Strategic Analysis of Emaar Properties - Case Study Example

Strategic Analysis of Emaar Properties Executive summary The report is based on the study of the strategic management of Emaar Properties; a UAE based Real Estate Company. The first part of the discussion has detailed the company overview and their vision and mission statements. It has also detailed the current strategic movement of the organization. The organization mainly follows the focused differentiation strategy and diversification strategy to expand their business across the world. The next section has detailed the macro-environmental factors of the UAE market such as political and legal, technological, socio-cultural and environmental factors. The analysis of these fact ors has assisted in the evaluation of the opportunities and threats of the business within the domestic and international market. The discussion has also evaluated Porter’s five forces framework to analyze the competitive position of the organization within its operated market. Therefore, it has detailed the strength, weaknesses and distinctive competencies of the organizations. The last section of the report has discussed the major strategic issues and challenges which includes employee retention, maintenance of product quality etc. hence, the study has offered a number of solutions and their implementations that can assist the organization to enhance their long-term market operation. Table of Contents Introduction 5 Brief description of the organization 5 Company overview 5 Vision and mission statement 6 Core values and strategies 6 External analysis 7 Political and legal factors 7 Economical factors 8 Socio-cultural factors 8 Technological factors 9 Environmental factors 9 Potential threats and opportunities 10 Five forces analysis 11 Threat of new competitors 11 Intensity of rivalry within the existing competitors 11 Threat of substitutes 12 Power of suppliers 12 Power of customers 12 Internal analysis 12 Strength and weaknesses 12 Distinctive competencies 14 Major strategic issues and challenges 14 Recommendation 15 Implementation 16 Conclusion 17 Reference List 18 Appendices 19 Introduction The report is based on the strategic analysis of Emaar Properties, a real estate development company situated in United Arab Emirates (UAE). Emaar Properties is a Public Joint Stock Company (PJSC) which is listed on Dubai Financial Market (DFM) (). The further discussion will elaborate the organizational structure, functions, vision, mission and core values of Emaar Properties. It will provide brief details about the current strategies of the organization. The next section of the report will illustrate the analysis of external and internal business environment of the organization. This section will also discuss the competitive position of the organization within the UAE market. The last sections of the report will emphasis on the major strategic issues and challenges faced by the organization. Hence, the report will evaluate various suitable recommendations and their implementation for improvising and ensuring the long-term performance of the organization. Brief description of the organization Company overview Emaar Properties is one of the largest real estate development companies. It is headquartered in Dubai, UAE. The organization was founded and established by Mohamed Alabbar in 1997. The organization provides property management and development services to over 36 markets across the globe through their through their 60 active companies and 6 business segments. The organization is we-known for various large scale real estate projects such as the development of Burj khalifa. Apart from their property development and management program the organization is also involved in hospitality, healthcare and retail sector. They have also diversified their business as a financial service provider in the Dubai market. The organization has established their business relationship across Middle East, Europe, North America and Pan-Asia. By the end of 2013 the organization has recorded revenue of AED 7.56 billion (approximately $3 billion) (Menoret, 2014). Almost 89% of the revenue of Emaar Properties has been generated from their domestic market in UAE while remaining 11% has been earned through their business development in international markets (Appendix 1). The organization incurs almost 56% of their revenue from the real estate business. Alternatively, 14% and 30% of their revenue is dependent on hospitality and leasing business respectively (Appendix 2). Vision and mission statement The vision of Emaar Properties is to transform the organization into the one of the most valuable and successful real-estate companies across the world. Their vision is focused on securing the leading position in development and management of real estate within all of their operated markets (Menoret, 2014). The mission of the organization is to deliver world-class solutions to different market segments such as redesigning of communities of houses in global market and creating luxury leisure and hospitality locations. Apart from the real estate development their mission is also diversified in the management of retail, education and financial businesses (Menoret, 2014). Core values and strategies The core values of Emaar Properties include: Development of internal as well as external clients. Building strong relationship with all levels of stakeholders in domestic and international market. Continuously development of the skills and performances of employees. Providing better lifestyle and living solutions for the consumers of their operated market (Menoret, 2014). The organization has adopted two main competitive strategies, such as focused differentiation and diversification strategies, secure their leading position in the market (Menoret, 2014). External analysis The external market analysis will enable the organization to assess the impact of different variables, such as political and legal, economical, socio-cultural, technological and environmental, on the overall business management. This analysis enables the organization to assess the potential threats and opportunities of the market or industry (Hollensen, 2015). Political and legal factors UAE can be considered as a federation that is comprised of seven different emirates. Headquarter of Emaar Properties, Dubai, is one of the seven emirates that comprise UAE. Though the political environment of UAE is quite stable, the government of national level as well as of each of the emirates has demonstrated little immature and dynastic nature (Amin, 2014). The national level of governance has displayed loose association of the seven emirates. UAE follows a very open trade policies within the Gulf Corporation Council region with very less import restrictions and no protective duties (Amin, 2014). The country possesses a well-structured legal framework for businesses. The legal framework also provides clear ownership rules for the organizations. The government has entitled 49% of ownership rights to the foreign liability companies and up to 100% ownership rights to the international professional companies within the market of Dubai (Government of Dubai website, 2009). The government is committed to provide liberal economic policies that include protection of intellectual property rights (Amin, 2014). Economical factors The major parts of revenue in Dubai mainly generates from real estate, construction and tourism business. The construction and real estate sector contributes almost 22.6% revenue to the Dubai economy. Except the branches of foreign banks and oil companies the organizations of Dubai pay no direct taxes in terms of corporate profit. The economic framework of the country possesses no barriers or quotas in terms of foreign exchange and foreign trade. The economical structure also provides very competitive import duties which are lower than 4% in many exemptions (Amin, 2014). Socio-cultural factors Near about 80% of the population in Dubai is consists of emigrants. This increased number of immigration is enhancing the requirements of housing properties. The GDP of UAE has demonstrated remarkable growth within the last five years. During 2014 the GDP growth rate of UAE was 5.2%. This growth rate has also increased the disposable income of the population. Therefore, it has enhanced the demand for high-end lifestyle and luxurious products within the population (Appendix 3). Technological factors Dubai is linked with a large number of global destinations through 120 shipping lines and 85 airlines. These facilities have not only welcomed foreign businesses and foreign investment in Dubai; it has also assisted the domestic businesses to explore the foreign market. UAE also possesses the strongest telecommunication network which has allowed the seven emirates to attract foreign IT market at a rapid pace (Amin, 2014). Environmental factors UAE demonstrate strict integration towards the environment development programs. The integrated program of Environment Impact Assessment (EIA) with ecological procedure is a vital part of business practices within the seven emirates of UAE (Amin, 2014). Potential threats and opportunities (Source: Amin, 2014). Five forces analysis Porter’s five forces analysis can assist an organization to examine their competitive position within the market. This analysis enables organizations to understand strengthens of the new and existing competitors and suppliers. This assessment is also essential to analyze the demand and purchasing power of the potential consumers (Magretta, 2013.). Threat of new competitors The real estate industry of UAE is highly liberal and deregulated. The barriers to the new market entrants are very low for the industry. The regulations of government are not at all strict in terms of foreign investment in the business sector of real estate. Therefore, these situations have enhanced the threats of new entrants in the real estate sector of UAE. These situations can also affect the profitability and market share of the organization. On the other hand, the availability of well-established real estate development companies has increased the entry level competition of the new organizations. The initial requirements of investment are very high for the new organizations to secure a competitive position in the UAE market. The development of advanced technologies can also act as a barrier to the entrance of new businesses in the UAE real estate industry (Al Bakri, 2014). Intensity of rivalry within the existing competitors The real estate sector of UAE is consists of a huge number of leading competitors. The major competitors of the organization are Nakheel PJSE Company, Majid Al Futtaim Group, Saudi Binladin Group and Aldar Properties PJSC. All of these organizations offer almost same products and services to the consumers. The low trade barrier and import changes have influenced all the major players to expand their business venture to different parts of the world. The price ranges of these organizations are also almost similar to each others. The business strategies and organization size of the competitors have very little differences. Therefore, it has intensifies the competition within the leading players of the real estate market. The industry exit cost is also very high for these organizations (Al Bakri, 2014). Threat of substitutes The real estate market in UAE has a number of substitute products with almost similar quality and price range. These substitute products are very easy to find. Therefore, the switching of products and services within the real estate industry of UAE is very easy (Al Bakri, 2014). Power of suppliers The market of UAE possesses various alternative suppliers. Most of the suppliers offer similar quality and ranges of products. There for the concentration of suppliers in the market is very low. The low concentration provides very limited bargaining power to the suppliers. The distribution channel in the UAE real estate market is highly diversified. This diversified distribution channel provides very low bargaining power to a single distributor. The cost of switching suppliers is also very low for the organizations within the real estate sector of UAE. This situation assists Emaar Properties to negotiate prices with the available suppliers within the market (Al Bakri, 2014). Power of customers The bargaining power of the buyers is very high within the real estate market of the UAE. The market possesses a number of options for the consumers. A large section of the consumers in the domestic and international market are very price sensitive. Therefore, the availability of substitute allows them to compare the price and the quality of products and services. The increase in the disposable income is also enabling the consumers to seek for better facilities and luxurious products. The easy access of different technological communication channel is also allowing the consumers to explore all the available options within the real estate market. Therefore, this situation is enhancing the bargaining and switching tendency of the consumers (Al Bakri, 2014). Internal analysis Strength and weaknesses Strength Weaknesses Emaar Properties has a strong global presence with their operation within 36 countries across the world. The organization is located in Dubai which is considered as one of the best place for real estate investment. Backing by government is one of the major strength of the organization which assists the management to eliminate the effects of global crisis. Dubai government holds near about 32% of the shares of Emaar Properties. This situation assists the organization to neglect the effects of numerous regulations. The business model of the organization has demonstrated expertise in the development of master-planned communities within international market. The organization has successfully adopted diversification strategy. This strategy has assisted the management to increase investment for their foreign expansion. The organization has initiated various joint ventures with other leading multinationals to expand their businesses in different market. They also have strong relationships with governmental bodies of different locations. Though the organization has expanded their business in various geographical locations, most of their revenue generation is hugely dependent on the Dubai market. The overexposure to the Dubai market has declined their profit ratio. The organization has confronted labor issues sue to their unethical strategy to pay lower wages to the workers from poor countries. A number of labor groups and non-profit organization have accused the organization for unethical treatment of the employees. Recently the organization has faced a number of failures to maintain the quality of their products due to poor product supply. This situation has influenced the potential consumers to rethink about their choices. The new limits of loan and funding strategy can reduce the flexibility of the organization to expand the operations within new geographical locations. (Source: Al Bakri, 2014). Distinctive competencies The distinctive competencies of the organization includes- The ability to create iconic projects for different geographical market. Strong financial capability to invest in different business projects. Huge brand reputation within the domestic as well as international market. The adaptability of different technological advancement in terms of real estate development and management. Diversification within different segment of businesses such as financial services, healthcare etc (Menoret, 2014). Major strategic issues and challenges Price The absence of price flexibility is one of the major strategic issues that the organization needs to address. The increase of competitors within the domestic market is enhancing the price war within the real estate sector. This inefficiency in the price flexibility is empowering the substitute products within their operated market. This situation is restricting the organization to attract the price sensitive consumers towards their products. Therefore, the customer base of the organization is very limited which includes only high-end business and commercial clients. This situation can cause huge challenge for the organization in the near future (Menoret, 2014). Employee retention and satisfaction The inadequate corporate culture is affecting the employee-employer relation. The ignorance towards the minimum labor wage strategy is hampering the performance of the workforce. This strategic issue is affecting the employee motivation, loyalty and job satisfaction. Therefore, it is decreasing the overall productivity of the organization (Menoret, 2014). Diversification in real estate services Though the organization has diversified its business line towards healthcare and financial services, they lack diversification in their real estate wing. The real estate service of the organization is limited towards the retail, commercial and leisure industry. The organization has not properly explored the residential sectors of the domestic as well as international market. This situation has increased the challenges in the market as the competitors are readily indulging in the residential real estate solution services (Al Bakri, 2014). Quality check and standardization of supplier product The inappropriate quality checking procedure of the organization is also hampering the market reputation of the business. The absence of standardization of their product and service quality is causing dissatisfaction within the potential consumers. This situation is challenging the future customer retention capability of the organization (Al Bakri, 2014). Recommendation The discussion of regarding the issues and challenges of Emaar Properties has illustrated a number of strategic issues of the organization. A number of strategic recommendations have been made to the management of the organization to influence the long-term performance. Cost leadership strategy The organisation needs to focus on adopting the cost leadership strategy. This strategy assists organization to create a strong position within their operated market by appealing to the price-sensitive consumers. This strategy assists organization to attract a huge portion of the potential customers by providing flexible and competitive pricing (Hitt, et al., 2012). The management of Emaar Properties needs to conduct extensive research regarding the pricing policies and price offerings of the leading competitors in the market. The management also needs to restructure their pricing policies as per the buying power of their clients. The management needs to introduce competitive pricing for their real estate products to achieve the leading position within the local as well as global market. Market development Strategy The market development strategy allows organization to pursuit new market segment or geographical areas. This market strategy assists organizations to neutralize the effect of the market saturation. This process also enables businesses to attract new sets of consumers within the existing market (Hitt, et al., 2012). The management must diversify their real estate business division to neutralize early market saturation. The management needs to establish new property development wing for the residential apartments within the Dubai market. The management can also utilize their profit from the commercial real estate segment, leisure segment to expand their residential property business to different parts of the world. Minimum wages strategy and employee motivational program The organization needs to focus on restructuring their wages policy. The management must follow the minimum wage structure of each geographical location they are operating. The wage restructuring program should concentrate on the employee benefit, health and well-being. The organization should conduct different ethical program within all the level of management to influence the adequate and ethical behavior within the employees and employers. This process will assist the business to retain their valuable workforce while improving their productivity. Vertical integration strategy The vertical integration strategy allows businesses to expand their operation within different areas which include the supply and distribution procedure of the organization. The vertical integration can assist organization to reduce their cost while increasing their efficiency (Hitt, et al., 2012). The management of Emaar Properties should adopt vertical integration strategy to accrue their supply as well as distribution chain. This process will enable the marketers to maintain the product quality. This process will also help them to standardize the offerings of the organization. Therefore, it will enhance the consumer satisfaction. Implementation The implementation of the recommended strategies needs to be monitored properly after a certain internal of time. In the primary stage the organization needs to implement the competitive pricing strategy within the Dubai market. The management needs to monitor the changes in customer database after each six months to assess the success of the new pricing policy. They also need to analyze the financial gain of the organization after each six months. This analysis will assist the management to measure the success of the new pricing strategy. It will also help them to input any required modification. The management of the organization needs to utilize the profits from their other business wings to invest in the market development program of residential property. The organization should invite new investors from different geographical location to accrue sufficient investment to ensure the successful implementation of their market development plan. The management should focus on advertising their new business venture through the digital as well as print media to grab awareness of the potential consumers. The management should also consider foreign sponsorship to increase the visibility of their new market development program. The organization needs to create a new department to periodically examine the quality of their supplies and end product. The successful implementation of the vertical integration strategy requires constant quality monitoring and adequate training to the employees of the supply chain department. Finally, the human resource department needs to arrange different motivational as well as feedback programs to ensure the proper implementation of their employee retention program. Conclusion The overall discussion of the report has evaluated the current organizational structure and strategies of Emaar properties. The discussion has illustrated the external as well as internal factors that are affecting the domestic as well as international business venture of the organization. The study has elaborated the competitive position and the effects of other competitors on the market strategies of the organization. The further discussion has evaluated internal strength and weaknesses and the external opportunities and threats of the organization. This analysis has assisted in recommending new marketing and business strategies to the organization to improve their long-term business performance and goal. The recommendation includes the adoption of market development strategy, vertical integration of the supply chain, offering of competitive pricing and maintaining the employee satisfaction. Reference List Al Bakri, A., 2014. Portfolio Diversification Strategy and the Impacts on the Middle East Real Estate Investment Decision. International Journal of Economics and Finance, 6(2), pp. 62. Aljazira Capital, 2014. Emaar Properties PJSC Co. [pdf] Aljazira Capital. Available at [Accessed 30 April 2015]. Amin, K., 2014. IREITs: An Unrealized Potential in Gulf, Issues and Recommendations. Asian Journal of Business and Management, 2(1), pp. 22-58. Emaar, 2007. Emaar Properties PJSC. [pdf] Emaar. Available at [Accessed 30 April 2015]. Hitt, M., Ireland, R. D. and Hoskisson, R., 2012. Strategic management cases: competitiveness and globalization. Connecticut: Cengage Learning. Hollensen, S., 2015. Marketing management: A relationship approach. New York: Pearson Education. Magretta, J., 2013. Understanding Michael Porter: the essential guide to competition and strategy. New York: Harvard Business Press. Menoret, P., 2014. The Superlative City: Dubai and the Urban Condition in the Early Twenty-First Century ed. by Ahmed Kanna, and: Dubai Amplified: The Engineering of a Port Geography by Stephen J. Ramos, and: Demystifying Doha: On Architecture and Urbanism in an Emerging City by Ashraf M. Salama, Florian Wiedmann. The Middle East Journal, 68(4), pp. 642-645. Rothaermel, F., 2012. Strategic management. New York: McGraw-Hill. Tradingeconomics, 2014. United Arab Emirates GDP. [online] Available at [Accessed 30 April 2015]. Appendices Appendix 1: Revenue of Emaar Properties2013 (Source: Aljazira Capital, 2014) Appendix 2: Revenue generation of Emaar properties in 2013 (source: Aljazira Capital, 2014) Appendix 3: GDP growth of UAE (Source: Tradingeconomics, 2014) Read More