Turn-key Business Model.
The concept of turn-key business model has been too long identified with a tactic within the project management realm. In construction and real estate development industries is widely used: it is aimed to outsource a service or finished product through a third party. The point is that this product is in turn composed of a number of disciplines, processes and raw materials.
The concept of turn-key business model has been too long identified with a tactic within the project management realm. In construction and real estate development industries is widely used: it is aimed to outsource a service or finished product through a third party. The point is that this product is in turn composed of a number of disciplines, processes and raw materials.
Using the concept of turn- key makes sense in some industries and in others less so. For a real estate developer in Mexico, a small or medium size firm, its core business is providing financial returns to its investors or business owners, so they can focus on buying land bank to develop their projects instead of focusing on construction & sales processes. From the point of view of their business model, doing so will only lead to problems and do not leave any real value to their business: providing a financial instrument acceptable to their owners.
In simple terms one can see it from different perspectives. If you are making a birthday party for your child age 7, would not you like to hire one person, even with a higher price to take care of absolutely everything?, ie from the room arrangement, through invitations, music, games and ending up with the cake. This would prevent you had to hire 3 or 4 different people to do everything individually and hardly would be coordinated among themselves.
Of course, this concept does not apply if your business is treated by customers as a commodity, ie the lowest selling price is usually what determines one company to get the largest market share. This is well know by companies like Wal Mart or Tesco as they have developed and negotiated the supply chain with all its suppliers so that their prices are always lower than competitors.
In Mexico, companies like Casas Geo, Homex or Ara have developed the same strategy and operational way as they not only buy the land but also build the housing projects & urbanization through qualified suppliers who provide them with even the construction materials of housing. The same, thanks to economies of scale, cause their final selling prices to be the lowest in the market.
In conclusion, although the concept of "turnkey" applies perfectly in small and medium businesses, where the operational complexity and the final price is not the key business, it is also true that there is a tendency for large companies to move this concept in its supplier development program.
The challenge looks rather a tricky one.
www.clarensyst.com.mx
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