A strategic management paper on Roxas Land Corporation

Date of Publication

2001

Document Type

Oral Comprehensive Exam

Degree Name

Master of Business Administration

College

Ramon V. Del Rosario College of Business

Department/Unit

Decision Sciences and Innovation

Abstract/Summary

Real estate products undergo a boom and bust cycle. The performance of the property sector in the Philippines, as well as in other countries, is largely influenced by economic and political factors. Land appreciation and healthy rental rates can only be sustained if healthy economic and socio-political conditions prevail. The real estate industry has consistently followed the ups and downs of the general economy, from the economic doldrums that is the 1980s when growth was hindered by high interest rates, stagnant economic growth and political instability, to the economic boom in the mid 1990s, and then again through the Asian financial crisis which the country felt in late 1997.

This paper looks into the operations of Roxas Land Corporation, the company responsible for the development of One Roxas Triangle. In 1996, Ayala Land, Inc. (ALI) formed a joint venture company with Hongkong Land (HKL) and Bank of the Philippine Islands (BPI) called Roxas Land Corporation (RLC). The company envisioned to build One Roxas Triangle, a luxury condominium project, that would be comparable to other luxury buildings and addresses in the world such as the 5th Avenue in New York and the Peak in Hongkong. ALI's interest in One Roxas Triangle stands at 50%, HKL at 40% and BPI at 10%.

One Roxas Triangle has experienced a sluggish sales rate since its launch in October 1996. While it was off to a good start, challenges coming from the Asian crisis and fierce competition made selling luxury condominiums extremely difficult. This is compounded by the fact that at an average of P32 million per unit, we were faced with a limited market. As of end-December 2000, of the total 182 units available, only 54 units have been sold (30% take-up).

Using Michael Robert's framework, Strategy Pure and Simple, this paper shall evaluate the company's current differentiation strategies to see if these are still applicable in relation to the current glut in the market. This framework was used because it identifies the company's driving force, business concept, corporate culture and values as it aligns with the company's strategic and operational plans in the attainment of company objectives amidst this economic crisis. In this study, customer satisfaction was identified as the overriding value that will allow the company to survive during these uncertain times.

Notwithstanding the current regional crisis, the real estate industry is expected to bounce back from its dismal state. As One Roxas Triangle approaches its final stages in construction completion, the greatest customer need is reassurance that the building will be completed, at the soonest possible time, and with the same level of specifications indicated at the onset of development. To reinforce RLS's A Promise Fulfilled message, this paper shall present three (3) recommendations to sell the remaining units. These are: (1) Pricing and bulk sales strategies (2) Leasing activities and (3) Unit modification strategy.

Pricing and bulk sales strategies are recommended in order to move the bulk of the units in 2001. These will address the results of the March 2000 survey that the project is overly expensive and has stiff payment terms. Large spot cash discounts (as high as 40%) and financing options reflecting attractiveness of units based on views and heights shall be implemented to improve value for money and affordability via pricing. Easier financing schemes will be assigned to those units that have less attractive views. This will be done to improve their marketability relative to competition. These schemes, however, should not deter RLC from formulating individualized payment terms that would suit the clients' needs and match competitor efforts. The offering of more liberal schemes have signaled to buyers that RLC is open to tailor-fitting payment terms according to their needs. RLC should also continue to sustain product awareness thru print advertisements, non-traditional events, press releases, web page and superior on-site model units.

In order to defray carrying costs, RLC should embark on leasing selected residential units. It is recommended that at least 18 units this year starting July 2001 will be leased and another 10 units in 2002. Its target market should include the following: (1) Senior executives of embassies and related agencies, international organizations, and multinational corporations (2) Residents of Apartment Ridge condominiums who wish to upgrade within the Makati CBD (3) Empty nesters in Makati's premier subdivisions who desire a smaller, more secure housing unit within the Makati CBD.

Lease price shall range from P140,000 to P160,000 per month. Condominium dues shall be for the tenant's account. Lease shall end upon sale of all units by year 2003. Prospects will be tapped through RLC's in-house marketing consultants, broker network, direct mailing and web page.

The unit modification strategy shall be implemented to entice hot prospects to pursue their purchase of residential units. This will address the result of my evaluation of the company's current strategy that customer satisfaction is the overriding value which will help the company survive this financial crisis. RLC will assist the buyers in their interior design and construction works. We will use our existing Architect-on-record and contractors to undertake the interior design plans and its construction at a direct cost. This means that RLC will not charge any profit just to keep the loyal base of customers and prospects. Each request for modifications will be evaluated by the Project Team in terms of compliance with the project's restrictions.

These strategies will be on top of the company's continuous effort to bring to the market the highest quality luxury condominium project in the country comparable to the world's best. It is expected that after adopting the new strategies, the company's revenues will increase with the jump in sales. However, caution is needed to retain the loyal base of current buyers.

Given more time, this study could be more meaningful if another market research can be conducted to validate the results of RLC's March 2000 survey. The objective of this survey is to determine hesitance of prospective buyers to invest in a Roxas Triangle unit and also to determine suggestion on how to improve the development like what type of amenities, finishes, and services among others.

Abstract Format

html

Language

English

Format

Print

Accession Number

OCE1103

Shelf Location

Archives, The Learning Commons, 12F Henry Sy Sr. Hall

Physical Description

1 v. (various foliations) ; ill. (some col.) ; 28 cm.

Keywords

Real estate business--Philippines; Roxas Land Corp

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