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The development of the elite real estate sales sector is dynamic in those regions where the income level of the population is high, and there is a demand for this offer. In Dubai, where the infrastructure is advanced, and a large number of luxury apartments is concentrated, the high-end real estate is a product with an extensive target audience. As an example of one of the companies involved in such a business, DAMAC Properties Dubai can be cited. This corporation has been operating in the elite real estate market for a long time and has a large client base and positive feedback received for diligent work. The activity of DAMAC Properties Dubai is successful, however, difficulties may arise during work. To analyze the company’s activities, a special technique can be used – Porter’s five forces analysis. This method allows considering the main components of the corporation’s work and highlighting those areas of activity that deserve special attention. Porter’s five forces analysis is a valuable mechanism for assessing the performance of any organization, and it can be applied to DAMAC Properties Dubai as a tool for evaluating its success.
Basic Characteristic of Porter’s Five Forces Analysis
This technique is the common way of analyzing the work of any enterprise. Proposed in 1980, it includes the key aspects of the activity – “the threats posed by competitive rivalry, powerful buyers, powerful suppliers, potential new entrants, and substitute products” (Dobbs, 2014, p. 32). In the case of DAMAC Properties Dubai, these elements can help to assess the company’s performance, difficulties encountered, and the primary areas of work. Each of the components should be considered separately to obtain a comprehensive result.
The threat of New Entrants
Even though DAMAC Properties Dubai possesses a sufficient number of assets and a large customer base, the threat of new entrants may adversely affect profits. The corporation has been successfully operating since 2002, and more than 20,880 homes have been purchased (“About DAMAC,” 2018). However, during this period, many new real estate agencies have appeared, which can potentially create harsh competition. The need for costs for product differentiation can become one of the forced conditions for the company’s activities. Moreover, the brand may lose its power because of the appearance of new entrants in the market, and additional work may be required to return consumer interest. The price policy should also be revised if the company’s profit is insufficient. DAMAC Properties Dubai may lose some of its assets, and it may be caused by a decrease in the value of the goods provided. Nevertheless, this measure can help to maintain a client base and prevent the loss of interest in its brand, which is unacceptable in the face of high costs for advertising and the promotion of the product line.
Power of Suppliers
The assets of DAMAC Properties Dubai allow the company to provide customers with the high-class elite real estate that meets modern standards of luxury housing. As practice shows, much depends on how effective work with suppliers is. According to Bodolica, Spraggon, and Shahid (2018), after the financial crisis of 2008-2009, the attitude of the heads of large companies regarding partnerships has changed, and more attention is paid to integration possibilities today. DAMAC Properties Dubai cannot act on its own since partner assistance is a prerequisite for the construction of the luxury real estate. As the representatives of the corporation note, their success is connected with “choosing the right development partners that include award-winning architects, designers, and contractors” (“About DAMAC,” 2018, para. 4). Therefore, the power of suppliers is an essential aspect that influences the success of work.
Power of Buyers
The growth of consumers of the DAMAC Properties Dubai company for sixteen years of work in the market is stable, and sales data confirm customers’ interest. The availability of information for clients is provided by the active marketing policy of the corporation. At the same time, the number of customers is the variable that directly affects the organization’s strategy and its development plans. The concentration of consumers is the factor that allows the company’s management to calculate the volume of products, in particular, the estimated area of real estate being sold. In case the interest of buyers is insufficient, there is a risk of the loss of profit and serious financial problems, for example, the inability to pay rent to creditors. Thus, the power of buyers is a significant factor that largely determines the company’s operating policy, and in the case of DAMAC Properties Dubai, this aspect is one of the fundamental ones.
Availability of Substitutes
The elasticity of demand is the aspect of work that determines consumers’ interest magnitude and its dynamics. In case many companies in the market provide similar services, clients have a wide choice. However, for an individual organization, this factor is undesirable since there is a risk of losing customers. DAMAC Properties Dubai was one of the first corporations to provide services for the sale of the luxury real estate, and its sphere of influence spread not only in the UAE but also abroad – Jordan, Saudi Arabia, Qatar, and some other countries (“About DAMAC,” 2018). Nevertheless, as Bodolica et al. (2018) note, the real estate market in such a developed city as Dubai is the area where high competition is natural. Therefore, despite the success, DAMAC Properties Dubai needs to pay attention to the emergence of new organizations with similar services and to respond to any changes in the interest of consumers timely.
DAMAC Properties Dubai has a stable economic base and a good reputation. Nevertheless, according to Bodolica et al. (2018), adaptation market strategies provide for the need to take into account the activities of competing enterprises. The rapidly developing sphere of the construction of elite housing in Dubai is a potential source of earnings for many enterprises. Therefore, the corporation under consideration should follow the criteria of the market saturation and the cost of advertising to secure a steady flow of customers. Otherwise, it will not be easy to succeed in a competitive environment and recognition among new customers.
Porter’s five forces analysis is an effective and convenient tool for evaluating the activities of DAMAC Properties Dubai since the primary aspects of operating and potential threats can be mentioned. Based on the company’s work, it has a rather stable business, but some factors of activities, for example, market monitoring, may be strengthened to avoid strong competition. The elite real estate market is prosperous in Dubai, therefore, appropriate measures should be taken to maintain the high demand and consumer interest at the appropriate level to avoid competition.
About DAMAC. (2018). Web.
Bodolica, V., Spraggon, M., & Shahid, A. (2018). Strategic adaptation to environmental jolts: An analysis of corporate resilience in the property development sector in Dubai. Middle East Journal of Management, 5(1), 1-20. Web.
Dobbs, M. E. (2014). Guidelines for applying Porter’s five forces framework: A set of industry analysis templates. Competitiveness Review, 24(1), 32-45. Web.