General Characteristics of the Public Housing in the U.S. Market - Term Paper Example

 Identify a firm which you are familiar with that has a global orientation – The William Sutton Housing Association I. Introduction The forms of the commercial development around the world are numerous. Their structure and their operation usually depend on the local rules and ethics whereas the international orders are also applied to a significant level. One of the most common forms of the international commercial activities is the export of services/ goods between the countries of the global market. Regarding the perspectives of such an effort (i.e. exporting services/ goods) it has been considered [4] that the benefits are very important. At a first level ‘there is the opportunity to increase sales and generate higher profits, particularly if all the fixed costs of the company are covered by domestic operations’. This assumption can be explained by the fact that ‘foreign markets offer diversification, thereby reducing the company's dependence on traditional markets (when one economy is struggling, another may be booming); this diversification also presents opportunities for growth in new directions, as well as new experiences that can translate into greater domestic competitiveness’. It should be noticed however that the specific activity can face significant challenges. More specifically ‘services are often intangible; creating awareness of one’s company and its services, establishing one’s credibility and demonstrating one’s competence outside of the home territory is critical’. A very important issue is also to demonstrate ‘a high level of commitment to foreign clients and building relationships; this demands time and effort, as well as willingness to research and respect differences in culture, language, and business practices’ [4]. Regarding the types of services that are exporting, it has been considered that the export of services is more preferable from that of goods. The reason for such an assumption can be found to the ‘extended’ content of the services sector. More specifically it has been considered [4] that ‘the benefits to exporting services include the potential for increased sales, higher profits, the ability to reduce dependence on the domestic markets, and access to new knowledge, experience, and enhanced competitiveness; moreover, the challenges to going global, however, include marketing invisibles (or a promise to perform), the high level and long term commitment needed, cultural differences, paperwork, and accessibility’. Current paper examines the potentials of William Sutton (a Housing Association) based in UK to entry a foreign market and specifically that of the U.S. Current structure of the company is presented in order to evaluate its strengths and weaknesses. A reference of the public housing sector in the U.S. has been considered as necessary whereas the examination of the relevant theory helps towards the achievement of an objective evaluation for the perspectives of such a commercial attempt. II. The Housing Associations – Definition and structure - The William Sutton case – current structure of the firm In order to achieve an integrate analysis of the issue involved a presentation of the relevant definitions is been considered as necessary. At a first level ‘Public housing’ or project homes [9] is ‘a form of housing tenure in which the property is owned by a government authority, which may be central or local; although the principles are common, the details of the arrangements differ between countries and so does the terminology’. Specifically for the United Kingdom, ‘Housing associations’ are [5] ‘independent not-for-profit bodies that provide low cost housing for people in housing need; any trading surplus is used to maintain existing homes and to help finance new ones; they are now the United Kingdom's major providers of new homes for rent, while many also run shared ownership schemes to help people who cannot afford to buy their own homes outright’. The main activities of Housing Associations (Keating, 2000, [5]) are focused on the provision of ‘a wide range of housing, some managing large estates of housing for families, while the smallest may perhaps manage a single scheme of housing for older people’. On the other hand in a number of countries, [8] ‘associations assume the role of the provider of inexpensive (frequently subsidized by the state) construction of apartments for citizens with average to lower incomes; in many counties, this is a traditional form (Germany), often defined as publicly beneficial housing associations (Austria)’. As a general assumption, it can be stated [8] that ‘housing associations are operating on the brink of profit/loss and they can generate benefit precisely through the provision of inexpensive housing; that is why we would prefer the housing associations to enjoy a suppression of certain market-imposed exceptions – in order to preserve the cooperative identity; there is no need for exceptions from the "one member equals one vote" rule clamored for by manufacturing, consumer and other cooperatives, which, in order to stay afloat on the market, must adopt certain rules meant for capital companies’ William Sutton Housing Association was founded [1] ‘in 1900 under the will of William Richard Sutton, a Victorian entrepreneur who left the bulk of his fortune to found a charitable trust for the provision of model low rented dwellings for the poor of London and other towns and populous places in England; on 5 January 2004, Tor Homes and Ridgehill Housing Association became subsidiaries of William Sutton Trust, joining Asian-led Aashyana Housing Association, already a subsidiary of the Group’. According to statistics published by the above organization ‘the new Group has 24,000 homes in management and an annual turnover of some £75 million with 900 employees, making it one of the top 10 housing groups in England; in April 2004 the homes and assets of William Sutton Trust (WST), the parent of the Group, were transferred to William Sutton Housing Association (WSHA) a charitable Industrial and Provident Society’. As of the general strategy of the firm, it has been stated that it is concentrated on the provision of ‘the best value for money affordable housing in any area in which it operates, and to integrate its housing into wider housing markets and the local community’. [1] III. The entrance of William Sutton Housing Association in the U.S. market IIIa. General Characteristics of the public housing in U.S. market In the United States and Canada [9], public housing is usually a ‘block of purpose-built housing operated by a government agency, often simply refered to as "projects"’ The history of the specific sector is formulated under the influence of a series of events and governmental decisions that seek to intervene in the private initiatives regarding the formulation and the operation of housing associations designed especially for the needs of the public. In this context [9] ‘in the nineteenth and early twentieth centuries, government involvement in housing for the poor was chiefly in the area of requiring new buildings to meet certain standards - like having airshafts - for decent livability; most housing communities were developed from the 1930s onward and initial public housing was largely slum regeneration, with no nationwide expansion of public housing; public housing was only built with the blessing of the local government, and projects were almost never built on suburban greenfields, but through regeneration of older neighborhoods; the destruction of tenements and eviction of their low-income residents consistently created problems in nearby neighborhoods with "soft" real estate markets’. As for the modern era [9], many of the above described projects have been ‘torn down, renovated or replaced after criticism that the concentration of poverty in economically depressed areas, inadequate management of the buildings, and government indifference have contributed to increased crime. U.S. public housing continues to have a reputation for violence, drug use, and prostitution, leading to the passage, in 1996, of a federal "one strike you're out" law, calling for the eviction of tenants convicted of crimes, especially drug-related; in reaction to the problems surrounding public housing, the US Congress passed legislation enacting the Section 8 Housing Program in 1974, which Richard Nixon signed into law, to encourage the private sector to construct affordable homes; this kind of housing assistance assists poor tenants by giving a monthly subsidy to their landlords’. IIIb. Corporate strategy for the entrance in a foreign market of a firm with only domestic experience A. Factors that have to be examined before entering a foreign market One of the most fundamental prerequisites in order to entry a foreign market is the thorough and detailed analysis of this market in accordance with the local and the international standards. This market analysis is usually taking place using methods and principles that are common around the world no matter of the geographical position of the foreign market or its cultural/ political or financial structure. The most important element that can lead to the success of the relevant factor is the recognition of the fact that the specific company (which in interested in entering the foreign market) will have to develop a ‘unique design based upon its specific goals and more importantly, its budget and existing capacity’. It has also [2] been noticed that ‘many business executives facing a decision about going global too often fail to understand one very basic fact: you can not do an analysis, if you have nothing to analyze; In some ways, deciding which markets to pursue is a very easy decision because those markets that are highly developed will almost always be preferable; the bulk of the analysis task is in gathering the information first and then understanding how this information is relevant to your company's specific goals and its circumstances’ In order for the manager of the company to decide its potentials and perspectives for an international commercial activity, there are a few issues that should be examined which could be summarized to the following ones [2]: 1. Size of the market. The issue under consideration is whether ‘the demand in a specific market for the offered service is large enough to act as an incentive to enter’. 2. The possible existence of barriers to entry. Such barriers could be the regulatory issues, the cost involved in the whole procedure as well as in the operation of the company in the foreign market, the accessibility for transport and the number of the available channels of distribution (in order to decide if the price of the goods/ services offered will be competitive). 3. The level of competition. In this context it should be examined ‘how many other companies sell similar products and with what amount of success and how skilled are local distributors in penetrating the market’ 4. The availability in other markets in short distances where the goods/ service could be also offered. It has been noticed however that ‘some markets are going to present thin profit margins, but compensate for this fact by being gateways to other local markets; this is also true of transport issues as well for landlocked markets’. 5. Product/service localization issues. In this context it has to be examined if the product or the service offered is ready for the market or it needs alterations in order to be ‘localized’. 6. Business infrastructure. One of the main issues that has to be examined before entering a foreign market is the volume and the quality of the business infrastructure available to ‘support sale and distribution of the product and/or services (port facilities, highways, access by air, the type and the quality of telephone service as well as of Internet access). 7. Local business customs. In this context, it has to be examined if there are ‘any local customs that could be perceived as a particular competitive advantage for the company’. 8. Political risk. While examining the political risk it is usually an issue of governmental stability as well as of governmental behaviour towards the foreigners (individuals, companies) that enter the country. 9. Banking and financial institutions. A very important issue included in foreign market analysis is the level and the quality of the financial support which is offered to the potential entrepreneurs. The fluctuations of the currency and the interest rates are also included in this area. It has also been noticed that [3] ‘in addition to government measures, private business practices can create market entry barriers; these practices include "vertical restraints" such as exclusive dealing relationships between firms, thereby forestalling possible sales by other firms; private and public measures may come in combinations that reinforce their market-restricting effects; although the combinations are not specifically border measures, it may be argued that in some cases they have been created with the intent to favour domestically-owned firms over foreign-owned or -controlled ones’ The existence of the above barriers can lead to a reduction of the ‘international contestability of the markets concerned; a market is contestable if barriers to entry are sufficiently low that incumbent firms must behave competitively to forestall entry by rival firms; among other things, pricing in a contestable market is competitive; in other words, prices are maintained at levels that would prevail if a very large number of sellers participated in the market’. In general, when deciding to enter a foreign market, a company has to examine the following issues [4]: a) the “export readiness” which refers to the company’s capacity for success in an export market; b) the resources available. In this context it is examined if the company has ‘sufficient internal capacity to handle extra demand, internally efficient systems to respond to customers quickly, culturally sensitive marketing skills and management support for export objectives’, c) the competitiveness. It has to be examined if the service offered is ‘unique and/or competitive in the type of market which is been targeted, if there are sophisticated market entry methods that the company uses while at the same time there should be conducted a ‘market research demonstrating the viability of your service abroad’. Another issue that has to be taken into account is the fact that ‘if a service firm decides to establish an office abroad, there will be a need for research over the local regulations about work permits, foreign corporate operations, profit repatriation, and much more’. Furthermore, it has been stated that [4] ‘understanding the cultural considerations for the market in which the company operates in is important in that managing an interpersonal interaction, and likely an ongoing relationship, appropriately is critical to customer satisfaction; exporters must be aware of, understand and be sensitive to social norms and how they influence the way business in conducted’. In this context, there will be paid particular attention to the following points: ‘a) the meaning of the company’s name, brand, logo, and slogans in the target market, b)religious practices and prohibitions, c) concepts of right and wrong, guilt, shame, d) ethical standards, e) personal greetings & introductions, f) business protocol, g) etiquette for hosting & gift giving, h) personal space and so on’ B. Methods of entering in a foreign market In order to enter a foreign market the potential exporters can use a variety of methods: • ‘Directly exporting in the target market • Directly exporting abroad either through remote delivery or through services supplied to clients in their markets • Forming partnerships with companies abroad • Gaining market experience by subcontracting to a local exporter • Working through contracts from organizations to gain exposure’ [4] In general it has been found that the two most important methods for entering a foreign market are the following two: a) through a local partnership, b) by creating an office abroad. The first of the above proposed methods is usually ‘the optimum method of providing services in most markets because it can provide solutions to many of the issues regarding: cultural sensitivity and language capability, professional accreditation, competitive pricing, breadth of technical expertise, creating links and synergy between providers of goods and services, mobility of personnel, taxation and legal status in the target market and eligibility to bid on target contracts’. On the other hand, the establishment of an office in a foreign country although offers a lot of advantages is usually related with a high cost both in the beginning as well as during the commercial activity of the company in the foreign market. It’s for this reason that this specific type of entering a foreign market has been considered more appropriate for the large firms. On the other hand ‘smaller service exporters can often achieve the same ends through a strong partnership with a well-respected local firm’. Main advantage of such a commercial option is that ‘in most situations, once established, exporters will be able to provide services on an equal basis with all other providers in the market’. On the other hand, the ‘main disadvantage is high cost in general, as well as additional costs that would not be encountered in the foreign country’ [4] GLOBAL SHARES OF TRADE IN SERVICES 1997-2003 (as in [6]) Share of world trade in services 1997 2003 Change EU15 24.0% 25.8% +1.8 United States 19.6% 20.2% +0.6 China/India 3.5%   5.1% +1.6 Other Asian* 17.1% 13.9% -3.2 Other economies 35.8% 35.0% -0.8 IIIc. Issues for consideration regarding the entrance of William Sutton Housing Association in the U.S. market – Choice of foreign market entry mode A. Types of modes available when considering entering a foreign market The issue of the entrance in a foreign country in order to activate in the commercial sector has been examined thoroughly in theory (Agarwal et al.1992, Erramili, 1991, Zacharakis, 1997). In this context there have been a series of models available that could be applied by a company when this one is trying to enter a foreign market. Among all the theories there are five that have been considered as the most important [7]. They are 1. the Stage of Development (SD) model (Johanson and Paul 1975), The stage of development (SD) model, which is also known as U model, was proposed by Johanson and Paul (1975) while studying internationalization strategies of Small and Medium sized Enterprises (SMEs). The model asserts that the internationalization of SME is a long, slow, and incremental process with two dimensions: the geographical or rather cultural expansion and the commitment. 2. the Transaction Cost Analysis (TCA) model and extensions (Anderson and Gatignon, 1986), Transaction cost analysis (TCA) was proposed by Anderson and Gatignon (1986). Under the hypothesis that organizational structure and design are determined by minimizing transaction costs, they concluded that MNEs choose a specific mode of market entry which maximizes the long term risk-adjusted efficiency. The choice depends on four constructs that determine the optimal degree of control: transaction specific asset, external uncertainty, internal uncertainty, and free riding potential 3. the Ownership, Location and Internalization (OLI) model (Dunning 1977), The OLI theory stated that entry mode decisions are determined by the composition of three sets of advantages as perceived by enterprises: a) ownership advantages (i.e. advantages that are specific to the nature and the nationality of the owner), b) internalization advantages (i.e. advantages arising from transferring ownership advantages across national boundaries within own the organization), and c) location advantages (arising from the fact that different locations feature different resources, institutions and regulations affecting the revenue and the cost of production). 4. the Organization Capacity (OC) model (Aulakh and Kotabe 1997) It regards a firm as a bundle of capabilities and knowledge where individual skills, organization and technology are inextricably woven together. The model argues that entry mode decision, the firm’s boundary issue, is a capability related one, and it is made under a calculus governed by considerations related to the deployment and development of a firm’s capabilities. 5. the Decision Making Process (DMP) model (Root 1994). It argues that entry mode choice should be treated as a multistage decision making process. In the course of decision making diverse factors, such as the objectives of the intended market entry, the existing environment, as well as the associated risks and costs, have to be taken into account. Focusing on optimizing the process of decision making but not on exploring which factors might affect and what their impact on entry mode choice is this model might be more practical. B. Elements of the strategy’s success In the above context, it can be assumed that in order for the specific company to successfully enter the U.S. Housing market, the following practices need to be followed [4] (in addition to the previously mentioned methods): The company should be ‘use referrals whenever possible, either from other clients in the same country, or from clients with similar mandates in other countries; the use of referrals also benefits potential clients by helping them manage their risk in purchasing the services’. There must be an intensive participation in all ‘networking activities’ taking place in U.S. and that are preferably ‘organized by sector specific industry associations, local Chambers of Commerce, service clubs, or other business organizations’. In this context, the company should also try to ‘identify opportunities to meet individually in a social or professional context, with potential clients’. On the other hand, the firm should be registered for quality standards and compete for awards whereas the collection of testimonials could be proved really valuable. A very important issue is the listing of the company both in professional and trade directories A lot of time should be spending in order for the clients’ needs to be identified and put under examination in order to be resolved. The cultural differences and the ethics applied in the foreign market as also of high importance The company should be prepared to ‘provide a "sample" of the service destined for exporting to establish credibility; potential clients will want to see how well exporters perform so doing tasks such as presenting at information workshops and writing articles for association newsletters or the media may be a good option’. IV. Conclusion The presentation and the analysis of the above issues involved in the entrance and the operation of a company in a foreign market show that the specific commercial activity is of a high importance and complexity. The main problem seems to be that the interested company will have to face a total different cultural, financial, legal, social and commercial environment when trying to achieve such a target. Of course, there are measures that can be taken and methods that should be applied in order for such an attempt to be completed successfully (Bowie, 2002, Broene et al., 2002). However, there are always factors, like the financial turbulences (which can be related with specific events in the foreign countries) which cannot be always predicted in advance. This has as a result that the relevant effort (to enter a foreign country) has always a significant level of risk which has to be accepted by a company before starting the procedure for entering a foreign market. The same assumptions have to be applied in the company of the specific case (William Sutton). An element that could perhaps be differentiated regarding the specific company could be related with its particular type of services which also have to follow specific rules and ethics if they are to be offered in a foreign country. References Agarwal, S., Ramaswami, S. N. (1992). Choice of Foreign Market Entry Mode: Impact of Ownership, Location and Internalization Factors. Journal of International Business Studies, 23(1): 1-16 Anderson, Erin and Hubert Gatignon (1986), “Modes of Foreign Entry: A Transaction CostAnalysis and Propositions,” Journal of International Business Studies 17, 1 - 26. Aulakh, P. S., Genturk, E. F. (1995). The Use of Process and Output Controls in Foreign Markets. Journal of International Business Studies, 26(4): 755-773 Aulakh, Preet S. and Masaaki Kotabe (1997), “Antecedents and Performance Implications of Channel Integration in Foreign Markets,” Journal of International Business Studies 28 (1): 145 - 175. Bowie, S. L. (2004). Privatized Management in Urban Public Housing: A Comparative Analysis of Social Service Availability, Utilization, and Satisfaction, 49(4): 562-574 Broene, P., Clickner, R. P., Friedman, W., Jacobs, D. E., Marker, D. A., Roger, J. W., Viet, S. M., Zeldin, D. C., Zhou, J. Y. (2002). The Prevalence of Lead-Based Paint Hazards in U.S. Housing. Environmental Health Perspectives, 110(10): 599-619 Brown, J., Dev C., Zhou, Z. (2003). Broadening the Foreign Market Entry Mode Decision: Separating Ownership and Control. Journal of International Business Studies, 34(5): 473-493 Buckley, P. J., Casson, M. C. (1998). Analyzing Foreign Market Entry Strategies: Extending the Internalization Approach. Journal of International Business Studies, 29(3): 539-554 Datta, D. K., Hermann, P. (2002). CEO Successor Characteristics and the Choice of Foreign Market Entry Mode: An Empirical Study. Journal of International Business Studies, 33(3): 551-567 Dunning, John H. (1977), “Trade, Location of Economic Activity and the MNE: A Search for an Eclectic Approach,” in The International Allocation of Economic Activity, O. Bertil et al., eds. Proceeding of Noble Symposium held in Stockholm, London: Macmillan. Erramili, M. K. (1991). The Experience Factor in Foreign Market Entry Behavior of Service Firms. Journal of International Business Studies, 22(3): 479-492 Johanson, J. and Paul F. Wiedersheim (1975), “The Internalization of the Firm: Four SwedishCases,” Journal of Management Studies 12 (3), 305 - 322. Keating, L., (2000). Redeveloping Public Housing. Journal of the American Planning Association, 66(4): 384-397 Root, F. R. (1994), Entry Strategies for International Markets. London: Lexington Books. Zacharakis, A. (1997). Entrepreneurial Entry into Foreign Markets: A Transaction Cost Perspective. Entrepreneurship: Theory and Practice, 21(3): 23-38 http://www.williamsutton.org.uk/ [1] http://www.going-global.com/articles/analyzing_foreign_markets.htm [2] http://strategis.ic.gc.ca/epic/internet/ineas-aes.nsf/en/ra01573e.html [3] http://64.233.179.104/search?q=cache:2pfBMFfBozYJ:www.cbsc.org/alberta/exportlink/exporting_your_services_guide.pdf+entry+in+foreign+markets+and+service+firms&hl=el&gl=gr&ct=clnk&cd=60 [4] http://en.wikipedia.org/wiki/Housing_association [5] http://64.233.179.104/search?q=cache:LnrZETMERSsJ:www.amicustheunion.org/docs/TUC%2520Economic%2520Analysis%2520Nov%252005.doc+entry+in+foreign+markets+and+service+firms&hl=el&gl=gr&ct=clnk&cd=43 [6] http://bieson.ub.uni-bielefeld.de/volltexte/2004/507/pdf/m_entry.pdf [7] http://www.ica.coop/activities/un/2002-colloquium-prikryl.pdf [8] http://en.wikipedia.org/wiki/Public_housing [9] Read More