What challenge(s) do our clients face?
Successful Construction and Property Development companies not only take wise strategic choices, but also execute them efficiently. A combination of insight and operational excellence which can be hard to deliver consistently.
In this industry, where several years may pass from negotiating land contracts through to final delivery and payment of the sold real estate, many pressures exist which impact actors in the supply and demand side of the value chain; for example:
- High capital intensity: Acquiring attractive lands and the construction of both residential and commercial buildings requires significant upfront investments. Companies often connect with public and private financial institutions, including traditional banks and specialized investment funds, to access the liquidity required for starting and running these operations.
- Long lead time and investment cycles: It can often take several years from negotiation until construction is completed and the asset can be transferred and paid for. As contracts frequently require the majority of payment upon delivery, this puts financial pressure on the operator. Inefficient processes, poor decisions and delivery delays can therefore deteriorate expected returns.
- High sensitivity to economic volatility: Real estate prices and availability of capital for construction projects are heavily affected by a given economic context. During a boom the industry flourishes, whilst downturns bring tough challenges. All players therefore need to diversify to mitigate this risk and engage in different types of projects, such as a combination of commercial and residential property. At the same time, they need to balance this diversification with the trend towards specialization and the development of a USP vs. competitors.
- Low margin for error: Especially for those on the supply side, such as cement manufacturers, low margins mean that lack of optimization in the delivery network or supply chain can rapidly reduce profits and put pressure on sales which cannot be realized in a struggling economic context.
How do we help?
We help organizations across the Real Estate value chain to manage this dichotomy of long-term strategic thinking and operational excellence.
Having worked with construction companies on the supply side, as well as investment funds and retailers on the demand side, we have built up an understanding of the dynamics of the industry and what it takes to win.
Combining this knowledge with the different functional expertise which exists within Integration from our practices, we are able to provide a range of services which covers all aspects:
We have worked with clients in different categories, geographies and positions along the value chain:
In this video, a range of clients from the Real Estate sector talk about their positive experience working with Integration.
A well-known brand in the civil construction sector in Brazil was aiming to expand; however, the market dynamics and regional differences meant that they saw ahead a significant implementation challenge in rolling out a consistent commercial framework.
They asked Integration for our support in redesigning their Go-to-Market strategy and conducting strategic roadshows with commercial leaders from each region, in order to detail the most adequate commercial structure in terms of client allocation across segments and to plan delicate negotiations with sales representatives, clients and distributors.
Integration provided extended support through the implementation phase and helped define and put in place a two-year phased implementation plan, with 5 regional go lives for the new structure and client segmentation.
We worked alongside the client right until the first regional go-live, conducting all the necessary roadshows to tackle their local realities, detailing and managing the communication and execution plan for both clients and internal professionals and working side by side with a multifunctional project team and regional leaders.
Altogether, the project required deep organizational changes across all regions of Brazil’s broad geography, hiring and training over 80 new professionals, a new commercial policy definition and the creation of a commercial department focused on a new segment.
After a very challenging first year of implementation due to the high impact on processes, structure and company culture, the results surpassed the estimated business case in the second year with more than 30% growth after years of flat revenue, putting the company on track to double in size within 5 years. The decision to tackle a new segment also proved lucrative as its sales grew to represent 20% of overall revenues in just 2 years.
Our client, a leading residential construction and real estate company, was undergoing the process of disbanding a Shared Services Centre, to support the sale of a wholly owned subsidiary company.
They asked for our support in restructuring the corporate and back-office areas of the company’s in their portfolio to facilitate the sale; ensuring a smooth transition with minimized cost.
Integration supported the definition of separate organizational structures, evaluating and discussing the financial impacts on each company’s results, and identifying all necessary changes in processes and systems to operationalize the separation.
The development of a simulation tool which would define the G&A costs under different scenarios and associated benefits/risks aided the decision-making of the client’s leadership in this critical moment.
Our performance supported the client in the execution of the entire separation process, providing:
- Visibility of the impact on costs and headcount of the separation of the 2 companies.
- Visibility of the organizational structure of the Corporate and back-office areas of the companies after the separation.
- Visibility of all systemic, infrastructure and procedural adjustments that needed to be made to enable the separation of companies.
- Visibility of the waves of implementation of the separation of the areas of the 2 companies, with a detailed schedule until the completion of the total separation of the companies
After a challenging restructuring cycle, the outlook for a construction company was improving as the market picked up. They had undergone a multi-billion-dollar merger with the second largest player in the industry to reinforce their primary position and best capture the positive market movements. However, the company needed to transform its approach from short-term day-to-day crisis management to a long-term vision of sustainable strategic positioning and growth for the newly formed ‘Newco’.
After this merger we worked alongside both the management team and advisory board to support in setting a clear and unified vision for the new business, anchored by a set of clearly defined strategic pillars. We identified the Newco’s internal needs and market opportunities and brought together the leadership teams through a series of structured workshops.
A key factor in our approach was driving a workstream related to organizational culture. Supporting some key shareholders (CEO and HR VP) we defined the basis for the Newco’s corporate culture, enabling a common ground on which to set the company’s vision for the future.
A market penetration strategy was defined to support growth both organically and through M&A. This was supported by newly defined customer centric services which aimed to differentiate the organization and consolidate its leadership position.
This strategy was supported by the cultural redefinition of the Newco, which strengthened the way in which the company could move forward and capture these opportunities with a common Mission, Vision and Manifesto.
The combination of these activities generated organic top line growth of 140% and EBITDA growth of 240%.
A cement manufacturer, with revenues surpassing $3 billion, needed to redesign its entire transportation strategy. After a period of cement scarcity in the Brazilian market (up to 2014), the balance between supply and demand shifted and pressures on logistics cost reduction (the second largest cost line of cement businesses) and service level (now an important differentiator) increased a lot. The challenge was multiplied by the size of the operation, which included more than 30 plants and 70 DCs across the country.
They asked Integration to help them implement these changes fast and capture results in the short-term.
As competition in the cement industry is typically regional (given that it is a low value-added product, without contribution margins high enough to allow the products to travel long distances) we began by analyzing, through interviews, their customer’s expectations per region in order to define the service level which would drive their differential by audience.
We worked together with the client’s team to model the optimized network, generating efficiency while ensuring the organization met the service level requirements in each geography, considering site organization and their transportation strategy. Once the final model was agreed with leadership, we supported the business to implement the new network, coordinating the execution and removing roadblocks.
- Logistic cost reduction of ~6%
- Reduced vehicle loading time by ~50% in the largest factory, increasing fleet turnover significantly
- Clear targets set for service level KPIs per region, based on customer needs
- Created a strong differential through record OTIF results, reduction in order lead time and new logistic services
- Internal capabilities developed for the team to drive continuous improvement