Editorial Board

A Refereed Monthly International Journal of Management

Strategic Diversification in the Malaysian Construction Industry: A Case Study on Expansion into Facility Management (FM) Services

Rosnia Masruki

Associate Professor,

Universiti Sains Islam Malaysia

rosnia@usim.edu.my

Marini Kasim

Senior Lecturer,

Universiti Utara Malaysia

Nazahah Abd. Rahim

Senior Lecturer,

Universiti Utara Malaysia

Faizahani Ab. Rahman

Senior Lecturer,

Universiti Utara Malaysia

Abstract

In alignment with the Malaysia Madani government's emphasis on sustainability, particularly through effective asset maintenance, this study investigates strategies for sustaining order books and executing efficient facility management by emphasizing the strategic diversification of services. This qualitative single-case study examines a company's strategic transition from a construction-centric operation to a comprehensive facility management approach, highlight      ting the complexities of such strategic integration within the local construction industry. Data were collected through semi-structured interviews involving top management, managers, and operational employees of a leading construction company, providing multi-level organisational perspectives on diversification into facility management services. The study reveals that the transition was largely driven by strategic leadership at the top-management level, supported by managerial coordination and employee readiness and loyalty, aiming to expand services while retaining a strong focus on construction. Challenges in adhering to statutory requirements prompted proactive involvement from top management, together with managers and employees, including compliance training and operational adjustments to ensure the successful launch of facility management services. Despite these challenges, the integration was managed as a value-added extension to the company’s core business operations through coordinated actions across organisational levels. However, caution is advised when interpreting these findings, as the study is limited to a single company, limiting the generalisability of the results to the broader industry. Future research should consider including a diverse range of companies to validate these findings and further explore the respective roles of leadership, managerial capability, and workforce readiness in the evolving construction industry. This study underscores the critical role of multi-level strategic decision-making, advocating alignment between top-management vision, managerial execution, and employee capability in service diversification strategies that not only enhance current operations but also ensure long-term sustainability. The study's insights provide a foundational understanding of human-capital-driven service diversification, offering a valuable framework for business expansion strategies in Malaysia’s construction industry.

Keywords: Strategic diversification, facility management, construction industry, sustainability, case study.

Introduction

The construction industry in Malaysia is a critical driver of the national economy, contributing approximately 3.6% to country’s Gross Domestic Product (GDP) and accounting for about 10% of total employment (Statista, 2023). Over recent decades, the industry has experienced significant growth, driven by government initiatives, urbanization, and foreign investment. However, this growth has brought challenges, such as maintaining the quality and sustainability of construction projects. To address these challenges, Facility Management (FM) services have emerged as a vital aspect, ensuring that buildings and infrastructure are managed efficiently, meeting the highest standards of safety, functionality and sustainability (Islam et al. 2019; Meng 2014).

According to Aziz et al. (2016), the International Facility Management Association (IFMA), FM is a multidisciplinary field that integrates various activities to enhance the functionality, comfort, safety and efficiency of the built environment. FM achieves this by coordinating people, place, process and technology. This wide-ranging scope includes services such as maintenance, cleaning, security and energy management, which are essential for optimising the performance of buildings throughout their lifecycle (Hassanain et al., 2025). Integrating FM services into the construction industry can provide significant benefits, including extending building lifespan, reducing cost and improving user satisfaction.

The Malaysian government has prioritised sustainability and asset maintenance as part of its Malaysia Madani agenda, aiming to foster a more sustainable and resilient construction sector. In line with this agenda, the Federation Budget of Malaysia reported substantial investments in construction and infrastructure development, as evidenced by RM69.8 billion allocated for public projects in the 2023 federal budget (Ministry of Finance Malaysia, 2023). FM plays a pivotal role in the post-construction phase by ensuring that buildings and infrastructure maintain their intended quality and operational standards.

Key functions of FM. FM in the construction context can be categorised into five core management areas, these are:

1. i) Maintenance Management: Conducting regular inspection and preventive maintenance (Islam et al., 2019; Hassanain, 2025) to ensure the longevity and reliability of building systems.
2. ii) Energy Management: Optimising energy consumption to reduce operational costs (Meng, 2014) and environmental impact.

iii)   Space Management: Managing space utilisation effectively to meet organisational needs and accommodate changes.

1. iv) Health, Safety, Security and Environmental (HSSE) Management: Implementing robust systems and protocols to protect occupants and assets.
2. v) Sustainability Initiatives: Adopting practices that minimise environmental impact, such as waste reduction and obtaining green building certifications.

However, as noted by Renard Yung Jhien Siew (2017), environmental and social reporting is often less comprehensive compared to corporate governance reporting within the Malaysian property and construction sectors. Moreover, there is a notable absence of detailed information regarding health and safety performance and the specific initiatives to improve these areas.

Despite the acknowledged importance of FM services, there is an urgent need for diversification within the Malaysian construction industry. Many construction companies have traditionally focused narrowly on their core activities, potentially overlooking the advantages of expanding their FM capabilities. This lack of diversification may result in missed opportunities to enhance operational efficiency and achieve long-term sustainability. Additionally, specific challenges within the Malaysian context, including regulatory requirements, market competition and workforce readiness (Akunyumu et al. 2021), necessitate a strategic approach to FM service diversification. Such an approach will help construction companies can maintain a competitive edge while addressing the evolving demands of the industry.

This study aims to explore strategies that can sustain order books and enhance the efficiency of facility management by focusing on the strategic diversification of services. The primary objective is to identify and analyse strategies that construction companies can implement to maintain their market position and improve their FM services. Figure 1 represents construction–facility management integration for sustainable asset performance.

Figure 1: Construction–Facility Management Integration for Sustainable Asset Performance

Literature Review

The increasing complexity and expectations surrounding the built environment have driven the evolution of Facility Management (FM) from a support function to a strategic component of construction and infrastructure development. Meng (2014) urged facilities managers to play important roles in sustainable agenda. In global contexts, FM is recognised for its capacity to enhance lifecycle performance, optimise operational costs, and support sustainability goals (Islam  et al., 2019). These functions are becoming more crucial in Malaysia, particularly in light of the Malaysia MADANI framework, which underscores sustainability (keMampanan), well-being (kesejahteraan), and innovation (daya cipta) as national development priorities (Prime Minister’s Department, 2023).

The strategic diversification of services into FM by construction firms is increasingly viewed as a viable response to industry volatility and shifting policy demands. Scholars have noted that diversification allows firms to leverage existing project management capabilities while tapping into recurring revenue streams from maintenance, energy management, and other life cycle services (Olanrewaju & Abdul-Aziz, 2015; Opoku & Akotia, 2020; Hassanain, 2025). Importantly, diversification aligns with servitisation trends in the construction sector, where firms adopt more integrated models combining design, build, and maintain services (Galera-Zarco & Campos, 2021).

Recent studies in emerging economies have highlighted key challenges in FM adoption, including regulatory complexity, human capital readiness, and limited organisational agility (Ho et al., 2021; Rahman et al., 2022). In Malaysia, while public investment in infrastructure remains robust (Ministry of Finance, 2023), firms face increasing pressure to ensure that infrastructure assets are efficiently maintained, comply with environmental and safety regulations, and deliver long-term value. The MADANI government's emphasis on governance and sustainability therefore makes FM not merely a technical necessity, but a strategic imperative for construction firms.

Additionally, leadership commitment and change management play a crucial role in successful FM integration. The Resource-Based View (RBV) theory, as discussed by Olanrewaju and Abdul-Aziz (2015), highlights how firms leverage internal resources and capabilities, such as skilled leadership and employee development, to achieve competitive advantage through diversification. Meanwhile, servitisation theory explains the strategic shift from construction-focused operations to integrated facility management services, emphasising value creation and organisational transformation (Galera-Zarco & Campos, 2021). Ongoing professional development and internal alignment with new service models are cited as critical enablers of strategic transformation. As FM matures in Malaysia, scholarly calls have emerged for further empirical research, especially case-based evidence to inform best practices in navigating diversification and maximising organisational effectiveness (Azman et al., 2021).

Methodology

This study adopts a qualitative single-case study approach to investigate strategic diversification in FM services within the Malaysian construction industry. A combination of primary and secondary data collection methods was used to gain a comprehensive understanding of complex organisational decisions and outcomes. Primary data were gathered through semi-structured interviews involving the CEO, managers, and selected operational employees of a prominent construction company, conducted on 7 January 2024 at the company's office. For confidentiality, the company is referred to as C Corp. Secondary data were obtained from industry reports and academic literature to provide context and triangulate findings. The CEO, managers, and employees were selected due to their respective roles in strategic decision-making, managerial coordination, and operational implementation, offering valuable insights into the company's diversification strategies. The interviews explored drivers behind the diversification into FM, challenges faced, and outcomes achieved from multiple organisational levels. The audio-recorded interviews were transcribed verbatim and analysed using thematic analysis. Initial open coding identified key concepts, which were grouped into themes aligned with the study objectives. To enhance credibility, member checking was conducted by validating findings with the participants, and triangulation was applied through comparison with secondary data. Reflexivity was maintained throughout the analysis to minimise researcher bias. Table 1 provides demographic profile of interview participants.

Table 1. Demographic Profile of Interview Participants.

Results and Discussion

The interview results are organised under four thematic subheadings, namely:

1. Overview of C Corp. from a Multi-Level Organisational Perspective,
2. Revenue Distribution and Strategic Focus,
3. Operational Challenges and Strategic Responses, and
4. Key Strategies of Strategic Diversification.

1. Overview of C Corp

C Corp., a subsidiary of AC Synergy Bhd., has strategically diversified its operations beyond its core construction business into property development and hospitality. Insights gathered from top management, middle managers, and operational employees indicate a shared understanding of diversification as a necessary strategy to stabilise and expand the company’s revenue base. While construction remains the primary source of income, contributing approximately 80–85% of annual revenue, property development accounts for 10–20%, and hospitality constitutes a smaller proportion. Senior management participants emphasised the strategic intent behind this diversification, noting that the company structure allows different subsidiaries to focus on complementary business segments. As one top management respondent explained, “C Corp. is 100 percent owned by AC Synergy Bhd.… we have construction, property development, and hospitality operating within the group.” This reflects the organisation’s deliberate effort to balance its core competencies with new ventures. Table 2 shows Business Segments, Revenue Contribution, and Strategic Role of C Corporation.

Table 2: Business Segments, Revenue Contribution, and Strategic Role of C Corp.

Both managers and operational staff corroborated this revenue structure, highlighting construction as the financial backbone of the group while recognising diversification as a long-term risk management strategy. One managerial respondent noted that “Corp is the revenue owner of the whole group,” emphasising C Corp.’s pivotal role in sustaining group-level financial performance. Employees further highlighted the breadth of C Corp.’s construction portfolio, referencing projects such as airports, hospitals, universities, transport infrastructure, and specialised facilities. These perspectives reinforce the organisation’s strong legacy in construction, which underpins its credibility when extending into FM services.

2. Revenue Distribution and Strategic Focus

Figure 2 illustrates C Corp.’s key strategic considerations in its diversification into Facility Management (FM) services. These considerations—identified consistently across interviews with top management, managers, and employees, include synergising FM with existing construction capabilities, investing in workforce development, targeting financially stable clients, ensuring regulatory compliance, and managing operational complexity (Wimalasena & Gunatilake, 2018; Galera-Zarco & Campos, 2021; Akinbola et al., 2022).

Figure 2: Strategic Considerations of Diversification.

The integration of FM services is positioned as a complementary extension rather than a departure from core construction activities. Participants across organisational levels consistently described FM as a value-adding service aligned with existing competencies. As one senior respondent stated, “We want to go into FM not to drop what we do now, but to complement and add value.” This perspective aligns with sustainable growth strategies in Malaysia’s competitive construction and FM sectors (Meng, 2024). Figure 3 illustrates the key internal and external drivers influencing C Corp.’s strategic diversification into facility management.

Figure 3. Key Drivers Influencing C Corp.’s Strategic Entry into Facility Management.

The findings indicate that regulatory compliance requirements, market slowdown in new construction projects, government policy shifts towards asset maintenance, workforce readiness, and value addition opportunities collectively shaped the firm’s decision to pursue FM as a complementary business strategy.

3.       Operational Challenges and Strategic Responses

The transition into FM services presents multiple operational challenges requiring coordinated strategic responses. Top management outlined the strategic phases of transition, while managers and employees highlighted readiness, skills, and service delivery challenges at the operational level. As one senior participant explained, “The process itself… is not that straightforward… the second and the third stages are all about readiness.” Market conditions were identified as a key driver. Managers noted reduced availability of large construction projects, particularly during periods of limited government-led infrastructure initiatives. One respondent observed, “If only MRT3 didn’t come, there’s not much project in the market.” This shift has increased the attractiveness of FM services, especially given the government’s growing emphasis on asset maintenance. Employees highlighted a practical advantage: C Corp.’s familiarity with assets it originally constructed provides a competitive edge in FM contracts. As noted by several participants, “After we construct, we naturally service and maintain the facilities.”

However, transitioning from project-based construction to user-oriented FM services requires a cultural and operational shift. Operational staff emphasised the challenge of direct engagement with end users, contrasting it with traditional contractor–consultant interactions. FM was also described as encompassing a wide service scope—cleaning, security, and total FM infrastructure—necessitating careful selection of financially viable contracts to avoid low-margin risks. Table 3 provides operational challenges and strategic responses in C Corp.’s diversification into FM.

Table 3: Operational Challenges and Strategic Responses in C Corp.’s Diversification into FM.

Strategic Focus Areas Supporting FM Diversification

1. Optimising Resource Allocation and Enhancing Operational Workflows

C Corp. faces the challenge of allocating resources efficiently across its diversified construction and FM operations. To address this, the organisation has implemented strategies to optimise resource utilisation by leveraging digital platforms for project coordination, internal deployment, and workflow standardisation. These initiatives, driven by management teams and operational units, aim to minimise waste, improve coordination, and enhance productivity across service lines (Hashim et al., 2021).

1. Implementing Robust Quality Assurance Protocols

Maintaining high service standards is critical as C Corp. expands into FM services. Interviewees across management and operational levels highlighted gaps in quality oversight during earlier post-construction phases, particularly in non-core services such as housekeeping and security. In response, C Corp. introduced structured quality assurance protocols, including routine performance audits, standard operating procedures, and compliance monitoring aligned with FM best practices.

Training efforts further reinforce this emphasis, particularly in safety, quality, and environmental management. These initiatives reflect growing organisational awareness that FM service delivery requires consistent quality control mechanisms beyond traditional construction defect management (Islam et al., 2019).

1. Investing in Employee Training and Development

A recurring theme across interviews was the importance of workforce capability in supporting FM diversification. While some supervisors and engineers possess relevant skills, participants acknowledged the need for broader and more systematic training as FM operations scale. To address this, C Corp. institutionalised annual training plans managed by the human resource function, complemented by employee-initiated training requests.

Additionally, specialised subcommittees were established to ensure operational training requirements are aligned with contractual and regulatory obligations. Priority areas include safety, quality, and environmental compliance, reflecting the operational realities of FM service delivery. These measures foster adaptability, employee engagement, and retention—key enablers of successful diversification (Akinbola et al., 2022).

1. Targeting Financially Stable Clients to Mitigate Risks

In response to market volatility, C Corp. adopted a selective client targeting strategy, prioritising financially stable organisations such as government-linked companies (GLCs). Interviewees noted that FM services are positioned as a complementary extension rather than a replacement for construction activities, enabling the firm to sustain order books during periods of reduced construction demand.

Moreover, C Corp. leverages post-construction obligations embedded in existing contracts, transitioning completed projects into long-term FM service arrangements. This lifecycle-based approach strengthens client relationships and ensures recurring revenue streams while reducing exposure to payment and contract risks.

1. Ensuring Stringent Regulatory Compliance and Certification

Regulatory compliance emerged as a critical challenge across all organisational levels. Participants highlighted the complexity of FM certification processes, which require structured planning, competency mapping, and continuous engagement with regulatory bodies. In response, C Corp. adopted a coordinated compliance strategy involving top management oversight, cross-functional collaboration, and targeted regulatory training.

Compliance is viewed not merely as a statutory requirement but as a strategic enabler of operational readiness and service credibility. Achieving high Health, Safety, Security, and Environmental (HSSE) standards is considered essential for long-term competitiveness in the FM sector (Akinbola et al., 2022; Hashim et al., 2021).

4.    Key Strategies of Strategic Diversification

Table 4 summarises the key strategies and initiatives employed by C Corp. in its strategic diversification into FM services. These strategies reflect organisation-wide efforts involving leadership, management, and operational personnel, rather than reliance on individual decision-makers. By leveraging internal capabilities, integrating technology, strengthening compliance, targeting suitable clients, and fostering organisational resilience, C Corp. has expanded into FM services while maintaining operational excellence and client satisfaction in Malaysia’s competitive construction industry (Wimalasena & Gunatilake, 2018; Akunyumu et al., 2021; Hashim et al., 2021; Galera-Zarco & Campos, 2021; Akinbola et al., 2022).

Table 4: Key Strategies in C Corp.’s Strategic Diversification into Facility Management (FM) Services

These findings highlight the strategies that have enabled C Corp. to expand into FM services while maintaining operational excellence and client satisfaction in Malaysia's competitive construction industry. The case study suggests that construction firms considering diversification into FM services should invest in employee training and leadership development to navigate the complexities of FM service delivery successfully. This study contributes to the broader understanding of strategic diversification in Malaysia’s construction sector, demonstrating how aligning FM services with core competencies can enhance operational efficiency and long-term sustainability (Wimalasena & Gunatilake, 2018; Hashim et al., 2021; Azman et al., 2021).

The CEO’s reflections indicate that diversification into FM does not necessarily require extensive upfront investment but instead depends on technological adaptation and strategic deployment of human capital: "There is a cost. Maybe very minimal investment depends on technology later on... For example, if you manage facility within class area... You want to put a sensor for the lamp temperature. There’s technology for that kind of thing."

This quote reinforces the “high tech, high touch” principle noted during the interview, where smart facilities management is enabled through affordable technological integration. While FM presents a new revenue stream, it does not replace existing operations; rather it complements them by aligning strategic goal with operational needs (Meng, 2014). As the CEO emphasised: "We want to go into this FM not because we want to drop everything we do now. More to complement. Add value."

In terms of staffing strategy, C Corp. adopts a flexible approach, balancing internal mobility with new recruitment. The CEO explained: "If we don’t have a job, but we want to put 30 people to do FM... staff can’t say he doesn’t want to go. Absolutely. Transferability. Because we are still in the same group... He has an offer letter, a job offer."

However, the decision to retrain existing staff or hire new talent depends on the context, each approach presenting its own challenges. The CEO elaborated: “If we take a new person, maybe we’ll take a veteran with experience... But, assimilation to the company may be difficult. He can’t fix company culture... So, it’s actually no fixed and fast rule for this is good, this is not good.”

Regarding readiness, the organisation expresses confidence in its internal structure and capabilities, while acknowledging the need for further technological investment. The CEO noted: “It’s ready. Nothing so big for us to embark on... We have the management; we have the people. It’s just that the readiness is the technology to invest a bit more.” She also pointed out the gap between leadership vision and broader staff perception: “If you all have a top definition from BOD level, it’s medium. But you having that definition from the CEO is the top. Depends on how you define it.”

This insight indicates the importance of alignment between leadership and organisational understanding in executing FM diversification initiatives effectively. By adopting strategic diversification measures, construction firms can not only sustain their order books but also contribute to national economic stability and growth through improved FM capabilities. As Meng (2014) suggests, this reflects a sustainable progression in the context of FM services.

Conclusion

This study explores C Corp.’s strategic diversification from construction to facility management services, highlighting strategies for sustaining order books and enhancing operational efficiency in Malaysia’s construction industry. The findings reveal that successful diversification depends on multi-level strategic decision-making, where top-management leadership, managerial coordination, and employee readiness collectively drive effective implementation. Key strategies include proactive leadership engagement, compliance training, phased FM integration, and flexible staffing approaches, ensuring FM services complement rather than replace core construction operations. Although limited to a single case study, these insights underscore the importance of aligning diversification initiatives with organisational competencies and sustainability objectives. Future research should expand to multiple firms to validate these findings, examine sector-wide best practices, and explore the interplay between leadership, managerial capability, and workforce readiness in service diversification. Overall, this study provides a framework for human-capital-driven strategic expansion, offering practical guidance for construction companies seeking to diversify into FM services while maintaining operational and financial sustainability in line with Malaysia Madani’s vision.

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