Strategic plan for company based in UAE
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The report is talking about the UAE real estate sector with a benchmark to Government owned Nakheel as an example. The idea of the report is to analyze the complete market and then chose upon the right business level and functional level strategies to be used for a new start up company which I would be describing. The report starts with an external analysis of Industry life cycle and followed by competitive forces analysis which will talk about the five forces with in the Industry. This is followed by business level strategy description and functional level strategy matching the business level strategy and then the business model description will be given with its goals and values and finally project is completed with the idea on the competitive advantage constituents of the new company.
Part 2: External Analysis
Industry Life Cycle Model is used in order to analyze the affects the industry might face due to competitive forces in the industry and is found to have 5 different stages in its life cycle.
The five stages of the Industry are as follows-
Embryonic Stage- This is the stage when the industry just takes birth.
Growth Stage- This is the stage when a set of customers for a plat form for the industry to take off.
Shakeout stage- The stage of the industry growth when the demand for the industry offering is saturated and supply increases.
Maturity stage - This is the much advanced stage in which the market is much with enough projects and there is less growth happening in the market.
Decline stage - This is the final stage in the industry life cycle and here the growth becomes negative.
UAE Real Estate Industry life cycle-
From the above graph it is very much clear that UAE real estate industry is in the Shakeout stage of growth. The reason for this is clearly explained below-
Real Estate Industry in UAE started off with the initiative of Shaikh Sayed bin Maktoom and his son Rashid when they announced the Dubai Creek development project with funding from Kuwait of Euro 600,000
With the oil exploration in the Abu Dhabi the state earned USD 70 million in the year 1960 and thus investment in the real estate started to increase.
The industry was in embryonic stage till the 1990s
The industry went on a sky rocketing phase of growth stage in the year 2005 with an investment of AED 62.4 billion. Thus the output also increased to a massive AED 40 billion per year.
Finally with the crash of markets in the year 2008 and 2009, cash crunch many development projects were put on hold, people who had paid money by taking loans got stuck in the midst of nowhere. This is the stage the Industry is presently in the year 2010. The industry has high supply but no demand. Thus UAE Real Estate Industry is in Shake out of development.
Part 3- Use Michael Porter's "Competitive Forces" model
Porter's Five Forces Model
Porters five forces model is also referred to as the competitive forces model which is used for the purpose of understanding the opportunities and threats available in the Industry for the chosen example company as Nakheel.
The five forces are as below-
Force 1- Risk of Entry by Potential Competitors
Force 2- Industry Rivalry
Force 3- Bargaining Power of Buyers
Force 4- Bargaining Power of Suppliers
Force 5- Threat of Substitutes
The Real Estate Industry of UAE had been growing at a very high speed till the sudden slump in the year 2007 3rd quarter. There arrived a lot of competition in the market and it completely changed the face if the business and the pace at which the growth was taking place.
With the concept of bargaining power of suppliers going high the bargaining power of customers went high too. There were issuance of tighter tender bonds and as a result the companies had to reduce their sales force. Thus it required the companies to work up on its margin and play with it in order to survive in the business. There are internal competition as well external pressures with the external giants entering the market. Thus the company like Nakheel has to stay in business and they started reducing their head count and most of the companies started to outsource the work to sub contracting companies. This gave them an opportunity to wash their hands off by putting all the pressure on to the sub contractors and by just managing the projects with a helicopter view.
Talking about Nakheel in specific, it has two major competitors in the UAE domestic market and they are Emaar and DP World.
Thus the competition is very high which is considered to be a threat.
Nakheel is mainly and specially made by the UAE government in order to develop land-reclamation projects as it has done some property development as well. Some of the well known developments are the three Palm islands, The World, International City and Jumeirah Lake Towers.
The competitor Emaar is enough o be given only one credential of building the world's largest tower Burj Khalifa.
Where the other competitor Dubai Holding is been in to building some of the parts of Dubai in to cities such as Healthcare City, Media City, Internet City and amusement parks and so on
Bargaining power by Suppliers is moderate and cannot be categorized on to threat and nor opportunities, bargaining power of buyers is low as the demand always outstrips the supply in the market. Finally threat of substitutes is low and hence this can be considered as an opportunity for Nakheel.
Part 4: Business-Level Strategy
Porter's Generic level strategies have the following 4 types of strategies listed which is spread across the scope of the target market and the advantage the company is intending to gain from the particular market.
Strategy 1- Cost leadership strategy- A strategy used by a company in order by keeping the cost of manufacturing least and broad target market.
Strategy 2- Differentiation strategy- A strategy of offering unique products in to the market and concentrating on the brad segment if the market
Strategy 3- Focus Low cost strategy- This is a strategy used in order by offering the low cost products to a segment of small time segment only and being very much focused to that particular segment only.
Strategy 4- Focused differentiation strategy- This is a strategy which is been used with an offering of an unique product in to the small segment if the market only.
By considering the above, Nakheel is found to have opportunities with respect to bargaining power of buyers, and lower threat of substitutes, Nakheel is well known for its Cost Leadership business strategy in the UAE market. This can be well taken up by the company following up with the customers to stick to the company and its houses and development by offering the cost leadership strategy.
In order to reduce the threat zones of high industry competition, medium to high supplier power the company should mainly concentrate up on building the differentiation strategy. This will help the company to come up with some unique projects which it is doing in order for it to beat the competition and get the best cost from the suppliers.
Part 5: Functional-Level Strategies
Five distinct strategies for Nakheel to chose out of the Functional level strategy are-
The strategy matching the Low cost leadership and differentiation strategy of business level are well accompanies with the following functional level strategies-
The company should develop a unique set of employees from different countries which the company will have the pay lesser than what it would otherwise pay for an expensive staff and it should manage to get cheaper man power with a better quality.
The company should develop a unique infrastructure with respect to its image so that the customers should be in a position to find out the quality of the buildings developed by Nakheel just in comparison to its office building.
The company should also adapt to the best in class technology available in the market in order to get the right mix of differentiation and cost advantage by avoiding the manual error.
In terms of primary activity enhance its marketing and sales in terms of unique buildings it is planning to undertake
Finally the strategy will be the company should build a full time service centre which can be reachable by the customers any time which will give the company again a differentiation from the competitors.
Part 6: Internal analysis
For each of the distinct capabilities you identified previously, discuss whether a capability is rare and cannot be imitated in the short run. Ideally, you have to demonstrate that at least some of your capabilities are rare and cannot be easily imitated by competitors
What is THIS??
Developing unique employees will give a differentiation to the company in terms of having an internal strength to the company and this can be strength. This is a strategy which will take time for the competitors to imitate and get results as having the right set of employees is not always easier.
Developing a unique infrastructure is something which can be imitated by the competitors and in short run it required investment
Marketing and sales strategy of enhancing the brand image of the company in order to get the right brand image for the company in terms of differentiation, this is again not possible for the competitors to imitate in the short run
Finally the best in class technology and the service option is a strategy which is much different and is not easy to imitate in the short run.
Some of the strengths are as noted below-
Operating in a developed economy and oil rich country and set of customers who are always ready to invest on property
Political stability and
Tax free environment
Part 7: Business Model
I am planning to start a real estate development company which is in line with Nakheel and Emaar of Dubai or ALDAR, Mubadala of Abu Dhabi. . I would apply for government sponsorship in to the project through my internal sources. The company will aim at developing a complete site in to layout and develop villas in the same and have a cost leadership strategy of least cost provider in the market than any other competitor as most of the work will be done in relation with a Taiwan based company which will work as a sub contractor in the entire first project phase.
The business model will be initially based upon buying and developing already existing properties. These properties will be upgraded with some of the world class technology which is well with in the budget and should be made to look a real good place to live all the required amenities in it. This is done with an idea of differentiation strategy and the low cost will follow with the minimum pricing by developing the affordable housing segment.
Part 8: Mission, Vision, Values, and Goals
Mission of the company is to be the company which provides new value added real estate development opportunities which can develop mutual relationship with our business partners.
Vision of the company is to be the leading real estate developer of MENA region by the end of 2020.
Some of the main values upon which the company will work are-
Having a clear cut edge of innovation
Providing best customer service
Serve the clients with a professional attitude
Provide the best in class villas at the most affordable prices
Maintain value for money and low cost leadership in the market
Aim for customer delight and not just for satisfaction
Part 9: Conclusion
The intended company for operation with in the UAE real Estate Industry is to follow the path of Nakheel, a government development firm. But the unique and differentiated strategy which the company would be following is to have a low cost advantage by subcontracting the work to cheap Taiwan Company which will take up the maintenance contract as well. The company is expected to bring the most affordable housing to the market and is found to be having a sustainable competitive advantage as it is going to provide unique villas to the people in Dubai with lower cost of housing. Moreover the company will have government backing which is much a competitive advantage.
Part 10: References-
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