STRATEGY ANALYSIS
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INTRODUCTION
Preferred apartment communities was found in 2009 by Silverstein Leonard A and Williams, John A. the company headquartered in Atlanta, it was started with the aim of acquiring the multifamily properties throughout the United States markets. The company operates in three segments that include finance, retail, and multifamily communities. The financing segment of the company includes the bridge loans, the investment portfolio of the firm of mezzanine loans, and other instruments that company deploy for partially financing the constructions, developments, real states and its related assets, and new multifamily communities’ prestabilization carrying a cost. The multifamily communities segment includes owned multifamily residential communities. However, the retail center of the company includes owned shopping centers. The managers of the company and preferred apartment advisors externally manage the firm (The Wall Street Journal, 2016).
Multiple strategies have been presented in the documents but after having a weighted score, it has been decided that the company rather focusing any other factor should adapt the technological advancement strategy that will allow the company to gain efficiency and cost advantage in its existing market. The paper has been five major sections; the first section presents strategic analysis through utilizing of SWOT analysis. The second section presents BCG matrix that revealed the company is at question mark position as the company has high growth rate but low market share. The grand strategy section proposes six strategies for the company that can be used to have higher market share. However, in the later section, two strategies have been narrowed down. The last section reflects on implementation strategy that includes the resources required to implement the strategy and cultural issues.
STRATEGIC ANALYSIS
The company position itself as an acquirer and operator of multifamily properties, which means it is not a construction company just acquires and operates multifamily properties. For attracting customers, the company entered into the purchase options, and forwards purchase with the purpose of having price competitive advantage. Forward buying helps company preventing itself from the affects of price rise and allows the company to offer housing facilities at lower price. The company also offers performance assurance, provide deposit arrangements, and make mezzanine loans (a contact that if the loan taking organization will not be able to repay the loans, will transfer the ownership of the property to PAC). The total revenue of the company is improving significantly (Yahoo Finance, 2016).
Strategic analysis is the procedure of carrying out research on the environment of the business with which the company operates and on the firm itself, so the firm can better formulate strategies. Several tools are available that can be used to conduct strategy analysis; however, in this paper SWOT analysis is used (Pearce, Robinson, & Subramanian, 2000).
BCG Matrix
The BostonConsulting group (BCG) matrix presents the organizations along two dimensions that are market share and business growth rate. The growth rate of the business determines that how quickly the entire sector is improving. However, market share determines in evaluating the business that either they have smaller or larger share than their competitors. The combination of low and high business growth and market share presents the four categories for the business portfolio. These categories help in determining the company’s position in the industry (Daft, Kendrick & Vershinina, 2010). The company has four major competitors that are Alexander’s Inc, Mid-American Apartment, Communities Inc, UDR Inc, and AIV Company. BCG Matrix can be found in the appendix 1.
Through the analysis, it has been observed that companies who have gained high market share have left with low chances to grow. However, the preferred apartment communities has low market share, but the company growth is high, which means the company has a potential to gain high market share in future. If the company deploys right strategies and take appropriate strategic decisions, then it can attain a significant market share from its competitors.
STRATEGIC OPTION GENERATION
After analysis, following strategies have been proposed for the company:
Horizontal integration refers to the acquisition of more business activities that are in the value chain is at the same level. As in horizontal integration, different firms are at the same stage of acquisition they share resource that help them in reducing cost and therefore, prices. Therefore, it is recommended that the firm should do horizontal integration that would allow the company to offer its multifamily communities at a lower price and gain competitive advantage over other firms (Meisenheimer, 1997).
The company should enhance its marketing efforts to communicate its products and services to its customers the more the customers will be aware regarding the products of the company the more they will buy. In this way, the share of the company will improve that will be beneficial for the business.
Currently the company is offering land for building and construction activities as other competitor organizations. The company can differentiate itself from competition through offering construction services rather just offer finances. It will give the reason to customers to consider the company as first option that will contribute in improving the market share of the company.
The company should invest in its research and development activities. For example, currently, the company is offering partial financial services to constructions, developments, real states and its related assets, and new multifamily communities. Research and development may encourage the company to enhance its financing services for these segments. Construction and development activities are growing around the world, offering additional financing services to construction projects will increased the financing segment market share that will contribute in the overall profitability of the organization.
Technology contributes in streamlining the work processes that ultimately helps companies in reducing cost. The company can take the advantage of globalization and can buy the advanced technologies that will give the corporation edge over competitors and will help in lowering the cost of its multifamily residential plots.
The competition in the current multifamily industry is high. The company can diversify by entering in other related or unrelated segments that can help the firm in out beating the competition. For example, the company can offer consulting services to its multifamily segment customers. The firm can acquire a complete construction company and could offer construction services to other companies (Diversified Commercial Real Estate, 2015).
STRATEGIC OPTION ANALYSIS AND SELECTION
The company is in question mark position as the growth rate of the company is high, but it has a lower market share.This communicates the weak position of the company. Therefore, the company needs to differentiate itself from its competitors. For differentiation, it is essential that company offer differentiated benefits to its customers.
The firm acquires forward purchase contract strategy to control the cost and aggressive acquisition and expansion in financing services strategy (Atlanta, 2014; Nasdaq, n.d). However, the best two recommended strategies to the Preferred apartment communities include investing in research and development as it will reveal several growth options for the organization. Secondly, the firm should enhance its technological capabilities for having growth and competitive advantage.
Quantitative Strategic Planning Matrix
The two strategic options are considered from the matrix, and it has been realized that if the company expands its technological capabilities, then it would be able to expand on its growth as shown by the QSP Matrix presented in appendix. The two options have been evaluated on the basis of different factors by allocating different ratings and calculating the weighted average scores of both options. Therefore, the recommended strategy is to expand the technological resources (see appendix).
STRATEGY IMPLEMENTATION
Strategy implementation is a phrase refers to the activities that are adapted for the management of the implementation of strategic plan. Successful implementation of the strategy demands the involvement of every employment in strategic change (NCVO, n.d). The company has decided that it will implement the technological advancement strategy to further develop its capabilities and enhance its competitive advantage.
The critical resources that will contribute to implementing the plan are financial resources of the organization and educated and talented workforce. For further training and educating employees regarding the utilization of newtechnology, training will be required that will demand more finances.
Cultural Factors
For the successful strategy implementation, it is essential that the culture of the organization is determined. When implementing strategy then people many resists because of the lack of using new technology. Therefore, the company should make sure that people are aligned with the organizational goals and organization’s vision and mission. The firm should have employees that the change is essential and aligned with organization’s goals. The firm should build a collaborative culture that helps employees in supporting change implementation (Roll, 2014).
CONCLUSION
The paper presents the analysis of preferred apartment communities; the company is at the question market stage, and the reason is the high competition in the industry. The company has high growth, but the market share of the organization is low. Therefore, it is essential that the company need to take diverse strategy initiative to increase the market share of the company. The strategy that has been proposed top the company is that it should increase its research and development efforts that will help in recognizing the business expansion opportunities and therefore, will contribute in market share. However, later on, after having weighted score it has been extracted that the company should enhance its technological expertise and expand on technological development that would enhance the company efficiency and effectiveness and will contribute to enhancing the market share.
EXHIBIT 1
BCG MATRIX
EXHIBIT 4GRAND STRATEGY MATRIX(strategies appropriate to each box)
EXHIBIT 3Quantitative Strategic Planning Matrix
Rating Key
1- Major Weakness, 2- Minor Weakness, 3- Minor Strength, 4- Major Strength
REFERENCES
Anderson, (2015). Can Apartment Supply and Demand Keep Pace?. national real estate investors. Retrieved February 19, 2016, fromhttp://nreionline.com/multifamily/can-apartment-supply-and-demand-keep-pace
Atlanta, G. A. (2014). Preferred Apartment Communities, Inc. Announces Agreements to Acquire Nine Grocery-Anchored Necessity Retail Shopping Centers. Retrieved February 19, 2016, from http://www.sec.gov/Archives/edgar/data/1481832/000148183214000074/pressrelease-retailpropert.htm
Daft, R. L., Kendrick, M. K., & Vershinina, N. (2010). Management. Singapore: Cengage Learning EMEA.
Diversified Commercial Real Estate. (2015). Diversified Commercial Real Estate & Investment Company. Retrieved February 21, 2016, from http://www.divcommercial.com/
Meisenheimer, C. G. (1997). Improving Quality: A Guide to Effective Programs. USA: Jones & Bartlett Learning.
Nasdaq. (n.d). PREFERRED APARTMENT COMMUNITIES INC (APTS) IPO. Retrieved February 19, 2016, from http://www.nasdaq.com/markets/ipos/company/preferred-apartment-communities-inc-833934-64819
NCVO, (n.d). Implementing strategy. Retrieved February 21, 2016, from https://knowhownonprofit.org/organisation/strategy/implement
Pearce, J. A., Robinson, R. B., & Subramanian, R. (2000). Strategic management: Formulation, implementation, and control. Columbus, OH: Irwin/McGraw-Hill.
Roll, M. (2014). Culture Can Make or Break Strategy. Insead. Retrieved February 19, 2016, fromhttp://knowledge.insead.edu/strategy/culture-can-make-or-break-strategy-3730
The Wall Street journal. (2016). Preferred Apartment Communities Inc. Retrieved February 19, 2016, from http://quotes.wsj.com/APTS/company-people
Yahoo Finance. (2016). Preferred Apartment Communities, Inc. (APTS). Retrieved February 19, 2016, from https://finance.yahoo.com/q/is?s=APTS&annual
