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Strategy project presentation! We got an A for it.
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Agenda
Industry
Company
Alternatives
Recommendations
Suppliers
Industry Analysis Threats of Entry
Buyers
Threats of Substitutions Industry Analysis
Low-income housing Market Analysis
50,000homes
Sold in one year
Growing market that is far from saturation
Expected growth @ XX% per year
Real Estate Industry in Colombia
7.6 millionpeople
2.2 millionhomes
2005
*** millionpeople
2.6 millionhomes
2015
Exp
andi
ng
Increasing -people & homes-
Real Estate Industry in Colombia
people
homes
6.5 million
1.6 million
30,000 - homes created every year- shortage of homes in low and mid income segment- low and middle income: US$ 400 – US$ 1,400
Target -low income segment-
homes
people
homes
Low-income housing Market Analysis
• qualification of Grants / Price Sensitivity • quality: buyer wants the best value for flats
Suppliers
Industry Analysis Threats of Entry
Buyers
Threats of Substitutions Buyer
Suppliers
Industry Analysis Threats of Entry
Buyers
Threats of Substitutions
Low-income housing Market Analysis
Supplier
land
Sub-contractors
Const material
Monopoly- concrete- bricks- steel
Strong power
lack of land
Strong power – government administration
Bottle neck
manysubcontractors low power
Suppliers
Industry Analysis Threats of Entry
Buyers
Threats of Substitutions
Low-income housing Market Analysis
• capital requirement• economies of scale when building• good project administration
Threat of Entry
Suppliers
Industry Analysis Threats of Entry
Buyers
Threats of Substitutions
Low-income housing Market Analysis
Threat of Substitution
Bogota
Buy a new home
or
stay in the same home
leave to suburbs
Industry Trends
• Economic Cycles
• Government Subsidies
• Land Availability
FASE CRECIMIENTO1-2 years
Demand > SupplyMejora de la confianza del consumidor
FASE EQUILIBRIO1-3 years FASE CONTRACCION
2-4 years
Supply > Demand → Precios Sector financiero pesimista → dificultad para financiación → mayor costoLimita generación de nuevos proyectos
Market Summary – Opportunities & Threats
Mild Competition
Good growth potential
Land availability
Political Pressure
Opportunities Threats
What do you think?
So, is this a dream or a nightmare?
TRÍADA Company
Bolivar
Pordes
a
Triada
Colsubsi
dio
Ingeu
rbe
Prom
otora
Viv
endiu
m
Constru
ctora
Colp
atria
5,703
1,482 1,126 802 755 718 713
Sales Volume
Key Competitors – Low-Income Market
TRÍADA Company
WHO
• Low and mid income Families who buy their first house with Government Subsidy
WHAT
• Low and mid income apartments - Standard built - Good quality - Competitive price
HOW
• Good cost benefit equation (good quality with competitive price)
• Lower costs vs. other competitors due to lean implementation across processes
• Higher margin vs. other competitor
Tríada’s key Resources & Capabilities
• First company to implement Lean methodology across its business processes
• Control tools for product quality and productivity
Operating Efficiency
• Standard designs that achieves the market needs while optimizing the construction process by reducing timing and waste
Superior Design
• Key subcontractors integration with into its process• Triada is able to typically pay to its subcontractors less than the market
average for the comparable amount of work performed, the marginsof the subcontractors were higher than the market average due to improved efficiency
Relationship with
suppliers
Tríada’s key Weaknesses
• Limiting the number of projects that the company is taking • Threat for potential transferability of key capabilities.
Shortage of Management
Talent
• Overreliance on a limited number of subcontractorsLimited #
Contractors
• Despite the good customer satisfaction and the high experience of the company, overall the client awareness of the company is relatively low.
Brand Awareness
Triada’s SWOT
Weakenesses Strengths
Opportunities
- Access to Macro- Projects- Strategic alliances- Brand awareness
- Sales team capabilities to increase sales closure Rate- Shortage of management talent- Projects processes coordination- Brand awareness
Threats
- Land availability- Increasing trend of land and supplies costs- Lack of subsidies- Customers low purchase power- Low or non market entry barriers- Limited number of subcontractors
- In – house design department - Construction- Paperwork- Finance - Good reputation
Alternative 1 – Geographical diversification
Places where the cost advantage can be replicated
Location and land availability driven
Access to additional knowledge and new markets
Features
Alternative 1 – Pros &Cons
Economic risk mitigation; Mitigation of political risks; Keep building brand awareness across the country; Leverage on existing agreements with suppliers and banks.
Increase operating costs; Finding the right human capital; Finding and training the subcontractors in order to keep
productions efficiencies and quality Lack of knowledge of the new markets.
Alternative 2 – Services differentiation
Offer of value added services – i.e. financial services
Complimentary products – finishing, furniture
Same areas of operation
Features
Alternative 2 – Pros &Cons
Improved access to potential customers; Increased awareness of the company; Improved perception of the company by financial sector; Eventual increased sales in finished projects and pre-order
books for planned; Improved economies of scale due to new projects starting.
Increased marketing costs; Increased administrative costs; Further increase of business and political risks due to
concentration on one market.
Alternative 3 – Product diversification strategy
JV with a construction company, specializing in business real estate
AA, A and B+ class office buildings
Primarily in areas of Triada’s presence – Bogota and Cali
Features
Alternative 3 – Pros &Cons
Economic risk mitigation; Mitigation of political; Taking advantage of the current economic growth of the
country; More flexibility in the use of available land for development; Access to additional project management talent; Additional stable revenue sources.
☒ Additional construction expertise required;☒ Fewer project financing options available;☒ Different client profile, with different financing.
Alternative 3 – New Who, What & How
WHO
• Small and medium businesses• Investors
WHAT
• AA, A, B+ office buildings • Complimentary infrastructure
HOW
• JV with an existing player• Lower costs vs. other competitors
due to lean implementation across processes
• Low resource costs
Conclusion – there can be only one!
Of the identified development options we believe that the product diversification option has the most advantages for the Vélez family and for the Triada company. The diversification option allows to mitigate some of the key risks that the company is facing, gain additional knowledge and expertise while still being able to capitalize on the key capabilities of the company.
The option gives more flexibility in response to the changes in the economic climate by shifting the production focus. In addition to that it allows increased splitting opportunities and additional revenue streams which are independent from the main construction business.
What do you think?