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Idle Inventory*

CASELET, OPERATIONS MANAGEMENT
ET Cases - GSMC, 7 Pages
AUTHOR(S) : Asst. Prof. Sanjiv Kumar, Department of Management Studies, G.H. Raisoni College of Engineering

Case Preview

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..........

Nagpur City Overview

Nagpur, the largest city in central India, is the third largest city in the western state of Maharashtra after Mumbai and Pune.

Strategic Location

Nagpur is the geographical centre of India, with the Zero Mile being located in Nagpur. Nagpur is also equidistant from all the metros of India.

Mumbai-863 kms
Delhi-1012 kms

....................

Geography

Spread across 220 sq.km. with a population of 2,388,558 (2011 Census), Nagpur was India’s 13th largest urban conglomeration in 2001 and the foremost city in Maharashtra’s eastern Vidarbha region, in addition to being the state’s winter capital and the headquarters of Nagpur District and Nagpur Division administrations.............

Industry Overview

MIHAN-Multi-modal International cargo Hub and Airport, an airport project at Dr. Babasaheb Ambedkar International Airport, Nagpur, is one of the biggest ongoing economic development projects in India. Total land being acquired for the MIHAN project............

The Residential Real Estate Landscape at City

It is dominated by end-users. Investors are present in the MIHAN township, but most of these investors are from outside of Nagpur, as the integrated township concept has not caught up..........

Consumer Behavior

The development of residential townships, malls and flyovers are some of the growth stimulators changing the cityscape of Nagpur..........

End User Driven Market

Nagpur is witnessing few migration from neighboring cities, hence is mostly led by consumption from the residents of the city...........

Affordable Homes in Nagpur

Affordable housing is still a preferred medium and huge demand for affordable houses was witnessed in Nagpur..........

Walk To Work Culture

People in Nagpur prefer to stay closer to their workplace (maximum 4-5 km). Since the mode of transport is expensive...........

Preferred Choice

Nagpur residential market is mostly composed of bungalows, villas and row houses. Since the last 10-12 years with new developers buying land parcels and building projects, most of them are more than 1000 per square feet..............

Ankit Construction

Marketing Outsourced

Ankit Construction, one of the prominent companies in Nagpur Reality Industry, started its business way back in 1998 as a road construction contractor. The company participated in tenders and bid for the government orders. When the business started growing and surplus funds started coming in, the company diversified into real estate business in 2002..................

Negotiation Apprehension

The project is almost 75% complete. The delivery of the flats as promised to customers is March 2016. However, looking at the actual site it is hard to believe that Ankit Construction is going to fulfill the promise. After the break-up with Grace Reality, no major marketing efforts had been undertaken by the company to promote their product.......

Distressed Situation

Ankit Construction is analyzing the situation very closely. Ankit Construction’s anxiety is increasing day by day as October 2015 is almost over and the company had promised customers to deliver the flats in the month of March 2016. The financial crunch had made the remaining construction work very slow...............

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...............

Exhibits

Exhibit I: Computerized Landscape of the Project

Exhibit II: Residential Property Rates in Prime Residential Markets of South Nagpur

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

This Case Pack Includes:
- Abstract
- Caselet
- Teaching Note (**ONLY for Academicians)


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