Diversification of Property Developers — Case Study on Lih Pao Group and Kindom Construction Corp.
Date Issued
2015
Date
2015
Author(s)
Chen, Yung-Ming
Abstract
Property development is a trade of business featuring long industrial cycle, low turnover, susceptibility to political and economic factors and risks from economic fluctuation. News that developers run out of capitals or run on high financial leverage is frequent. Property developers are known to bankrupt due to shortage of cash flow or inability of flexible financial operations as they are subject to the rapid changes in the factors mentioned above. As a result, developers have to improve and even extend their competitiveness by improving company efficiency, reforming corporate organization and strengthening the relationship with clients. In addition to merging and market expansion, they often seek to exploit the existing resources, increase independence, pursue for growth outside the trade of business, lower risks, and have more flexible financial operations for better synergy through vertical integration and diversification. Some even have to transform in response to the current trends as the “Philips Group” did. The transformation and diversification are for the sake of improvement of “product value” and the goal of sustainable operations. As a starter, Chapter 3 is the discussion of corporate competitive strategy and extended theories on expansion, integration and diversification in market and products to build the theoretical foundation for the practical interviews presented in Chapter 4. The interviews with CEOs of Lih Pao and Kindom in Chapter 4 provide an understanding of the process they started the diversification, the type and characteristics of existing resources they had at the beginning (in their original trade of business), timing as they started the diversification, the process of diversification, the selection and implementation of diversification strategies, whether to introduce a professional management team and performance review, and what to do if the business performance is not satisfactory. Also, the interviews provide the information on what role(s) CEOs play in the diversification, the keys to successful diversification for small and medium-sized businesses based on their experience in business running and diversification, and most importantly, the inspirations and suggestions that they believe helpful for property developers who are interested in diversification strategies from the experience of these two top-level groups in property development. The study started with theory investigation to pave the way for the practical interviews that provided the experience in successful diversification of the case study subjects, as to identify the common grounds for diversification strategies both in practice and theory. Finally, the practical motivation, sequence and even direction of the diversification for these property developers were determined. Hopefully, the result will serve as the experience and suggestions for other property developers interested in diversification and contribute to their success in diversification strategies.
Subjects
Property Development
Strategy
Competitive Theory
Core Competitiveness
Diversification
Transformation
Type
thesis
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