This document is an assignment submission for a student named Sameh Kandil Mohammed Ibrahim. It proposes a diversification strategy for a joint venture between Freemantle, a construction company, and Sandford, a hotel chain, to enter the market in Timor-Leste. The strategy recommends diversifying into infrastructure construction and then hotels/resorts. It analyzes opportunities and threats in Timor-Leste, performs a SWOT analysis, and outlines the diversification strategy which includes targeting different markets, clients, services, and delivery systems to spread risk. An action plan is proposed to implement the strategy.

1. SECTION 1 STUDENT TO COMPLETE
Student name Sameh Kandil Mohammed Ibrahim
Student number 109122319
Unit title Strategy in Construction
Unit code
(delete as
AR50126
appropriate)
Note: to look up your student number go to SAMIS on the
web
SECTION 2: TUTOR TO COMPLETE
Overall
Mark
TUTOR COMMENTS AND ADVICE TO STUDENT
In submitting this assignment, I confirm that I have read and understood the entry on Cheating & Plagiarism in
the Department's current Programmes Handbook. In submitting this assignment, I certify that all this material
is my own work, except where I have indicated otherwise with appropriate references.
NOTE ABOUT YOUR ASSIGNMENT FEEDBACK: Your assignment mark is provisional, subject to approval by
the Faculty Board of Studies following the Board of Examiners meeting, where your overall unit result will be
confirmed.
ASSIGNMENT
COVER SHEET

2. AR50126 Assignment
Name: (Sameh Kandil Mohammed Ibrahim)
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3. AR50126 Assignment
Name: (Sameh Kandil Mohammed Ibrahim)
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Contents
1.0 Executive Summary................................................................................................................... 4
2.0 Current Country Situation ......................................................................................................... 5
2.1 Political Situation ...................................................................................................................... 5
2.2 Economical Situation ................................................................................................................ 5
3.0 Current Internal Situation.......................................................................................................... 6
4.0 Entering New Market Opportunities and Threats .................................................................... 6
4.1 Potential Opportunities ............................................................................................................. 6
4.2 Potential Threats ...................................................................................................................... 7
5.0 SWOT Analysis .......................................................................................................................... 8
6.0 Propsed Diversification Strategy .............................................................................................. 8
6.1 Diversification Strategy ......................................................................................................... 8-9
6.2 Diversification Strategy Evaluation ......................................................................................... 10
7.0 Action Plan ............................................................................................................................... 10
7.1 Recommended Action Plan .................................................................................................... 10
List of Figure
Figure 1 Diversification Strategy……………………………………………………………………………………………….4
Figure 2 Timorese Market Threats …….……………………………………………………………………………………….4
Figure 3 Timor-Leste Map……..……………………………………………………………………………………………….5
Figure 4 Ranking of Timor-Leste in Trading Across Border and Paying Taxes……………………………………………….6
Figure 5 Ranking of Timor-Leste in Freedon from Corruption...…………………………...………………………………….7
Figure 6 Unemployment Rate In Timor-Leste………………………………………………………………………………….7
Figure 7 Ranking of Timor-Leste in Dealing with Construction Permits……...……………………………………………….7
Figure 8 SWOT Analysis……………………………………………….……...……………………………………………….8
Figure 9 Diversification Strategy……………………………………….……...……………………………………………….8

4. AR50126 Assignment
Name: (Sameh Kandil Mohammed Ibrahim)
1.0 Executive Summary
In response to the economic downturn faced by Freemantle in the construction industry and the desire of Sandford to
expand plus the existing business opportunities in Timor-Leste, this strategy report is prepared to provide Freemantle
and Sandford with a vested interest in investment through their joint venture in the democratic Republic of Timor-
Leste.
Firstly, this report recommends adopting a related diversification strategy as shown below in figure 1;
Page 4 of 11
Figure 1
This recommended diversification strategy would enable our joint venture to achieve the followings;
Take the advantage of the existing economic and political conditions in Timor-Leste.
Developing the Timorese infrastructure, this will be a step towards constructing hotels and resorts.
Achieve expansion, spreading of industry risks, growth of Sandford and Freemantle, financial savings, long-term
profitability, shareholders’ return and offset the slump at home country.
Secondly, this report highlights some risks (figure 2) that will challenge the joint venture and then suggests the
possible solution to eliminate it, as shown below; -
Figure 2
Partnering with advisors can eliminate the first three risks. Getting political risk insurance will eliminate the potential
political unrest risk. The languages barriers and scarcity of skilled resources risks have to be included in the cost of
doing business. The slowing in Sandford’s core business will be mitigated when construction of hotels and resorts start
after developing the country infrastructure.
Finally, this report also recommends producing and implementing a Corporate Social Responsibly Policy.

5. AR50126 Assignment
Name: (Sameh Kandil Mohammed Ibrahim)
Page 5 of 11
• 2.0 Current Country Situation
2.1 Political Situation
The Democratic Republic of Timor-Leste became independent in 2002 after the Indonesian occupation for 25 years
and two and half year of administration by the United Nations, Heritage Foundation (2013:429).
Figure 3
In terms of stability Hancock (2008:8-9), the country is politically stable as the first democratic legislative elections was
held on Aug 2001 and around 91% of Timor-Leste voters elected a constituent assembly which approved the Timor-
Leste’s constitution with an elected president and prime minister. Also the East Timorese parliament’s members are
elected by popular vote to a five years term, Australian Government (2012).
In terms of openness Hancock (2008:8-9), Timor-Leste is 191st member state in united nation plus it is a member in the
Association of Southeast Asian Nations (ASAN). Timor-Leste has signed a free trade agreement with the members of
ASAN and scored improvement in business and investment freedom, Heritage Foundation (2013:429).
2.2 Economical Situation
Timor-Leste is one of the poorest countries in Asia-Pacific region. The economy depends on the government
spending and assistance from international donors. According to Heritage Foundation (2013:429), in 2011 the
national GDP scored 9.5$ billion, inflation rate and the economic growth scored 13.5%, 10.6% respectively.
Timor-Leste has a market economy that depends heavily on petroleum exports, Australian Government (2012).
Timorese Government is planning to use its petroleum revenues to achieve a long-term economic development
and poverty reduction. According to IV Constitutional Government (2007:40), the government is seeking investing
in infrastructure. Building infrastructure will improve the poor infrastructure, increase the national GDP, reduce
the unemployment rate and improve the tourism sector.
The Strategic Development Plan (2011-2030) sets out an infrastructure investment plan, which includes the
improvement and development of telecommunication, airports, roads, water and sanitation infrastructure, IV
Constitutional Government (2007:40).

6. AR50126 Assignment
Name: (Sameh Kandil Mohammed Ibrahim)
Page 6 of 11
• 3.0 Current Internal Situation
Sandford is one of the largest multinational leisure and hotel chains around the globe and they are looking for
investment opportunities and ways of expanding their existing field of interests. Freemantle is a successful
construction company and has its own good reputation in construction industry. Freemantle was hit by the
economic downturn, as a lot of staff were terminated and new awarded projects were nil since three months.
Freemantle and Stanford possess together financial strength and expert managers in technical and business
aspects as was advised by Hancock (2008:8-14).
• 4.0 Entering New Market Opportunities Threats
4.1 Potential Opportunities
There are some opportunities for our JV to enter the Timorese market; -
• The Timorese government has a strategic development plan 2011-2030 to spend on developing the country
infrastructure, IV Constitutional Government (2013:40).
• Increasing tourism is a crucial part of the Timorese development plan 2011-2030; tourism creates an
opportunity for our JV to construct and operate more hotels and resorts.
• The official currency is USD dollars and that eliminate the risk of exchange rate fluctuation as was advised by
Howes and Tah (2003:77).
• According to World Bank (2013:60 to 67), the Ease of Doing Business Report mentioned that Timor-Leste has
many opportunities in terms of trading across borders and paying taxes.
o Trading across border; the construction projects will require importing materials and equipment into
Timor-Leste. Importing container of material requires only 7 documents, take 26 days and costs $755.
Timor-Leste stands at 83 in the ranking of 185 economies on the ease of trading across borders.
o Paying taxes; paying taxes to Timorese government is essential but it is about the taxes rates and
rules. A firm will make 18 tax payments a year, spend 276 hours a year filing, preparing and paying
taxes. Firms pay only 15.1% of their profits as taxes. Timor-Leste stands at 61 in the ranking of 185
economies on the ease of paying taxes.
Figure 4 World Bank (2013:68 61)

7. AR50126 Assignment
Name: (Sameh Kandil Mohammed Ibrahim)
Page 7 of 11
4.2 Potential Threats
There are some obstacles undermine the business climate for foreign investment and considerably affect on
the JV such as;
• Level of corruption; the public power in Timor-Leste is used to gain personal benefits. The corruption
worsened from -0.53 to -0.89, Nathan Associates (2008:27). Timor-Leste stands at 140 in the ranking of
freedom from corruption, Heritage Foundation (2013:430).
Figure 5 Heritage Foundations (2013:430)
• Potential Political Unrest; the high rate of unemployment (43%), Nathan Associates (2008:47) and
widespread poverty, income inequality beside lack of education and health services, may fuel a
political unrest, Nathan Associates (2008:13).
Figure 6 Nathan Associates (2008:47)
• Dealing with construction permits; Since complying with building regulations is costly in terms of
time and cost, these regulations are considered to be critical to any construction firm. In Timor-Leste,
the construction permits still require 19 procedures, takes 238 days and costs 13.9% of income per
capita. Timor-Leste stands at 116 in the ranking of 185 economies on the ease of dealing with
construction permits, World Bank (2013: 23 to 32).
Figure 7 World Bank (2013:25)
• Physical, professional and commercial infrastructure; as was advised by Hancock (2008:6-11,13),
the availability of essential infrastructure is one of the factors affect on the business. However,
business support services such as accounting, auditing, law, enterprise consulting is inadequate.
Beside the inadequate roads network, Nathan Associates (2008:29,30).
• Scarcity of Skilled Resources; In overseas markets, there is a risk of failing in procuring the
necessary skilled labours for the planned projects, Hancock (2008:8-7). This is exactly the case in
Timor-Leste as Curtain et al (2013:8), confirmed that Indonesians taking construction jobs in Timor-
Leste due to the scarcity of trained and experienced Timorese workers.
• Language Barriers; The language will cause barriers in communication, as the Portuguese is the
common language, Australian Government (2012), but English is our JV language. The majority of
Timorese supervisors speak only Portuguese.

8. AR50126 Assignment
Name: (Sameh Kandil Mohammed Ibrahim)
Page 8 of 11
• 5.0 SWOT Analysis
Figure 8
6.0 Proposed Diversification Strategy
6.1 Diversification Strategy
The proposed diversification strategy will be the related type, Hancock (2008:2-16), and will be built on the diversity
of our markets, clients, services and delivery systems.
Figure 9

9. AR50126 Assignment
Name: (Sameh Kandil Mohammed Ibrahim)
Page 9 of 11
6.1.1 Market Diversity
Firstly, we intend to offer our services in infrastructure sector. We are going to target the construction of roads
and power plants as Timor-Leste suffers from the shortage of supplying electricity in many areas within the
country. Also the roads network is very poor.
Secondly, after improving the Timorese infrastructure, we will target the construction of hotels and resorts,
which will serve the tourism sector. Our team will be comprised of diversified staff of experienced hotel
management specialists (Sandford) and technical staff of architects and engineers (Freemantle). They will
manage all the components of potential hotel projects from construction to operation.
Our JV will follow the model of Tishman (hotel and real estate) as they have a strategic relationship with
Tishman Construction Corporation, Tishman (2013). They are providing a comprehensive services starting from
construction to operation of hotel chains in United States of America.
6.1.2 Client Diversity
We intend to get contracts with the public and private sector. Public sector contributed in 2007 with $25.4
million in the Timorese construction market and the private sector contributed with $19 million as per Kirit
Vaidya (2008:15).
The public sector can secure long-term government contracts, as was stated by AECOM (2012:14).
Government contract can provide steady and on-going monthly revenues. Guaranteed steady revenues will
enable us to improve the cash flow and get it always in the positive side. Furthermore, the government
contracts make our JV more valued when we apply for business loans.
6.1.3 Services Diversity
We intend to adopt horizontal diversification strategy, MERIG (2009), by offering a variety of services to
leverage our competitive strengths in Timorese market. We have to offer besides contracting services the
project management services as well by acquiring a global cost and project management consultancy firm.
This acquiring will enhance our construction management services portfolio and enable us to secure more
construction management contracts.
We will follow the model of AECOM Corporation Technology, a leading designer, and Davis Langdon, a
leading program management expert. AECOM acquired Davis Langdon in 2010 in order to widen its capability
in serving the clients around the globe not only with design services but also with project management
services, AECOM (2013:3).
6.1.4 Delivery System Diversity
We intend to adopt vertical diversification strategy, MERIG (2009), by offering variety of additional services
ranging from financing, design to operation and facility management through following different project delivery
systems such as:
• Private-Public Partnership (PPP).
• Build, Operate and Transfer (BOT).
• Design, Build, Finance and Maintain (DBFM).
For finance; the global construction industry as per Howes and Tah (2003:100) has followed the principle of
using the private fund for large public infrastructure projects such as roads and power plants. This trend can
help the Timorese government to construct more mega projects in short time without worrying about the
availability of cash by using our joint venture’s working capital, in securing the required cash to deliver the
infrastructure projects using PPP, as the government will only share part of the required cash, or we can
secure all the required cash if we follow BOT or DBFM.
Recently, the potential consortia of Plenary, Bouygues Construction with Probuild Honeywell adopted DBFM
delivery system to construct Perth Stadium in Western Australia, Tondut (2012:32 and 36). They will use the
consortia financial capability to finance the project.
For design, operation and facility management; a consortium with design, operating and facility
management specialists will help our JV to deliver these services to our clients as was advised by Hancock
(2008:9-6).
In the potential consortia for Perth stadium, each company is responsible for defined scope of work, Hancock
(2008:9-8), plenary group is the financing entity, Bouygues and Probuild represent the construction and design
entity and Honeywell is the facility management entity.

10. AR50126 Assignment
Name: (Sameh Kandil Mohammed Ibrahim)
6.2 Diversification Strategy Evaluation
The proposed diversification strategy has advantages and drawbacks to our JV. Some advantages mentioned by
Hancock (2008:2-15,17);
• Spreading of industry risks; our joint venture will target different types of markets (infrastructure, hotel,
resorts) and also services (contracting, project management) therefore we will avoid the risk of being reliant on
a single market or service, especially during the time of market downturn.
• Company Growth; the diversification will offer securing more projects hence achieving more profit to the
company. This profit will fulfil the growth and secure more return for the shareholders on their investment.
• Financial savings: the vertical diversification will allow our joint venture to integrate various backward
(design, finance) and forward (facility management) linkages in the supply chain and thus make a
considerable financial savings.
• Resources Utilizing: Making competitive use of our resources instead of staff termination during the current
Page 10 of 11
downturn in UK, Hancock (2008:8-2).
Despite the aforementioned advantages, slowing in core business may arise when our joint venture attempt to
diversify. Sandford tend to move away form their core business (hotel sector), as they will work in construction
sector. However, Sandford will come back for their core business when the country infrastructure will be developed
and constructing of hotels will be viable then.
7.0 Action Plan
7.1 Recommended Action Plan
• Implement the aforementioned diversification strategy.
• Get partnering with various advisors to eliminate the risk of corruption and unease of getting construction
permits as advised by Hancock (2008:9-9). Also partnering with advisor can eliminate the risk of absence of the
professional infrastructure.
• Get a political risk insurance to eliminate the risk of political unrest as per the cover policy of OEKB (2013: 27).
• Languages barriers, scarcity of skilled resources will be eliminated by considering its cost impact and add it to
the cost of doing business, Hancock (2008:9-6), as an expected extra cost for teaching the Timorese
supervisors the English language plus the extra cost associated with getting overseas labours to cover the
shortage of skilled resources in Timor-Letse.
• Produce and implement Corporate Social Responsibly Policy in order to continue commitment by our business
to behave ethically therefore we can improve our reputation, avoiding pressures of environmental and human
rights groups and getting positive media coverage, Hancock (2008:10-18).

11. AR50126 Assignment
Name: (Sameh Kandil Mohammed Ibrahim)
Page 11 of 11
References
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Available from: http://www.google.com.au/#q=evolving+our+aecom+2012+annual+report
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Technology Corporation. Available from: http://www.aecom.com/deployedfiles/Internet/Brochures/0026-PCC-Brochure-NA-v5-
LoRes.pdf
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dfat.gov.au/. Available from: http://www.dfat.gov.au/geo/timor-leste/timor-leste-brief.html
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http://devpolicy.anu.edu.au/pdf/2013/reports/timor-leste-submission.pdf
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(online). Timor-Leste: Constitutional Government. Available from: http://timor-leste.gov.tl/wp-content/uploads/2012/07/ACBD_en.pdf
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Guide (online). Austria: strategy-train.eu. Available from: http://www.strategy-train.eu/index.php?id=145L=0
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http://www.tishmanhotels.com/company/index.html
14- Tondut, John. 2013 (viewed on 19-09-2013). New Perth Stadium Project (Online). Perth: Department of Treasury. Available from:
http://www.perthstadium.com.au/assets/files/presentations/The%20new%20Perth%20Stadium%20Presentation%20April%202013.pdf
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(online). 10 th ed. Washington: The World Bank. Available from:
http://www.doingbusiness.org/~/media/giawb/doing%20business/documents/profiles/country/TMP.pdf