The Canadian real estate industry has experienced a better share of the effects of last year’s economic depression since the last quarter of last year. Players in the industry experienced doubled interest rates charged on mortgages which was attributed to the decrease in the value of the Canadian dollar. With the real exchange rate favoring foreign goods which were cheap as compared to local goods, several investors preferred the international market and hence the circulation of money in the economy reduced. This further pushed up the interest rates for borrowing money since investors withdrew money from local banks and invested in the international market, reducing savings hence the amount available to be borrowed.
Owing to these market condition prevailing for the better part of last year, the real estate sector was hard hit in the last quarter of last year. Inflation led to the increase in costs of implementing ongoing real estate projects and many real estate projects stalled with several real estate companies recording reduced margins of profit and other even recording losses. With the economy recovering and business coming back to normalcy, many companies in this industry have to rethink how to recover from the shakeup. Having served in different positions in Nextle real estate, I would wish to propose certain strategic plans that I feel are necessary for achieving and sustaining growth even after being hard hit by the economic depression.
Recommendations aimed at increasing the chances of success
1. Investment in “safe bets” to reinforce infrastructure used to execute plans: Investing in infrastructure that supports any strategic plan is mandatory for the successful execution of the plan. Safe bets are predictable arrangements or infrastructure that can be used to achieve positive results (Morecroft 25). Some of these safe bets are: Doing away with regional and departmental silos. Silo mentality describe an attitude amongst some members, departments or even groups in a company, not willing to share information with each other. The second bet is making use of performance drivers and leading indicators that are in tandem with a strategy to be executed. Thirdly, a company should invest to develop leaders at all level in an organization (Morecroft 26).
2. Processes to identify processes with a high chances of success should be initiated. Top leaders should begin this process taking into consideration the available growth potential that falls within a company’s core business. Top leaders, while undergoing these processes will identify if any other available adjacent growth avenues be considered (Morecroft 33).
For Nextle Real Estate, we should focus on a customer-oriented growth strategy. A customer oriented growth strategy prioritizes customer satisfaction and will always strive to achieve that. For our company, Nextle Real Estate, we should try and understand our clients’ preferences in real property, try and always make inquiries of what more we should offer to the clients. To identify the most profitable growth avenues available, the process always begins with a company’s core business. When considering a company’s core business, our interest is in the products and services of the company, our clients, our channels or distribution and finally, the geographic areas where the company derives a greater percentage of its revenues and profits. It, therefore, means that top management should kick start this process by asking the question, “what is Nextle Real Estate’s core business? (Dess & Alan 11).
Evaluating how the company’s core business performs
This requires that Nextle Real estate benchmarks and measures its profitability with its peers in the industry. Through this, the company can know its position and performance in comparison to the rest in the industry. It also involves benchmarking on revenues and finally, the company should assess its reputation considering some of its most valued customers (Dess & Alan 36). With an assessment like this, there should arise certain questions, what direction are these main pointers taking the company and what is the reason? Who doesn’t belong to the major customers of the company and what are the reasons? What is Nextle Real Estate’s main competitive market and what does it take to strengthen it? What major threats is Nextle Real Estate’s core business facing? What are the available opportunities that can still be exploited within the company’s core business? (Dess & Alan 76)
The results of the above evaluation process should be significant in that they will influence Nextle’s renewed urge to pursue excellence within its core business. The results will also initiate insightful conversation amongst the top leaders of the company on the ability of Nextle’s core business and ultimately invoke urgency in making significant changes regarding the core business of this company or a new plan to forge a new future by abandoning the current core business and exploiting other profitable options of growth (Wheelen & David 65).
Another customer-oriented growth strategy should be based on Nextle’s existing clients. This focuses on creating high impacting value propositions but for new client sub-set. The principle underlying this strategy is the will and ability to view clients from an entirely different position. Using this strategy, our company will create a process through which specialists and managers, at the interface with customers, gain some new insight into customer preferences and needs. Through this, Nextle will be able to identify undeserved customers and the hidden opportunities for the country’s growth. This is very appropriate for top leaders who interact with clients frequently, and they can contribute immensely to the process (Dobbs and Hamilton 299).
In addition, we should prioritize lower customer sub-set. These are clients for which our cost to provide them with goods and services exceeds the revenues we derive from them. The company then designs value propositions that moves the client to a position of profitability to the company. For example, Nextle may eliminate traditional procurement method when seeking maintenance services for its properties and adopt e-procurement. Traditional procurement method involves a lot of costs in terms of documentation, time and the bureaucratic processes involved. However, e-procurement is first, efficient and cheap hence the company stands at a position of reducing costs when using the later than the former. This will reduce costs considering low segment customers hence increase the chances of our company obtaining profits from such clients (Dobbs and Hamilton 302).
The third growth strategy which is client oriented is entering organizations that link strongly to the core adjacent avenue. This will mostly appeal to our company when we are approaching our full potential, generate surplus cash that is reinvested and operates efficiently. It may be a plausible option when it is evident that the core business’s future potential for growth is weak. More often than not, preference on starting this process is to current clients. Opportunities are available through various meetings with innovative clients. Through these meetings, suggestions on alternative avenues, new geographic markets, new ventures and new services or products, can be obtained (McGrath 253).
Consideration of the non-core activities of the company should be made. The question we should ask then is, is there potential for Nextle to leverage its current positions into attractive opportunities for growth? Special consideration, however, is required when making such considerations. The relationship with the core business calls for some special considerations, the specific being assessing the strategic similarities and differences with our core business. When the differences are significantly much, our capabilities as a company can be taxed. We can, however, reduce this risk by testing Nextle’s capacity through piloting our adjacent initiatives for growth in stages (Wheelen & David 76).
Execution of strategies
The above strategies available for Nextle require infrastructure for successful implementation. This infrastructure must be supportive, and such infrastructure includes strong leadership practices, organization having capabilities valued by clients, management-performance system which relies on leading drivers and indicators of growth (McGrath 248).
(i) Organization capabilities: These include strategic processes which deliver quality products and services to clients. For example, our company may successfully enter new markets and improve the quality of our customer service.
(ii) The second key element of infrastructure required to successfully execute these strategies is performance management. This is premised in the belief that what has been measured should get done.
(iii) The last component of supportive infrastructure is leadership. Leadership should be the key to steering the organization to success. Nextle should hence ensure that leaders at all levels of the organization should be appreciated and motivated. The relationship amongst the leaders and other staff of the organization should, therefore, be healthy and properly coordinated. This will ensure that we work towards achieving the same set of goals.
With proper implementation of the above-suggested recommendations, I believe that Nextle Real estate will pick up and start growing sustainably now that the economy is recovering are opportunities are opening up for us. Since this growth strategy is a long term one, the results of its implementation maybe be realized fully in the long run. In the short run, we should focus on providing the recommended infrastructure and monitor the implementation of short term strategies without much focus on the immediate results. Moving forward, diversification is a necessity so that we can spread risks and maintain a portfolio that does not easily become overwhelmed by market shocks. For example, the company should consider investment in REITs because from a risk analysis point of view, the risks associated with such an investment are cushioned.
References
Morecroft, John DW. Strategic modelling and business dynamics: A feedback systems approach. John Wiley & Sons, 2015.
McGrath, Rita Gunther. "Business models: a discovery driven approach." Long range planning 43.2 (2010): 247-261.
Dobbs, Matthew, and R. T. Hamilton. "Small business growth: recent evidence and new directions." International journal of entrepreneurial behavior & research 13.5 (2007): 296-322.
Dess, Gregory G., G. Tom Lumpkin, and Alan B. Eisner. "Strategic management: Text and cases." (2010).
Wheelen, Thomas L., and J. David Hunger. Concepts in strategic management and business policy. Pearson Education India, 2011.
