External and Internal Environment Analysis Essay Sample
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Introduction of TOPIC
Guzman Realty is a new real estate company that was launched in the market a couple few years ago. The main purpose of Guzman Realty is selling homes for the diverse local community in the Phoenix area. Changes in the external and internal environment of the real estate company will determine the decisions management takes. With this purpose in mind, this paper will provide a complete environmental scan for the proposed real estate company. Identify and analyze the Most Important External Environmental Factors
The external environment is defined, according Pearce & Robinson (2013), “as factors beyond the control of the firm that influence its choice of direction and action, organizational structure, and internal processes”(Pag. 87). The external factors that affect the operations of Guzman Real Estate Company include the remote, industry, and external operating environments. These factors together influence the basis for opportunities and threats that firm encounters in its competitive environment. The Remote Environment
The remote environment is comprised of factors that affect the real estate operating situation, and some of those factors include economic, social, and political factors. For instance, the economy is a key external factor that can influence the success of the real estate company. Economic factors
The economy is typically measured, according to Nguyen (2015), “by economic indicators such as the gross domestic product, employment rates, manufacturing activities, the price of goods, etc.” (Pag. 1). Consequently, the economy cycle can have varying effects on real estate industry. For instance, when the economy slows down, and construction starts to decline, Guzman Realty can begin to experiment experience decreases in home sales. On the other hand, the opposite is true, as the economy growth, homes sales begin to raise. Also, prime interest influences the real estate market because changes in interest rates can affect the ability of a person to purchase a house. For instance, when interest rates fall, the cost of buying homes decreases, which in turn creates a higher demand for homes, which increases prices. Conversely, when interest rates rise, the demand for homes decreases and real estate prices drop (Nguyen, 2015). Political Factor
Legislation as part of politics is considered another important factor that can have a long lasting effect on the demand and price of real estate. The government can create a temporary demand for housing by providing the population with increases on tax credits, deductions, and subsidies. So if the Guzman Realty is aware of the incentives offered by the government, they can inform clients in order to influence the demand and supply and identify potentially false trends. For example, in 2009, the government introduced, according to Nguyen (2015), “the first—time homebuyer’s tax credit to homeowners in an attempt to jump-start home sales in a sluggish economy. But according to National Association of Realtors (NAR), this tax incentive alone led to the sale of 900,000 home buyers to buy home” (Pag. 2). Social Factors
Some of the social factors affecting the external environment of Guzman Realty include beliefs, attitudes, values, opinions, and lifestyle of individuals. These factors are developed, according to Pearce & Robinson (2013), “from culture, ecological, demographic, religion, educational, and ethnic conditions (Pag. 89). Demographics are the actual data that describes the structure of a population. This structure is composed of gender, race, age, income, migration patterns, and the rate of growth. These types of statistics are significant factors that can affect the price and demand of real estate properties. Larger changes in the demography of a location can have a tremendous effect on real estates trend for many years. For instance, an interesting trend in housing market has been the transition of the baby boomer to retirement, which began back in 2010. This transition has had a significant effect on the actual market for many years. For instance, retiring in the Phoenix area is a dream for many baby boomers that look forward to the warmer winter weather and plenty of recreational areas (Nguyen, 2015). Industry Environment
The industry environment is defined, according to Pearce and Robinson (2013), “as the general conditions for competition that influence all businesses that provide similar products and services” (Pag. 97). As a result, one of the most critical business factor
s for Guzman Realty is competition. Since Guzman Realty works in an enourmous industry with numerous
Operating environment are factors, according to Pearce & Robinson (2013), “in the immediate competitive situation that affect a firm’s success in acquiring needed resources. Some of the operating factors that influence the operations and success of Guzman Realty include the firm’s competitive position, the composition of its customers, and its reputation among suppliers and creditors. By assessing its competitive position, the company can improve its probabilities of planning strategies that enhance its environmental opportunities. Customer profile
The most valuable result of analyzing the operating environment is the understanding of Guzman Realty’s customers. Developing a profile regarding its present and prospective customer increases the ability of managers to plan strategic operations. Also a profile is useful to foresee changes in the real estate industry, to rearrange supplies so as to support forecast shifts in demand designs (Pearce & Robinson, 2013). Reputation
One of the most important aspects for Guzman Realty is its reputation because reputation is seen as a signifant significant element in its ability to satisfy company’s needs. If Guzman Realty is perceived as permanent in the community, competitive in its compensation package, and concerned for the welfare of its employees and the environment, it is most likely to attract valuable employees and clients. Having a good reputation means that the company will be respected and appreciated for its contribution, services, and products on behave of the general public (Pearce & Robinson, 2013). Identifying and Analyzing the most important internal strengths and weaknesses In determining the strengths and weaknesses affecting Guzman Realty, it is necessary the conduct a SWOT analysis. A SWOT analysis enables companies to identify the positive and negative factors affecting the business and its strategic planning.
After a careful analysis and considerations of the company’s strengths and weaknesses, analysts were was able to identify the following strengths: the company is recognized as having strong working relation with its personnel, by employing good, high work ethics, and by providing employees with a flexible schedule. Employees at the real estate business are provided with flexible schedules because the company sees employees as independent contractors and their own bosses. As a result, agents get to set-up their own hours, they get to build their own client base, and try to work in the best manner that they see it fit. For the same reason, the firm has a lot of potential to build a strong business relation not only with employees, but also with their clients. Low Brand Recognition
A major weakness affecting Guzman Realty is its currently low brand recognition. In the real estate industry, dominant agencies tend to control a large portion of the industry. Home sellers often want to take advantage of listing their real estate property with recognized agencies (Kokemuller, 2015). As a result, it is recommended that Guzman Realty increase advertisement and hired as many agents as necessary as a way to increase brand recognition. An assessment of the company’s resources
Financial limitations and low brand recognition are part of Guzman Realty resources since Guzman Realty is a brand new firm. The firm has limited financial resources. If the business is limited in resources means that the company may encounter limitations while trying to open an active office location, market its business, and attract new customers (Kokemuller, 2015). Competitive position and possibilities
The real estate industry is extremely competitive, and numerous agencies are competing to offer their products and services to the consumer. The success of Guzman Realty strongly depends of competitive pricing and effective marketing practices. As more companies compete to gain market share, there is a strong possibility that Guzman Realty may experience low profit and decrease in its total sales. As the economy gets better, and growing demand for homes slowly start to rise, Guzman Realty needs to focus on increasing advertisement in order to increase its competitive position. To get its foot in a prospective seller’s door, the company is planning to offer 48 hours, quick, and free comparable Market Analysis Reports. The report will include a detail analysis of the seller’s property. Also, the analysis will include a face–to-face presentation of the final report, and the signing of the listing agreement within seven days of the performance (Hoover Real Estate Services, 2015). Structure of the Organization and its Affect on Organizational Performance
Guzman Realty Company has an overlapping structure in which a licensed broker oversees a group of licensed independent contractors. The salespeople are classified as independent licensed contractors that work in different areas and supply assistances to a sole proprietorship that often act as a licensed broker. In addition salespeople that work for Guzman Realty work under the direction of a broker but are fundamentally accountable for their own business actions. The parties working for Guzman Realty have approved to a particular compensation arrangement that provides very little accountability toward each other. In conclusion
Guzman Realty is a new real estate company that was launched in the market couple years ago. The main purpose of Guzman Realty is selling homes for the diverse local community in the Phoenix area. Changes in the external and internal environment of the real estate company will determine the decisions management takes. The real estate industry is extremely competitive, and numerous agencies are competing to offer their products and services to the consumer. The success of Guzman Realty strongly depends on competitive pricing and effective marketing practices. As more companies compete to gain market share, there is a strong possibility that Guzman Realty may experience low profit and decrease in its total sales.
Hoover, G. (2015). Seller’s Competitive Market Analysis. Retrieved from http://www,glennhooverrealestate.com/selling-homes/competitive-market-analysis Kokemuller, N. (2015). Threats and Weaknesses of a sole proprietor Real Estate Company. Retrieved from http://yourbusiness.ascentral.com/treat-weakness-sole-proprietor-real-estate-company-25113.html Nguyen, J. (2015). 4 Key Factors that Drive The Real Estate Market. Retrieved from http://www.investopedia.com/articles/morgage-real-estate/factors-affecting-real-estate-market.asp Pearce, J. A., & Robinson, R. B. (2013). Strategic Management: Planning for Domestic and Global Competition. New York, NY: McGraw Hill.