Real Estate Investment & Portfolio Management Prof C Bhattacharjee.
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Transcript of Real Estate Investment & Portfolio Management Prof C Bhattacharjee.
Real Estate Investment & Real Estate Investment & Portfolio ManagementPortfolio Management
Prof C BhattacharjeeProf C Bhattacharjee
Marketing is marketing; Marketing is marketing; its everywhereits everywhere
- Prof. Michael S Baker- Prof. Michael S Baker
External and Internal Environment External and Internal Environment factors for an MNCfactors for an MNC
Socio-CulturalSocio-Cultural LegalLegal EconomicEconomic PoliticalPolitical
- Domestic- Domestic
- Local- Local
- International- International TechnologicalTechnological
RegulatorsRegulators CompetitorsCompetitors SuppliersSuppliers Consumers/Consumers/
External External CustomersCustomers
Internal CustomersInternal Customers
Political/Legal
Political/Legal
EconomicEconomic
TechnologicalTechnological
GlobalGlobal
DemographicDemographicSocioculturalSociocultural
CompetitiveCompetitiveEnvironmentEnvironment
Industry Environment
Industry Environment
Components of the General EnvironmentComponents of the General Environment
Components of the General EnvironmentComponents of the General Environment
External Environmental AnalysisExternal Environmental Analysis
The external environmental analysis process should be The external environmental analysis process should be conducted on a continuous basis. This process includes conducted on a continuous basis. This process includes four activities:four activities:
Scanning:Scanning:
Monitoring:Monitoring:
Forecasting:Forecasting:
Assessing:Assessing:
Identifying early signals of environmental Identifying early signals of environmental changes and trendschanges and trends
Detecting meaning through ongoing observations Detecting meaning through ongoing observations of environmental changes and trendsof environmental changes and trends
Developing projections of anticipated outcomes Developing projections of anticipated outcomes based on monitored changes and trendsbased on monitored changes and trends
Determining the timing and importance of Determining the timing and importance of environmental changes and trends for firms' environmental changes and trends for firms' strategies and their managementstrategies and their management
Scanning modelsScanning models
Delphi TechniqueDelphi Technique Spire Approach – Systematic Spire Approach – Systematic
Probing and Identification of the Probing and Identification of the Relevant Environment*Relevant Environment*
1) fgfgf1) fgfgf
2) kk2) kk
*Klein and Newman
Environment ScanningEnvironment Scanning
Competitor IntelligenceCompetitor Intelligence Strategic AnalysisStrategic Analysis The SPIRE Approach (Systematic Probing and The SPIRE Approach (Systematic Probing and
Identification of the Relevant Environment)*Identification of the Relevant Environment)*
-- Detailed list of environment variablesDetailed list of environment variables
-- Set out strategic marketing componentsSet out strategic marketing components
-- Facilitate interactions of different factors Facilitate interactions of different factors for any for any linkageslinkages
Scenario BuildingScenario Building
* Klein and Newman, How to Integrate New Environmental Forces into Strategic Planning, “Management Review”, Volume 69, July 1980, pp.40-48
Scenario BuildingScenario Building
Stage 1: Analysis of the DecisionsStage 1: Analysis of the Decisions Stage 2: Identification of Key Stage 2: Identification of Key
Decision FactorsDecision Factors Stage 3: Identifying the Socio-Stage 3: Identifying the Socio-
Cultural FactorsCultural Factors Stage 4: Analysis of each of the key Stage 4: Analysis of each of the key
variables separatelyvariables separately Stage 5: Selection of Scenario LogicsStage 5: Selection of Scenario Logics
Portfolio Analysis: BCG Portfolio Analysis: BCG GridGrid
CASH CRUNCH
No profits or cash flow either now or in the future:
Divest or liquidate unless turnaround is possible
CASH COWSLimited growth prospects:
Minimum investment, can be divested with
profitability
STARS Additional growth
potential:
Invest further
PROBLEM CHILD
Risky – a few go on to become STARS:
Invest in some, divest in others
Market
Growth
Rate
LOW
HIGH
HIGH LOW
Relative Market Share
Strategies: BCG GridStrategies: BCG Grid
CASH CRUNCH
REVENUE + +
EXPENSE - - - -
NET - -
CASH COWSREVENUE + + + +
EXPENSE - -
NET + + +
STARS REVENUE + + + + +
EXPENSE - - -
NET + +
PROBLEM CHILD
REVENUE ++ +
EXPENSE - - - -
NET - -Market
Growth
Rate
LOW
HIGH
HIGH LOW
Relative Market Share
INVEST
HOLD/HARVEST
DIVEST/ INVEST
DIVEST
A Perceptual Map of apparel retailers
High Price Low Price
“For Me”
“Not For Me”
Thanks
Sheetal Boutique
WestsideApna Bazar
Big Bazaar
Shoppers’ Stop
Pantaloons
‘Flea markets’
Fashion Street
Globus
Raymond’s Shoppe
Competitor TypologyCompetitor Typology
OFFER
NEEDSIMILAR
NEEDDIFFERENT
NEED
Similar Offer
Different Offer
DIRECT COMPETITION
SBI vs. ICICI Bank vs. IDBI Bank
INDIRECT COMPETITION
SUBSTITUTE COMPETITION
NEW ENTRANTS
Barriers of Entry
A mall has food court (hunger need), sports courts, multiplexes
(entertainments) retail stores (acquisition need) etc.
Archie’s Gallery and Titan / Tanishq can both compete for
the gift market
An existing player has taken the diversification route to offer
a service concept but now becomes a direct competitor
Threat of Substitute Products
Threat of Substitute Products
Threat of New
Entrants
Threat of New
Entrants
Threat of New
Entrants
Rivalry Among Competing Firms
in Industry
Rivalry Among Competing Firms
in Industry
Bargaining Power of Buyers
Bargaining Power of Buyers
Bargaining Power of Suppliers
Bargaining Power of Suppliers
Porter’s Five Forces Model of CompetitionPorter’s Five Forces Model of Competition
Managing the External Managing the External EnvironmentEnvironment
19691969
The Chinese have not ONE but The Chinese have not ONE but TWO words for “TWO words for “crisescrises”:”:
““Danger’Danger’
& &
““Opportunity”Opportunity”
1969: Mrs G “seizes the day”1969: Mrs G “seizes the day”
1964: Nehru dies and Shastri becomes 1964: Nehru dies and Shastri becomes PM; Indira is Defense ministerPM; Indira is Defense minister
1965: Indo-Pak War-II; Shastri dies in 1965: Indo-Pak War-II; Shastri dies in TashkentTashkent
Cong party filled with powerful oldiesCong party filled with powerful oldies They select a widowed woman as PM, They select a widowed woman as PM,
so that they can control her: Indira so that they can control her: Indira GandhiGandhi
Indira’s second honeymoonIndira’s second honeymoon
1969: Mrs G “seizes the day”1969: Mrs G “seizes the day”
Indira splits Cong: ‘Old’ and ‘New’Indira splits Cong: ‘Old’ and ‘New’ Communist Party splits into CPI & CPMCommunist Party splits into CPI & CPM Indira’s strategy of acquiring a Indira’s strategy of acquiring a radical radical
imageimage Nationalizes 19 banksNationalizes 19 banks Abolishes Abolishes privyprivy purses for ‘royal’ purses for ‘royal’
familiesfamilies ““Garibi Hatao”Garibi Hatao” More socialist than the CommunistsMore socialist than the Communists
ITC vs TAJITC vs TAJ P N Haksar & Ajit HaksarP N Haksar & Ajit Haksar ‘‘Only tobacco’ to ‘Also Only tobacco’ to ‘Also
tobacco’tobacco’ 1969: Hotels1969: Hotels PaperPaper PackagingPackaging ITH – travel & cargoITH – travel & cargo Sangeet Research Sangeet Research
AcademyAcademy Edible Oil – ‘Crystal’Edible Oil – ‘Crystal’ Foods – ‘Aashirwaad’Foods – ‘Aashirwaad’
Ajit KerkarAjit Kerkar Single Hotel: Hotel Taj Single Hotel: Hotel Taj
MahalMahal Multiple HotelsMultiple Hotels India’s own MNCIndia’s own MNC
• Hotels, motels, palaces, “indovilles”
Those who forget history Those who forget history are condemned to repeat are condemned to repeat
itit
- Georghe Santyana- Georghe Santyana
Managing the Internal Environment Managing the Internal Environment factors for International Marketingfactors for International Marketing
Socio-CulturalSocio-Cultural LegalLegal EconomicEconomic PoliticalPolitical
- Domestic- Domestic
- Local- Local
- International- International TechnologicalTechnological
RegulatorsRegulators CompetitorsCompetitors SuppliersSuppliers Consumers/Consumers/
External External CustomersCustomers
Internal CustomersInternal Customers
Forces affecting DMP
D
M
P
SITUATIONAL FACTORS
INFORMATION SOURCES
SOCIAL/ EXTERNAL/ GROUP FORCES
PSYCHOLOGICAL/ INDIVIDUAL/
INTERNAL FORCES
Examples of accessibility objectives :
To locate retail stores near high pedestrian traffic To set up ATMs in major petrol bunks to cater to
high vehicular traffic.
To set up a mall which is within twenty minutes drive from at least five major residential areas (e.g. Centre One, the mall that opened at Vashi, Navi Mumbai desires a catchment area of the whole of the seven nodes of Navi Mumbai).
Selecting a location: A Clear idea of
The volume of the business Market share Competition Customer segments Sociological factors as the degree of urbanization Suburbanization Population density cluster Customer type (Are the residents mostly from the
lower class, upper-middle class or upper class and are the residential areas slums, low income zones or posh areas? etc.).
Important studies in analysing residential areas PRIZM: Potential Rating Index for Zonal Index Post
Market………. in the US ACORN: A Classification of Residential Neighbourhoods…..in
the UK.
In this method, data has been compiled from the UK census on the characteristics of the households like age, family size, occupation etc. to help cluster UK population into similar groups of lifestyles.
MOSAIC developed by Experian Systems, UK is based on an analysis of post codes (similar to India’s PIN codes).
After a study of households, they have divided the population into 12 lifestyle groupings.
Customers – present and potential
1. Numbers by demographics2. Age and gender spread3. Family size and structure4. Income or employment by occupation,
industry, trends5. Spending patterns6. Population growth, density and trends7. Vehicle ownerships
Accessibility
1. Site visibility2. Pedestrian flows3. Barriers such as railway tracks,
streams, slums4. Type of location zone5. Road conditions and network6. Parking7. Public transports
Competition
1. Amount and level (intensity)2. Type and numbers 3. Saturation Index4. Proximity of key competitors, traders,
brand leaders in services (Western Union, the money-transfer people might look at the presence of Indian Post Office which has the money order facility – both delivery as well as receipt).
Costs
1. Building costs2. Rent costs3. Rates payable 4. Delivery and supply
(transportation) costs5. Insurance costs6. Labour rates7. Bank interest rates
To Assess The Viability Of A Location Site:
Count the number of people frequenting the area
Say at every five- minute interval, During the busiest periods of the week The traffic patterns would decide the
consequent footfall pattern It would be a pointer to the potential
spending and purchases if a retail outlet were located in that area
Example: 100 people are passing by the area in five
minutes Expenditure per person: weighting the money at
say Rs. 5,000 per person Potential for the area would be around Rs
500,000. The whole process is normalized by taking into
account whether the location is in the suburb/periphery of the town or downtown and other central places.
For every additional 100 people frequenting the area, the potential sales for the retail stores will also increase accordingly.
Alternate Assessment of the Site:
Use the location factors as a kind of checklist
Narrowing it down by salience and scoring the locations on a scale of 1 to 10 (1 = poor and 10 = excellent)
Management can decide on the location depending on the final score – whether to go ahead or withdraw.
Catchments Area:
It is the area within a specified boundary, within which people are attracted to the store; and beyond
which people are uninterested in the store or are pulled by some other store.
Catchments Area Analysis STEP 1: Calculate the travel time/distance, to the retail
stores. STEP 2: Analyse the population of the catchments area (could be expressed in terms of age, income, vehicle population, gender, SEC classifications etc).
STEP 3: Calculate the weekly potential sales (by projecting weekly purchases of the sample of the population).
Further refinement - break down the purchases by category so that a retailer can pinpoint his target customers and decide on his appropriate merchandise-mix.
STEP 4: Analyse the existing competition in terms of their footage of retail space as well as retail square feet per customer.
STEP 5: Forecast sales as per the data gathered. An analysis of data from competing stores will give a retailer wanting to enter a new area a realistic picture of the nature of demand and potential, which will aid him in choosing the location.
Gravitational Model
Developed by W. J. Reilly, in 1929 Proposes that consumers are attracted to
a certain location because of its pull effect or its drawing power as opposed to that of other outlets
The model works on the principle of gravitational attraction
It must include two counterpoises (attractions) and their relative ‘weights’ - two retail outlets and their drawing powers.
Gravitational Model includes the following factors:
1.The population of two competing locations, say X and Y. Thus population of location X would be P(X) and that of Y would be P(Y).
2.The distance between the two locations in kilometres, say D.
3. A point of indifference between the two locations to enable the marking of respective catchments areas.
4. The point of indifference is a certain geographic outer limit, wherein the customers would be uninterested in either of the two stores located at X or Y.
Gravitational Model
D
CX =1 + P(Y)
P(X)
‘CX’ is the outer limits of the catchments area of location X when a customer travels from X to Y
‘D’ is the distance in kilometres along a main road between locations X and Y;
‘P(X)’ is the population of location X
‘P(Y)’ is the population of location Y
Gravitational Model
XY
P(X)P (Y)
‘D’ km
Cx = Outer Limits
Growth Option:Growth Option:
How would you grow?How would you grow?
Growth Model: AnsoffGrowth Model: AnsoffOLD PRODUCT NEW PRODUCT
OLD MARKET/ CUSTOMERS
NEW MARKET/ CUSTOMERS
Growth Model: AnsoffGrowth Model: AnsoffOLD PRODUCT NEW PRODUCT
OLD MARKET/ CUSTOMERS
NEW MARKET/ CUSTOMERS
MARKET PENETRATION
STRATEGYConvince its customers to
consume more of its present offers
Growth Model: AnsoffGrowth Model: AnsoffOLD PRODUCT NEW PRODUCT
OLD MARKET/ CUSTOMERS
NEW MARKET/ CUSTOMERS
MARKET PENETRATION
STRATEGYConvince its customers to
consume more of its present offers
MARKET DEVELOPMENT
STRATEGY
Service firm continues with its old offers but now to
different customers
Growth Model: AnsoffGrowth Model: AnsoffOLD PRODUCT NEW PRODUCT
OLD MARKET/ CUSTOMERS
NEW MARKET/ CUSTOMERS
MARKET PENETRATION
STRATEGYConvince its customers to
consume more of its present offers
PRODUCT DEVELOPMENT
STRATEGY
Give newer bouquet of offers, satisfying different needs for its
present customers
MARKET DEVELOPMENT
STRATEGY
Service firm continues with its old offers but now to
different customers
Growth Model: AnsoffGrowth Model: AnsoffOLD PRODUCT NEW PRODUCT
OLD MARKET/ CUSTOMERS
NEW MARKET/ CUSTOMERS
MARKET PENETRATION
STRATEGYConvince its customers to
consume more of its present offers
PRODUCT DEVELOPMENT
STRATEGY
Give newer bouquet of offers, satisfying different needs for its
present customers
MARKET DEVELOPMENT
STRATEGY
Service firm continues with its old offers but now to
different customers
DIVERSIFICATIONSTRATEGY
The service firm targets entirely new customers with different offers
You’ve got babies, and you’ve You’ve got babies, and you’ve got money:got money:
- How would you allocate your How would you allocate your resources?resources?- How would you categorize your How would you categorize your SBUs?SBUs?
If you don’t have a If you don’t have a competitive advantage, don’t competitive advantage, don’t competecompete
- Jack Welch, GE- Jack Welch, GE
GE Business ScreenGE Business Screen
Market Attractiveness
SBU Strength/Business Position
HIGH
LOW
MED I UM
HIGH MED I UM LOW
INVEST
INVEST
INVEST
PROTECT
(Selectively invest)
PROTECT
(Selectively invest)
HARVEST
HARVEST
PROTECT
(Selectively invest)
PROTECT
(Selectively invest)
PROTECT
(Selectively invest)
DIVEST
Market attractiveness:Market attractiveness:
Market sizeMarket size Market growth rateMarket growth rate Market entry barriersMarket entry barriers Competition – number and type of Competition – number and type of
competitors competitors Technological requirementsTechnological requirements Profit margins, etc.Profit margins, etc.
SBU strength/business position:SBU strength/business position:
SBU sizeSBU size Market shareMarket share Research and development capabilitiesResearch and development capabilities Power or strength of differential Power or strength of differential
advantage(s)advantage(s) Cost controlsCost controls Production capabilities and capacitiesProduction capabilities and capacities Management expertise and depth, etc.Management expertise and depth, etc.
Ratings of the SBUs Ratings of the SBUs
Criteria are assigned weightsCriteria are assigned weights Each SBU/product is rated with Each SBU/product is rated with
respect to all criteriarespect to all criteria Overall ratings are calculated for all Overall ratings are calculated for all
SBs/productsSBs/products Each SBU/product is then rated as Each SBU/product is then rated as
high, medium or low according to high, medium or low according to market attractiveness and then market attractiveness and then business position/SBU strength.business position/SBU strength.
Pros & cons:Pros & cons: portfolio portfolio modelsmodels
Constant product Constant product audit through audit through profitability screenprofitability screen
Judicious mixture Judicious mixture of portfolio-mixof portfolio-mix
Too narrow focus Too narrow focus on costson costs
Nothing on Nothing on innovationinnovation
No weightage to No weightage to risksrisks
Where To GrowWhere To Grow
Related/Unrelated Diversification Related/Unrelated Diversification Value ChainValue Chain
RELATED AND UNRELATED BUSINESSRELATED AND UNRELATED BUSINESS
NEW ENTRANT
OPENING NEW BUSINES LINES
CUSTOMERS“Coming Closer”
VERTICAL INTEGRATION
Going “Upstream” or Forward Integration
“Downstream” or Backward Integration
SUPPLIERSSUPPLIERS SUPPLIERS
CO.
“Coming Closer”
CompetitionCompetition
??
CompetitionCompetition
ICICI BankICICI Bank Air DeccanAir Deccan Titan WatchesTitan Watches
TBZ ?TBZ ? Volvo ?Volvo ? Archie’s Gift Archie’s Gift
Gallery ?Gallery ?
Competitor TypologyCompetitor Typology
SIMILAR SERVICE OFFER
DIFFERENT SERVICE OFFER
OFFER
NEED SIMILARNEED
DIFFERENT NEED
Competitor TypologyCompetitor Typology
SIMILAR SERVICE OFFER
DIFFERENT SERVICE OFFER
OFFER
NEED SIMILARNEED
DIFFERENT NEED
DIRECT COMPETITION
SBI vs. ICICI Bank vs. IDBI Bank
Competitor TypologyCompetitor Typology
SIMILAR SERVICE OFFER
DIFFERENT SERVICE OFFER
OFFER
NEED SIMILARNEED
DIFFERENT NEED
DIRECT COMPETITION
SBI vs. ICICI Bank vs. IDBI Bank
INDIRECT COMPETITIONA mall has food court (restaurants),
sports courts, multiplexes (entertainments) retail stores etc.
Competitor TypologyCompetitor Typology
SIMILAR SERVICE OFFER
DIFFERENT SERVICE OFFER
OFFER
NEED SIMILARNEED
DIFFERENT NEED
DIRECT COMPETITION
SBI vs. ICICI Bank vs. IDBI Bank
INDIRECT COMPETITIONA mall has food court (restaurants),
sports courts, multiplexes (entertainments) retail stores etc.
SUBSTITUTE COMPETITION
Archie’s Gallery and Titan/Tanishq can both
compete for the gift market
Competitor TypologyCompetitor Typology
SIMILAR SERVICE OFFER
DIFFERENT SERVICE OFFER
OFFER
NEED SIMILARNEED
DIFFERENT NEED
DIRECT COMPETITION
SBI vs. ICICI Bank vs. IDBI Bank
INDIRECT COMPETITIONA mall has food court (restaurants),
sports courts, multiplexes (entertainments) retail stores etc.
SUBSTITUTE COMPETITION
Archie’s Gallery and Titan/Tanishq can both
compete for the gift market
NEW ENTRANT
An existing player has taken the diversification route to offer a service
concept but now becomes a direct competitor
Barriers of Entry
Competitor TypologyCompetitor Typology
OFFER
NEEDSIMILAR
NEEDDIFFERENT
NEED
Similar Offer
Different Offer
DIRECT COMPETITION
SBI vs. ICICI Bank vs. IDBI Bank
INDIRECT COMPETITION
SUBSTITUTE COMPETITION
NEW ENTRANTS
Barriers of Entry
A mall has food court (hunger need), sports courts, multiplexes
(entertainments) retail stores (acquisition need) etc.
Archie’s Gallery and Titan / Tanishq can both compete for
the gift market
An existing player has taken the diversification route to offer
a service concept but now becomes a direct competitor
Threat of Substitute Products
Threat of Substitute Products
Threat of New
Entrants
Threat of New
Entrants
Threat of New
Entrants
Rivalry Among Competing Firms
in Industry
Rivalry Among Competing Firms
in Industry
Bargaining Power of Buyers
Bargaining Power of Buyers
Bargaining Power of Suppliers
Bargaining Power of Suppliers
Porter’s Five Forces Model of CompetitionPorter’s Five Forces Model of Competition
66thth Force: Value Net Force: Value Net ModelModel
MNC
Competitor
Supplier Complementor
Customers/ Buyer
Thank YouThank You