Dubai financial market

EXECUTIVE SUMMARY

Among the largest property companies in the world, is Emaar Properties, popularly known simply as Emaar. Emaar is the constructor for many world renowned assignments like the 20 Billion USD worthy of Burj Downtown task - which includes the world's tallest building - the Burj Towers which was just completed in '09 2009.

Emaar collaborated with MGF Development - another successful and dominant property large in India as Emaar-MGF. Now, Emaar has tasted success in a great many other countries it forayed into (mentioned in next section), however in India, it endured some setbacks. A SHORT Community Offering - IPO was launched in the Indian Stock Market segments, but Emaar got an extremely lukewarm response and got to revoke the IPO.

Emaar also faced various property troubles and courtroom conditions which it found itself entangled with. Apart from all this, Emaar also encountered bureaucracy from Indian governments and local regulatory firms, and a lot of other red-tapism which made its progress difficulty in India despite having excellent specialized expertise and a fool-proof strategy and a robust local alliance with MGF Innovations.

In this review, International Business Management of Emaar was analyzed in detail from various perspectives and the many international forces that Interplay and have an impact on Emaar as an organization was critically assessed. The theories, principles and Frameworks learnt in International Business Course like Porter's Five Causes Model, PEST analysis Platform and SWOT examination were used to drill down to the many Macro Economic Business Pushes that Emaar encounters and the perfect strategy the business should follow given its Strengths, Weaknesses, Opportunities and Dangers.

Finally, the recommendations which stemmed out of the analysis is the fact Emaar should firmly move ahead with its International Business Management decision to enter the hugely attractive and profitable Indian Property and Realty Market. The Advantages and Opportunities far outweigh the weaknesses and hazards, and thought Emaar may have suffered some modest setbacks, it is bound to experience very good gains and achieve same or higher levels of success as achieved in other countries.

Emaar is also credited with building the famous Dubai Mall, the business enterprise Hubs, and may other business assignments along with cover projects like the Dubai Greens, Arabian Ranches, Emirates Hillsides, The Meadows and many others properties of world class quality and infrastructure. Emaar is DFM or Dubai Financial Market posted and also on the renowned DJATI or Dow Jones Arabian Titans Index, boasting with properties of above 14, 000 housing properties (Ref: Hoovers)

Emaar is a International Business oriented company for our study - Emaar has huge occurrence in countries ranging from Bahrain, Morocco, Egypt, Jordan, Saudi Arabia, Syria, Tunisia, Pakistan, Turkey till remote countries like Indonesia, Algeria and even France.

The company has embarked on international projects in these countries like Cairo Heights and Smart Community in Egypt (Ref: Hoovers), Hotel Tasks in Morocco, and a very ambitious task in Saudi which is famously called as King Abdullah Economic City which is a staggering 27 Billion USD Investment, in Jeddah.

Having set up that Emaar is a truly global company with international occurrence in multiple countries, we will drill right down to one of the major Strategic Business Decision the business is grappling with for days gone by year or so in the International Business Management Area.

INTERNATIONAL BUSINESS MANAGEMENT ISSUE

Recently, Emaar was by using an ambitious growth strategy after tasting success in all these countries. Emaar collaborated with MGF Development - another successful and dominant property large in India as Emaar-MGF. (Ref: Emaar-MGF Corporate Website-About us)

Back in early 2006, Emaar and MGF decided for an enormous capital investment in a variety of locations in India amounting to a 4 Billion USD plan; we were holding in Delhi, Mohali, Andra Pradesh-mainly Hyderabad, Kerala and Tamil Nadu expresses in India.

The nature of the intended tasks ranged from Residential Villas, homes, high climb apartment complexes to Shopping Complexes, till WORKPLACE and IT office buildings. For example in Hyderabad, Emaar prepared a Boulder Hillsides Project - personal and leisure community complex and Lanco Hillsides a high climb apartment complex spread over 100 acres and with a capital investment plan of 125 Mil USD. (Ref: Emaar-MGF Corporate Website-Residential Vertical)

Emaar's India Extension Strategy can be plainly realized from the red oval highlighted for RESEARCH STUDY Purpose (Source: Ad at the Bombay Airport terminal)

But in many of these assignments and in its desire enlargement in India, Emaar encountered lot of International Business Management Issues:

  • Emaar-MGF also planned to offer Original Community Offering - IPO in the Indian CURRENCY MARKETS. But this got an extremely lukewarm response and Emaar was required to revoke the IPO (Ref: Emaar MGF IPO Registration revoked)
  • Emaar encountered numerous roadblock and hindrances like bureaucracy from Authorities in Approvals and Project sign-off, red-tapism, corruption, slow implementation and insufficient defined operations.
  • Property Acquisition Land dispute and the instances are still caught in the Apex court of India and the court docket hasn't still made a ruling to this circumstance. (Ref: Andra Pradesh High Court, Case Position Information)
  • Tough Competition from Indian Biggies in Property and Real Estate segments like DLF, Sobha Developers, HDIL, Reliance Properties, and IndiaBulls PROPERTY with severe cut-throat competitive strategies.

In view of most these, Emaar is currently re-thinking and re-assessing its Strategy of International Business Procedures in India.

Emaar must conduct an objective and critical evaluation of its current areas of problems with the Future Strategies, Goals & Objective of Emaar as in International Multinational Company having stakes in Multiple countries.

We will examine in detail using the International Business Ideas, Concepts and Fundamental forces which Emaar is facing and provide a couple of conclusions and recommendations on the optimal International Business Approaches for Emaar.

PORTER'S FIVE Makes FRAMEWORK

Porter's Five Forces (Ref: Michael E Porter, Competitive Advantage: Creating and Sustaining Superior Performance) is a very effective tool which can be used in a global Business Management context. Basically, we have to evaluate the five causes that determine the amount of Market Competitiveness.

Emaar needs to assess each one of these five forces in the Indian Property Industry and examine the appeal of the same and then re-assess which areas to focus and where you can direct the ventures as well as how to enter in the Indian Property and Market in the wager way possible in order to gain maximum profitability. The analysis is really as follows:

  1. Entry of rivals: Emaar should determine the easiness or difficulty for a fresh market player and what are the barriers can be found or not. These will include legal conformity an entrant company will need to have, Municipality, Corporation and Building Licenses, occurrence of strong Marketing Arm to attain out and entice customers, capacity to source recycleables of good quality at cheap prices etc.
  2. Substitutes Threat: Emaar needs of risks of other substitutes and how to own products at a cheaper property to attract Indian Customers.
  3. Buyer Bargaining ability: The strength of the audience of Emaar-MGF properties in India, their ordering process and the lead times etc
  4. Supplier Bargaining electric power: The strength of the Suppliers of Recycleables and other consumables for Engineering of Emaar Properties in India, are they monopolistic or oligopolistic, the pool of quality suppliers etc.
  5. Existing Player Rivalry: The competition factors that Emaar-MGF will face in India from companies like DLF, IndiaBulls Properties, Sobha Programmers, Reliance Properties and other major companies who are already established and have a strong nationwide or regional existence in India which have a impact on Emaar-MGF.

Porter's Five Causes Model is without a doubt one of the most often used strategy tool in deciding and examining the various forces that inter-play in International Business for an organization as well as how to effectively counter them. Now, each one of these five causes have a basis or rationale about how it comes and what are its basic dependencies.

  1. Rationale and Causes that have an effect on 'New Entrants Threat'-
  • Brand Devotion to Emaar
  • Cost of Customer Transitioning to new company
  • Regulations and Norms from the Government
  • Access to vast and stable Marketing & Distribution Channel
  • Probability of counter-attack from other competitors like DLF, Sobha etc
  • Rationale and Makes that influence 'Substitutes Threat'-
    • Product Quality and other Enclosure and home offerings Variety
    • Cost of changing over or preference to other property companies
    • Ease in changing over to other companies like Down payment etc
    • How much willing the clients are to Swap other companies
  • Rationale and Makes that have an effect on 'Provider Bargaining Power'-
    • Presence of good quality supplier pool for Emaar
    • How dominating or concentrated they are really in Property Market
    • How strong is the Dealer branding like Cement Companies etc
  • Rationale and Forces that impact 'Buyer Bargaining Power'-
    • How differentiated the merchandise offerings are potential buyers perceive
    • How focused the Buyers are, in Metros vis--vis Rural areas
    • Interest rates and other factors for MORTGAGE LOANS for Buyers
    • Importance the Buyers surrender procuring and owning a property
  • Rationale and Causes that impact 'Existing Player Rivalry'-
    • Anti-trust laws and regulations and other protection mechanism for the companies
    • The industry cost framework and what set costs are widespread - Taxes etc
    • To what level the property are differentiated which influences the rivalry
    • Strategic Objectives met by the opponents - like if they're having a growth strategy or a 'cash cow' strategy that will own an impact

    The major importance of Porters Five pushes model is that it not only offers a very insightful information about a rationale and objective assessment on what exactly are the various forces that are prevalent in the Industry and how to deal with them.

    But it also is a major type for SWOT research (which we can do later), which is one of the powerful tool for assessing the company's power vis--vis with other opponents and the industry per se. If we examine all the five pushes and how it concerns Emaar of the various fronts discussed above, we can conclude that we now have many favorable makes for Emaar and it is definitely in an exceedingly strong position.

    What stems right out of the Porters Five Causes analysis is the fact that although Emaar faces a quite strong 'Rivalry Push from the Opponents', the other forces are quite beneficial. In fact the Buyer bargaining and Dealer bargaining electricity is not so much against Emaar. The Indian Housing Loan rates attended down drastically within the last few years and with an enormous population of upper-middle course income segment, the throw-away income is increasingly more and more people want to buy and own property. The migration from rural areas to urban areas is still including strong and there is strong basis of favorable makes of buyer and company aspects.

    As significantly as the new entrants dangers can be involved, Emaar is quite safe as there are stringent norms by administration and metro building regulatory authority which stipulates very stringent compliance norms making the entry barrier for other companies difficult.

    Now, having an objective analysis of the Five Causes Model, we will now check out use one of the critical tool which is vital in International Business Management for inspecting the Macro Economic Causes in the international land - like the Political Causes, Economic Condition, Community Factors and Technological aspects included.

    PEST Research FOR INTERNATIONAL BUSINESS

    Having analyzed the many forces Emaar is put through in its India Extension Strategy; we have now need to assess the exterior Macro-Environment where Emaar runs.

    This can be carried out using the Infestation platform - this is actually a robust tool that Strategy Consultants in International Business Management use. (Ref: Mike Morrison, PESTEL evaluation of the macro-environment)

    PEST is actually a brief form which comprises of the following facets:

    • Political Aspects
    • Economic Aspects
    • Social Aspects
    • Technological Aspects

    PEST aspects have a pivotal function in evaluating Value Creation Opportunities of a global Business Strategy. As Macro-Economic Factors change from country to country, Infestations needs to be for a particular country and that's the reason this becomes an exceptionally important tool for Emaar-MGF. (Ref: David Aaker, Developing Business Strategies)

    PEST Examination for Emaar-MGF in India:

    Political (including Legal)

    • Regulations on Property Constructions
    • Government Tax insurance policies on Foreign Buyer like Emaar buying India
    • Laws of Contract Enforcement like Builders/Supplier Selection
    • Employment laws on employing laborers for Property construction
    • Attitude of the neighborhood and Central Federal government and Helpfulness

    Economic

    • Property Increase in India for previous few years
    • Low Interest rates for residential lending options etc
    • Increased Government shelling out for Infrastructure development in India
    • Exchange rates of Dirham and Indian Rupee Fluctuations
    • High Inflation rates in India on Infrastructure raw materials like Cement

    Social

    • Rise of Higher Income section in India
    • Higher Age syndication of Younger People
    • Lifestyle change towards investment in Property
    • Highly Educated Profession focused customers with a sense of style

    Technological

    • Property Industry's concentrate on Technological advancement
    • Higher Energy usage in Development and Realty Markets
    • Changes in Technology utilization like Cranes and Automated Machines
    • New innovations & development like Build-To-Order Concrete blocks etc

    (Ref1: Factors that Drive PROPERTY Prices in India)

    (Ref2: Creators to Shift Concentrate on Developing Affordable Cover)

    CONCLUSIONS

    The Porter's Five Pushes and PEST research will give a good picture for Emaar-MGF to determine their International Business Management of Functions in India. However the Five Makes and PEST evaluation gives only a target and clear assessment of the market, the industry and the variety of makes that interplay.

    Our Analysis will be complete only if we identify the Advantages, Weakness, Opportunity and Dangers that Emaar encounters. This is what will be eventually become useful in International business Management Strategy formulation.

    In out conclusive step, we will use SWOT Analysis to recognize these Strengths, Weakness, Opportunity and Hazards that Emaar possesses or encounters. This is extremely critical as any company must strive for a match its exterior environment. (Ref: Hill, & Westbrook, SWOT Research). According to Hill & Westbrook, SWOT is a great tool to assess Internal Talents - Power & Weakness as well as External Advantages - Opportunity & Threats.

    SWOT analysis is most beneficial represented as a 2x 2 matrixes as shown above. From the above SWOT research, we find that thought there are a few Weaknesses and Threats to Emaar's International Business Functions in India, the Talents and Opportunities are many and considerably outweigh the negatives. Hence, Emaar should concentrate on its center competencies and not get disturbed by setbacks like Dubai Financial Crisis and failed Emaar-MGF IPO in India and move forward in growing its International business in India.

    RECOMMENDATIONS

    Using the ideas, ideas and frameworks learned in International Business Course, we can identify the causes that interplay in Emaar's International Business in India and examine the factors that Emaar needs to comprehend and consider before its next move.

    From the Porter's Five Forces and PEST research, in conjunction with the powerful SWOT examination, we advise that large potential opportunities that can be captured in India with Emaar-MGF collaboration are many and though Emaar acquired some modest setbacks, it will continue its large development strategy in India.

    Emaar's success in other countries can be related to its technical experience, economics of level and strong and meaningful partnerships with local companies in these countries. The setbacks Emaar suffered in India is majorly anticipated to downturn and analysts are boasting that India is already on the road to recovery. (Ref: 2010 can be considered a brighter aspect for Retail Sector, Indian Realty Media)

    It is predicted that Indian Property Market will appeal to just as much as 12 Billion USD in property investment over another five years and in line with the 10th Five-Year-Plan, India is facing a scarcity of 22 Mil homes! (Ref: PROPERTY, IBEF). These will be mainly be targeted towards the bigger throw-away income group in the Indian MIDDLE INCOME group who are an enormous source of potential for Emaar.

    When we go through the Advantages and Opportunities that considerably outweigh the Weakness and Risks, due to occurrence of factors like the Fiscal Benefits, Regulatory relaxations, Sociable, Infrastructural and Technological benefits, Emaar is offered an extremely favorable International Business Environment in India. These are coupled with excellent professional know-how and edge that give Emaar the capability to meet the latent Customer Needs in the shortest amount of time in the perfect way, reaping huge gains.

    Hence it makes a advisable International Business Management decision for Emaar to foray into the hugely profitable Indian Property Market as Emaar-MGF.

    1. Michael E Porter, Competitive Gain: Creating and Sustaining Superior Performance, Free Press, pp 4-27, 1998
    2. Hill, T. & R. Westbrook, SWOT Examination: It's Time for something Recall, Long Range Planning, Elsevier Publishing, 30 (1): 46-52, 1997
    3. David Aaker, Growing Business Strategies, Wiley Web publishers, pp-56-87, 2001
    4. Mike Morrison, PESTEL examination of the macro-environment, Oxford School Press, CIPD, 2007
    5. Hoovers, Emaar Properties Company Fact document, D&B Company, http://www. hoovers. com/company/Emaar_Properties_PJSC/rhksiff-1. html
    6. Indian Realty Reports, Factors that Drive PROPERTY Prices in India, www. indianrealtynews. com/property-prices/factors-that-drive-real-estate-prices-in-india. html
    7. Indian Realty Media, Developers to Change Focus on Growing Affordable Enclosure, http://www. indianrealtynews. com/real-estate-india/developers-to-shift-focus-on-developing-affordable-housing. html
    8. Indian Realty Information, 2010 can be a brighter part for Retail Sector, http://www. indianrealtynews. com/real-estate-india/2010-can-be-brighter-for-retail-sector. html
    9. IBEF - Indian Brand Collateral Foundation report, Real Estate, http://www. ibef. org/industry/realestate. aspx
    10. Emaar-MGF Corporate Website-About us http://www. emaarmgf. com/about_emaar. asp
    11. Emaar-MGF Corporate Website-Residential Vertical http://www. emaarmgf. com/residential. asp)
    12. Andra Pradesh High Judge, Case Status Information, http://hc. ap. nic. in/pls/lobis/caseno1?kmtype=WP&kmno=21382&kmyear=2008
    13. Stock Market Views, Emaar MGF IPO Registration revoked, http://www. stockmarketsview. com/emaar-mgf-ipo-subscription-revoked/94/
    14. Grundy T, Rethinking and reinventing Michael Porter's five forces model, Strategic Change, volume level 15, No 5, August. pp 213-229. 2006
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