IMPERIAL CONSTRUCTION COMPANY
Mr. Ashutosh Kalamkar set up family owned real estate business, Imperial Construction Pvt
Ltd, in 1989 in Pune mainly focusing on construction of small houses for individual clients.
By qualification, Mr. Ashutosh was civil engineer and had almost 15 years of experience in
construction planning & execution. Initially the company had only 20 employees and started
focusing on outskirts of Pune for seeking business opportunities. Mr. Ashutosh believed that
people staying in outskirts or semi-urban area would be less demanding in terms of their
expectations about configuration, design, technology and construction quality of their houses.
He was right in his reasoning to some extent as clients in outskirts were looking for low cost
housing on account of low income compared to those who lived in city area. Even it was also
easy for Mr. Ashutosh to build such low cost and technically less complex houses as he was
not an experienced contractor. Hence, he continued focusing upon this segment. Apart from
serving individual clients, now company had started constructing low cost reasonable quality
apartments in outskirts. After a decade of operations and having completed plenty of projects,
Imperial became significantly known and bigger company in outskirts. Now with better cash
reserves and long experience, Mr. Ashutosh thought of entering into a bigger market by
venturing into large apartment projects market. He also planned to construct luxurious
bungalows and high end homes for affluent clients in Pune city area. After completing almost
15 housing projects of different configurations in next another decade, Imperial Construction
became top real estate company in Pune. Later, Mr. Ashutosh had never looked back. He
entered into construction of malls, multiplexes, and hotels in Pune. Followed by his success
in these segments in Pune, Imperial was ready to spread his business in different cities of
Maharashtra other than Pune. By the time Mr. Varun, son of Mr. Ashutosh joined his family
business. An MBA from Kellogg business school, USA, Varun brought dynamism and
organised management approach to company. He adopted departmentation process in the
company and set clearly distinctive management departments like marketing, finance, human
resource management departments etc. Very soon family business turned into national level
multi-business company venturing into different segments. Company ventured also into
infrastructure and industrial construction segments. Company also started bidding for
international infrastructure projects and got its first break through in form of one flyover
construction project in Saudi Arabia. Now Mr. Ashutosh handed over leadership of company
to Mr.Varun. Mr. Varun took the company to the new heights. At one point, the company's
business in different segments became much bigger in size. These businesses were very
different from each other and hence became difficult to be managed under one common top
management body. As a result, company had to detach these businesses from parent company
Imperial Construction. Newly formed companies operating in various segments were
Imperial infrastructure Ltd, Imperial realty Ltd, Imperial Industrial Construction Ltd. Each of
these companies became an independent company led by an independent CEO. These CEOs
were given absolute autonomy to run their companies and they need not report to parent
management body for daily affairs. However, they would consult parent management body to
get the long term corporate directions or guidelines to enter into new markets. Over the
period of time, Imperial construction entered into business of steel and cement to achieve
better cost economy in its operations. After having a successful run in national and global
markets, Imperial Construction top management decided very much different path to enter
into electronic business by manufacturing products like TV, mobile handsets. They also
planned to enter into hotel business in future.
THE PROBLEM
After decades of successful operations in various segments of construction sector, Imperial
has become well known name. But the universal law about any business has also proved right
in the case of Imperial - universal law of having ups and downs in business. After imperial
has been doing so well from very long time, now it started facing signs of problems in
various businesses. The first sign they witnessed in terms of not a single order they won in a
particular year in industrial construction segment. Infrastructure segment was doing well and
it registered a decent growth but the business was increasing at a decreasing rate for them.
The real estate sector invited lot of competition in form of various corporate group
diversifying into construction segment. Imperial has taken huge borrowings from the bank
which it started finding difficult to service on account of late payment from the clients. Late
payments were attributed to delay in project completion. Delay in project completion further
attributed to shortage of funds to execute the projects. Discouraged by all these
developments, Mr. Varun hired consultant’s services to find out the cause. The regular
management consultant to Imperial, Mr. Rao, analysed the situation and came with following
analysis after reviewing all the necessary facts and figures:
1. The imperial lacks in long run planning as no corporate goals are set up.
2. There are no goals set for various divisions of a company.
3. Instead of focusing on parent businesses, company has gone for unwanted
diversification.
4. The resource allocation to various divisions from head quarter was centralised, totally
controlled by head quarter.
5. The project execution was not broken down into various phases so as to achieve the
on time project completion.
6. In case of deviation from a work breakdown structure, there was no instant project
control and feedback mechanism.
7. The decision to enter any new business was taken without considering the business
environment variables.
Mr. Rao submitted this report to Mr. Varun for further decisions and actions.
Questions
1. Review various strategies followed by Imperial with proper justification.
2. Which, according to you, were major reasons for the problems faced by
Imperial?
3. If you were in the place of Mr. Varun, what actions will you take followed by
analysis submitted by Mr. Rao?
