A strategic management paper on Vazquez Building Systems Corporation (VAZBUILT)

• Main Author: Masacupan, Adelfa R.
• Format: text
• Language: English
• Published: Animo Repository 2000
• Subjects: Housing > Philippines; Vazquez Building Systems Corp
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/3978
• Institution: De La Salle University

After bottoming out in the wake of the 1997 Asian crisis, the Philippine real estate industry has been experiencing a painful recovery process. Oversupply and intense competition still characterize the office and high-end segment of the residential market. Fortunately for the housing sector, recovery is on the horizon. The low-cost segment is being given the necessary push by a member of financing incentives aimed at making housing affordable to the average Filipino wage earner. Guarantees loans for distressed developers have also been made available in efforts to pump prime the ailing industry. Demand coming from the middle-income market, considered the most sensitive segment, has been on the upswing largely due to lowered mortgage rates charged by banks. The plight of the industry has been echoed by the declining profit performance of Vazquez Building Systems Corporation (VAZBUILT). From a pre-crisis profit level of P50million, the company's profitability had continuously dropped dramatically that by last year, the company barely broke even its operations. A thorough review of Vazbuilt's strategy vis-a-vis prevailing market conditions is in order if the company is to successfully cyclical fluctuations. Vazbuilt has been closely-held family business since its incorporation in 1991. It has confined its services toward serving only the housing sector within the huge real estate industry. Conservatism has characterized the company's operations as evidenced by its stakeholders' adamance to maintain control, its low profile marketing strategy and a limited geographical market reach, among others. It is this same conservatism that limits the company's revenue-generation potential and ultimately its profit performance. The capital-intensive nature of the real estate industry requires the pooling of sizeable resources not otherwise achievable from a closed group of investors. To effectively take advantage of emerging market opportunities and leverage on its competitive advantage, an aggressive approach to company operations, beginning with rethinking its ownership structure, is called for. Vazbuilt is currently a housing contractor, supplying a mass housing orders from partner developers and building retail houses for individual lot owners. As such, it has no control over the location of the project it will undertake next. Because location is an important competitive leverage and is a significant price driver, the company will do well to undergo horizontal development (become a developer itself) in the future. Having pioneered the use of modular housing technology in the country, two of Vazbuilt's driving forces are its technology and its capability to achieve economies of scale in the pre-fabrication process. As such, the company should be off up its R&D efforts to keep abreast of the latest in housing technologies elsewhere in the world. To achieve enhanced economies of scale, it is recommended that the company expand its current limited provincial markets.