Build Home Business Plan

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According to (Marketline, 2016b), India construction India has a double digit growth rate. According to (Marketline, 2016a), the residential construction sector of India grew by 7.3% and reached a value of $33,800.4 million.

Increasing investment on housing and infrastructure projects are driving growth in the construction industry. Suppliers of construction materials are greatest beneficiaries of this growth.

According to (Marketline, 2016b), cement companies will increase production capacity by 56 million tonnes by 2018. Construction materials market had total revenue of $82,060.5m and the growth rate was 10.9% in 2015 (Marketline, 2016b).

According to (Marketline, 2016b), Bricks is the most lucrative segment followed by cement.

Social

India is urbanising at a rapid pace. Individuals are moving away from their homes and initially they settle in rented apartments but due to the high rent, people prefer to build their own homes.

The rising income levels of people have also promoted an increase in the purchase of luxury apartments.

Technological

Low grade technology is used in construction industry as a result there is low productivity and low value addition. The sales channels are conventional despite of the growing penetration of internet there are no players who offer construction equipments through internet.

Legal

Obtaining permission to become a supplier is not difficult. Obtaining license is easy to start a business.

Environment

Construction is one of the major causes of pollution however being a developing country it is a necessity for India. Suppliers do not have to worry about the environmental issue.

Micro Analysis

Porter’s five force analysis

Buyer power

India has a largely fragmented construction industry. There is hardly any differentiation in the industry and cost leadership is the driving point of industry. Due to the low differentiation in the industry buyers can switch easily because there are no switching costs.

Markets are segmented geographically in construction industry therefore buyers purchase products from their location. Buyers have the option to purchase products only from local suppliers.

Low costs are the driving point in the industry. Consumers prefer to purchase low cost cement and bricks because they bring down the overall cost of construction. Consumers usually conduct intensive research regarding product costs before searching a supplier.

Buyer power is high.

Supplier power

Cement is manufactured from silica, limestone and commoditised ores. Energy is also a important factor that drives cement manufacturing. These products are mandatory for cement construction and cannot be substituted. For bricks construction clay and energy are must.

There are only a few suppliers of limestone, silica, and ores in the industry. These players determine the price of cement however there is control of government to ensure price increment.

Supplier power is high for suppliers of these materials.

However there is no differentiation in the cement and suppliers compete on price point as a result supplier power is low.

Therefore supplier power is moderate.

Barriers to entry

Buyers can switch suppliers easily without any significant switching cost. There is a huge level of commoditisation in construction industry.

Setting up a retail outlet requires some amount of capital investment. Warehousing facilities are also required to hold the stock. These are fixed costs.

In order to setup an investment plant huge capital is required. Setting up a huge plant is beneficial because player with bulk production gets the benefit of economy of scale.

Therefore players willing to start a retail outlet will not face significant barriers however barriers are high for those willing to setup a manufacturing unit.

Existing players have also been accused of price fixing to lower the threat of new entrants.

Barriers to entry are moderate.

Threat of substitutes

There are currently no substitutes to cement are bricks. Prefabrication techniques and usage of timber have started to emerge however there are rarely used. Threat of substitute is low.

Competitive rivalry

There is a rise in the demand of construction materials and it is expected to rise further with rise in the average age of the country. With increase in urbanisation there is tremendous increase in the construction of business and residential complexes.

Investments in the sector are anticipated to increase. There are two types of competitors. Multinational companies are working on huge projects and small scale suppliers providing materials within the city.

New players have started to emerge in small scale supplier segment. Individuals building their homes or small scale developer purchase products from these suppliers.

However, no player is currently offering products through an internet based platform.

Because transporting construction materials over long distances is not feasible due to low ratio of value to weight.

These products have a longer shelf life and require huge facilities for storage. Players operating in the industry do not have a fixed business model.

Competition is moderate.

Opportunities & Threats

Opportunities

- Growth in the construction industry.

- Young demographic of the country.

Threats

- Large players can compete aggressively on price.

- Business