Case Compendium for Consulting Interview Question - Growth Strategy for Construction Company

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Case in Point: Complete Case Interview Preparation - Growth Strategy Interview Question


Growth Strategy for Construction Company


Interviewer: Our client is a road construction company. They have excessive cash, and they want to invest it. Please devise a strategy for the same. 

 

Priyanka: I would like to ask a few clarifying questions to understand the client better. 
Interviewer: Sure. 
 

Priyanka: Which geography is the client operating? What kind of projects is the client working on? 
Interviewer: The client works on government projects and is operating in Bangalore. 

 
Priyanka:  How is the client able to generate excessive cash? I am assuming that the client is making good profits through some efficiency – process, technology etc. 

Interviewer: That’s right. The client has identified certain process efficiency which allows it to make more profits than its competitors. 
 

Priyanka: That’s great. Now I would like to look at the different ways in which our client can use this excessive cash. 

  1. Backward integration
  2. Forward integration
  3. Expansion in similar industries
  4. Expansion in different/new industries
  5. Expansion in new geographic areas
  6. Other long-term investments like R&D, Equity markets etc.


Interviewer:  This looks like a comprehensive list. Let's explore each one of them. 

 

Priyanka:  

First, while considering forward or backward integration it is important to understand what part of the value chain the client is operating in. 

Backward integration can be possible for the client by directly investing in companies that provide raw materials and equipment for construction. This will enable the client to save costs. 

Forward integration does not make much sense as the client is at the customer end of the value chain. 

 

Interviewer: Ok, what about expanding to similar industries? 

Priyanka:  Since the client has expertise in the construction domain, it can think of industries which require heavy digging-related work. Some of the industries that can be appropriate are – real estate, mining, metro line construction etc. 

 

Interviewer:  The client wants you to evaluate metro line construction. 

Priyanka: Yes, that seems like a great opportunity. A few factors that I can think of are: 

  • The government is interested in expanding the metro to cover the entire Bangalore. Since our client is currently operating in Bangalore and has already worked on Government projects, it can leverage this opportunity.  

  • As the Indian government is also planning to scale the metro in other Tier-2 cities, our client can get those contracts as well. 

  • The client can leverage their existing capabilities and deliver efficiencies leading to cost savings. 

 
Interviewer: Ok can you think of some downsides? 

Priyanka: Yes, few reasons why the client might not want to invest here: 

  • Low return on investment 

  • Policy & legal barriers 

  • Delayed timelines due to Covid-19 

 

Interviewer: Ok that would be all. It was a great discussion. Thank you.


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