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Idle Inventory*

CASELET, OPERATIONS AND PROJECT MANAGEMENT
ET Cases - GSMC, 7 Pages

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Idle Inventory

 

The real estate sector in India has come a long way to become one of the fastest growing markets in the world. It is not only successfully attracting domestic real estate developers, but foreign investors as well. The growth of the industry is attributed mainly to a large population base, rising income level, and rapid urbanization. In India, it is the second largest employer after agriculture and is slated to grow at 30% over the next decade. It comprises four sub sectors – housing, retail, hospitality, and commercial. The real estate sector has transformed from being unorganized to a dynamic and organized sector over the past decade. Government policies have been instrumental in providing support after recognizing the need for infrastructure development in order to ensure better standard of living for its citizens.

The residential segment dominates the industry with a lion’s share of nearly 75% of total turnover of the Indian real estate sector. Housing alone contributes around 5%–6% to the country’s GDP. Growing disposable income, shifting trend towards nuclear families, rapid urbanization, and favorable demographics are some of the factors driving demand for residential real estate. While demand for housing has increased substantially over the years, supply has not kept pace. As per the 11th five-year plan (2007-2012), an estimated shortage of 2.6 crores houses offers a big investment opportunity.....

Teaching Note Preview

Idle Inventory

 

Synopsis

Ankit Construction, a well-known company in Nagpur Reality Industry, started its business way back in 1998 as a road contractor. When the business started growing and surplus funds started coming in the company diversified into real estate business in 2002. For the next 10 years they built small flat schemes and sold successfully. The only marketing communication used was the word-of-mouth campaign. After 2010, as the reality business at Nagpur started picking up Ankit Construction launched a large flat scheme in December 2012.

Many small time builders at Nagpur became developers and promoters of big projects having flat scheme of around 200-250 flats in a township. Ankit Construction also started with a flat scheme of 82 flats under the Brand name ‘K-SQUARE’ Narendra Nagar, Nagpur. The scheme was launched in December 2012. The time passed and sales did not pickup despite having the project at good location.

As the company had little experience in residential housing business and lacked of long term vision, initially it did not focus on marketing of the project. As a result, the sales did not pickup despite having flats at good location. In order to improve the sales, in 2013 Ankit Construction made a tie-up with another company Grace Reality to sell its flats. The symbiotic relation lasted for nearly one year. After the bad experience of tie-up no major marketing efforts were undertaken by the company. Moreover, the project got delayed because of fund constraints. In desperation of funds again, Ankit Construction is evaluating the option of taking support from a very reputed builder of Nagpur city to sell their flats and the negotiation is going on.

With the bad experience of tie-up and cash crunch no major marketing efforts has been undertaken by the company yet. The project has got delayed because of fund constraints. The project is almost 75% complete. In desperation of funds, again Ankit Construction is evaluating the option of taking support from a very reputed builder of Nagpur city to sell their Idle Inventory of flats and the negotiation is going on.

Assignment Questions

  • I. Whether engaging Pioneer Builders for selling flats is a right decision of Ankit Construction? Support your answer with proper reasoning. If not then what do you think could be the right solution?
  • II. As a consultant to the Ankit Construction do the Positioning of the ‘K-Square’, Narendra Nagar project in Nagpur Market.
  • III. ................

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Abstract

Ankit Construction, a well-known company in Nagpur Reality Industry, started its business way back in 1998 as a road contractor. When the business started growing and surplus funds started coming in the company diversified into real estate business in 2002. For the next 10 years they built small flat schemes and sold successfully. The only marketing communication used was the word-of-mouth campaign. After 2010, as the reality business at Nagpur started picking up Ankit Construction launched a large flat scheme in December 2012.

As the company had little experience in residential housing business and lacked of long term vision, initially it did not focus on marketing of the project. As a result, the sales did not pickup despite having flats at good location. In order to improve the sales, in 2013 Ankit Construction made a tie-up with another company to sell its flats. The symbiotic relation lasted for nearly one year. After the bad experience of tie-up no major marketing efforts were undertaken by the company. Moreover, the project got delayed because of fund constraints. In desperation of funds again, Ankit Construction is evaluating the option of taking support from a very reputed builder of Nagpur city to sell their flats and the negotiation is going on.

There could be two obvious ways of dealing with the said problem, one is again going for marketing tie-up with someone having reputation in market but the pit fall is, it will result in exploitation of Ankit Construction. The other option could be going solo and making a strong marketing team to sell the Idle Inventory.



Pedagogical Objectives

  • To understand the marketing environment in which the Real Estate business operates
  • To understand the exploitation faced by Ankit Construction when they outsource marketing services to sell their inventory
  • To understand the importance of market positioning of the housing scheme, which is the basis for designing Integrated Marketing Communication for the project

Case Positioning and Setting
The caselet can be used at the Post Graduate level in subjects of Foundation course in Marketing Management, Integrated Marketing Communication and Business Strategy. The target audience would typically be management students who are specializing in Marketing Management. The caselet would also be useful to impart training to managers who are in sales and marketing team in real estate business.


* GSMC 2016, IIM Raipur

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- Caselet
- Teaching Note (**ONLY for Academicians)
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