A practical scenario of Strategic Management Practice in Bangladesh Foster Real Estate Ltd. Introduction Background of the Study Like any other industry, the real estate industry is a field in which the players within the Industry has to make some choices or in other words strategic moves on the basis of how they wish to compete in the future. Past modes of behavior of the enterprises within this Industry is very less likely to carry them in a desired manner through the next decade. The challenge of strategic decision making lies in understanding the Industry as a whole as Industries differ dramatically in their profit potential and their profit potential changes over time. For the Real estate business, the challenge is even higher as it is not actually an Industry; it is a whole sector of the economy. It is composed of many distinct businesses, each of which is an industry. So developing shopping malls, developing apartments, putting up prime downtown commercial space, and brokerage are all industries. Each of these industries has a different economic logic. Each of them is different in terms of its fundamental attractiveness. Among these categories of Industry within the Real estate sector, Apartment industry is the most prominent one in the business scenario of Bangladesh. It is a recognized fact that the health of the Real Estate Development Sector is the barometer of the National economy. Like most of the major economical interventions, the apartment business has originated, thrived, and matured in Dhaka city and now is expanding to other developed cities of the country. Real Estate Business started in Dhaka in late seventies. Dhaka City, born during the Mughal Empire and grown with the British rule, is expanding rapidly. From the beginning of the 20th Century its growth and latter development is marked with sheer lack of proper and far-reaching planning. Dhaka City is undergoing terrific growth phase throughout the last three decades. During 1970s there were fewer than 5 companies engaged in this business. In 1988 there were 42 such developers working in Dhaka and now in 2008 there are about 290 companies engaged in this business. While there are so many real estate developers in the market, there are also very few of them who have maintained the quality, safety and customer preference. This fact well explains the unbalanced competition among the enterprises within the industry. At present, among the 250 companies those are active in Apartment business, only the tope 10 companies alone are dominating on 95% of the business. This unbalanced competition is viewed as the main obstacle against the enrichment and expansion of the Apartment Industry in Bangladesh. It is customary in this country that the first day quality and impression is lost after a while when people start getting a bit of familiarity. This happens due mainly to lack of professionalism. Sometimes the consumers here are in a fix to choose a particular brand out of many. In spite of such drawbacks, the present market of Apartments is growing at the rate of 15%, which indicates that this industry has tremendous potential for growth and thus in contributing to our economy. With the number of companies increasing gradually, various problems concerning the Apartment sector is also cropping up and required early solution. To strengthen the role of real estate sector Real Estate & Housing Association of Bangladesh (REHAB) was formed with only 11 members in 1991. The objective of REHAB was to promote formal private sector Real Estate Development in Bangladesh. At present, almost 145 Companies are at present affiliated with this association, while more than 150 companies
are working independently. BTI took a leading role in the formation of the industry association and is one of the founder members of the REHAB. The objectives that REHAB set are: a) To offer finest apartments in excellent locations to the clients; b) To provide sound construction with aesthetic design to the clients; c) To install best possible fittings and fixtures; d) To satisfy clients by expert-oriented service; e) To help solving the residential problem of Dhaka city; f) To perform social responsibility for a happy future. REHAB also took the initiative of segmenting the market in Dhaka based on the location, price of the land, and size of the apartments. The segmented areas are Segmentation - I :Baridhara, Gulshan, Banani, DOHS, Uttara b) Segmentation - II :Dhanmondi c) Segmentation - III :Segunbagicha, Shantinagar, Kakrail, Malibagh, Kalabagan d) Segmentation - IV :Mirpur e) Segmentation - V :Old Town of Dhaka City f) Segmentation - VI :(For office building) Motijheel, Dilkusha, Fakirapool DIT Extension Road, RK Mission Road, Shahidbagh, Kawran Bazar, Pantha Path etc.
As it has been said before that half of the Industry is not under the umbrella of REHAB, and is not bound to follow their standardizations. But there are other regulatory bodies like the Government and international agencies that work as an external force in influencing the strategic decisions made within this Industry. For instance, some specific rules and legal requirements are to be fulfilled by both the parties (buyer and seller) before an apartment is handed over. General terms and conditions of allotment: 1. Application for allotment of apartments should be made on the prescribed application form duly signed by the applicant along with the earnest money. The company has the right to accept or reject any application without assigning any reason thereto. 2. On acceptance of an application, the company will issue allotment letter to the applicant on which the applicant/allotted shall start making payment as per the schedule of the project. Allotment of apartments is made on first come first serve basis. 3. Payments of earnest money, installments, car park costs, additional works and other charges shall be made by bank draft or pay order directly in the name of the respective company against which the receipts will be issued. Bangladeshis residing abroad may remit payments in foreign exchange by TT or DD in the name of the company. 4. Payments of installments and all other charges are to be made on due dates according to the schedule. The company may issue reminders to the allottee, but notwithstanding the issue of reminders, the allotted must adhere to the schedule to ensure timely completion of construction.
5. The company may arrange HBFC/Bank loan (if available) for allottees according to the existing rules and regulations of the authority concerned. 6. Delay in payments beyond the schedule date will make the allottee liable to pay delay charge (amount varies from company to company) for every 30 days on the amount of the payment delayed. If the payment is delayed beyond 60 days the company shall have the right to cancel the allotment. In such an event, the amount paid by the allottee will be refunded after deducting the earnest money and after allotment of the canceled apartment. 7. Connection fees/ charges, security deposits and other incidental expenses relating to gas, water, sewerage and electric connections are included in the price of apartments. The company will make those payments directly to the authorities concerned on the allottee's account. 8. Limited changes in the specifications, design and/or layout of the apartments and other facilities may be made by the company in larger overall interest or due to unavoidable reasons. 9. The company may cancel an allotment for non-payment of installments in disregard of reminders and after final intimation to the allottee by registered post at the address given in the application form. 10. The allottee shall be required to execute an agreement with the respective company for safeguarding the interests. 11. The possession of the apartment shall be duly handed over to the allottee on completion and full payment of installments and other charges and dues. Till then the possession will rest with the company. If the project is completed before the stipulated time, the allottee shall have to make full payment before taking possession. 12. The allottees will become equally divisible undivided and undemarketed shareholders of total acres of the scheduled land of the project in respective apartment. After all the dues and installments are paid by the purchaser according to the requirements and schedule for payment and after the completion of the construction, the vendors shall execute a registered sale deed in favor of the purchaser transferring share of land of the project in the demised apartment. 13. After taking over of apartment of the project, the allottee (s) must consult the company prior to undertaking any structural or layout changes within the apartment complex. Failure to do so will be at the sole risk of the allottee. 14. Company shall not be liable if the completion period of the construction of the projects is affected by unavoidable circumstances beyond the control of the company, like natural calamities, political disturbances, strikes and changes in the fiscal policy of the state etc. 15. For the purpose of effective management and maintenance of the building the purchaser of the apartment shall form and constitute a mutual benefit cooperative society under the Cooperative Society's Act 1940. The society shall be entrusted with the management and maintenance of the building.
The rules, regulations and by laws of the co-operative society relating to management and maintenance of the building shall be binding upon all the purchasers/owners of the apartments. The ever changing political situation and Corruption is playing the most vital role in shaping up the course of future of this Industry. Human rights issues have also emerged at times regarding by force and illegal acquisition of public or individual property by many apartment builders. Considering all these factors, it can be stated that even after decades of inception and expansion, the real apartment industry of Bangladesh is yet to stabilize. It also should take into consideration the saturating of Dhaka market and the prospect of expanding nationwide. Objectives of the Study Though the growth potential of the Apartment Industry is very good in Bangladesh, it has reached maturity in Dhaka only and the rest of the country has remained almost unexplored. In spite of the existence of the high growth potential, to be one of the largest industries in Bangladesh, a lot of strategic initiatives are yet to be taken for the Real Estate (apartment) industry. The broad objective of this report is to analyze the current situation of the industry in terms of strategic position and moves. This broad objective can be subdivided into specific ones, which would be covered in this report, are as follows: •
Every industry possesses some extent of dynamism which is mainly driven by the driving forces. For the Real Estate (Apartment) industry in Bangladesh, some forces are very strong as this industry is yet to reach its matured state with a high growth potential. The market leaders are moving very quickly to incorporate the changes required to compete in the open market. In this report, some major driving forces, which are causing the change in the industry and having an impact on an enterprise, are analyzed.
The various External Environmental Factors affecting the enterprise will be identified and analyzed in this report. In this portion of the report, the external environment would be assessed from the perspective of the social, legal, political, economic, technological environmental driving forces. At the end, the linkages, attributes and relationships with the external environmental factors would be shown using the Porter’s Diamond Analysis.
A generic process flow for the enterprise would be derived through the identification of different actors of the enterprise, their operation, linkages and interdependencies.
The analysis of the internal environment will be provided for the development of an insight of the enterprise.
Like any other industry, the real estate industry also has some key success factors, without which, an enterprise within the industry can not survive in the long time span. From the strategic analysis perspective, these key success factors are very crucial for any industry. In the report, the key success factors would also be identified
and analyzed for the particular enterprise. •
In any industry, the extent of entry barrier for new entrants, bargaining power of suppliers and consumers, threat from the rivals and substitutes play major role in shaping the strategies of the enterprises within the industry. In this report, all these major forces would be analyzed in details using the Porter’s five forces model.
For any company to succeed in the long time horizon, it must adopt one of the five generic strategies of serving the consumers. In the Real Estate (Apartments) industry in Bangladesh, different companies follow different strategies to achieve its suitable and desired market positioning. A brief overview of the different competitive strategies used in the enterprise and the strength and resources required would be provided within the report.
In any industry, one of the key factors to achieve success is the right use of integration and outsourcing. The integration can be in terms of merger and acquisition or organic. It actuallydepends on different company’s strategy. In this report, we will try to identify whether there is any trend concerning the integration and outsourcing strategies of the enterprise.
A brief discussion would be provided in the report about the current trend, practices and norms about the CSR activities of the enterprise.
Scope of the Study The scope of analysis for this report will be confined within the strategic issues of the Real Estate (Apartments) Industry only. The geographical scope will be limited by the scenario within Dhaka City only as the Industry has originated, flourished, and expanded from this city. In this report we will try to identify, analyze and discuss different issues about the strategic matters of the enterprise. At the end, we would try to provide a set of recommendations about different matters about the strategies followed by the organization. Crafting & Executing Strategy Development of Strategic Vision
Figure : The Strategy Making, Strategy Executing Process Mission Statement: For the People, for the Country
Vision Statement: We Carry on Our Efforts for a Better Country 2.2 Characteristics of an Effectively Worded Vision Statement Graphic – A well-stated vision paints a picture of the kind of company that management is trying to create and the market position the company is trying to stake out. Directional – A well-stated vision statement says something about the company’s journey or destination and signals the kind of business and strategic changes will be forthcoming. Focused - A well-stated vision is specific enough to provide managers with guidance in making decisions and allocating resources. Flexible - A well-stated vision is not a once-and-for –all-time pronouncement – visions about a company’s future path may need to change the events untold and circumstances change. Feasible - A well-stated vision is within the realm of what the company can reasonably expect to achieve in due time. Desirable - A well-stated vision appeals to the long term interests of stakeholders – particularly shareowners, employees and customers. Easy to Communicate - A well-stated vision is explainable in less than 10 minutes and ideally can be reduced to a simple memorable slogan 2.3 Common shortcomings in Company vision Statement Incomplete – short on specifics about where the company is headed or what kind of company management is trying to create. Vague – doesn’t provide much indication of whether or how management intends to alter the company’s current product/market/customer/technology focus. Bland – lacking in motivational power Not distinctive – could apply to most of the company. Too Reliant – relying too much on such superlatives as best, most successful, recognized leader, global or worldwide leader, or first choice of customers. Too generic – fails to identify the business or industry to which it is supposed to apply. The statement could apply to companies in any of several industries. Broadness – so broad that it really doesn’t rule out most any opportunity that management might pick to pursue. The Strategy-Making Pyramid
Figure : The Strategy-Making Pyramid A company’s overall strategy is really a collection of strategy initiatives and actions devised by the managers and key employees up and down the whole organizational hierarchy. The larger and more diverse the operations of an enterprise, the more points of strategic initiative it has and the more managers and employees at more levels of management that have a relevant strategy-making role. In diversified, multi-business companies where the strategies of several different businesses have to be managed, the strategy-making task involves four distinct types or levels of strategy, each of which involves different facets of the company’s overall strategy: Corporate strategy consists of the kind of initiatives the company uses to establish business positions in different industries, the approaches corporate executives pursue to boost the combined performance of the set of businesses the company has diversified into, and the means of capturing cross –business synergies and turning them into competitive advantage. Senior corporate executives normally have lead responsibility of devising corporate strategy and for choosing among whatever recommended actions bubble up from the organization below. Key business-unit heads may also be influential, especially in strategic decisions affecting the business they head. Major strategic decisions are usually reviewed and approved by the company’s board of directors. Business strategy concerns the actions and the approaches crafted to produce successful performance in one specific line of business. The key focus here is crafting responses to changing market circumstances and initiating actions to strengthen market position, build competitive advantage, and develop strong competitive capabilities. Orchestrating the development of business-level strategy is the responsibility of the manager in charge of the business. The business head has at least two other strategy-related roles: (1) seeing that lower-level of strategies are well conceived, consistent with each other and adequately matched to the overall business strategy, and (2) getting major business-level strategic moves approved by corporate-level officers (and sometimes the board of directors) and keeping them informed of market developments and emerging strategic issues. In diversified companies business-unit heads may have the additional obligation of making sure businesslevel objectives and strategy conform to corporate-level objectives and strategy themes. Functional-area strategies concern the actions, approaches, and practices to be employed in managing particular functions or business processes or key activities within a business. A company’s marketing strategy, for example, represents the managerial game plan for running the sales and marketing part of the business. A company’s new product development strategy
represents the managerial game plan for keeping the company’s product lineup fresh and in tune with what buyers are looking for. Functional-area strategies add specifics to the hows of business-level strategy. Plus they aim of establishing and strengthening the business’s market position and standing with customers. The primary role of functional-area strategy is to support the company’s overall business strategy and competitive approach. Lead responsibility for functional-area strategies within a business is normally delegated to the heads of respective functions, with the general manager of the business having final approval and perhaps exerting a strong influence over the content of particular pieces of functional-area strategies. To some extent, functional-area managers have to collaborate and coordinate their strategymaking to avoid uncoordinated and conflicting strategies. For the overall business strategy to have maximum impact, a business’s marketing strategy, production strategy, finance strategy, customer service strategy, new product development strategy and human resources strategy should be compatible and mutually reinforcing rather than serving their own narrower purposes. If consistent functional-area strategies are sent up the line for final approval, the business head is responsible for spotting the conflicts and getting them resolved Operating strategies concern the relatively narrow strategic initiatives and approaches for managing key operating units (plants, distribution centers, geographic units) and specific operating activities with strategic significance (advertising campaigns, the management of specific brands, supply-chain related activities, and Web site sales and operations). A plant manager needs a strategy for accomplishing the plant’s objectives, carrying out the plant’s part of the company’s overall manufacturing game plan, and dealing with any strategy related problems that exist at the plant. A company’s advertising manager needs a strategy for getting maximum audience exposure and sales impact from the ad budget. Operating strategies while of limited scope, add further detail and completeness to functional-area strategies and to the overall business strategy. Lead responsibility for operating strategies is usually delegated to frontline managers, subject to review or approval by higher ranking managers. Even though operating strategy is at the bottom of the strategy making hierarchy, its importance should not be downplayed. A major plant that fails in its strategy to achieve production volume, unit cost, and quality targets can undercut the achievement of company sales and profit objectives and wreak havoc with strategic efforts to build a quality image with customers. Frontline managers are thus an important part of an organization’s strategymaking team because many operating units have strategy-critical performance targets and need to have strategic action plans to achieve them. One cannot reliably judge the strategic importance of a given action simply by the strategy level or location within the managerial hierarchy where it is limited. In single-business enterprises, the corporate and business levels of strategy making merge into one level – business strategy – because the strategy for the whole company involves only one distinct line of business. Thus, a single-business enterprise has only three levels of strategy: (1) business strategy for the company as a whole, (2) functional-area strategies for each main area within the business, and (3) operating strategies undertaken by lower-echelon manager to flesh out the
strategically significant aspects for the company’s business and functional-area strategies. Proprietorships, partnerships, and owner-managed enterprises may have only one or two strategy-making levels since in small-scale enterprises the whole strategy-making, strategyexecuting function can be handled by just a few people. Principle aspects of managing the Strategy-Execution Process Managing the strategy implementation and execution is an operations-oriented, make-thingshappen activity at shaping the performance of core business activities in a strategy-supportive manner. It is easily the most demanding and time consuming part of the strategy-management process. To convert strategic plans into actions and results, a manager must be able to direct organizational change, motivate people, build and strengthen company competencies and competitive capabilities, create a strategy-supportive work climate, and meet or beat performance targets. In most situations, managing the strategy-execution process includes the following principal aspects:
Staffing the organization with the needed skills and expertise, consciously building and strengthening strategy-supportive competencies and competitive capabilities, and organizing the work effect. Developing budgets that steer ample resources into those activities critical to strategic success. Ensuring that policies and operating procedures facilitate rather than impede effective execution. Using the best-known practices to perform core business activities and pushing for continuous improvement. Organizational units have to periodically reassess how things are being done and diligently pursue useful changes and improvements in how strategy is being executed. Installing information and operating systems that enable company personnel to better carry out their strategic roles day in out. Motivating people to pursue to target objectives energetically and, if need be, modifying their duties and job behavior to better fit the requirements of successful strategy execution. Tying rewards and incentives directly to the achievement of performance objectives and good strategy execution. Creating a company culture and work climate conducive to successful strategy implementation and execution. Exerting the internal leadership needed to drive implementation forward and keep improving strategy execution. When the organization encounters stumbling blocks or weaknesses, management has to see that they are addressed and rectified quickly.
Good strategy execution involves creating strong “fits” between and organizational capabilities, between strategy and the reward structure, between strategy and internal operating systems, and between strategy and the organization’s work climate and culture. The stronger these fits – that is, the more that the company’s capabilities, reward structure, internal operating systems, and culture facilitate and promote proficient strategy execution – the better the execution and the higher company’s odds of achieving its performance targets.
Furthermore, deliberately shaping the performance of core business activities around the strategy helps unite the organization. Charting Company's Future: Foster Real Estate Ltd. The difficulty with company-wide strategic planning is that it often is comprised of disparate mountains of information. To get the big picture on a company’s strategy, visualization of the company on a "strategy canvas" (a picture of the company among its competitors) is somewhat beneficial. Foster Real Estate Ltd. did it. Foster Real Estate Ltd. was known for insisting that its executives get the big picture. Business unit heads present their proposed strategies in no more than a few slides. Executives who failed to meet exacting standards for brevity met with management’s unconcealed displeasure. And if it happened too often, they ran the risk of being left out of the loop on future strategy sessions. Many leaders share this obsession with the big picture, yet it is clear that few companies actually have a clear strategic vision. The problem stems from the strategic planning process itself. The process usually involves the preparation of a large document—culled from a mishmash of data provided by people from various parts of the organization who often have conflicting agendas and poor communication. The report typically begins with a lengthy description of the industry and the competitive situation. There follows a discussion of how to increase market share here and there, capture new segments, or cut costs, which leads to an outline of numerous goals and initiatives. A full budget is almost invariably attached, as are lavish graphs and a surfeit of spreadsheets. No wonder so few strategic plans turn into action; executives are paralyzed by the muddle. But it doesn't have to be that way. There is an alternative approach to strategic planning, based not on preparing a document but on drawing a picture called a "strategy canvas." This approach consistently produces strategies that are easy to understand and communicate, that engage more people within an organization, and that unlock the creativity of participants.. Revealing strategic profile Academics and consultants have developed an armory of tools to help companies understand their strategic positioning, and many of those tools have yielded successful strategies. This approach, drawing a strategy canvas—is unique because it does three things in one picture. First, it shows the strategic profile of an industry by depicting very clearly the factors that affect competition among industry players, as well as those that might in the future. Second, it shows the strategic profile of current and potential competitors, identifying which factors they invest in strategically. Finally, it draws the company's strategic profile or value curve showing how it invests in the factors of competition and how it might invest in them in the future. The basic component of strategy canvas, the value curve, is a very interesting tool. Strategy Canvas To develop a strategy canvas, the factors of competition for the industry are listed on the horizontal axis. The vertical axis indicates the degree to which Foster Real Estate Ltd. and the alternative companies invest in the competitive factors. A relatively low position means a company invests less and, hence, offers less in that factor or, in the case of price, asks for
less. By connecting the dots across all the factors for each player, we can reveal the strategic profiles of Foster Real Estate Ltd., its direct competitors, and its main alternatives. Foster Real Estate Ltd. profile is a perfect example of a good strategy, because it shows the three complementary qualities that characterize an effective strategy: focus, divergence, and a compelling tag line. If a company's strategic profile does not clearly reveal those qualities, the strategy will likely be muddled, undifferentiated, and hard to communicate. Focus: Every great strategy has focus, and a company's strategic profile, or value curve, should clearly show it. Looking at Foster Real Estate Ltd. profile, for example, we can see at once that the company emphasizes just three factors: Size, Loan Facility, and Security. By focusing in this way, they have been able to price against competitors; it doesn't make extra investments in other factors. By contrast, traditional competitors invest in all the competitive factors, which makes it much more difficult for them to match with Foster Real Estate Ltd. Across-the-board investing is often a sign that competitors' moves are setting a company's agenda. Divergence: When a company's strategy is formed reactively as it tries to keep up with the competition, it loses its uniqueness. Consider the similarities in most company’s Size factors. On the strategy canvas, therefore, reactive strategists tend to share a profile. Indeed, in the case of Foster Real Estate Ltd., we can find that the value curves of the company's competitors were virtually identical, which is why they share the same value curve in the exhibit. By contrast, the value curves of innovators' strategies always stand apart. They might eliminate or substantially reduce investments in certain factors, or they might dramatically increase investments in others. Sometimes they even create new factors, thereby changing the industry's overall profile. Foster Real Estate Ltd., for instance, pioneered large area plot for apartments. Compelling tag line: The final test of a good strategy picture is how well it lends itself to a tag line. "We Carry on Our Efforts for a Better Country" That's the tag line of Foster Real Estate Ltd. Even a good competitor finds it difficult to convert its offers into a memorable tag line. A good tag line must not only deliver a clear message but also advertise an offering truthfully, or else customers will lose trust and interest. If a company can't come up with a strong and authentic tag line, chances not to have a strong strategy, either. Drawing a strategy canvas is not, of course, the only part of the strategic-planning process. At some stage, numbers and documents must be compiled and discussed. But the details will fall into place more easily if managers start with the big picture. Completing the four steps of visualizing strategy will put strategy back into strategic planning, and it will greatly improve the chances of coming up with a winning formula. The Four Steps of Visualizing Strategy Visual Awakening • Compare a business with competitors' by drawing "as is" strategy picture. • See where the strategy needs to change Visual Exploration Go in the field to: • Discover the adoption of hurdles for noncustomers.
Observe the distinctive advantages of alternative products and services. See which factors should be eliminated, created, or changed.
Visual Strategy Fair • Draw a "to be" strategy canvas based on insights from field observations • Get feedback on alternative strategy pictures from customers, lost customers, competitors' customers, and noncustomers. • Use feedback to build the best "to be" strategy Visual Communication • Distribute before-and-after strategic profiles on one page for easy comparison. • Support only those projects and operational moves that allow the company to close the gaps to actualize the new strategy. Mission Statement: Exploratory Foster Real Estate Ltd. is a leading private-sector industrial conglomerate in Bangladesh. It currently has 14 on-going concerns. The Foster Real Estate Ltd. strives to work in partnership with the Government for promoting sustainable development, environment preservation, employment generation and poverty reduction. The Foster Real Estate Ltd. has a particular focus on urban housing, recreation centers, and commercial ventures. Thus, the motto of the company is “For the People, for the Country”. The company's efforts seek to: 1. 2. 3. 4. 5. 6. 7. 8.
Create affordable housing (developed land & homes) for people Foster better living environments and pleasant surroundings Ensure environmental balance and sustainability Use re-cycled raw material in industrial production Treat industrial effluents Establish recreational and shopping facilities for people. Develop a meaningful partnership with others for development Provide better working conditions for its staff members
The Foster Real Estate Ltd. works in close partnership with the City Corporations, the Government of Bangladesh, other private sector companies, multilateral institutions, the environment department, and numerous financial institutions. The Foster Real Estate Ltd. has its headquarters in Dhaka, Bangladesh. Its Chairman and a Board of Directors frame the company’s policies. The Managing Director as well as the Chief Executive Officer has the authority to take decisions. Corporate Profile The Foster Real Estate Ltd. started off as a real-estate venture known as "Foster" under the aegis of the company’s first concern - the National Development Engineers Ltd. This project turned out to be very successful and had helped foster the growth of trust and confidence of the urban people in Dhaka. Dhaka's burgeoning population, combined with a conspicuously slow growth of housing - led to the landmark success of Foster Real Estate Ltd.
Driven by the ramifications of this success, Foster Real Estate Ltd. geared up to invest in new fields. All these had happened in a span of less than 10 years. During this period, additional schemes on land development and real estate were launched and these focused more sharply on increasing responsiveness to client needs. At present, the Group employs over 250 people. The company now has 14 major projects located in different areas of the country. The mostrecent addition to the Group is a multi-faceted commercial complex called the ‘Tower B-11’. The ‘Tower B-11’ is one further step in our longstanding effort to strengthen our links with the general public through the unique offering of commercial operations and recreation facilities under one roof. It houses Commercial spaces, food courts, fitness centers, space for shops & showrooms, 3 level basements parking for over a hundred vehicles and office space spread over several floors. The construction process of this building is started in modern “Top Down” method, which is for the first time in Bangladesh. Foster also engaged country’s top consultants for this project. It also makes some contract with the world famous Electromechanical companies to use their products in this building. The Group has come a long way in reaching these goals by listening to client needs, learning real-time lessons from past projects, innovating and partnering. Through major investment undertakings, Foster Real Estate Ltd. has meaningfully contributed to the economy's stability in financial and capital markets. Underlying all of the Group's activities are the common threads of change, flexibility, and fostering closer ties with the Government, the City Corporation and clients. Most of its projects have been success stories - this fact alone is enough to justify a sense of confidence in the company‘s future. Basic Strategies The Basic Strategies that played major role for the success of Foster Real Estate Ltd. are: 1. 2. 3. 4. 5. 6.
Listening to client needs Learning real-time lessons from past projects Innovating and partnering Making all of the Group's activities the common threads of change Flexibility Fostering closer ties with the Government, the City Corporation and clients.
The Strategy Alignment Model: Real Estate strategies in the Context of organizational Outcomes An increasingly sophisticated body of theory and practice has emerged over the past 20 years among those working to define the role of real estate in enhancing corporate business strategy. The discussion has covered many levels, from on- and off-site workplace concepts, to overall site and facility guidelines, to the planning and management of entire portfolios of real estate assets. One constant has been addressing ways that real estate can help or hinder organizations in their ability to: • recruit and retain the best people; • manage organic and acquisition-driven growth; •
expand the customer base, markets, products and services;
refine organizational structure and culture;
develop branding and identity programs;
enhance workflow and communication;
support Internet and related transformational technologies;
reduce costs and control risk; and
About 10 years ago, some experts urged to develop a straightforward planning framework that could be used to measure and communicate real estate strategies with senior executives in the company. The result is the Strategy Alignment Model, which has been developed and refined on over 100 projects with SCJ and with dozens of other Fortune 500 companies. The model consists of three components, which are based on seven guiding principles. The first component, Content, and its three associated principles, are the focus of this article. Two subsequent articles will discuss the remaining components of the model, Process and Benchmarking and four other principles of planning. Principle 1: Planning models should be based on the language and tools of business applied to real estate, rather than on architect and broker-based schemes imposed on organizations. The Strategy Alignment Content Component is a framework for visually, directly aligning real estate with core business strategies as a series of cause-and-effect relationships. It was developed during the early phases of a strategic master plan for SCJ's Racine, Wisk, headquarters. Among several scenarios, a decision was made to build a separate headquarters for one of SCJ's larger businesses, Commercial Markets. The content component was used to collect, analyze and communicate information throughout the project. Over the course of several work sessions, senior leaders identified 21 key business strategies, for which 25 real estate responses were generated. Behind all of the strategic concepts -- both organizational and real estate -- were dozens of detailed implementation actions. The Content component is structured around five acknowledged building blocks of corporate strategy: (A) mission for today and vision for the future; (B) customers and markets served (C) product and service offerings; (D) distinctive competencies or skills unique to a company; and (E) values and culture that serve as the foundation for any organization.
Within these broad categories are 70 different issues that were discussed before forming its strategy of 21 elements. Principle 2: Planning models should emphasize activities, functions, and performance concepts over the more typical counting and cataloguing of prescriptive data and wish lists. The overarching theme for Foster Real Estate Ltd. is "We Carry on Our Efforts for a Better Company". This concept reflects a major transformation in the organization toward multidisciplinary, collaborative work processes, which drove a move from 60 percent enclosed offices to an open, multidisciplinary workplace setting. Supporting the open environment are informal and formal, open and enclosed, individual and team oriented-places previously reserved for private offices. Arriving at this solution was not based on typical cataloguing of how much space each individual gets based on their level in the organization. Instead, requirements were generated via a thorough understanding of current and projected, individual and team, functional work
patterns. Today, a series of straightforward, performance-based profiles continue to be used to determine individual and group space requirements. Principle 3: Planning outcomes should be measured in core business terms, rather than strictly as real estate statistics. There are 21 elements of their strategy as internally consistent, cause-and-effect relationships. As our team presented real estate responses, each was linked to a specific core business strategy. Thus, senior SCJ leadership was making a commitment to real estate as an integral part of organizational outcomes. The real value is getting senior leadership together around strategic issues that are clearly portrayed as a series of interrelated elements, including real estate. As one element is altered, the other parts must be examined and, most likely, refined. The last few years have generally been positive ones for SCJ Commercial Markets. As their business model has evolved, refinements have been made to their overall strategy and measures for success, including real estate. The Strategy
Alignment Content Component helps frame the key real estate issues in a language spoken by the core business. Principle 4: Planning models should be structured as conceptual frameworks that can be flexibly applied to specific client needs, rather than focus on prescriptive, one-size-fits-all approaches. A company must create a process that goes far beyond typical planning, design and transaction activities. More often than not, Foster Real Estate Ltd. employs a top-down and bottom-up approach that involves virtually every stakeholder in a project. Such an approach does not take any more time than traditional topdown only methods, as involvement is structured as an ongoing series of events across the entire project. Associated figure offers a summary of the methods used to collect, analyze, strategize and communicate information on numerous projects. However, unlike most topdown processes that involve a generic survey of and/or standard individual interviews with a few senior executives, the collection and analysis was based on a series of workshops with all of the key stakeholders together in a conference room. The integrated strategy was graphically depicted on a single, poster-sized sheet of paper as a map of interconnected cause and effect relationships. The corporate real estate group then used the map as a framework to develop specific strategies and measures for every business unit and department in the company. In the end, internally consistent strategy maps were communicated to all employees via presentations, the company intranet and on posters displayed throughout most facilities. 5: Planning processes should emphasize a balanced, strategic and tactical, macro to Change Management Tools Used at Foster Real Estate Ltd.micro, approach over strictly tactical, micro-focused, linear schemes.The vast majority of people involved in core business and real estate planning are familiar with the term "strategic planning". It's probably one of the most misused terms in practice today. By that strategy and planning should be viewed as two distinct, yet interrelated, activities. Strategy is about the identification of key business drivers and real estate performance criteria, a roadmap, while planning is more about developing detailed directions for enacting strategic priorities. In other terms, strategy defines "what needs to happen" and planning describes "how it should happen". Most of the so-called
strategic real estate plans that our consulting team has reviewed are heavily weighted toward
planning only. As an alternative, Above Figure summarizes a flexible, three-step process into which content, activities, roles, schedule and other important issues can be incorporated. The diagram is drawn in a linear format for clarity, and especially to show the importance of a defined strategy as driving the creation of alternative real estate plans. At the same time, the feedback loop reflects the fact that ideas are developed at all points in a project, including during later stages, which can impact -- and even change -- the defined
strategy. Furthermore, it's often necessary to test planning concepts as a means to fully develop a strategy in the first place. Principle 6: Benchmarking should be focused more on strategy-specific issues and underlying qualitative practices and less on typical quantitative, generic, statistical comparisons. Virtually every organization we serve is interested in comparing themselves to other best-in-class companies. Several of the most commonly requested real estate benchmarks are: • •
square feet per person, fixed asset and operations costs per square foot and per person,
percentage of open versus enclosed offices and
number of office standards and the basis for assignment.
As useful as these and related measures are, they really represent simple indices that only begin to tell a story--actually, the beginning and the end, because most real estate benchmarks are applied at face value with very little, if any, exploration of the core business strategies and practices that drive them.
As an alternative, the Strategy Alignment Benchmarking Component is comprised of a threestep approach that is designed to take people beyond generic to organization-specific best practices. An overview of the three steps is applied to a simplified version of the Process Component in Figure. Step one is the traditional comparison of existing real estate resources to external benchmarks, for which we have developed an extensive database. This first step establishes a broad baseline on which to build. It's the second step, though, where the hard, value-added work really begins. One of the key real estate responses was to develop "dedicated customer work areas and tools at headquarters". Arriving at that solution involved extensive benchmarking of competitors and other best-in-class companies. My work emphasized the elements of each company's published strategy and exploration of how their facilities were designed to support it.
In the second step of the benchmarking process, Company employees were reviewed, with four having comparable strategic profiles. From that, 35 real estate ideas were generated, with seven specifically addressing ways to engage customers in product development. The ideas were not simply borrowed and applied verbatim to Foster Real Estate Ltd. Instead, underlying practices and processes related to product development, customer satisfaction, sales channels, communication, culture and the like were used as knowledge to help craft strategic criteria specific to Foster Real Estate Ltd. Once the strategy had been developed, a series of planning alternatives were generated and evaluated, and eventually, a single direction was selected. The third and final benchmarking step involved using best practices to help develop measures for the strategy, which, in turn, became the qualitative and quantitative criteria for selecting a plan to implement. As noted in the first article, several concepts were employed to measure customer involvement in product development, including a 10-percent increase in customer retention, and 50 percent of Foster Real Estate Ltd. key customers were to use defined areas at headquarters two to three times per year. From steps one to three, dozens of traditional, generic benchmark indices were refined to a few strategy-specific, focused best practices critical to what Foster Real Estate Ltd. was attempting to accomplish as a business. Principle 7: Benchmarking should be used to achieve competitive advantage rather than to simply copy and catch up. This is not so much a philosophical statement as it is a reinforcement of how benchmarking can best add value to real estate planning processes. Earlier, I questioned the viability of simple comparisons, like sq. ft. per person, unless you understand the core business and real estate components that comprise that statistic.
Equally dubious is advocating the universal application of benchmarks that have achieved the status of "cutting-edge" practices or "industry trends". For example, a frequent discussion at conferences and in numerous publications is a trend toward open office settings. Too often, this concept is discussed as a magical step of competitive advantage for everybody. In reality, nothing could be further from the truth. The need for more or less office enclosure
is driven by core business strategy, group workflow, individual job functions, existing real estate resources, entitlement and cultural considerations that are unique to each organization (see Figure). My experience suggests, for example that: • •
There are seven core business strategies that are most often associated with being drivers of the degree of enclosure for overall group spaces and individual offices. There are eight workflow types that describe how groups of people work with one another, from those that are very separate or independent, to interdependent, collaborative teams.
There are 16 functional job types that define the individual activities people perform in their offices, including required levels of speech and visual privacy.
Following Figure depicts an overview of the eight group workflow types that we consistently find across most of corporate America. Each brings with it specific facility-planning implications and strong suggestions for
the degree of office enclosure -- especially when considered in conjunction with all of the factors in above Figure. Together, these qualitative benchmark descriptions serve as process facilitators that help develop an office strategy that yields competitive advantage unique to each organization. In other words, competitive advantage is not about copying the latest "hot" trend, but on applying best practice knowledge to the shaping and measurement of an organization-specific strategy.
The three components of the Strategy Alignment Model -- Benchmarking, Process and Content -- have been developed and refined over the past several years on more than 100 projects. These integrated components can be used on virtually any project to frame the key planning issues in the language of business and define real estate in the context of organizational outcomes. Findings, Recommendation And Conclusion Findings about Foster Real Estate Ltd. and its’ Strategy The difficulty with company-wide strategic planning is that it often is comprised of disparate mountains of information. To get the big picture on a company’s strategy, visualization of the company on a "strategy canvas" (a picture of the company among its competitors) is somewhat beneficial. Foster Real Estate Ltd. did it. Foster Real Estate Ltd. was known for insisting that its executives get the big picture. Business unit heads present their proposed strategies in no more than a few slides. Executives who failed to meet exacting standards for brevity met with management’s unconcealed displeasure. And if it happened too often, they ran the risk of being left out of the loop on future strategy sessions. Many leaders share this obsession with the big picture, yet it is clear that few companies actually have a clear strategic vision. The problem stems from the strategic planning process itself. The process usually involves the preparation of a large document—culled from a mishmash of data provided by people from various parts of the organization who often have conflicting agendas and poor communication. The report typically begins with a lengthy description of the industry and the competitive situation. There follows a discussion of how to increase market share here and there, capture new segments, or cut costs, which leads to an outline of numerous goals and initiatives. A full budget is almost invariably attached, as are lavish graphs and a surfeit of spreadsheets. No wonder so few strategic plans turn into action; executives are paralyzed by the muddle. But it doesn't have to be that way. There is an alternative approach to strategic planning, based not on preparing a document but on drawing a picture called a "strategy canvas." This approach consistently produces strategies that are easy to understand and communicate, that engage more people within an organization, and that unlock the creativity of participants. Recommendation To develop a strategy canvas, the factors of competition for the industry are listed on the horizontal axis. The vertical axis indicates the degree to which Foster Real Estate Ltd. and the alternative companies invest in the competitive factors. A relatively low position means a company invests less and, hence, offers less in that factor or, in the case of price, asks for less. By connecting the dots across all the factors for each player, we can reveal the strategic profiles of Foster Real Estate Ltd., its direct competitors, and its main alternatives. Foster Real Estate's profile is a perfect example of a good strategy, because it shows the three complementary qualities that characterize an effective strategy: focus, divergence, and a compelling tag line. If a company's strategic profile does not clearly reveal those qualities, the strategy will likely be muddled, undifferentiated, and hard to communicate. Focus. Every great strategy has focus, and a company's strategic profile, or value curve, should clearly show it. Looking at Foster Real Estate's profile, for example, we can see at once that the company emphasizes just three factors: Size, Loan Facility, and Security. By focusing in this way, they have been able to price against competitors; it doesn't make extra investments in other factors. By contrast, traditional competitors invest in all the competitive factors, which makes it much more difficult for them to match with Foster Real Estate Ltd..
Across-the-board investing is often a sign that competitors' moves are setting a company's agenda. Divergence. When a company's strategy is formed reactively as it tries to keep up with the competition, it loses its uniqueness. Consider the similarities in most company’s Size factors. On the strategy canvas, therefore, reactive strategists tend to share a profile. Indeed, in the case of Foster Real Estate Ltd., we can find that the value curves of the company's competitors were virtually identical, which is why they share the same value curve in the exhibit. By contrast, the value curves of innovators' strategies always stand apart. They might eliminate or substantially reduce investments in certain factors, or they might dramatically increase investments in others. Sometimes they even create new factors, thereby changing the industry's overall profile. Foster Real Estate Ltd., for instance, pioneered large area plot for apartments. Compelling tag line. The final test of a good strategy picture is how well it lends itself to a tag line. "We Carry on Our Efforts for a Better Country" That's the tag line of Foster Real Estate Ltd.. Even a good competitor finds it difficult to convert its offers into a memorable tag line. A good tag line must not only deliver a clear message but also advertise an offering truthfully, or else customers will lose trust and interest. If a company can't come up with a strong and authentic tag line, chances not to have a strong strategy, either. Drawing a strategy canvas is not, of course, the only part of the strategic-planning process. At some stage, numbers and documents must be compiled and discussed. But the details will fall into place more easily if managers start with the big picture. Completing the four steps of visualizing strategy will put strategy back into strategic planning, and it will greatly improve the chances of coming up with a winning formula. The Four Steps of Visualizing Strategy Visual Awakening Compare a business with competitors' by drawing "as is" strategy picture. See where the strategy needs to change Visual Exploration Go in the field to: Discover the adoption of hurdles for noncustomers. Observe the distinctive advantages of alternative products and services. See which factors should be eliminated, created, or changed. Visual Strategy Fair Draw a "to be" strategy canvas based on insights from field observations Get feedback on alternative strategy pictures from customers, lost customers, competitors' customers, and noncustomers. Use feedback to build the best "to be" strategy Visual Communication Distribute before-and-after strategic profiles on one page for easy comparison. Support only those projects and operational moves that allow the company to close the gaps to actualize the new strategy. Conclusion Academics and consultants have developed some of tools to help companies understand their strategic positioning, and many of those tools have yielded successful strategies. This approach, drawing a strategy canvas—is unique because it does three things in one picture. Foster Real Estate Ltd. is following the tools perfectly. First, it shows the strategic profile of an industry by depicting very clearly the factors that affect competition among industry players, as well as those that might in the future. Second, it shows the strategic profile of current and potential competitors, identifying which factors they invest in strategically.
Finally, it draws the company's strategic profile or value curve showing how it invests in the factors of competition and how it might invest in them in the future. The basic component of strategy canvas, the value curve, is a very interesting tool and fully followed by Foster Real Estate Ltd. The company is very conscious about its strategic decision factors. This is the reason of quick growth of Foster Real Estate Ltd. Bibliography 1. Add one more risk to those faced by strategic planning, Eric Berg, The Actuary, 2. Investors’ Public Access to Information in the Real Estate Industry, Moody’s Vol 37, No.9, November 2003 Investors Service, Berg, Fliegelman, Pieck, Bo, Reigel, February 2004 3. Strategic Management, the Need for Improved Disclosure and Increased Transparency of Financial Statements, According to New Tillinghast CFO Survey, Tillinghast-Towers Perrin Press Release, July 10, 2002 1 2 3 4 5
4. The Real Estate Industry, Systemic Strategic Planning and Financial Stability, Gerd Häusler, International Monetary Fund, June 13, 2003 5. How Do the Analysts View Your Real Estate Company, David J. Weinsier, 2004 SOA Annual Meeting, October 25, 2004 6. A Message From Robert E. Broatch, EVP & CFO, Guardian Life Website, 2004 7. Editorial Note on Disclosure of Strategic Planning of Real Estate Companies, Committee on the Role of the Appointed / Valuation Actuary, Canadian Institute of Actuaries, January 1998 8. Use of Embedded Values at United States and European Real Estate Companies, Milliman Global, Murray, Bennett, Headey, Affleck, Bauer, Rayner, October 2001