Environmental Impact on Retail Estate Business

What promotional strategies can be undertaken when environmental factors affect real estate business? Case study of “Magical Homes in London and Dubai”

ABSTRACT

Real estate business is one of biggest market of the business world, contained the largest surplus money of the business. The history of the real estate business is very strange and unpredictable. No doubt is slow moving industry with respect to time but it carries a lot. Past experiences shows that property investment was the first and safest priority in all over the world for long term investments and profit making business. Where the property investors has seen the huge profits there was also a slumps in the property market which made the real estate business an anonymous business. There were number of environmental factors behinds the uncertainty of the real estate business which influenced in the shape of recession, natural disasters, economic condition, political instability and some time in the shape of sports event like Olympics hit the real estate market positively and negatively.

On time decisions and effective management can make things easier. Promotion plans and strategies can reduced the impact of environmental factors on the real estate business. This study was about learnt the past experiences and to find out the impact of new environmental factor and their influenced on the real estate market. The aims of the study was to learnt the behaviour of the environmental factors in the modern age with respect of politically, economically, sociologically, technologically and legally. Even in the modern world an other emerging factor was the hosting of sports events like Olympics and worst factor in the history was the recession which influenced the real estate market in very unexpected manners.

The objectives of the study was to study the promotional plans and strategies which could be the best deal to reduced the impact of such environmental factors and to enhance the believe of the investors and builder to come forward and join the world leading business for huge profits and gaining. The on time decisions and the suggested strategy can raise the investment in the real estate business. The conclusion and recommendation can explain the objectivity of the study in a comprehensive manner.

Chapter one

1 Introduction

Real estate property business has a very interesting history of its own. It is a very uncertain and unpredictable market and because of its strangeness, this international business market is very charming for investors and entrepreneurs. The investments in this market usually much higher than expected therefore a huge surplus of money is still lying in this business market. Despite of recent terrible crash of real estate business, still got a large investment to spend.

People visiting around the world for peace and looking for luxury living at minimum cost or affordable cost, So customers and investors need to know the ups and downs of the market in the mirror of past, present and future, no doubt its not perfectly doable but at least the research like this can make the investors wiser and predictable and they can think either their investments are in right direction or they going to make a dumb decision. There are number of factors which influence the real estate market directly and indirectly. This research would be the comprehensive discussion of these environmental factors like location, type of land, weather, culture, languages and legal property laws of that particular state. This study would be a revolution in the understanding of real estate property business.

Affordable plans, promotions and advertisement can help to guide the investors in the right direction. In today’s real estate market every investor is looking for a competitive price to gain a profit as well as the service provider company should be the responsible for the successful delivery of the project, after sales support services, dedicated advantages comes in houses, arrangement of resale of the property, arrangement of rental services and all other strategies which designed to help the investor in order to maximise the return on investments. So this kind of strategies can be undertaken in order to gain trust of investors.

1.1 Background of the study

The current situation of real estate property business is very important after a terrible recession (2008-2009) in all over the world. The economic condition of the world developed countries is poor and struggling to get better environment for investments. This situation creates a compotation between the land giants but here the situation is different as we saw, State of Emirates getting better and have a sound position in terms of real estate property business infect Dubai got the attraction of the world investors and entrepreneurs’ because its past planning and attention in this market.

Free hold property law of Emirates in 2003 has changed from its present condition and they are changing the map of the world in the shape of luxurious living, large resorts of islands, desserts villas, world tallest buildings, under water hotel and many more attractions made real estate property business in ‘Dubai’ a great success story.

On the other hand in London situation has changed. After a terrible recession of (2008-2009) which had a worst impact on United Kingdom than European Union .UK is a huge economy of the world and has the opportunity to lead the world. The real estate property business in this country had faced the worst ever condition but now it is getting better day by day and it is going towards the peak point again. UK got the opportunity to host the Olympics 2012 in London. Olympics 2012 such a huge project with operating cost of £580 millions and it could be increase than the expected cost.

Comparison of real estate market of emerging city Dubai and developed country UK has raised many questions in the mind of investors, as time to time both countries has hit by the environmental factors like economic factors, political factors, social factors, cultural and legal factor. The uncertain situation of real estate market has created an economical crisis, because the financial institutions became tougher, the banks became stricter and this situation has affected the potential investors.

In this situation real estate companies and the investors needs to adopt the attractive and affordable promotion plans that can develop the interest of investors and buyers. Theses plans and strategies can help to reduce the impact of environmental factors on the business of real estate market.

1.2 Research Background

Jones, Lang, Lassalle entitled has given a report called ‘Reaching Beyond the Gold: The Impact of the Olympics on Real Estate Markets’ examines the impact of staging the Olympics on recent host cities and looks ahead to 2012.It shows that sports event like this has an impact not only on the real estate property business but also on the every institutions of the country. Past experiences shows a positive impact on the property like the prices of property in Sydney is still rising and even the prises are 50% higher than before. So the major impact of events like Olympics is on real estate property business which could be helpful to improve the prices of property after recession.

London and Dubai, both of the cities have got their own entity in the market of real estate property business. Past experiences showed that the people of the urban areas have been moving towards rural areas and there were a number of reasons behind this migration. Even in last decade people like to buy or rent their properties in countries like Dubai. In case of city like London the situation will change because of the environmental factor has changed the economic, political, social and legal conditions of the country. UK has improved economically in last few months and the real estate market getting better especially in London and investors has risen dramatically since recession over and being the host city of Olympics.

1.3 Organisation Background

This study has a case study of “Magical homes Dubai”, is a London based company, who dealing with the investors from all around the world, they offering them advice in off-plan, resale, renting or buying property. They are offering their services in UAE and especially in Dubai for buying, selling, renting, reselling of houses, apartment, offices, villas and commercial spaces.

‘Magical homes Dubai’ provided services to the customers from last ten years, is an expert in providing investment property in UAE and London. In addition providing investors with exclusive and the uniqueness in providing highly sought after property option with the best customer service is the core operation.

1.4 Rationale for the chosen topic

The main reason of the topic to be chosen that the demand of the profession and the scope of profession are very high despite of bad turn’s real estate property business has a vast field of business. Living of people has changed completely and its need to change further in future which opens the new horizons in real estate property business. Infect both the developed and under developed countries have a huge market in real estate business and its growing day by day with passage of increase in population of the world, in other words shelter is the basic need of life and its never gone to end. So it’s a profession of life and it has a wide scope in international business.

Currently if take a look on trends and developments of any country then its easy to say that the real estate property business plays a vital rule in assessment of the country’s economic condition. The real estate property business depends on different environmental factors which are important to study and need to have a good knowledge about so the investment needs to be invest in the right place, for this purpose of knowing this study could be a mile stone. This study would be helpful in the decision making and to find out the save investment plan on the international level.

Although, Real estate property business has effected by different environmental factors directly and indirectly but critical analysis of these environmental factors in the light of past and present can make the decision making quite easier for the future prediction. Comparison of big markets like London and Dubai can make the job easier for the investors and entrepreneurs to find out the right choice around the world.

1.5 Statement of the problem

World become a global market, any company can make strategy for its local market and the strategy to hit the international market but in this case there could be various environmental factors involved which influence the business either domestic level or international level. Theses environmental factors could be economical, political, social, cultural and legal factors. This study can help to understand the emerging problems of the real estate property business market. The population of any country shows the appreciation of the people and the development in the real estate property business show the growing power. The population of London was more than 8 million and it’s expected to be rise in the near future. After the recovery of economic crises the real estate property business has grown up and prices of the market is getting better and there will a positive chances of incoming investment for the near future because of the Olympics 2012. On the other hand Dubai has increasing population of 1.5 million which is expected to exceed 1.9 million in 2010. With the increase in population has directly effect the demand of property so the study can guide the investors and the financial institutions that which strategies could be helpful for new plans and promotions.

1.6 Research aims and objectives

This study contains a couple of aims and objectives but theses points cover a comprehensive study of knowledge which can provide a handsome idea to the investors and the entrepreneurs around the world.

· To examine the investors behaviour when environmental factors affect the development in the real estate sector.

* To analyse the impact of environmental factors on the real estate business internally and externally

* To find out the new strategies which could be helpful to reduce the negative influence of environmental factors

* To explore the promotional strategies that can be undertaken to help the real estate companies to overcome the crisis

· To determine the new promotional strategies that can be attractive and feasible for the investors internationally

The aims and objectives of the study is dame clear as it represents the importance and significance of the study. Real estate property business covers a big surplus of the business and it need to be study in terms of save and profit making business. So facts and s of this market are very uncertain and factors involved in the uncertainty of the market need to be study. These factors could be economic, geographical, cultural, demographical, legal and political. So the economic factor is very important in the real estate property market, it directly influence the price of the property, if the economic condition of that particular is not that well then the prices of the property could be lower than the expected prices but most of that type case the demand goes higher than higher but the supply of the property goes down and down.

The political factor is the most affective factor in environmental factors, as the political condition of any country or state has a direct impact on the economic condition, so the more stability condition of the country leads the country towards the most stable place.

The geographical factor is also an important factor in the real estate property market as it has direct impact on it, as the location of the property lies in the developed country then the prices and demand of that particular property goes high, and if the geographically it lies in the under developed country then the demand and prices goes down.

The factor of the culture has a impact on the real estate property business market, as the culture is the representative of any population if the population have a culture of luxurious life style then the market of the real estate property business will be higher but if it prevail in lower standard living then the real estate property business growth will be lower.

Demographical factor is very important factor of the real estate property business market because it has a direct influence with the real estate property business market like the first step of the building of a new housing unit is to commission the demographical study of that particular area, which shows the current population, density and the growth of the population, the age distribution of the population, the average size of the household, the race of the population, the sex of the population and the local market of the population, so demographic factor has its own importance.

The factor like legal condition of that particular area plays a very important rule, if the legal condition of the state is worthy, provides facilities to the both buyers and sellers then it can create a big market and can attract the investors but if the legal condition is not that flexible then the investors can never be interested in such type of market.

The seasonal factor has a very important place in the history of the real estate business market and it can change the destiny of the nation, as seen in the past that the seasonal events like Olympics had a positive effect on the real estate business market. The objectives of the studies are very clear which lead the study toward desirable results.

This study basically provides the feasibility of the real estate property market in the new era of world. It has also conducted to find out the potential of the real estate property market either it’s a worthy business of market or dumb way of caring a business.

This research will provides a brief but a comprehensive outline and relative concerns of the real estate property business market, which includes the brief knowledge of the market sector that how it can work? The pros and cons of the real estate property market, how the demand can be show?, how the property did suit the requirement of the investor?, how the offer can be made?, how to negotiate with the seller?, how the deal can be finalize the deal?, how to meet the legal laws of that particular part of the world?, how to make sure that the property is free hold or lease property?, how the survey of the property can be done?, how the demand and supply can be calculated?, how the demand and supply effect the prices of the property? Etc. it also includes the information about the financial estimate of the property that is very helpful to understand the feasibility of any property matches with the need of investors. It also includes the knowledge of the human resource that is required for the investment and maintains of the property.

1.7 Structure of the dissertation

1.7.1 First chapter

is introduction about the research work, tell about the research topic, its background, history, importance, aims and objective of the study, statement of the problem, scope of the study and then the structure of the study that how the reader can go through the study and find the guide for next study.

1.7.2 Second chapter

This chapter was the literature review of the study, which gives the brief but comprehensive guide of the study that has a complete knowledge about the research that was done in respect of the topic chosen.

1.7.3 Third chapter

This chapter is regarding the research methodology used in this study and has followed the recommended ‘harwared style of referencing’ and research process and eventually select the method of the research used to get the primary data and processed the secondary data.

1.7.4 Fourth chapter

This chapter was about the outcomes and finding knowledge of the research study made, which gave a comprehensive idea of the solution of the problem.

1.7.5 Fifth Chapter

This chapter was about the conclusion and recommendation of the study. The conclusion of the study was about the guideline for problem’s solution and some suggestions for the company or any other institution having same kind of difficulties and the recommend the way for further studies.

Chapter Two

2 Literature Review

In previous chapter of introduction presented the basic theme of this study that what has been discussed in the rest of the study. It showed the main aims and objectives and what research question have discussed to find the objectives of the study. In this chapter of literature review, a strong formation of knowledge and the efforts made in this study or the related study will be discussed that leads towards the finding and conclusion of the research work.

Promotional strategies can be undertaken when environmental factors affect the real estate business and it is the phenomenon of every business that promotion plans and strategies like market pull and product push strategies could be helpful to make good business strategies accordingly.

* A process can be a push operates as long as there all the goods or services to be processed, a system is said to be operate push if all its stages are push.

* A process can be operate pull if it is dictated to work or remain idle because of the feedback from downstream. So the system is called pull operates if all the stages are pull. (Brassington and Pettitt, 2007).

Push and pull strategy

(Brassington and Pettitt, 2007)

PUSH PULL

2.1 PESTLE Analysis of the real estate business

2.1.1 Introduction

While analysing the factors affecting the real estate industry, it is vital to over look the factors that in one way or another affect the number of important variables that have there influence on the specific business or organisations supply and demand and its cost (Katter and Schlesinger, 1991; Johnson and Scholes, 1993). The radical ongoing recession in the entire business world brings change in the society and customers behaviour towards their purchasing power and on real estate has its wide spread affect. (Tsiakkiros, 2002) Number factors been catalogues’ have possible issues addressed in the recent days which directly or indirectly affect the industry. PEST analysis is one of them which categories environmental influence as political, economic, social and technological forces. In recent studies two additional factors of environmental and legal added to make it PESTLE analysis. Analysis and impact of these factors will be examined and to observe their affect on the entire industry later the findings will be used to make the contingency plans against the threats to the business strategy and its growth plans (Byars, 1991; Copper, 2000).

According to Kotler(1998) PEST analysis is very influential tool for making business strategies for making growth and to understand the reasons for decline , positioning the product in the market, enhancing the product offer and its promotions, seeking the potential market and direction for operation. PEST is usually applied by companies for reviewing the business direction, and marketing proposition. Real estate business enhance its fortune in the modern world by this influential tool of PEST for making strategic planning , business and product development, and also for affective research of the market. PEST also ensures to the businesses that their performance in the market is aligned in positive direction while having the powerful forces of change which affect the business environment (Porter, 1985). PEST also helpful for the businesses which are which are new in the market operations in a very new market or country. Concluding the basic concept of PEST, it helps to effectively change to the realities of the new environment.

Main aspects of PEST analysis includes:

2.1.2 Political

Government policies which include tax policy, employment laws, trade restrictions, reforms, tariffs and political stability influence many other environmental factors which can affect the organisations performance. Policies like European countries join the single European currency or remain outside. There are many other aspects in which government policies will affect the organisation and the country’s economic situation a as a whole as they provide opportunities and threats. Where capital markets responsible for determining the for the alternatives for funding the organisations and business and they are under control of the governments policies. Even in UK Bank of England, which also influenced by the government policies like rate of interest charged for the loans some times determined by the government. Thompson (2002), refers capital markets will be more buoyant when government spending increase the money supply. Company performance according to the shareholders expectations, their decisions to sell the companies shares and willingness for providing more equity will also be affected by the government policies. Labour market which represents the national and regional availability of specific skills which all influenced by the government and other regional agencies. The power of trade unions and inflation which influenced on labour cost all affect the business environment in one way or other.

2.1.3 Economical

The economic condition which affects every business that how much its easy to flourish the business in easy economic conditions and what difficulties a business can face during the recession period of the economy . Economic conditions affect the success and profitability of the business at any time as it affects the capital availability, cost and product demand (Thompson, 2002). The timing factor for the investment also influenced by the economic conditions. When the economy as a whole or certain part of the economy sectors growing demand may exist for the product and services which are not in demand in economic recession circumstances. Recession and downturn situation in the economy is bad for most of the businesses but at the same time in these conditions some businesses prosper and avail some growth opportunities’ (Robinson and et al., 1978; Thompson, 2002).

Economic condition of the current era is also the worst one of its kind. Which resulted in the low demand for the housing and real estate and this can be judged from the declining trend in the UK and Dubai real estate businesses. Many large firms like Barrett’s homes in UK and Emaar stop there progress work on the ongoing projects and recent economic downturn in the Dubai World business is directly affected by Emaar company slump. Economic factor is the most important factoring the PEST analysis in the recent time.

2.1.4 Sociological

What is occurring socially in markets in which businesses operates , population growth rate , age groups , career attitude , emphasis on safety , global warming .Demand for fashion , taste and rapidly changing trends in the sociocultural environment both provide with threats and opportunities to the businesses (Thompson , 2002 ; Pearce and Robinson, 2005). Products production and promotion strategies affect to the change in the behaviour and liking and disliking of the customer. Changing behaviour of the customers affects the ways of routine production and forced the businesses to change the formal procedures of designing and producing the product. The demographic factor must be considered by the organisations while doing the overseas businesses as the products and services needs variations. The structure, age and the people working has vital important while bearing the demand and demand for the particular product and services.

2.1.5 Technological

Rapid changes in the technology has forced the companies to update there ways of doing the businesses to meet the demands and services of the customers. |technology in a way or other also benefited the organisations for cutting there cost by outsourcing etc. Various literatures in strategic management recognised technology (Capron and Glazer, 1987; Johnson and Scholes, 1993; Jan, 2002) for giving the competitive advantage to the organisation; technology is used for creating the model. Breakthrough in technology resulted in the invention of new industries which also poses the threat to the existing organisations in the market for its products and services , the affected firms must be alert themselves for coping with the new innovation threat from the new industries by enhancing the business techniques by adopting the new technology . New technology can provide a useful input and procedures for manufacturing the products and offering services. It all requires the well trained and skilled staff and there is a need for heavy funding.

2.2 SWOT Analysis of the real estate business

2.2.1 Introduction

Accessibility of resources and environmental opportunity is one thing and proper utilisation of these opportunities by the champion or the strategic leader is both different aspects of organisations efficiency. Evaluation of environment opportunities is very important by analysing and in direct relation to the strengths and weaknesses of the organisations resources and culture. The close relation between environment, values and resources results in the existence of real opportunities. Evaluating and analysing the organisations strengths and weaknesses in context to the environmental opportunities is generally known as SWOT analysis.

While studying strategic and marketing analysis history SWOT is considered to be a very important tool. Who actually explored and invent SWOT not known, but the text books in 1972 on strategy and marketing has some of its features. It advocates on the importance of SWOT in a way that, it is a tool to measure the fitness of the organisation‘s strategies and its environment and also used to suggest that the ways to defend the organisation against its weaknesses and threats (Adams, 2005). SWOT is criticised in recent period because of its simplicity as both the management and people at the academic level use and apply this tool without considering the long term impact of their decisions using SWOT which normally useless. The SWOT concept has been conceived and achieved in that simple time when there were no theories like trade-offs of strategic theory not comes into existence (De Witt and Meyer, 1998)

2.2.2 Strengths

Internal and external customer s can only analyse and determine the strong aspects of an organisation. Strength is a, Resources of the firm which gives the competitive advantage in the market and cause to serve or expected to serve in the market.

In SWOT, strength of the organisation refers to the comparative advantage of the firm’s distinctive competence on the other firms in the marketplace. Strengths of the company arise from the resources edge of the organisation available to the firm from other organisation.

2.2.3 Weaknesses

The firm’s weaknesses also not determined from organisations point of view but again from customers view point. Usually it is quite difficult for the firms to admit and acknowledge its mistakes and shortcomings but as far as the business ethics are

considered, they must admit their weaknesses and work for its improvement. A weakness of a firm is a,

“Limitation or deficiency in one or more resources or competencies relative to competitors that impedes a firm’s effective performance”

* http://4.bp.blogspot.com/_h-ozPPN71BY/Sqd0HAS-MKI/AAAAAAAAAas/wlb15zL5SfM/s400/swot-analysis-image.png 25/12/09

2.2.4 Opportunities

Organisations always try to continue to grow their business and opportunity is another major factor of SWOT which enables organisations to analyse the available opportunities in the marketplace to grow. Opportunities refer to the adaptation and use of new technology in the market, flexible government to encourage investment and new businesses, demographic and social patterns. Having an opportunity in the organisations environment is a big situation. Critical analysis of prior overlooked market segments, adaptation in competitive atmosphere, changes in technology and enhanced relationship between buyers or supplier relationship all refers to the strong opportunity for the firm’s growth.

2.2.5 Threats

No one consider the threats what any business can face at any point of time during the course of their business , no matter with fact that they are not controllable , like, recent economic recession in the world , for which the world economy as a whole was not prepared . Here, it is very necessary for the strategic management of the organisation to be prepared themselves for the threats even in the peak time of their businesses. Threat considered being the major and unfavourable condition in the business life. Threats can also become the key factor in the firm’s current and future position.

Threats refers to the easy entrance of the competitors in the market, slow grow rate , higher bargaining power of buyer or suppliers is another threat for the business and revised government regulations.(Adam, 2005)

2.3 Promotional strategies

Every business needs to sell its product at an attractive price. For this reason the benefits of the products must be conveyed to the customers in a very smooth and easy way. In marketing, for addressing the benefits of the products to the customers directly, companies climb on the ladder of known as “promotion”. “Promotion is all about companies communicating with customers”. (Jobber, 2007)

Walkers the UK’s number one brand in grocery, which cover the lucrative market of over 37 percent. They are spending about £17m on the advertising. It was heard that there is a nutrition shortage in children and the growing num