Real Estate Investment & Portfolio Management Prof C Bhattacharjee

1. Real Estate Investment & Portfolio ManagementProf C Bhattacharjee

2. Marketing is marketing; its everywhere- Prof. Michael S Baker

3. Socio-Cultural Legal Economic Political - Domestic - Local - International Technological Regulators Competitors Suppliers Consumers/External Customers Internal Customers External and Internal Environment factors for an MNC

4. Components of the General Environment Economic Demographic Sociocultural Industry Environment Competitive Environment Political/Legal Global Technological

5. Components of the General Environment

6. Scanning: Identifying early signals of environmental changes and trends Monitoring: Detecting meaning through ongoing observations of environmental changes and trends Forecasting: Developing projections of anticipated outcomes based on monitored changes and trends Assessing: Determining the timing and importance of environmental changes and trends for firms' strategies and their management External Environmental Analysis The external environmental analysis process should be conducted on a continuous basis. This process includes four activities:

7. Scanning models • Delphi Technique • Spire Approach – Systematic Probing and Identification of the Relevant Environment* 1) fgfgf 2) kk *Klein and Newman

8. Environment Scanning • Competitor Intelligence • Strategic Analysis • The SPIRE Approach (Systematic Probing and Identification of the Relevant Environment)* - Detailed list of environment variables - Set out strategic marketing components - Facilitate interactions of different factors for any linkages • Scenario Building * Klein and Newman, How to Integrate New Environmental Forces into Strategic Planning, “Management Review”, Volume 69, July 1980, pp.40-48

9. Scenario Building • Stage 1: Analysis of the Decisions • Stage 2: Identification of Key Decision Factors • Stage 3: Identifying the Socio-Cultural Factors • Stage 4: Analysis of each of the key variables separately • Stage 5: Selection of Scenario Logics

10. Portfolio Analysis: BCG Grid Relative Market Share HIGH LOW HIGH PROBLEM CHILD Risky – a few go on to become STARS: Invest in some, divest in others STARS Additional growth potential: Invest further Market Growth Rate CASH COWS Limited growth prospects: Minimum investment, can be divested with profitability CASH CRUNCH No profits or cash flow either now or in the future: Divest or liquidate unless turnaround is possible LOW

11. Strategies: BCG Grid Relative Market Share HIGH LOW HIGH PROBLEM CHILD REVENUE ++ + EXPENSE - - - - NET - - DIVEST/ INVEST STARS REVENUE + + + + + EXPENSE - - - NET + + INVEST Market Growth Rate CASH COWS REVENUE + + + + EXPENSE - - NET + + + CASH CRUNCH REVENUE + + EXPENSE - - - - NET - - HOLD/HARVEST DIVEST LOW

12. A Perceptual Map of apparel retailers “For Me” Raymond’s Shoppe Big Bazaar Shoppers’ Stop Fashion Street Westside Pantaloons Apna Bazar High Price Low Price Sheetal Boutique Globus Thanks ‘Flea markets’ “Not For Me”

13. Competitor Typology NEED SIMILAR NEED DIFFERENT NEED OFFER INDIRECT COMPETITION DIRECT COMPETITION SBI vs. ICICI Bank vs. IDBI Bank Similar Offer Barriers of Entry A mall has food court (hunger need), sports courts, multiplexes (entertainments) retail stores (acquisition need) etc. Different Offer SUBSTITUTE COMPETITION NEW ENTRANTS An existing player has taken the diversification route to offer a service concept but now becomes a direct competitor Archie’s Gallery and Titan / Tanishq can both compete for the gift market

14. Porter’s Five Forces Model of Competition Rivalry Among Competing Firms in Industry Threat of New Entrants Threat of New Entrants Bargaining Power of Suppliers Bargaining Power of Buyers Threat of Substitute Products

15. Managing the External Environment 1969

16. The Chinese have not ONE but TWO words for “crises”: “Danger’ & “Opportunity”

17. 1969: Mrs G “seizes the day” • 1964: Nehru dies and Shastri becomes PM; Indira is Defense minister • 1965: Indo-Pak War-II; Shastri dies in Tashkent • Cong party filled with powerful oldies • They select a widowed woman as PM, so that they can control her: Indira Gandhi • Indira’s second honeymoon

18. 1969: Mrs G “seizes the day” • Indira splits Cong: ‘Old’ and ‘New’ • Communist Party splits into CPI & CPM • Indira’s strategy of acquiring a radical image • Nationalizes 19 banks • Abolishes privy purses for ‘royal’ families • “Garibi Hatao” • More socialist than the Communists

19. P N Haksar & Ajit Haksar ‘Only tobacco’ to ‘Also tobacco’ 1969: Hotels Paper Packaging ITH – travel & cargo Sangeet Research Academy Edible Oil – ‘Crystal’ Foods – ‘Aashirwaad’ Ajit Kerkar Single Hotel: Hotel Taj Mahal Multiple Hotels India’s own MNC ITC vs TAJ • Hotels, motels, palaces, “indovilles”

20. Those who forget history are condemned to repeat it- Georghe Santyana

21. Socio-Cultural Legal Economic Political - Domestic - Local - International Technological Regulators Competitors Suppliers Consumers/External Customers Internal Customers Managing the Internal Environment factors for International Marketing

22. Forces affecting DMP PSYCHOLOGICAL/ INDIVIDUAL/ INTERNAL FORCES SOCIAL/ EXTERNAL/ GROUP FORCES D M P INFORMATION SOURCES SITUATIONAL FACTORS

23. 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).

24. 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.).

25. 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.

26. Customers – present and potential 1.Numbers by demographics 2.Age and gender spread 3.Family size and structure 4.Income or employment by occupation, industry, trends 5.Spending patterns 6.Population growth, density and trends 7.Vehicle ownerships

27. Accessibility 1.Site visibility 2.Pedestrian flows 3.Barriers such as railway tracks, streams, slums 4.Type of location zone 5.Road conditions and network 6.Parking 7.Public transports

28. Competition 1.Amount and level (intensity) 2.Type and numbers 3.Saturation Index 4.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).

29. Costs 1.Building costs 2.Rent costs 3.Rates payable 4. Delivery and supply (transportation) costs 5.Insurance costs 6.Labour rates 7.Bank interest rates

30. 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

31. 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.

32. 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.

33. 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.

34. 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.

35. 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.

36. Gravitational Modelincludes 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.

37. Gravitational Model • ‘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

38. Gravitational Model Cx = Outer Limits X Y ‘D’ km P (Y) P(X)

39. Growth Option: How would you grow?

40. Growth Model: Ansoff OLD PRODUCT NEW PRODUCT OLD MARKET/ CUSTOMERS NEW MARKET/ CUSTOMERS

41. Growth Model: Ansoff OLD PRODUCT NEW PRODUCT MARKET PENETRATION STRATEGY Convince its customers to consume more of its present offers OLD MARKET/ CUSTOMERS NEW MARKET/ CUSTOMERS

42. Growth Model: Ansoff OLD PRODUCT NEW PRODUCT MARKET PENETRATION STRATEGY Convince its customers to consume more of its present offers OLD MARKET/ CUSTOMERS MARKET DEVELOPMENT STRATEGY Service firm continues with its old offers but now to different customers NEW MARKET/ CUSTOMERS

43. Growth Model: Ansoff OLD PRODUCT NEW PRODUCT PRODUCT DEVELOPMENT STRATEGY Give newer bouquet of offers, satisfying different needs for its present customers MARKET PENETRATION STRATEGY Convince its customers to consume more of its present offers OLD MARKET/ CUSTOMERS MARKET DEVELOPMENT STRATEGY Service firm continues with its old offers but now to different customers NEW MARKET/ CUSTOMERS

44. Growth Model: Ansoff OLD PRODUCT NEW PRODUCT PRODUCT DEVELOPMENT STRATEGY Give newer bouquet of offers, satisfying different needs for its present customers MARKET PENETRATION STRATEGY Convince its customers to consume more of its present offers OLD MARKET/ CUSTOMERS MARKET DEVELOPMENT STRATEGY Service firm continues with its old offers but now to different customers NEW MARKET/ CUSTOMERS DIVERSIFICATION STRATEGY The service firm targets entirely new customers with different offers

45. You’ve got babies, and you’ve got money: How would you allocate your resources? How would you categorize your SBUs?

46. If you don’t have a competitive advantage, don’t compete - Jack Welch, GE

47. GE Business Screen SBU Strength/Business Position HIGH MED I UM LOW INVEST HIGH PROTECT (Selectively invest) PROTECT (Selectively invest) INVEST MED I UM Market Attractiveness PROTECT (Selectively invest) PROTECT (Selectively invest) INVEST HARVEST PROTECT (Selectively invest) DIVEST HARVEST LOW

48. Market attractiveness: • Market size • Market growth rate • Market entry barriers • Competition – number and type of competitors • Technological requirements • Profit margins, etc.

49. SBU strength/business position: • SBU size • Market share • Research and development capabilities • Power or strength of differential advantage(s) • Cost controls • Production capabilities and capacities • Management expertise and depth, etc.

50. Ratings of the SBUs • Criteria are assigned weights • Each SBU/product is rated with respect to all criteria • Overall ratings are calculated for all SBs/products • Each SBU/product is then rated as high, medium or low according to market attractiveness and then business position/SBU strength.