from the learning and experience associ-
ated with their operations in foreign markets, as well
as their extensive market networks [8]. Because they
can control their accumulated knowledge and experi-
ence more readily, firms with a higher degree of
international experience are more likely to enter a
newly opened international market earlier.
Isobe et al. [9] describes that the issue of whether
first movers have an enduring advantage over follow-
ers in terms of long-term overall performance is still
debatable. A pioneer advantage (first mover) is
defined as the capability of firm to obtain an
advantage over its competitors thanks to the early
introduction of product category [10]. However, there
are supporting evidence that the first entrants achieve
higher market shares and profitability, largely as re-
sult of economic, technological, and behavioral rea-
sons [11].
Early entry may provide the basis for the acquisition
of superior resources and capabilities. Pioneers may
preempt competitors in the physical, technological, or
consumer perceptual space [12].
The first mover may be able to attract and retain
high-quality employees, occupy superior locations, or
enjoy the benefits of patent protection. In addition,
several studies point to the fact that the first firm to
enter the market obtains benefits in terms of recogni-
tion and reputation [13].
Even so, follower advantages can stem from lower
innovation costs, rapid reverse engineering, market
knowledge from consumers already being familiar
with their products, cost savings from reproduction,
and even scope economies that arise from experience
curves [11].
Based on the previous studies, in international
construction environment, foreign construction firm’s
entry timing decisions have not been without prob-
lems in their expansion into international market, and
many consider the entry timing a difficult issue, with
its external and internal barriers to entry. Therefore,
there exists an urgent need for viable entry timing
strategies for Malaysian construction companies who
interested in the international construction market.
METHODOLOGY
CIDB Malaysia records showed that close to 100
companies had ventured into overseas projects under
various sectors. Ninety Five (95) under Grade 7 and
Class A construction companies were selected based
on the list provided by the CIDB of Malaysia. Survey
questionnaires were sent to the companies who had
ventured into overseas projects. They were from all
over Malaysia undertaking one or more contracting
activities in buildings, infrastructures, branches of
engineering and industrial and process plant. Results
from survey questionnaires were studied and
elaborated in the form of tables, graphs and finally
data were analyzed using Statistical Package for
Social Sciences (SPSS) program.

Respondents

There are 31 responses received, giving a success rate

of 32.6 percent. From the 31 responses used in the
analysis, all of them were from the construction
companies who had oversea experience in the
international market in various countries. Figure 2: Percentage Frequency of Respondents on
Types of Entry Timing
There were 64 non responses from the total sample. 6
questionnaires are returned back, indicating that the
companies have moved or no longer involve in any In term of timing of entry perspective, it appears that
overseas contracts. Thus, the respondents analyzed late entry is influential entry timing to Malaysian
can be classified as shown in Figure 1. construction companies in entering foreign market
with 58.0 per cent of responses.

The possible reason on why Malaysian construction

Total Sam-
companies tend to choose late entry is because of the
ple
majority of Malaysian companies is medium sized
95
companies. Some of them are lack of resources,
capabilities and powers in gaining access to suppli-
ers, markets, customers and other assets. They also
might choose to delay their entry in order for them
to avoid high initial risk of financial and operating,
especially in entering an unfamiliar foreign Most of
them are likely to enter late or become as a follower
Experienced Non when many companies exist and the risk and threat of
Companies Response competition is low. The attractiveness of the host
31 64 country and the level of risk are important
determinants of the timing of entry [12]. Deficiencies
in the institutional environment of the host country
also may deter or delay the entry of Malaysian
construction companies into foreign market.
Figure 1: Classification of the Respondents
In this study, the there is no significant differences
between the percentage of early entry and late entry.
However, Lambkin [14] stated that pioneers and late
ANALYSIS OF RESULTS entrants have significantly different strategic profiles
and performance. According to Gaba et al. [5],
Entry Timing Undertaken In Securing Job Overseas companies evaluate political and business risks in
making their entry timing decision. Some of Malay-
sian construction companies tend to choose early en-
There are two types of entry timing in undertaking try because of the vast experienced and accumulated
overseas projects. The result from responses on knowledge based capabilities of the companies. They
timing of entry exercised by their company is shown able to enter on a large scale and invest heavily in
Figure 2. building strong market position and hence increase
their market shares. The flourishing market Market Environment Strongly Agree
opportunities within host country also become
motivation to the companies to enter foreign market B3 Market Opportunities 0.800 Agree
earlier. According to Kerin et al. [11], surviving first Based on the highlighted results in Table 1, three factors
movers achieve higher market shares and profitabil- are ranked in Table 2 and discussed further accordingly.
ity, largely as result of economic, technological and
behavioral reasons. The advantage of this company to Table 2: Ranking of Statement of Factors
collect resources, extend support among related
services will lead them to facilitates early entry into Strongly Average
an international market. The impacts on innovation Factors Agree Agree Neutral Weighted
of construction companies’ capabilities in term of Score
introduction of new technologies also influence the
Strongly
companies to choose early entry as entry timing B2 61.3 % 38.7 % 0% Agree
decision. In addition, some studies describe that the
Agree to-
first firm to enter the market obtains benefits in terms B1 35.5% 58.1 % 6.4 % wards
of recognition and reputation [13].
Strongly
Agree
Agree to-
Factors Influenced Entry Timing Decision into B4 22.6% 77.4 % 0% wards
International Construction Market Strongly
Agree
Thirty One (31) Malaysian construction companies
had given their opinions related to the factors related
to entry timing decision in venturing the international Table 3: Mean Responses of Agreement for Opinion of
construction market. Respondent on How Company’s Capabilities Help in
Entry Timing Decision
The level of agreement with each statement of the
reported difficulties is given on a five point scale; Factor Element Relative Mean Response
Index Value
1 = Not an Issue
2 = Least Important D2 Increasing 0.845 Agree towards
3 = Moderate Company Strongly Agree
4 = Important Performance
5 = Most Important D1 Company 0.813 Agree towards
Relationship with Strongly Agree
Analysis and Discussions host country
D5 Increasing Success 0.794 Agree
To facilitate further analysis, the respondents’ level Rate
of agreement with each statement of factors related to D3 Lowering the Risk 0.690 Neutral towards
the entry timing decision in implementing interna- Agree
tional construction were aggregated and ana- D4 More Flexibility in 0.632 Neutral towards
lyzed as converted weighted scores. entry timing Agree
decision
Key Factors Relative to the Entry Timing Decision
into Venturing International Construction Market
Table 4: Mean Responses of Agreement for Opinion of
Table 1: Mean Responses of Agreement for Factors Respondent on How Company’s Resources Availability
Related To the Market Entry Timing Decision into Help in Entry Timing Decision
International Construction Market
Relative Mean
Relative Factor Element Index Value Response
Factor Element Index Value Mean Response C4 Satisfying Capital 0.781 Agree
Requirement
B2 Company’s Capabilities 0.923 Strongly Agree C3 Lowering Risk 0.735 Agree
Agree towards
B1 Company’s Resources 0.858 Strongly Agree C1 More Flexibility in 0.710 Agree
B4 0.845 Agree towards decision making
C2 Increasing Market 0.594 Neutral
Power

Table 5: Mean Responses of Agreement for Opinion of
Respondent on Which Market Condition Influence
Entry Timing Decision
Relative Mean
Factor Element Index Response
Value
F1 Political stability of host 0.871 Agree
country towards
Strongly
Agree
F3 The status of competitor in 0.761 Agree
host country
F4 Market or Economic system 0.755 Agree
in the host country
F2 Geography location and 0.723 Agree
environment of host country
Entry timing decision could be quite difficult to
conclude. There are several factors that related to
market entry timing decision. The main factors that
always mention in previous studies are included
company’s resources availability, company’s
capabilities, market opportunities and market
condition. From the analysis, the respondents agree
that these factors have great influence in deciding a
suitable timing of entry.
A. Company’s Capabilities
Company’s capabilities, which are including the
company size, project management skills, specialist
expertise level, company reputation, technology
knowledge and company network, is one of the
factors that influence the entry timing decision. Most
of the Malaysian construction companies agreed that
company’s capabilities are the most important factor
in making entry-timing decision. Fuentelsaz et al.
[15] stated that organizational size increases market
power, lowering the barriers to entry in any market.
Beside that, larger firms may benefit not only from
the possession of slack resources that may help to sat-
isfy capital requirements associated with entry, but
also from the existence of a strong brand reputation
or from cost reductions related to size. Company’s
capability is important in increasing company
performance during entry timing, increasing company
relationship with host country, increasing market en-
try success rate, lowering the risk during entry timing
and increase the flexibility during entry timing deci-
sion. The performance level of the company is differ-
ent in term of their timing of entry. Majority of Ma-
laysian construction companies agreed that the
company’s with high capabilities will decide to enter
foreign market early due to higher market share and
lower competition.
Higher market share and lower competition during
early entry will encourage the company to increase
their performance level. The reputations of a com-
pany that enter the foreign market earlier also seen
higher compare to company that decided to enter
later.
More than 60% of the respondents agreed that they
believe the relationship of a company with their host
country is very important criteria in selecting entry
timing when venturing international construction
market in order to ensure the smoothness in operation
of the company within the country. Construction
firms interested in exploring foreign markets may
take part in overseas trade missions in order to estab-
lish international contacts. These trade missions
are generally organized by trade associations or by
the government. The capabilities of company to es-
tablish international marketing network will enables
the firm to secure information on technology, forth-
coming projects, potential competitors and potential
buyers. Quak [16] explained that this kind of infor-
mation allows a construction firms to formulate an
appropriate strategy in deciding when to enter a new
market.
Aside from the strategies that may be employed in a
host country market to extend and build relationship
on existing marketing capabilities, a strategy on
increasing the success rate is also important in entry
timing decision. The early success of entrance in the
new market will also depend on the strategic
positioning that it is able to develop. Its performance
will therefore be tied to the positioning of its product
relative to all other firms that are already in the mar-
ket [17]. Early entry firms appear to engage in an in-
tense market entry rivalry, which shows up in rapid
responses to competitors' actions, as entrants seek to
gain a leading position in the host market, relative to
home industry rival. In such a situation, the timing,
speed and aggressiveness of strategic actions are
related to the market share success of the strategy
[18].
B. Company’s Resources Availability
Results showed that majority of the respondents
agreed that company’s resources availability is an
important factor related to entry timing decision into
international construction market. According to
Lieberman et al. [12, 19], if company require new
resources in order to enter markets, entry via
acquisition and joint venture may enable firms to en-
ter earlier. More generally, the timing of entry de-
pends upon qualities of the company’s resource base.
Company resources are including financial,
equipments, material and laborers availability.
Company resources availability is important in
deciding whether to enter a foreign market early or
late.
Usually, the companies with huge reserves of
resources especially in term of financial resources
will decide to enter early to a new market and com-
panies with moderate resources will decide to enter
late.
According to Gunhan and Arditi [20], financial
strength is one of the important company resources in
international construction. Capital requirement during
market entry is considerably high and companies
with large resources can cover the capital require-
ment and enter the foreign market earlier. From the
analysis, the respondents agree that company’s re-
sources availability will help in satisfying the
initial capital requirement during entry timing,
which will encourage them to prefer early entry.
Company with moderate resource will prefer late en-
try due to lower capital requirement.
During foreign market entry, the risk, especially
when a company decides to enter early is high due to
unfamiliar market environment. From the opinions of
the respondents, regarding the role of company
resources availability in reducing the initial risk of
market entry, they agreed that initial risk could be
reduced if a company has large amount of resources.
According to Fuentelsaz et al. (2002), resources not
only make organizations more fluid, but also reduce
the risks associated with the process of
experimentation with new strategies, new products,
and new markets.
C. Market Environment
Market environment factors such as, geographical
factor, political factor, market system and competitor
status, must be considered in timing of entry decision.
In this study, the political stability of host country
and the status of competitor in host country became
the most important factor in deciding entry of timing.
Majority of Malaysian construction companies
agreed the political stability in host country will lead
to a smooth operation of the company and surely will
reduce the risk of operation in the country.
Political stability will encourage the company to
penetrate the foreign market earlier due to lower
operational risk. However, most of the companies
believe the unstable governments in the host country
that can harm the operations of foreign companies
The status of competitor within the host country also
becomes a factor influenced entry timing decision.
Most of companies agreed that the high competition
in the market will reduce the desire of construction
companies to enter the market early while low
competition will improve the desire to enter the
market earlier. Foreign competitors in the host
countries are potential threats for new movers into the
market. Over the past 10-15 years, competition in the
international construction industry has increased
dramatically as new construction companies have
entered industry from less developed countries as
workload have dropped in the major markets [20].
CONCLUSIONS
The study presented in this paper surveyed the entry
strategies adopted by Malaysian construction
companies in term of the entry timing decision.
Findings indicate that as Malaysian construction
companies go international, entry timing decision is a
really important aspect in determining a company’s
basic missions and long-term objectives. It must be
properly identified before they can implement a plan
of action. Empirical result on the timing of entry
perspective, the findings indicate that firms with
medium level of internalization capabilities and
resources are likely to enter this new market with late
entry as their entry timing decision. However,
construction firms with many experience, huge
resources and great capability and expertise will
decide to enter a foreign market earlier. The findings
also indicate that firm’s capabilities, firm’s resources
availability and market environment are the most
influential factors involved in market entry decision
making. Increasing firm’s performance, firm’s
relationship with host country and increasing success
rate are the most important criteria’s in firm’s
capabilities. Whilst satisfying capital requirement,
lowering risk and more flexibility in decision making
are the important factor in firm’s resources
availability. Moreover, political stability of host
country, status competitor in host country and
economic system in host country are the most
important factor in market environment.
Finally, this study is of relevance to Malaysian
companies as it systematically highlights the factors
that affect entry timing decision making for the
benefits of Malaysian construction companies who
are considering expanding into foreign construction
market. The choice of when to enter commits a firm
to operating on a given terrain and lays the founda-
tion for its future international expansion. This study
has shown that the possibility of Malaysian construc-
tion firms to be recognized as global players are ex-
pected to increase near the future if they can plan an
excellent entry timing decision making and grab the
chances of globalization and get involve in interna-
tional construction industry that flourishing in
every part of the world today.

Acknowledgements
The authors are grateful to the professionals and
managers from Malaysian construction companies,
Malaysian Construction Industry Development Board
(CIDB) and institutions that have provided
information for this research.
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