HOUSING SECTOR ( CONSTRUCTION )

PEST Analysis of Construction Industry

PEST refers to all political, economic, social and technological factors affecting any industry.
The objective of PEST analysis is to objectively study the environmental factors facing a firm,
company or an industry. The external environment affects the company in many different
manner and unlike internal environment it cannot be influenced much.
Political Factors

The political factors affecting the construction and housing industry mostly consists of
documentations and permits that has to be obtained during the various phases of construction of
a structure and its sale.
Building Commencement Certificate: Construction of a building or any such structure
cannot take place unless and until the builder or the company secures a commencement
certificate from the authority, in case of Mumbai it is the BMC who gives IOD&CC-
Intimation of Disapproval & Commencement Certificate.
Floor Space Index (FSI): FSI is basically a ratio, which determines how tall can
buildings or a structure can be constructed on a particular plot. The local authority issues
it.
Occupation Certificate: After the completion of construction work of a building, the
builder or the company has to secure an Occupation Certificate without which the flats in
the building cannot be occupied for residential or commercial purposes.
Brihan Mumbai Corporation [BMC] Developing Plans: BMCs developing plans
form the most basic criteria in selecting a site. These developing plans chart out pre-
defined areas, which the BMC has already allocated for certain purposes.
E.g. In a given area, some land is reserved for plantation/farming, some piece is kept for
industrial establishments like the MIDC area and the other one reserved for residential
purposes. So the Builder finds out the type of land, which is suitable for his purpose, i.e.; if
he wants to build up a residential complex, then he has to do so in the area reserved for
residential purposes; as per the BMCs developing plans.
CRZ (Coastal Recovery Zone): According to this rule a builder cannot carry out any
construction within the radius of half kilometer from sea.
TDR (Transfer of Development Right): This right is available to a builder for
utilizing the additional FSI. Normally TDR is given by the local Municipal
Authority who acquires the portion of land of builders either for the purpose of
constructing road or for making gardens.
Others: Apart from the above mentioned points there is also tax exemption that is
given for the construction of building on the land having area of more than 1 acre.

Economic Factors

Fluctuations in prices of inputs: Many builders tend to stop work when the prices of
inputs like cement, iron etc goes up so as to wait for the time when they expect the prices
will come down. This result in unnecessary delay in the work and the cost of wasting
time would actually be more than the increase in price.

Changes in demand: Changes in demand due to factors like changes in disposable
income of prospective buyers and inflation. Also with the easy availability of housing
loans and tax exemption on loans the demand for houses is rising.
Future Growth & Resale Value: Any project must be located in an area that if not
fully developed must at least be on the way. This is because people prefer those areas
having high resale value and will fetch them a good amount of gain.
Stamp Duty & Registration: Payments of Stamp duty followed by the registration of
the agreement are two important acts when one enters into an agreement with a
developer/seller. With the decrease in the stamp duty by 50% it is considered as a good
sign for Construction Sector.
Social Factors

Credibility of the company/firm: People dont know what kind of materials has been
used in the construction of a building or a structure. Credibility of a builder or the
company plays an important role in convincing the buyer to buy the house and be sure of
the quality of construction work done. A low credibility or image can lead to poor
financial performance. A good image is not just built in a day, it takes years of servicing
the society through following high standards of work in the process of construction and
sale.
Perceived Image of the property developed: A flat in a so-called posh area may cost
much more than a one in a not so posh area. This factor can also determine the success
of failure of a project. A flat is selected on the basis of infrastructure facilities like water
availability, transport facilities, nearness to schools, colleges, hospitals, shopping
complexes, leisure centers, etc.
Building Facilities: The builders may offer buildings that have swimming pools, health-
clubs, gyms & parks.
Technical Factors

Due to technical nature of the construction process, the technical environment keeps on changing
everyday. There are developments in techniques used, materials used and various other such
aspects of the construction business. A few of such developments are as follows

Pre-structured Concrete Blocks: These are blocks of concrete, which are made in the
factories according to the dimensions of the building or structure to be built. It is just like
a jigsaw puzzle where these blocks are put together using a huge crane and joined
together using mortar by workers. This enables quick completion of work and also
economies of scale.
Mixture of Cement and Sand: nowadays in order to save time the constructor can order
the mixture of sand and cement directly from the suppliers as against the traditional way
of ordering cement and sand separately and then filtering them and then mixing it.
Other Equipments: other modern machines that are used in construction are the use of
huge drilling type of machines to dig the ground, which was before done by workers.



7 Ps of marketing mix:

PRODUCT:
In marketing product refers to the totality of the offering.

In Construction industry the total product includes services offered by the contractor in the
support of the core product i.e. physical product.

For the construction industry products are :

Physical: houses, public and commercial facilities infrastructure & building products.
Service: expertise consultancy & design
Persons and reputation: eg hafeez contractor
Ideas and proposals: urban regeneration, regional development and competitions
Essentials: water gas electricity telecommunication, transport facilities
Highly desirable: schools, hospitals, shopping complexes, leisure centers
Desirables: environmentally secure, adaptable.

Product offerings can be explained through the total product concept which consists of core
product, formal product and augmented product.

In the Housing industry:

The core product consists of : permanent accommodation / living space. The format product
consists of : locations, utilities, electricity, brand name, availability of schools and hospitals
nearby.
The augmented product consists of : security available clean environment, amenities.

PLACE:

Product has to reach the ultimate buyer so the company works with its intermediaries to bring to
bring their product to the market. Marketing channels perform work of moving goods from the
producer to the consumer.
In the housing and the construction industry construction cannot be transferred but here
intermediaries transfer information of distinct places about the availability of accommodation so
that not having any idea about these constructions get to know about it. In this industry
distribution is done through real estate agents, who acts as connecting tool between the consumer
and the provider.


PRICE:

Agreeing the price for a piece of work seals the relationship between contractor and the client. It
is the central feature, and reflects the value placed on the relationship.

Prices is based on the combination of:

What the market expects
What the client can afford
The nature of competition in the sector
What the contractor can afford to work for
Any specific factors concerning the particular job e.g. location material used
What is being agreed and paid for- whether completion of a bldg or wider process offered
supported by maintenance, pre sale and after care agreements?
Pricing considerations

For housing an construction industry there are many considerations:
Capital projects & bldg activities are priced so that variable costs- the costs incurred as a
result of gaining the work-are covered. Ideally the price also makes a contribution to the
fixed costs of the contracted org. It is also necessary to consider charges incurred by the
contractors as the result of having to underwrite the project from inception to delivery &
from the need to acquire any specialists equipment and expertise necessary.
Building products are priced so that an individual perception of quality value and service
are at a level that the size and nature of the can sustain. it is also increasingly common to
find differentiate pricing approaches as competitors seek real and perceived price
advantages.

PEOPLE:

The people in housing and construction industry can be divided into groups:

Those who develop the product

They consists of location hunters architect builders. They are required to have technical skills of
geological mapping soil testing building designs and so on. The possessions of this skills is of
utmost importance because building cannot be constructed on all types of land. Also materials
use to build houses in different regions because of climatic differences. E.g. in England most
houses are builds of woods whereas wood is not a viable portion in the tropical area. Builders
who do the final construction consists of civil engineers skilled and unskilled labor

Those who market the product

These consists of marketing people who may or may not have civil engineering background but
certainly have the skills of understanding the customer as a well as the product. The marketer
uses all the tools that help to overcome the unique characteristics the service industry. It includes
the construction of a sample flat, which will break the tangibility factor intensive advertising to
overcome the perishability factor and so on.

PROCESS:

Service Company can design a superior delivery process. Because of heavy initial, capital
investment, long gestation period and a speculative tendency (irregular demand) housing and
construction industry works other peoples money i.e. construction begins with advance booking
and then customers are suppose to pay installments most of the payment is made after the
product has been handed over this strongly experiences intangibility aspect of this industry.

In this industry tangible industry is supported by services in which the services offered enhance
the client appeal for the product this relates to all aspects of the building and civil engineering
where the creation of [particular facility is supported by the project and environment
management, client liaison and specialist consultancy services and sometimes through maintain
refurbishment upgrading and facilities management services and for public project sometimes
also for general services to wider community.


PHISICAL EVIDENCE:

A service industry can develop a more attractive service environment where a service can be
delivered. In the housing and the construction, sample houses photographs and posters of
previous achievement can be displayed in construction offices or those can be shown to the
customers when they come foe enquiry gets attracted to it.

The need to place the client need rather than the contractor expertise at the core of all
activities
Attention to all aspects of project design and inception, and the development of presales
services and activities the service aspects of work in progress and after sales activities.
Attention to quality and durability of the project when complete.
Acknowledgement that presentation is as important as technological expertise.
Continuous attention to service, service extension and service development
Taking the truly enlightened view of the needs wants and demands of the clients and
commissioner of work the pressure on contractors and consultants and understanding
them
Total enduring impact of activities on the particular environment and location in which it
takes place.

PROMOTION:

The construction industry is concerned with following forms of production:

The promotion of its capabilities and expertise to client and potential client
The promotion of its finished products to the community and society at large
The promotion of professionals within the industry to each other promoting specific general and
continuing inter relationships and confidence between architecture, contractor quality surveyor
planner other consultant civil engineers and sub contractors.
The promotion of general confidence, public sympathy and support for activities.

The overall purpose of promotion is:
Promotion activities of the construction industry can be divided in following:
Primary promotion

Direct sales:
This is targeted at clients potential clients and other capable of using the distinct expertise on
offer. It involves opening up client face to face contact with those commission work and inviting
tenders and presenting the distinct expertise on offer in the clients best interest.

Targeted direct market:
If this is to be effective it requires knowing who the people with influence are promotional
material, brochures, and achievements can then be arranged and presented and if necessary
specially prepare on client or sector specific basis.
Secondary promotion

General advertising:
General advertising especially in the trade press to ensure continuing general awareness. From
time to time some construction companies have engaged in television and radio ads.
Logo design and reinforcement:
Billboards, hoardings and perimeter fences.
Attendance at trade, professional and regional fairs and exhibit
Other efforts include:

Speculative designs and proposals
Tendering
Tertiary promotion

Positive media coverage
it is in various forms e.g. Contractors places the hoardings at side of the finished bldg stating
completed six months ahead of schedule
General positive pubic relations:
the current activity that comes under this hading at present includes general support for schools,
colleges and universities and contribution to the general amenities to communities

Marketing:

Marketing the Construction industry forms a very crucial part. A good awareness level is
required for your product to be successful. Marketing under this sector is done through various
mediums such as:
Advertisements in newspapers and magazines, television and radio and also through e-
mails and websites
Sole selling agencies: These are agencies that are given the contract of marketing the
product who are responsible for the sale of the product.
Hoardings: These hoardings are put up at the site and contact numbers are given.
Hoardings are also put up at railways, roadways and on BST buses, etc.
Marketing through Estate agents: These estate agents also called as consultants act as
middlemen between the customer and the builder. They are provided with brochures and
site maps.

Target market:

The target market i.e. determining the customer are based on the following considerations:

1. Locality: The region where the building is constructed and the type of crowd it will attract
will have varied expectations. E.g. whether its in the suburbs or south Mumbai
2. Income group and family size: Depending on the budget of the customer, a particular
income group people will be given specific type of amenities. In a country like India, every
product is formed after taking into consideration the family size. E.g. carsOccupation: There
are colonies and societies set up for people from the same occupation also employed by the
same company e.g. Indian oil nagar at Andheri (west) and Railway quarters for the railway-
employed people.
3. Religion, races and social class: There are societies for people from a particular caste
e.g. Parsi colony at andheri (west)

Service encounter:

The total number of interactions between the service provider and the customer is known as the
service encounter. These interactions are called as the moments of truth.
Construction is a secondary service sector unit but is gaining much importance now. In this
way, people (customer) coming directly in contact with service provider are very low.
The moments of truth here are during:

1. When the estate agent, who acts as a middleman, fixes a meeting between the service
provider (builder) and the customer (buyer). This is the first meeting/ interaction where
negotiation takes place.
2. The final meeting when the deal is finalized between the builder and the buyer to fulfill
all the formalities.

This falls under low direct contact service.

Service quality: RATER

The 5 dimensions of quality can be explained as follows:
RELIABILITY
Reliability under construction would mean if the builder gives timely possession to the buyers
and fulfills all his commitments.
ASSURANCE
Credibility: This is the trust developed by the builder, the goodwill that he has attained since so
many years. E.g. Raheja builders , people know that if they go to Rahejas they wont be cheated.
The trustworthiness is maintained since years.
Security: Strong foundation of building earthing, proper indicators on towers as a safety
measure, the building exterior paint to be stain resistant.
Courtesy: Respect your customers and their suggestions. Be friendly and understand their
complains.
Competence: the personnel have to be knowledgeable in their concerned fields so that any issue
raised on them will sort out as soon as possible.
TANGIBILITY
In construction, major quality dimension is the tangibility. Facilities provided are the tangible
factors such as e.g. a builder shows a furnished flat he gives good fittings & fixtures, furniture,
aqua-guard, intercom facility, elevators, etc. the most important tangible factor is the locality of
the building.

EMPATHY

Access: The customer should be able to easily access any information regarding our product. The
ways to access can be the site office present at the site itself, websites, some organizations also
have the facility of call centers, etc.
Communication: Listening to the customers needs and communicating in an easy language.
Understanding: To understand their needs and make changes according to their necessity.

RESPONSIVENESS
Willingness to provide prompt service. There are people appointed in large organizations for
handling queries of the customer.

Complain handling:

In Construction, there is a standard way of handling complains, the customer has to give his
complain in writing to the builder that can be before possession or after possession and within 7
days action is taken. This also shows after sales service given by the constructors.
The procedure to lodge these complains can be explained as follows:

Screening and logging:
The date the problem occurred; a description of the problem, and any other information should
be formally being given in writing to the builder
Investigating:
After the builder receives the complain, he gathers facts about the problem and investigates on
the issue.
Acknowledging:
Let the customer know that the matter is receiving attention and how long it will take to resolve
the issue.
Formulating a solution:
While formulating a solution, the important criteria to consider include the warranty obligations,
customers expectation, and the cost versus benefit of alternative solution. Here, within 7 days
appropriate action is taken after considering these important criterias.

On person within the organization has the ultimate authority and responsibility for customer
relations.
When a customer complains they expect 3 things:
1. Outcome fairness: In construction, if the builder fails to construct the building within the
mentioned period, then he has to give his customers a compensation in the form of providing
housing facility to them for the remaining period. e.g. if the construction of the building is
delayed by 6 months then he has to provide the buyers with housing facility for 6 months.
2. Procedural fairness: Here, the builder takes the responsibility to solve the complain
within 7 days of receiving it in writing.
3. Interactional fairness: The builder listens to the problem of the buyer and tries to
resolve it. Listening plays a very important role in communication. It is always
considered here that the Customer is always RIGHT