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 documentation’s
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: BMC’s 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 BMC’s 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 don’t 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 P’s 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 client’s 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 client’s 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. Contractor’s 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 buyer’s 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 Raheja’s 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 customer’s 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,
customer’s expectation, and the cost versus benefit of alternative solution. Here, within 7 days
appropriate action is taken after considering these important criteria’s.

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 buyer’s 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”
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