Case Study on Business Growth Strategy of Housing and Development Companies : Using P Company as Example
Date Issued
2014
Date
2014
Author(s)
Mai, Sheng-Wei
Abstract
The object of this thesis paper is to investigate the growth strategy of a listed housing and development company with more than 40 years of history. By using Ansoff matrix and relevant growth theories to generalize the growth strategies adopted and locate the key success factors of this company, this study concludes with recommendation on future growth strategies.
Research on growth strategy often ties in with the growth gap that occurs during Product Life Cycle (PLC) to project corporate level strategy. However, housing and development industry effectively responds to real estate cycles while lacking obvious traits of phases in PLC, making it inconsequential for application. To study the relationship between real estate cycles and business growth strategy, subject was chosen based on its experience in several real estate cycles during its 40 years of history.
This study describes two stages in subject company history: (i) 1973-1989 (ii) 1990- present. The first stage was the expansion phase. Subject grew by establishing core competence, achieving market penetration, market development and strategically transform itself from a local company to a national developer.From 1990 onwards, having experienced three times of real estate cycles in Taiwan, subject was committed to diversification and decided its direction. Nevertheless, without key resources and know-how about target industry for diversification, subject took incremental approach instead of drastic method to get through the transformation stage.
The first project for diversification is a joint venture investment on a local hotel. When relevant key resources and SOP were established, subject further pushed the frontier into independent investment in international chained-brand hotel. The incremental approach started from collaborative investment, smaller scale of funding and local hotel brand acquisition to 100% ownership, larger scale of funding and cooperation with international hotel brand, all aiming to prevent risk borne from insufficient control of key knowledge and resources.
Housing and Development industry is affected enormously by the real estate cycles. Rapid accumulation of profit during a real estate cycle uptrend is as risky for a company without diversification as gamblers who won’t leave the table until losing everything.A good solution to the growth issue in housing and development industry is diversification strategy. Applying the BCG matrix dynamic view, main operation can be seen as the STAR during an uptrend of real estate cycle. While in downturn, the STAR turns into CASH COW as it now suffers from low market growth. At this point, it is highly recommended to fully utilize benefits generated from CASH COW to invest in QESTION MARK type of industry to achieve diversification. To make up the growth gap, diversification measures have to be adopted as early as during real estate cycle uptrend.
The real estate cycle in Taiwan is the fifth one and is currently at its peak. Data and studies show that it is now almost on the edge of cycle turning point. This study suggests the subject company to continue its expansion on diversification strategies, especially on hotel businesses. As previously accumulated key resources and knowledge could be absorbed to enhance its capability in hotel business management and further forge a dual core corporation with strong management ability in both housing and development business and hotel business, the dual core strategy brings more competitive advantage and accentuates differentiation. Many housing and development corporations in the world have successfully leveraged on the dual core advantage in large mixed-use development projects and performed a greater synergy with the combination of such pattern. Subject is capable of following similar pattern to take full advantage of dual core competence, feeding resources from the housing and development segment to hotel business to ensure a sustainable growth during cycle downturn.
This thesis also uses white space strategy four-frame structure of the business modelto evaluate diversification strategies. By using the two four-frame structures of original industry and the target industry for transformation, the direction of diversification is defined, gaps between key resources and processes are revealed and profit formula is analyzed to increase the chance for the success of diversification strategy.
Subjects
建設開發業
安索夫矩陣
成長策略
多角化
房地產景氣循環
BCG矩陣
白地策略
四格商業模式
SDGs
Type
thesis
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