Investment Strategy to Adopt in the Brighton Office - Essay Example

1. Although the repairs and maintenance sector has not grown as much as the new activity sector in recent years (Key 2003), the Brighton office should invest in this sector, as this market is a fragmented one and there is demand for it in the Brighton area. For the same reason, the Brighton office should expand in design and build. Moreover, expansion in this area does not require additional resources. With technology becoming more sophisticated and projects increasingly complex, the demand for project management should increase, hence justifying the expansion in this area. Also, expansion in the affordable rural housing sector is justified by the low supply in this sector. The difficulty in obtaining the necessary land and approval only makes the barrier to entry higher making this sector an attractive one. The outlook for the shopfitting market is bleak and is expected to pick up only in the medium and long term, amidst poor consumer sentiments (AMA Research 2005). However, moderate amount of investment is justified by the patronage of a regular client. Expansion in the speculative development market is justified by the low market supply (CPAT 2004). However, this segment is risky and therefore only moderate amount of investment is justified. The three tables below show the three feasible programmes, (1) expand shopfitting and forego speculative development, (2) expand speculative development and forego shopfitting, and (3) moderate amount of investment in both shopfitting and speculative development. As discussed above, the third programme of moderate amount of investment in both shopfitting and speculative development is proposed. Table 1.1 Expand Shopfitting and Forego Speculative Development 2006 2007 2008 2009 2010 2011 Current Business Turnover 5,000,000 5,250,000 5,512,500 5,788,125 6,077,531 6,381,408 Profit 425,000 446,250 468,563 491,991 516,590 542,420 Domestic Repairs and Maintenance Turnover 350,000 350,000 350,000 350,000 350,000 Profit - 61,250 61,250 61,250 61,250 61,250 Shopfitting Turnover 400,000 831,609 831,609 831,609 831,609 Profit 60,000 166,322 166,322 166,322 166,322 Design and Build Turnover 840,000 1,440,000 1,440,000 1,440,000 1,440,000 1,440,000 Profit 100,800 172,800 172,800 172,800 172,800 172,800 Project Management Turnover 350,000 420,000 504,000 Profit 70,000 89,250 113,400 Affordable Rural Housing Turnover 240,000 600,000 600,000 600,000 Profit 24,000 72,000 72,000 72,000 Speculative Developments Turnover Profit - - - - - - Total Turnover 5,840,000 7,440,000 8,374,109 9,359,734 9,719,140 10,107,017 Profit 525,800 740,300 892,934 1,034,362 1,078,212 1,128,191 Turnover Per Annum in the 5 Years Beyond 2006: 9,000,000 Table 1.2 Expand Speculative Development and Forego Shopfitting 2006 2007 2008 2009 2010 2011 Current Business Turnover 5,000,000 5,250,000 5,512,500 5,788,125 6,077,531 6,381,408 Profit 425,000 446,250 468,563 491,991 516,590 542,420 Domestic Repairs and Maintenance Turnover 350,000 350,000 350,000 350,000 350,000 Profit - 61,250 61,250 61,250 61,250 61,250 Shopfitting Turnover 400,000 Profit 60,000 - - - - Design and Build Turnover 840,000 1,440,000 1,440,000 1,440,000 1,440,000 1,440,000 Profit 100,800 172,800 172,800 172,800 172,800 172,800 Project Management Turnover 350,000 420,000 504,000 Profit 70,000 89,250 113,400 Affordable Rural Housing Turnover 240,000 600,000 600,000 600,000 Profit 24,000 72,000 72,000 72,000 Speculative Developments Turnover 665,288 665,288 665,288 665,288 665,288 Profit - 144,146 144,146 144,146 144,146 144,146 Total Turnover 5,840,000 8,105,288 8,207,788 9,193,413 9,552,819 9,940,696 Profit 525,800 884,446 870,758 1,012,186 1,056,036 1,106,015 Turnover Per Annum in the 5 Years Beyond 2006: 9,000,001 Table 1.3 Moderate Amount of Investment in Both Shopfitting and Speculative Development 2006 2007 2008 2009 2010 2011 Current Business Turnover 5,000,000 5,250,000 5,512,500 5,788,125 6,077,531 6,381,408 Profit 425,000 446,250 468,563 491,991 516,590 542,420 Domestic Repairs and Maintenance Turnover 350,000 350,000 350,000 350,000 350,000 Profit - 61,250 61,250 61,250 61,250 61,250 Shopfitting Turnover 400,000 500,000 500,000 500,000 500,000 Profit 60,000 100,000 100,000 100,000 100,000 Design and Build Turnover 840,000 1,440,000 1,440,000 1,440,000 1,440,000 1,440,000 Profit 100,800 172,800 172,800 172,800 172,800 172,800 Project Management Turnover 350,000 420,000 504,000 Profit 70,000 89,250 113,400 Affordable Rural Housing Turnover 240,000 600,000 600,000 600,000 Profit 24,000 72,000 72,000 72,000 Speculative Developments Turnover 331,609 331,609 331,609 331,609 Profit - - 71,849 71,849 71,849 71,849 Total Turnover 5,840,000 7,440,000 8,374,109 9,359,734 9,719,140 10,107,017 Profit 525,800 740,300 898,461 1,039,889 1,083,739 1,133,718 Turnover Per Annum in the 5 Years Beyond 2006: 9,000,000 2. Table 2 Effect of an Annual Growth in the Contracting Work of 10% 2006 2007 2008 2009 2010 2011 Current Business Turnover 5,000,000 5,500,000 6,050,000 6,655,000 7,320,500 8,052,550 Profit 425,000 467,500 514,250 565,675 622,243 684,467 Domestic Repairs and Maintenance Turnover 350,000 350,000 350,000 350,000 350,000 Profit - 61,250 61,250 61,250 61,250 61,250 Shopfitting Turnover 400,000 500,000 500,000 500,000 500,000 Profit 60,000 100,000 100,000 100,000 100,000 Design and Build Turnover 840,000 1,440,000 1,440,000 1,440,000 1,440,000 1,440,000 Profit 100,800 172,800 172,800 172,800 172,800 172,800 Project Management Turnover 350,000 420,000 504,000 Profit 70,000 89,250 113,400 Affordable Rural Housing Turnover 240,000 600,000 600,000 600,000 Profit 24,000 72,000 72,000 72,000 Speculative Developments Turnover 331,609 331,609 331,609 331,609 Profit - - 71,849 71,849 71,849 71,849 Total Turnover 5,840,000 7,690,000 8,911,609 10,226,609 10,962,109 11,778,159 Profit 525,800 761,550 944,149 1,113,574 1,189,391 1,275,765 Turnover Per Annum in the 5 Years Beyond 2006: 9,913,697 3. The marketing strategy of product, price, place, and promotion will be discussed. PRODUCT: Product mix has been discussed previously as the earlier section has identified the most lucrative opportunities that the company can take advantage of. This paper recommends that the company infuse moderate investments in shopfitting and speculative development in order to maximize turnover. Thus, the company should focus on enhancing its previous products and services as well as well as the two business segments to support the chosen programme. The company should be able to make a name for itself by strengthening its position in the market. In this regard, the company will still pursue its provision of its current business lines which include design and build, project management, domestic repairs and maintenance, and affordable housing. However, moderate investments in shopfitting and speculative developments will also be undertaken. The over-all marketing strategy to be utilized by the company will be a cost leadership strategy where it will offer quality housing at lower price. In order to support the marketing strategy, Brighton office will offer to design and build houses and apartments to companies which provide these services. Quality in terms of design and infrastructure will be supported by an intensive research and development effort in order to find materials which cut cost. The Brighton office will tap the healthcare, education and infrastructure industries to take advantage of the growing demand in these sectors. PRICE: The price of domestic repairs and maintenance and speculative development could be increased due to shortage of supply (CPAT 2004 and Keynote 2003). Demand for shopfitting and affordable rural housing is price elastic, as it is a necessity rather than a luxury. Therefore, to stimulate demand to hit the target of 500,000 p.a., price should be reduced. The price for affordable rural housing should also be reduced following the same line of reasoning. The price for design and build could be increased due to the strong level of demand. The price for project management could be increased in the backdrop of a bright outlook for this sector. To pursue the cost leadership strategy, pricing will be based on Brighton's competitors. Ensuring cost leadership will mean pricing lower than the prices charged by its competitors. Lower prices will entail adjusting the company's cost structures in order to maintain and remain the company's profitability. This will ask for measures which will significantly minimize cost without sacrificing product quality. PLACE: The Brighton office should target the Brighton market as preferences for design vary in different cities. However, expansion will entail opening up of new offices which will take into account the different preferences of each locality catered to. The Brighton office should look into areas with the same needs and concentrate on servicing these. It can also tap profitable niches which are not currently serviced. As promotion strategies which can reach further into more markets are employed, it is also expected that Brighton office will be receiving more orders from customers other than those in the Brighton area. The internet technology which will be employed in the promotion of Brighton's products and services will spur demand from customers as geographical limitations are bridged by the new technology. Brighton's new investments in shopfitting and speculative development would be geared in taking advantage of profitable business opportunities in these new markets. PROMOTION: Promotional tools are essential in creating and maintaining a good reputation for the company. Print ads can be utilized to market the company's products and services to customers. Brighton will intensify its marketing efforts to further reach into the Brighton area through the use of billboards, signboards, and publications which circulate in the locality. Brighton office should also seek into utilizing the latest technology such as the internet to reach out to its customers. The internet technology allows the office to reach out into a larger customer base which can be profitable for the business. Brighton office can create its own user-friendly website where customers can have a glimpse of the company's products and services and get quotes on its offerings. Latest designs and trends in the construction sector can also be posted in the website to further inform the customers of the company's advances. Lastly, the successful marketing of affordable rural housing should be continued to increase demand up to a level to achieve economies of scale. The Brighton office can also increase promotion in shopfitting to make its demand inelastic and less dependent on consumer spending through advertisement. References AMA Research 2005, The Shop Fitting Market Report UK 2005. Retrieved January 6, 2006, from http://www.amaresearch.co.uk/Shopfitting05s.html CPAT 2004, City Office Market: Digest of Key Agents' Assessments Fourth Quarter 2004. Retrieved January 6, 2006, from http://72.14.203.104/searchq=cache:hkg01WS8XqIJ:www.cityoflondon.gov.uk/NR/rdonlyres/7A1F14A1-1C2F-4108-9EE8-36A635034D1B/0/BC_Q4_04_report.pdf+uk+construction+speculative+development+outlook&hl=en&start=9 Eccles, T, Sayce, S & Smith, J 1999, Property and Construction Economics, International Thomson Business Press, London. Keynote 2003, The UK Building Contracting Market 2003: a UK Market Briefing. Retrieved January 6, 2006, from http://66.102.7.104/searchq=cache:7atXMayTlRYJ:www.biz-lib.com/ZKY80149.html+construction+repair+maintenance+outlook+united+kingdom&hl=en&start=11 Reshaping for Growth - Proposed Disposal of AMEC SPIE 2005. Retrieved January 6, 2006 from http://72.14.203.104/searchq=cache:3ohPL1Mas4IJ:www.amec.com/uploadfiles/AMEC%2520Reshaping%2520for%2520growth.pdf+uk+construction+design+and+build+outlook&hl=en&start=6 Read More