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