Establishing Luxury Housing in Dubai - Essay Example

? Establishing Luxury Housing in Dubai Table of Contents Introduction and Topic Sentence 3 2. Identification of Target Market for Luxury Housing Business in Dubai 4 3. Strategic Competitive Advantage 5 4. Major Difficulties and Problems and Ways to Overcome Them 8 Conclusion and Recommendations 9 Works Cited 10 1. Introduction and Topic Sentence Dubai, being the center of one of world’s richest countries is a place where individuals from different countries and cultures live and work together in harmony; it has become the foremost choice for both private and business investors from all over the world. The city has attracted an increasingly multi-cultural and highly skilled labor force. Due to the increase in population over the last few decades, the popularity of the need of property in Dubai has also increased. The need for property has further propelled the desire to have a luxurious life and due to the fondness of people of Dubai towards luxury, people are offered a wide rage of properties to choose from with unparalleled features implemented in each of them (Life in Dubai). Even though, the present situation of luxury housing is not topnotch, it is still feasible to start a new luxury housing business because of the dynamic nature of the economy and the demand for houses (Life in Dubai) allow customers to indulge in complete luxury. Thus, the basic idea of the business is to capture the market of domestic and foreign inhabitants who are interested in raising their standards of living and want to lead a luxurious life. Topic Sentence The business process that will be analyzed in the present paper is the luxury housing. The luxury housing will be named “Serene Living”. The market of luxury housing will be identified along with determining its current competitors and defining its strategic competitive advantage as well as identifying steps involved in the value chain that will be the key to the success of business. The paper will further identify the problems involved in the successful implementation of and the ways to overcome those problems. The analysis will be based on the Porter’s Five Force Model. 2. Identification of Market for Luxury Housing Business in Dubai Due to the increase in population and the desire to lead luxurious lives, the need for luxury housing is increasing day by day. Although they are priced at a higher rate than other houses, either rental or purchased, they are becoming capable of attracting customer because it offers unparallel facilities and complete luxury (Luxury Homes in Dubai). For instance, Al Mahra is an Arabic style Villa, which is basically a golf home and has been established on the theme of the desert. While, the Palm Jumeirah Signature Villa situated on the Palm Island in Dubai, spoils one with complete luxury. Similarly, studios and apartments that feature a mixture of architectural styles of different countries are being developed in Dubai and known as International City (Luxury Homes in Dubai). Target Market A number of foreigners reside in Dubai and because of the increase in their number in recent time in Dubai, the Government allowed property ownership rights to the non-United Arab Emirates Nationals in 2002. With the elimination of this restriction, the city has seen a number of magnificent ventures, among which were luxury homes in Dubai (Luxury Homes in Dubai). Thus, the target market for the luxury housing is both the domestic and foreign inhabitants who are the kind of people who take pleasure in living in a place that has a green and serene atmosphere and where there is a strong feeling of togetherness, which indicates that they are pleased to meet new people but also respect other people's privacy. Identification of Competitors The competitors of Serene Living would be all the luxury housing providers in Dubai who provide their clients with houses that combines residential area, commercial, hotel, entertainment, shopping and recreation with open green spaces. Serene Living will basically face competition from luxury housing facilities which have are already operating in the market and are generating profit. Moreover, companies who provide similar facilities and luxuries at a lower price would also be also strong competitors. The strategies for gaining competitive advantage over these competitors can be designed using the Porter’s Five Force Model. 3. Strategic Competitive Advantage This part of the research paper discusses the luxury housing industry of Dubai, UAE using the Porter’s Five Forces model and based on the analysis; conclusions will be drawn and competitive strategies will be recommended for the prevalence of the business in Dubai’s luxury housing. Porter’s Five Forces The Porter’s Five Forces model will help in the identification of competitive forces that will influence the planned strategies for the business implementation (Kurtz, MacKenzie, and Snow 57) of Serene Living. The following section will identify discuss the five forces of Serene Living. Bargaining Powers of Suppliers The suppliers of Serene Living would be those who would be involved in the construction of the houses and provision of other facilities to the tenants (Hill and Jones 43). Therefore, the suppliers would include the construction material industry, home furnishing industry, furniture industry, electronic, bathroom fittings industry, etc (Maheshwari). The number of suppliers who are available to Serene Living would influence suppliers’ bargaining power and as the company will have a number of suppliers, therefore, the suppliers’ bargaining power will be reduced (Kurtz, MacKenzie, and Snow 57). Therefore, it is important for the builders of Serene Living to choose suppliers that would provide them with the highest quality of material. Furthermore, the suppliers should be able to provide the required products in a timely manner with suitable pricing. Bargaining Powers of Buyers If customers have significant bargaining power, they can control an organization’s strategy to a great extent (Kurtz, MacKenzie, and Snow 57). Due to the current economic recession and devaluation of property prices, clients have a considerable bargaining power. Recent research indicated that a huge over-supply has started over-powering the Dubai Real Estate and Dubai Commercial Property (Marshel). Therefore, now the customers have the power to reject or accept offers upon their will. Thus, in the present case, the clients will have significant bargaining power regarding the prices and other issues. Barriers to Entry One of the biggest barriers faced by Serene Living is the need for high amount of initial capital investment. Due to the high standards of living of the people of Dubai, Serene Living needs to provide its customers with the finest quality of housing for which large amounts of capital is required. Therefore, Serene Living needs to find the most suitably priced suppliers who can provide them with high quality supplies to keep their costs low. Furthermore, it would also need to hire qualified financial consultants who would advise the company on finding out ways to keep their cost low along with the fulfillment of their organizational goals (Hill and Jones 43). Threats of Substitutes If the customers have the chance to substitute an organization’s products or services from a rival firm or industry, the organization’s management might have to take measures to change its strategy or compete in other ways to gain an advantage (Hill and Jones 43). Substitute of Serene Living would be luxury studio or two-room apartments by other companies because Serene Living offers its customers with villas. To overcome the threats of substitution, Serene Living has to provide its clients with facilities that are different from its competitors (Dubai Property Search-Consider Villas). One of the most attractive factors for customers is the close vicinity of all the tourist attractions, for example, the beaches, shopping malls and even the thriving nightlife (Dubai Property Search-Consider Villas). Thus, it would be extremely profitable for Serene Living to provide its customers with the additional facilities and maintain a competitive edge in the luxury housing market. Rivalry The increase in population and changes in the law has made Dubai one of the most desirable places to live and work (Life in Dubai). On the other hand, the devaluation of property due has also propelled the owners and investors to come up with new and innovative ideas to attract potential customers. Both factors combined, has increased the competition among different luxury home builders. Furthermore, rents for luxury apartments in Dubai’s Burj Khalifa, the world’s tallest building, have been cut down by 40 percent after the owners proved unsuccessful in finding tenants which have further propelled the rivalry (Fattah). Therefore, Serene Living needs to take appropriate measures to ensure successful running of their business. Thus, the Porter’s Five Force model indicates that Serene Living as a luxury housing facility can be introduced in the market. Furthermore, the strategies identified above can be used by the management of Serene Living to prepare the feasibility report of Serene Living. 4. Major Difficulties and Problems and Ways to Overcome Them The major difficulties faced by proposed luxury housing business in Dubai, UAE are as follows: Devaluation of Property The devaluation of property is one of the biggest threats to a housing business, more so luxury housing business. Even though, Serene Living does not have control over the world economy or even the economy of UAE but it can take measures to attract potential customers with reduced prices. This can be done by taking advantage of the present situation by finding a certain number of tenants and later increase its rates and earn profits. Furthermore, the location required for building the housing facility would also cost them less due to the devaluation of property (Nelson). Pricing Another problem faced by Serene Living is the pricing. This is a problem because the purchasing power of customers might not be enough to buy overly priced villas, therefore, the management needs to design a pricing strategy that would not only attract potential customers but would also cover up the cost and generate certain amount of profit. For this purpose, the management needs to conduct a thorough market analysis in which information regarding the competitors’ prices offering similar facilities would be obtained. Moreover, the research would also study the purchasing power of their customers and set the prices accordingly (Bothma). Promotion Due to the cut-throat competition in the luxury housing industry, Serene Living would need to invest huge amounts of capital in promoting their business. In order to achieve the desired outcome from the huge investment in this part of the business, different marketing techniques should be combined together, that is, make use if integrated marketing communication. This would help reach out to the customers through different means and mediums which would ultimately help in the successful running of the business (Bothma). Conclusion and Recommendations After conducting a thorough analysis of the scope of luxury housing business in Dubai, UAE, it can be concluded that Serene Living can prove extremely successful by offering different facilities as compared to its competitors. The Five Forces model has helped in the identification of the strategies that Serene Living can take to gain a strategic competitive advantage in the luxury housing industry. Furthermore, it can use problems such as devaluation of property to its advantage by offering lower prices to the potential customers. In conclusion, Serene Living can overcome the problems it encounters by implementing the above-mentioned competitive strategies. Works Cited Bothma, Neels. Integrated Marketing Communication. 2nd Rev. ed. New Africa Education Publishing, Johannesburg, 2005. Dubai Property Search-Consider Villas. 2009. Tickrin.com: Real Estate Search. 4 Feb. 2011. Fattah, Zainab. Rents for Dubai Tower’s Luxury Homes Are Cut on Lack of Tenants. 14 Oct. 2010. 4 Feb. 2011. < http://www.businessweek.com/news/2010-10-14/rents-for-dubai-tower-s-luxury-homes-are-cut-on-lack-of-tenants.html> Hill, Charles, and Jones, Gareth, R. Strategic Management: An Integrated Approach. 7th ed. United States of America: South-Western College Publishers, 2006. Kurtz, David, L., MacKenzie, H. F., and Snow, Kim. Contemporary Marketing. 2nd ed. Toronto: Nelson College Indigenous, 2009. Life in Dubai. No date. Dubai Property: Investment Ltd. 4 Feb. 2011. Luxury Homes in Dubai. No date. Maps of the World. 4 Feb. 2011. Maheshwari, Shushmul. Indian Housing Set To Boom On Influx Of Luxury Housing Demand. Jan. 2011. 4 Feb. 2011. Marshel, John. Dubai's Real Estate Behavior on Apartments & Commercial Properties. 11 Dec. 2010. 4 Feb. 2011. Nelson, Liam. Owning and Renting Villas in Dubai has become a Realistic Option. 1 Dec. 2010. 4 Feb. 2011. Read More