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ANALYSIS OF THE COMPETITIVE SITUATION IN THE MARKET OF CONSTRUCTION OF RESIDENTIAL REAL ESTATE OF THE REPUBLIC OF KAZAKHSTAN Sultanbekov Е-M. (Russian Federation) Email: [email protected]
Sultanbekov Erzhan Muratovich - Applicant Doctor of Business Administration, RUSSIAN ACADEMY OF NATIONAL ECONOMY AND CIVIL SERVICE, MOSCOW
Abstract: the competitive situation in the residential real estate construction market in the Republic of Kazakhstan is analyzed on the basis of Michael Porter's five competitive forces model. The individual components of the five forces are examined and analyzed in detail, their element-by-element scoring characteristic is given and the total level is estimated. An analytical profile of the model is built. The most significant forces and elements are identified and the reason for their excess over the others is analyzed. In conclusion, a conclusion is made and general recommendations are given on the functioning of companies in this market.
Keywords: marketing, competition, analysis, strategy, strength, company, construction, real estate, market, operation, scoring, profile.
АНАЛИЗ КОНКУРЕНТНОЙ СИТУАЦИИ НА РЫНКЕ СТРОИТЕЛЬСТВА ЖИЛОЙ НЕДВИЖИМОСТИ РЕСПУБЛИКИ КАЗАХСТАН Султанбеков Е.М. (Российская Федерация)
Султанбеков Ержан Муратович - соискатель степени доктора делового администрирования, Российская академия народного хозяйства и госслужбы, г. Москва
Аннотация: анализируется конкурентная ситуация на рынке строительства жилой недвижимости в Республике Казахстан на основе модели пяти сил конкуренции Майкла Портера. Подробно рассматриваются и анализируются отдельные составляющие пяти сил, даётся их поэлементная балльная характеристика и оценивается суммарный уровень. Строится аналитический профиль модели. Выявляются наиболее существенные силы и элементы и анализируется причина их превышения над прочими. В завершение делается вывод и даются общие рекомендации по функционированию компаний на данном рынке. Ключевые слова: маркетинг, конкуренция, анализ, стратегия, сила, компания, строительство, недвижимость, рынок, функционирование, балльная оценка, профиль.
In order to analyze the competitive environment in the market, the model of the five forces of competition of Michael Porter is used. Such an analysis determines the nature and intensity of competition forces in the industry and helps to find a position that will protect the company from the negative influence of competitive forces. The weaker the influence of these forces, the greater
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the opportunities for the firm to operate and make profit; and vice versa. An analysis of the five forces model is necessary in order to know which competition parameters to pay special attention to when creating and implementing a strategy.
Let us analyze on the basis of this model the competitive situation in the residential real estate construction market of the Republic of Kazakhstan.
Market Power Suppliers (1.5 / 5)
The suppliers for the development company are manufacturers of building materials, equipment, and building machines. Also in this category you can include consulting companies, manufacturers of promotional products, etc.
Supplier concentration (1/5)
There are a large number of companies producing building materials and performing contract work, as well as companies providing advertising and PR services. Both of these industries can not be called more cohesive compared to the one under consideration; thus, the factor of concentration of suppliers in this case does not increase their strength.
Uniqueness or product differentiation (3/5)
Products supplied by industry suppliers are not unique in their own right, which reduces the potential costs of switching from one supplier to another. On the other hand, development companies have certain requirements for the quality and characteristics of the supply, and they prefer to conclude contracts for the implementation of entire projects for a long time; and the inconvenience and losses that a company may incur if it needs to find a new counterparty cannot be ignored.
The threat of direct integration into the industry (1/5)
The peculiarities of the suppliers' business in the real estate industry do not suggest opportunities for further transformation into a development company. In the case of the real estate market, the probability of direct competition of the supplier with the client company is small.
Degree of buyers for suppliers (1/5)
Usually the developer is a large customer, purchasing goods or services for a large amount. From suppliers of building materials, developers usually, at a minimum, buy products for the entire project of a residential complex. Suppliers of advertising or consulting services also usually have long-term contracts that involve substantial amounts of work and bring in profits to suppliers, which has a rather large weight in the structure of the total profits of supplier companies. Thus, it can be said that supplier companies are interested in attracting such large customers and ready to make concessions if necessary.
Market power of buyers (2.5 / 5)
Customer Concentration (2/5)
Buyers in the real estate industry, as a rule, are not concentrated; they make single purchases. However, the cost of even a single purchase is high due to the peculiarities of the market (the cost of apartments is calculated in millions of tenge), and the company has only a limited number of available apartments at a certain point in time. Thus, companies are trying to keep every customer, as even buying a studio or a one-room apartment brings profit to the company.
The degree of standardization of the goods (2/5)
People perceive housing as a unique product with special characteristics, they choose and weigh their decision for a long time. It is unlikely that the buyer can easily switch from one developer to another if he has already found what he liked. However, it should be noted that residential complexes of several developers may be similar in terms of characteristics, prices and locations - in this case, the buyer will not be difficult to change their choice in favor of a competitor.
Price Sensitivity (5/5)
Buying an apartment is a serious step, for the implementation of which many people have been saving money for several years. Buying a home makes up a huge part of the cost to consumers throughout their lives, and they are very selective in their selection and purchase process.
The threat of absorption of the company by buyers (1/5)
Buyers in the industry - individuals who buy the product - apartments - for personal needs; there is no threat of their taking over the company.
Intra-industry competition (3.25 / 5)
Increased competition in the industry depends on the following factors:
The presence of a large number of competitors (5/5)
On the market there are many companies offering similar products in the eyes of the consumer. Developers monitor trends, customer preferences and actions of their competitors, constantly offering new features to their residential areas and bringing new apartments to the market. The buyer chooses from a variety of alternatives.
Slow growth of the industry (2/5)
The volume of the real estate market in the Republic of Kazakhstan is growing, which meets the needs and demand from buyers. With a slow growth of the market, competition would become more intense, as manufacturers would compete for the existing market share, which would not increase over time.
High fixed costs or short product life (2/5)
Naturally, the products of the companies-developers are not perishable. Fixed costs also can not be called distinctively high compared to the cost of production. Thus, development companies do not face the need to lower prices and stimulate sales when demand falls in order to sell products and make up for losses. But, on the other hand, companies usually plan to launch projects for the years ahead, and they cannot stop building the complex overnight, which pushes them to additional sales promotion during a fall in demand.
High Barriers to Leaving the Industry (4/5)
A company can leave the market if it currently has no projects under construction or planned. Otherwise, the exit is fraught with considerable difficulties: the need to write off large investments (plots of land, unfinished houses), protests from co-investors, who hope to get their own housing in the near future. Legislation obliges developers to fulfill obligations to sharers specified in equity participation agreements.
The threat of the emergence of new competitors (2.5 / 5)
The seriousness of the threat of the emergence of new competitors depends on the barriers to entry and the reaction of existing companies in the market to the emergence of new players. Barriers can be considered high with the following prerequisites:
Availability of economies of scale (1/5)
The real estate market is not an industry where companies benefit from increased production. Usually, each residential complex of a company is a separate project for which all costs are calculated, and the cost of a single apartment or house does not depend on the total volume of construction.
Consumer loyalty to brands (2/5)
The real estate market has a set of companies operating in the industry for more than a year and has gained popularity among residents. Even a person who is not interested in buying an apartment can name several companies without a hint. However, the choice of housing is a time-consuming process, decision-making during which depends not only on consumer confidence in a particular developer, but also on many other factors - characteristics of the house, location, price, construction dates, etc. In addition, most often the acquisition apartments are not a re-purchase, so the concept of brand loyalty is not always appropriate in the real estate market.
Capital requirement (4/5)
To implement the construction project, huge investments are required, estimated in tens of billions or even trillions of tenge, for which companies-developers usually use lending services in banks. Developers need to provide themselves with funds not only for the construction of residential complexes and all associated costs, but also to compensate for the losses from consumer loans that have decided to buy housing in installments.
Availability experience curve (1/5)
Growth of the company's experience is understood as an increase in production volumes, that is, an increase in the number of built construction projects. For real estate players, as well as for representatives of other industries, it is true that with experience comes a better understanding of the market and the needs of the consumer. However, it cannot be said that the experience of the
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developer helps it reduce costs, for example, by accumulating technology or having a patent. Special technologies that allow to obtain attractive housing characteristics, allow to gain the attention of consumers, but do not reduce the cost of construction.
Access to distribution channels (2/5)
Real estate developers sell their apartments through their own sales departments or through real estate agencies, with which virtually any developer can enter into contracts. There are several factors that increase the "weight" of distribution channels in assessing barriers to entry into the industry: for example, the presence of companies with long-term successful partnerships with agencies and being able to dictate specific sales conditions; availability of promotions and discounts for consumers. In general, distribution channels do not have significant weight in raising entry barriers.
State policy (5/5)
Real estate is an industry that is very strictly regulated by the state, as mentioned earlier in the PEST analysis. The laws governing the activities of market players are becoming tougher every year, protecting consumers from unscrupulous developers. In order to obtain all the necessary permits for the construction and operation of the facility, companies must meet a significant number of requirements. Despite the fact that legislation is one of six factors, its weight is significant enough to generally reduce the possibility of the threat of the invasion of new competitors.
The threat of substitutes (3.67 / 5)
From the point of view of consumers, alternatives to buying an apartment in a new building may be buying an apartment in the secondary market or renting an apartment.
Availability and Availability of Substitutes (5/5)
The secondary housing market and rental housing is huge, buyers do not have difficulty finding an apartment in almost any area (especially for those places where the possibilities of building new houses are limited). As for the lease, it depends on the type of clients. Lonely young people who have no money to buy, it is easier to rent an apartment temporarily than to agree to pay a dozen years for a mortgage. On the other hand, for families and people with children, on whom the majority of developers are oriented, it is more profitable to buy an apartment.
Competitiveness of substitutes (2/5)
Infrastructure, novelty and quality of housing in the primary market are highly valued, and the buyer is often willing to overpay a little for his own benefit. Repair of apartments, the condition of the house, the infrastructure of the complex as a whole usually leaves much to be desired in the case of secondary housing or renting an apartment.
Low switching costs (4/5)
In the secondary market, the price per square meter is lower than in the primary, which makes it attractive to the buyer. The monthly mortgage payment is comparable to the rent; besides, many banks are now offering to take a mortgage with a minimum down payment or without it at all. Thus, the costs associated with the choice of substitute goods are small.
Based on the analysis, we will build a pivot chart (Figure 1).
emergence of new competitors
The threat of substitutes
Intra-i
of
Market power buyers
Market power suppliers
competition
Fig. 1. Analysis of the residential real estate construction market of the Republic of Kazakhstan by Porter's
model of five competitive forces
Thus, the forces that have the greatest impact on companies in the industry are the current competition in the industry and the threat of switching consumers to substitute products. The competing companies are fighting for each consumer, improving the quality characteristics of the goods offered and actively promoting their product. Despite this, many potential customers, due to lack of funds or lifestyle, are switching to industry substitutes. In general, it can be argued that the industry is attractive; companies that meet the requirements of the state and monitor the activity of competitors have every chance of running a successful business.
1. Dannye Agentstva Respubliki Kazakhstan po statistike [Data from the Agency of Statistics of the Republic of Kazakhstan] // [Electronic resource]. URL: www.stat.kz. (date of acces: 25.03.2019) [in Russian].
2. Porter M.E. Konkurentnaja Strategija/ Metodika analiza otraslej I konkurentov [Competitive Strategy. Methods of analysis of industries and competitors]. 6th ed. M.: Alpina 9, 2016 [in Russian].
References / Список литературы
