Japanese construction contractors in the international market

Susumu Isoda, University of Reading, UK.

This study explores and compares the business models and financial structures of leading international construction firms. Its purpose is to identify the key determinants behind the declining presence of Japanese contractors in international markets.

Financial ratio analysis indicates that there are no major differences in liquidity and leverage across these firms, although distinct differences in profitability and efficiency between Japanese and non-Japanese contractors have been identified. Moreover, Japanese firms have been found to be particularly capital intensive, for two reasons:

• First, unlike western countries, Japanese firms tend to grow organically without adequately leveraging the opportunities afforded by mergers and acquisitions.
• Secondly, the companies are required to invest in innovation and develop technologies that provide disaster-resistant products and services for the domestic sector.

Furthermore, cost structure analysis reveals that a company’s efficiency in the procurement of materials and services plays an important role in its improved profitability. The corresponding business models of these two analyses indicate that Japanese firms are neither unique in character nor considerably different in comparison to contractors in other countries. Every construction firm has its business model and financial structure deemed suitable for its surrounding environment to enhance competitive advantage.

This dissertation was the Highly Commended Winner, Masters Dissertation Award, CIOB International Innovation & Research Award, 2014.

The judges said, “This is a very ambitious piece of work which draws equally from a comprehensive literature review and innovative empirical research. The dissertation addresses a number of complex business models, and provides a comparative analysis of data across the globe. Synthesised data is used to draw conclusions around the reasons for the declining engagement of Japanese contractors in international markets. The conclusions provide new insights which have not previously been recorded.”

--CIOB