Week Five Assignment

External Environmental Scan

Monique P. Garland

Argosy University

Introduction

In the week two assignment students were asked to research the marketplace for the organization that was selected in week one assignment. Student have to understand that an effective strategic plan has a good understanding of the marketplace. The selected organization will have an audit conducted throughout the course. Additional information that will be provided in this week’s assignment will include a comprehensive external environmental scan, and also a five forces analysis. The five forces analysis is completed to help students identify current trends for their organization that could potentially cause threat or opportunity.

Five Forces Analysis

Conducting a five forces analysis will focus on the five most important forces that have been determined to have competitive power in regards to any business situations. The Department of Housing and Urban Development has many important sources that could potentially have power against HUD’s business. The first section of the five forces analysis is supplier power; in this section the power of suppliers will be examined. In regards to HUD the suppliers of this industry would be the lenders. However, the lenders only receive properties that have been foreclosed on by borrowers. The size of HUD’s inventory is dependent on the number of properties the lenders send to HUD after they have been received. Now, once the properties are in HUD’s inventory the contractors have to maintain the properties until they are re-sold. The prices are driven up by the contractor trying to receive higher prices for the services they complete for HUD homes. The second section would be buyer power and the buyers that purchase properties from HUD always low ball the asking price because there are so many properties on the market, so at this present time this is a buyers’ market and they have the option to select any home they want. HUD has to compete against every home that is on the market. The buyers will offer below asking price and when that is done that causes the appraisals of other homes to be reduced as well. The third section is competitive rivalry, HUD has many rivalries in the industry, when it comes to placing homes on the HUD rivalries are every other home that is currently on the market. The biggest competition would have to come from new homes sales. Builders are able to offer so many incentives to buyers and their agents for purchasing their homes. With HUD hoes a lot of them are damaged ad HUD only pays three percent of closing cost and does complete repairs. New home builders are paying all closing cost and offering to purchase new appliances and homeowners insurance for a year. This is definitely a better way to purchase a home. The fourth sections deal with threat of substitution; HUD customers can easily decide to conduct business with someone else. HUD has an online bidding process to allows customers to bid on properties online. The problem with this is that HUD doesn’t get the opportunity to review all the bids before a decision is made. Other companies submit their bids in person and this gives the seller to select the best deal for them. HUD customer would probably prefer to submit their proposal in person to give them a better chance to be selected by the owner. The fifth and final step in the analysis is threat of new entry, the good thing is that is takes a lot of money and time to enter the real estate market and to be able to stay in real estate. At the moment there are no threat of new entry that will affect HUD’s business. (Wrote, 2016).

Key Factors and Trends

There are a few key factors and trends in today’s market that affect other areas in the real estate industry such as demographics, interest rates, and the economy. These three areas will determine how well the real estate industry will be in certain areas. (Nguyen, 2010). When it comes to demographics the real estate industry will not be the same or even successful in rural areas of the country that do not have a large population or have enough people in home buying age. Other areas such as Gary, Indiana that is very poor and doesn’t have income will not do as well as the real estate professionals in Atlanta that can focus on many different markets such as luxury or section 8. Real estate interest rates also are a driving factor for real estate. This is because the lower the rate the larger chance a potential homebuyer has to purchase a home. (Nguyen, 2010). Lastly, the economy is a huge factor in the real estate industry. The economy is usually indicators in the economy such as GDP, prices of goods, and available data on employment. This information will tell real estate professional about the financial stability of potential homebuyers and how well the market will be.

External Factors and Trends

There are some external factors in the form of threats that affect the real estate market. Some of the current threats would be consumer perceptions, most of the buyers and sellers in today’s market want their agents to be much more than salespeople. Most of the time agents spend are counseling the buyers and sellers they work with. Another threat in today’s market would be consumer education. Most of the time consumers are not educated in real estate and the value of real estate agents. Agents have to do a better job in educating their clients on the job they actually do. There are so many new technologies and new people that are challenging real estate agents on their pricing models. Lastly, an additional threat would be control over listing data. Many companies like Zillow have stepped in and are benefiting from the lack of information that is being provided by Multiple Listing. Zillow has found a way to become more engaged with consumers and narrow down what they actually want. Sites like Zillow will not replace real estate agent, but it forces them to become more educated in their particular fields. (Today’s top threats and opportunities in the real estate industry, 2016).

Conclusion

In conclusion the week two assignment covered the follow topics the five-forces analysis for the students selected industry. The industry that was selected was The Department of Housing and Urban Development, which is involved in the real estate industry. The second area that was covered was current key factors and trends that are affected other areas in the real estate industry. Lastly, student was required to create a preliminary classification of external factors. Students would have the ability to select if the external factors were considered opportunities or threats towards the industry.

References