Real estate developer

Case Statement:

Your client is a Real Estate Developer who already has a strong presence in Tier 1 cities. Now, they want to enter Tier 2 cities, starting with Ludhiana. How would you approach this case?

BCG

Market Entry

Real estate

Easy

C : That seems very interesting. I would like to get a better understanding of the client’s objective behind this and how are they positioned in Tier 1 cities currently?

I : The client is doing this for geographical expansion. The client is among the top three players in Tier 1 cities.

C : I would like to know more about the business model of the client and what product offerings do they have. Do they operate primarily in commercial or residential space?

I : They construct housing societies as well as commercial spaces for businesses.

C : What does the competitive landscape in Ludhiana look like?

I : The competition in Ludhiana is quite fragmented, with many small players.

C : By when does the client plan on entering and are there any budgetary constraints to kept in mind?

I : The client wants to enter as soon as possible. You can assume there are no budgetary constraints.

C : I will begin with the case. I will divide my approach into three parts- First I would like to judge the financial feasibility by computing the expected profits based on market size, market share and market growth. Next, I would check the Operational Feasibility and lastly I would analyse the Barriers to Entry, if any.

I : The client has already done the financial feasibility analysis and found that it is feasible to enter. I want you to tell what all additional factors will you consider for entering Tier 2 cities.

C : Sure, I would like to create a value chain for the client which will comprehensively cover relevant factors related to the operations, marketing and barriers.

I : Sounds good. You may go ahead.

C : Sure. First we will analyse the Mode of Entry- Should the client enter via Joint Venture, a greenfield investment or an M&A. After that we will look at Regulatory Considerations, understanding local government policies. This will be followed by Land Acquisition and deciding the type of Real Estate the client wants to develop. For this an analysis of the Demographics of the city will need to be carried out to understand population's age distribution, income levels, and housing preferences to tailor the offering.

Lastly, the Growth Potential will also need to be assessed - evaluating Ludhiana's economic development, population growth, and urbanization trends to ensure long-term viability.

I : Excellent insights. Let’s focus on marketing aspect. How would you approach marketing in Ludhiana?

C : I would divide Marketing into 3 segments- Traditional Marketing, Digital Marketing and Miscellaneous.

I : Why don’t you expand on all of them?

C : Under traditional marketing, we can focus on print media such as newspapers and magazines. Billboards could be installed for wide reach. Agents and Brokers can be onboarded who can provide insights into customer preferences and help drive sales.

For digital marketing, leverage social media platforms like Youtube, Facebook and Instagram to target potential buyers based on their interests and demographics. Online ads on local news websites could also help.

I : Awesome. What about the Miscellaneous category?

C : Events and Roadshows: Organize property expos, site visits, and promotional events to attract potential buyers and create excitement about the new project.

Apart from this, a referral program can be carried out to encourage existing customers in Tier 1 cities to refer friends and family in Tier 2 cities for special incentives. Local Search engine platforms such as Justdial, Magicbricks, etc. can also be explored to list properties on portals. Word-of-mouth marketing is also very strong in Tier-2 cities.

I : Sounds good. Can you please also expand on what type of M&A can the company look at? What type of avenues should it explore?

C : The company can undertake merger and acquisitions with 3 type of companies:

(1) Financial Institutions like Banks that can aid firm’s customers in loan financing.

(2) Construction companies for lower cost of building and increasing the margin during construction of houses.

(3) Real estate firms that are accessible in last-mile reach Is there anything else you would like me to analyze?

I : That’s a comprehensive breakdown. Can you tell me how you'd ensure that the pricing strategy is competitive without compromising margins?

C : Absolutely. The pricing strategy should consider the local competition and affordability of the target audience. By sourcing locally and using modular construction techniques, we can reduce construction costs. We should also look at optimizing land acquisition costs by targeting slightly peripheral but well-connected areas within the cities.

I : Sounds good. Lastly, how would you measure the success of this GTM strategy?

C : We can measure success through:

1. Sales Volume: Achieving pre-launch booking targets and tracking actual sales post-launch.

2. Customer Acquisition Cost (CAC): Reducing the cost per customer by optimizing digital and offline marketing efforts.

3. Brand Penetration: Tracking the brand’s awareness and reputation in Tier-2 cities through customer surveys and media presence.

I : Excellent! Thank you for your thoughtful answers.

Background Information:

Company – Real Estate Developer operating in both commercial space and residential space
Competitor – Among top 3 players in Tier 1 cities.
Objective - Enter a tier-2 city dominated by small fragmented players.
Consumer – Business houses and middle-income residents of the city
Timeline & Budgetary Constraints- No restriction on budget, the client wants to enter as soon as possible.

Case Recomendations:

Conduct a thorough market analysis of developing real estate in Ludhiana, including demographics, regulations, competitors, and potential areas for growth.

Case Tips:

This was not a conventional market entry case. The interviewer discouraged the candidate from sticking to a framework. The interview was very conversational in nature wherein the interviewer just wanted to assess how broadly the candidate can think and what all factors he can come up with.

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