July 26, 2016 Building Value

Volume 11 | Issue 2

Investment in technology and people has propelled Mexican construction firm Sare to become one of the leading housing builders in Mexico. Paul Harris reports on how thecompany transformed from a family business to a prize-winning public company.

Mexican housing construction firm Sare has experienced dramatic change over the last 10 years as it transformed from a privately held family business into a publicly traded one that continues to grow.

This decade has seen the company go from strength to strength as it bounced back from the recession in the 1990s. In 2003 the company went public and listed on the Mexican Stock Exchange and was included for the first time in the IPC index in 2006. In 2005, it started two important partnerships with ANIDA, the real estate business of Spanish bank BBVA, and GMAC, the General Motors financial subsidiary in Mexico.

But arriving at this point has presented many challenges for the company created in 1967 by Dionisio Sanchez, the father of the current owner. From the beginning the company specialized in the construction of housing projects although it diversified early on into the construction of other types of projects, forming different businesses to cater to different market segments as it grew, such as middle class housing and office buildings to handle its increased client base.

The construction sector saw boom years between 1990 and 1995 followed by rapid deflation in the latter half of the decade after the Tequila financial crisis. “Thankfully we were prepared and we managed to not only survive but also to stay strong,” says director general Jorge Arturo Sanchez.

It was during this period that the company began to restructure itself. In 1997 it split into the housing and office building businesses and created a holding company to administer them and the other parts of the business. Dionisio Sanchez also stepped-down as general manager, handing over the reins of power to Jorge Arturo Sanchez as the company began the process of moving away from a family business to a publicly listed company.

“This was a tough and very complicated process as a lot of changes had to be made, not only in the structure of the business but in every process. The whole structure of the business needed changes. New positions were created and old ones removed in order to improve the organization chart,” he says.

GROWTH
The new institutionalized format for the business allowed the company to embark on an expansion phase into other regions of Mexico to grow and diversify its markets, which called for the creation of regional manager positions to decentralize the decision-making process.

The company remains headquartered in Mexico City but it has regional offices in 12 states, including three of the four regional capitals (Mexico, Puebla and Guadalajara) and an office staff of around 860 people, and over 4,500 construction workers, placing the firm within the top eight construction companies in Mexico.

The company says it is the market leader for the construction of houses in the US$50,000 to US$200,000 price range. It builds houses under its Galaxy brand; the medium-price bracket under its Privanza brand and the high end market under its Altitude brand. Additionally, its Marena brand represents accommodation for the tourist market.

The company has experienced 35 percent growth, from US$1.8 billion in sales in 2002 to US$5.0 billion in 2007, and with more to come due to a deficit of housing projects costing under US$50,000 in Mexico, that are normally financed with state funding. “We expect to participate in the construction of 800,000 of these houses each year and we believe that with current country conditions and trends we can grow at least 16 percent next year,” says Sanchez.

TECHNOLOGY
Use of technology has been key to control growth and harness the potential of the new company format. Through the implementation of a SAP technology platform, the company has changed and flattened its internal structure to speed up the decision-making process. “We started a technological platform under a project called ‘stand in line and run with SAP,’ which has helped us create a more horizontal internal structure. It has also helped us improve costs, stocks and timing to become a better company with tighter control of the business,” says Sanchez.

This also includes the development of closer relationships with key suppliers such as cement producer Cemex, and suppliers of steel, window glass and doors. “They are not just suppliers, they are a really important part of the business and a big part of the construction chain,” he says.

One of its key relationships is with the suppliers of heavy construction machinery that it rents rather than buys. “We have found that this is better for the business because we save a lot of money in this area,” says Sanchez.

Technology and a flatter organizational structure means the company is better placed to satisfy all of its customers’ needs and desires. Construction speed is highly competitive due to its pool of available labor (4,500 workers), efficient control of building costs, strict control of product and supply quality, and a focus on meeting delivery dates.

This commitment to quality and performance, which the firm attributes to its people (“we hire people that are not only fit for the job but the best for the job”) saw the company receive a special recognition prize at the 2006 National Housing Awards in the urban saturation category.

“We try to provide customerss a high standard and quality product, and to be the best,” he says.

Use of technology and decentralization has smoothed Sare’s transition from family owned to public company. “Our mission is to maintain a commitment to good service and obtain the best result in order to keep stockholders and clients happy,” he says.

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