Maison Bouygues Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

DIAGNOSIS

Maison Bouygues (MB) was established by Bouygues Group as a wholly owned subsidiary in 1979,. It has successfully operated in the real-estate industry over the last two decades and its main focus was on the design and marketing of housing and construction of houses was outsourced to small constructers. However, recent economic crises and declining sales growth led MB to a dilemma where its VP marketing Gallet was emphasizing to spend more on advertisement activities. Whereas, the CFO, Marie Sachet, has suggested the all the departments should cut their cost in order to survive the recession period. During a recession period, an economy is expected to face a downfall and similarly the entities operating in that economy will also face downfall in its sales revenue so in this regards, Gallet’s emphasis for spending more on marketing activities is questionable because in a recession, economy’s sales will not grow very much in proportion to the investment in marketing programs, therefore, more investment in marketing activities will not increase the sales revenues.

Furthermore, all these facts have led to no growth in the year 1990 and even led a fall of 15% to 20% in sales revenues during the year 1991. Additionally, the data seen in table A of the case reveals that families are using resold home instead of new homes because when children grow up, so they move to other areas and their parents resell the houses that is also causing the fall in MB’s sales revenues, which is only providing services for construction of new houses. Meanwhile, the trend of living in large houses is being developed and the construction of housing is not being made according the needs of the population in different areas because in some areas houses are lower than the market demand for new houses and similarly there are areas where houses are built in excess of the demand.

However, the fall in sales revenue is has been eroded because of the mobility of families from one location to another and family units in France have increase to 22 million over during the year 1990. Moreover, MB requires it customers to arrange 90% financing with mortgage, additionally, since the legislation in France has limited the government grant for financing house mortgages which also affected MB’s sales because previously around 70% of its buyers benefited from the government grant and due the limited government grant only 30% of MB’s customers could benefit from government grant, hence, reduction in government grants limited the ability of middle class families to purchase new homes which contributed towards the falling revenues of MB.

Meanwhile, due to the declining sales and in efficient control of cost, MB’s competitors keep on changing that has put Gallet in a dilemma of setting its marketing strategy. Therefore, despite of the huge spending on marketing activities, MB was not able to increase its sales. Meanwhile, MB’s competitors in medium and large houses were small individual builders and they were charging lower prices of their housing partly because of the low cost advantage (10% to 15%) they have over MB and partly because of their inability to effectively estimate the construction cost; hence, they were charging low price in comparison to MB’s prices for medium and large size houses. In addition to this, MB had been paying its outsourced partners for fully completed houses after 90 days of work completion but according to the new law implemented in the year 1991, MB was required to pay the subcontractors after 30 days of work completion and this early payment increased the working capital requirements for MB’s operations. Additionally, since 85% customers were happy to buy a house from the available choices and only 15% wanted customized houses, which meant that customization of houses was not a very much value adding point for MB’s operations. However, MB had provided its customers with the service to find land for the construction of houses but they did not provide the land to its customers and they were required to select the land on their own.

However, despite the largest seller of small housings MB did not have a central recruitment and selection program for MB vendors and each region was hiring vendors on their own. Meanwhile, the supervision mechanism revealed that new vendors performed the screening process very fast in order to cover more clients and doing so would frighten the potential clients. Furthermore, the vendor’s turnover ratio was 150%, which showed that vendors were not satisfied with this job and their non-satisfaction level led to the non-performing behavior in their roles.

Furthermore, the analysis of annex 9 and 10 reveals that the most inefficient means of advertisement is technical; fees that have not attracted any customers during the year 1989 and neither it is expected to attract any new customers during the next two years. Meanwhile, advertisement through regional magazines have proved to ..............

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Vice President of Marketing in 1991, is considering a marketing plan and budget for the Maison Bouygues, a leading builder of new single-family home in France. Due to falling sales of the company, is projected to be flat and adjustments may need to be made in a mixture of marketing and sales. "Hide
by John A. Quelch, Greg Conley Source: Harvard Business School 21 pages. Publication Date: January 6, 1992. Prod. #: 592059-PDF-ENG