DLF LTD(BUSINESS STRATEGY)

By:Hitesh Gupta

DLF STATEMENTS

To contribute significantly to building the new India & become world’s most valuable real-estate company

Vision

To build world class real-estate businesses across six business lines with the highest standard of professionalism ethics, quality& customer service.

Mission

BUSINESS UNITSDevelopment Business•Involved in development of homes &

commercial complexes.•Mainly caters to super-luxury, luxury and

middle-income segment in home development. •Also develops commercial complexes for other

businesses. •Building commercial complexes in vicinity of

residential complexes.

Annuity Business•Mainly based on rental of office space to

various companies & retail outlets. •Has developed and lent some of the major

global brands their workspaces in India. •Was one of first companies in India to come

up with concept of shopping malls.

Hotels•On way to set up 20,000 business hotel rooms

in next 5 years in partnership with Hilton•Acquisition of domain expertise & assets with

buy-out of Aman Resorts business.

INDUSTRY ATTRACTIVENESS The vertical axis of the GE / McKinsey matrix is

industry attractiveness, which is determined by factors such as:

Market growth & size Profitability Technological Development Market rivalry Pricing Global opportunities

Industry Attractiveness (Scale :1 – 5 from very unattractive to attractive)

BUSINESS UNIT STRENGTH The horizontal axis of the GE / McKinsey matrix

is the strength of the business unit, which is determined by factors such as:

Market share Brand value and Customer Loyalty Distribution network Promotional effectiveness R&D Performance Access to finance & other investment resources

Business strengths ( Scale: 1-5 from 1- very weak and 5- very strong)

INDUSTRY ATTRACTIVENESSFactors Weigh

t Rating

Value Comments

Market Growth & Size

0.2 5 1 India’s real estate market is on high growth curve. Industry is US$ 72 billion at present and the growing at an average rate of 20% (Constructionweekonline). Very less bargaining power of suppliers

Profitability 0.1 4 0.4 Operating profit margin has remained high at 40 % while net margins stand between 18-20 %. (Business Standard)

Technological Development

0.2 4 0.8 Increase in quality of building due to innovation in structural design. Delivery of services using IT systems (e.g MS projects). Use of CAD/CAE software has enabled engineers to model and remodel designs. Availability of modern equipments & machines.

Market Rivalry 0.2 4 0.8 Almost 20 strong competitors and many small players. Threats of new entrants is high but high Working Capital requirements.

INDUSTRY ATTRACTIVENESSFactors Weigh

t Rating

Value Comments

Pricing 0.25 5 1.25 Monopolistic competition exist in market and so very high competition. Brand Value helps a lot. Promotional campaigns & advertisements to kill competition. Can earn above normal profit in long-run with differentiation being most important factor.

Global Opportunities

0.05 3 .15 Very less opportunities available for Indian developers globally. Opportunities can be availed in countries like Maldives, Srilanka, Pakistan or Bangladesh. Globally giving low cost and better technological real-estate solutions

Total 1 4.4  

BUSINESS STRENGTHSFactors Weigh

t Rating

Value Comments

Market Share

0.10 4 0.4 Total market share is 20% approx. Huge Land Assets. Profits going down.(icmrindia)

Brand value and Customer loyalty

0.20 5 1 Has been there since 1946. Excellent brand value. Brand hurt due to debt burden, timely delivery, corruption, competition, etc Customers and Businesses still very loyal to DLF because of product differentiation.

Distribution Network

0.15 2 0.30 Good but operates only in North India

R&D Performance

0.10 3 0.30 Started the Mall culture in Delhi. Unique residential properties. Didn’t perform good globally with Aman resorts & in luxury brand segment

BUSINESS STRENGTHSFactors Weigh

t Rating

Value Comments

Promotional Effectiveness

0.20 4 .80 Very Effective and innovative promotional deals (e.g IPL). Highest exposure of advertisements through different media. Best POP, through quality products and style statement

Access to finance & other investment resources

0.25 5 1.25 Govt. has allowed ECB for integrated townships. Excise duty cuts on cement and steel bring down construction costs. Better links with banks and private players. Public Company Huge land bank to avail debt from banks. Rent lease financing option

Total 1 4.05

GE MCKINSEY MATRIX Grow/Penetrate:Businesses here are in very attractive industries.

Business strength are good but can improve on them

They should be invested in to improve their long-term competitive position.

Should receive financial and managerial support to maintain their strong position and to continue contributing to long-term profitability.

STRATEGY OVERVIEW

Seek dominance Grow Maximise investmentDefend their positionIdentify weaknesses Build strengths

COMPETITIVE ADVANTAGESThreat of established Rivals Competition in real estate sector is increasing by

leaps and bounds. Other major Players are Unitech, Ansals, etc

Threat of new entrants Profitability decreasing due to increase in the

number of new entrants like Sobha developers, Tata etc.

Though new entrants are coming in this sector, but due to high initial capital it is not much alarming.

DLF has experience & expertise advantage over new players.

COMPETITIVE ADVANTAGESBargaining Power of Suppliers:o Large number of organized & unorganized suppliers

providing required material for the real estate industry, like, cement firms, steel firms, eg, ACC cement, TATA steel etc.

Bargaining Power of Buyers: Forces of demand and supply will always apply,as

Indian population is way too large with respect to the infrastructure developed in the country.

RECOMMENDATIONSConcentration of bottom of the pyramid –

Increase in competition. Target ever increasing middle class. Brand equity will help. Huge demand for cheap but quality residence

Penetrate outside North-India

Build on strengths to grab the opportunities and work on the Weaknesses

Shift from construction and real estate to other projects like infrastructure development

THANK YOU