Abhimanyu Kumar Singh MP15002

BOP Assignment - Prof S K Pani , XLRI XLRI BME 2015-18

1. Find out What CEMEX did after Patimonio hoy success after 2004.

The huge rate of success can be attributed to three important factors: group commitment, social capital,
and the penalty fee structure. Patrimonio Hoy has expanded beyond Mexico to Colombia, Nicaragua,
Costa Rica, and the Dominican Republic, and looks to expand to additional developing countries in the
coming years; this will necessitate an adaptation and update of the original model, which was tailored to
conditions specific to the Mexican low-income construction market.
CEMEX post 2004 Patrimonio hoy success is;
Gaining internal alignment on how to manage and grow the program
Increasing productivity of sales force
Expanding network of service centers
Developing new product offerings
Developing alliances with social and private sectors (Government and VivAh program)
CEMEX divided the market into areas comprising 100,000 people each, and established small managerial
cells in each area consisting of just one to four full-time staff members - typically a manager, an
engineer and an architect. It contracted promoters from the local community, mostly women, and paid
them a commission for attracting clients. Linking the commission to the customer's membership
ensured that promoters had an interest in ensuring long-term financial discipline of participants. The
Patrimonio Hoy return on investment is 34%. The normal building methods return on investment is
6.5%.
Progress since program started
201,000 families served
86 offices
105,000 new 10sqm rooms built 105,000 new 10sqm rooms built
$92 million in loans
Targeted reach in next 5 years
2 million families
1,600 offices
542,000 new 10sqm rooms built 542,000 new 10sqm rooms built
$470 million in loans
-Participants build houses, on average, three times faster and at a third of the average national cost
-Patrimonio Hoy creates jobs among local craftsmen, and through its sales force, 95% of which are
women, and half of whom had no prior work experience
- In 2005, a study found that than 99.2% of the $42 million in materials and loans provided by Cemex
had been paid for on time.
- The program now operates through more than 100 offices in Mexico and four other countries

2. With the existing model how did they manage?

With a previous saving of 20% of the materials needed for completing the construction project, credit is
granted without any requisites for the remaining 80% with an annual fixed interest rate of 15%. The
weekly instalment per family if can be made USD 13.50 instead of 11; significant profit can be made
considering future vulnerabilities of Competition and geographical expansion by managing
organisational structure, Managing costs and Managing Production. [Pls see figure 1].
USD 11.5 covers the cost of the materials and the remaining USD 2 cover the services including:

Individual technical assistance

 Abhimanyu Kumar Singh MP15002
BOP Assignment - Prof S K Pani , XLRI XLRI BME 2015-18

Fixed prices guaranteed for 70 weeks

One year of materials storage
Home delivery of materials packages
Improvement of public schools infrastructure
2 main income sources:
Services fee
Discounts from participating Discounts
Extra Profit can be used for contingencies and customer retention.

By improving life conditions through housing, Patrimonio Hoy supports a healthier development and
supports a healthier development and family integration.
CEMEX finances 80% of the cost of materials
Commits groups of 3 people in solidarity
Supplies the necessary materials Fixed prices during the project cycle Storage of materials

Figure 1
As-Is To-Be
Each Individual Each Individual
Payment 10 Payment 11.5
Membership fee 1.5 Disbursal after 2 Weeks Membership fee 2 Disbursal after 2 Weeks
Total 11.5 Total 13.5
Weeks 70 Total Collection 23 Weeks 70 Total Collection 27
Total 805 Cost of Material 43 Total 945 Cost of Material 50
Total membership fee 105 Total membership fee 140
Total Collection Total Collection of
Cost of Construction 483 of Material 0.5349 Cost of Construction 500 Material 0.5400
Distributor Margin 64.4 Distributor Margin 94.5
Profit 257.6 Profit 350.5
450 Clients(1
Promoter) 115920 450 Clients(1 Promoter)
157725
Salary 16305 Salary 20000
Office Cost 17750 Office Cost 20000
Net Profit 81865 Net Profit 117725

Note: All Values in US $

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