External and Internal Environment Analysis
March 2, 2015
External and Internal Environment Analysis
Guzman Realty is a new real estate company that was launched in the market a couple few years ago. The main purpose of Guzman Realty is selling homes for the diverse local community in the Phoenix area. Changes in the external and internal environment of the real estate company will determine the decisions management takes. With this purpose in mind, this paper will provide a complete environmental scan for the proposed real estate company. Identify and analyze the Most Important External Environmental Factors
The external environment is defined, according Pearce & Robinson (2013), “as factors beyond the control of the firm that influence its choice of direction and action, organizational structure, and internal processes”(Pag. 87). The external factors that affect the operations of Guzman Real Estate Company include the remote, industry, and external operating environments. These factors together influence the basis for opportunities and threats that firm encounters in its competitive environment. The Remote Environment
The remote environment is comprised of factors that affect the real estate operating situation, and some of those factors include economic, social, and political factors. For instance, the economy is a key external factor that can influence the success of the real estate company. Economic factors
The economy is typically measured, according to Nguyen (2015), “by economic indicators such as the gross domestic product, employment rates, manufacturing activities, the price of goods, etc.” (Pag. 1). Consequently, the economy cycle can have varying effects on real estate industry. For instance, when the economy slows down, and construction starts to decline, Guzman Realty can begin to experiment experience decreases in home sales. On the other hand, the opposite is true, as the economy growth, homes sales begin to raise. Also, prime interest influences the real estate market because changes in interest rates can affect the ability of a person to purchase a house. For instance, when interest rates fall, the cost of buying homes decreases, which in turn creates a higher demand for homes, which increases prices. Conversely, when interest rates rise, the demand for homes decreases and real estate prices drop (Nguyen, 2015). Political Factor
Legislation as part of politics is considered another important factor that can have a long lasting effect on the demand and price of real estate. The government can create a temporary demand for housing by providing the population with increases on tax credits, deductions, and subsidies. So if the Guzman Realty is aware of the incentives offered by the government, they can inform clients in order to influence the demand and supply and identify potentially false trends. For example, in 2009, the government introduced, according to Nguyen (2015), “the first—time homebuyer’s tax credit to homeowners in an attempt to jump-start home sales in a sluggish economy. But according to National Association of Realtors (NAR), this tax incentive alone led to the sale of 900,000 home buyers to buy home” (Pag. 2). Social Factors
Some of the social factors affecting the external environment of Guzman Realty include beliefs, attitudes, values, opinions, and lifestyle of individuals. These factors are developed, according to Pearce & Robinson (2013), “from culture, ecological, demographic, religion, educational, and ethnic conditions (Pag. 89). Demographics are the actual data that describes the structure of a population. This structure is composed of gender, race, age, income, migration patterns, and the rate of growth. These types of statistics are significant factors that can affect the price and demand of real estate properties. Larger changes in the demography of a location can have a tremendous effect on real estates trend for many...
References: Hoover, G. (2015). Seller’s Competitive Market Analysis. Retrieved from http://www,glennhooverrealestate.com/selling-homes/competitive-market-analysis
Kokemuller, N. (2015). Threats and Weaknesses of a sole proprietor Real Estate Company. Retrieved from http://yourbusiness.ascentral.com/treat-weakness-sole-proprietor-real-estate-company-25113.html
Nguyen, J. (2015). 4 Key Factors that Drive The Real Estate Market. Retrieved from http://www.investopedia.com/articles/morgage-real-estate/factors-affecting-real-estate-market.asp
Pearce, J. A., & Robinson, R. B. (2013). Strategic Management: Planning for Domestic and Global Competition. New York, NY: McGraw Hill.
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