The following report is aimed at providing a business environment analysis for a new market entry of Knight Frank Company in Oslo, Norway. Since the real estate sector is a broad sector, the report will concentrate on the Residential Property Investment and International Property Investment the company engages in since majority of the millionaires are made here. Within this report, the major strengths and weaknesses of the company and the Norwegian market that should be considered in the new entry will be outlined through the SWOT analysis technique. Furthermore, a detailed analysis of the market environment through the PESTLE (for the macro environment) and Porters 5 Forces (for the micro environment) shall be conducted to get the gist of how the new market is and what the company can do to thrive within the market.
Background of Business Organization
Knight Frank is an international real estate consultancy company with the global headquarters in UK, London. The company has over 14,000 employees in 411 offices worldwide which are spread in 59 countries in Europe, Asia, Africa and even America (Headquarters, 2017). The company has been ranked among the companies with incomes between PLN 5,000,000 and 50,000,000 by the Forbes Magazine. In this case, the company received the award of the 2017 Forbes Diamond on 22nd June 2017 (Knightfrank.com, 2017). Also, good to mention, the country was ranked as number three in the category of World's Best Countries for Business, which is based on 11 different factors, as per the Forbes report in 2016. Further, the country was ranked as the most prosperous country as compared to 142 other countries globally in 2016 by the Legatum Institute in the Annual Global Prosperity Index (The Wealth Report, 2017).
Background to Business Environment
To begin with, the target market for consideration is Norway. Notably, Norway has generally been categorized as being highly suitable for start-up businesses. Further, the country has a history of having a well-established and flourishing real estate sector which is very open to new investors. As a result, the Knight Frank real estate company has high chances of success if it ventures into the proposed market. Thus, analyzing the environment of the new market, the PESTLE and Porters Five Forces will be used here since it is crucial for the company to have a strategic entry that will enable satisfaction of the customers and enable them to gain a competitive advantage within the new market.
The PESTLE analysis in this report will entail the determination of the political, economic, social, technological, legal and environmental factors that may influence the Knight Frank real estate company as it starts up in the new market.
First and foremost, the country, Norway, is a monarchy. For that reason, the country has no pressures from the opposition as is the case with other non-monarchal countries. As such, there is a guarantee of political satisfaction if the company can put up with the existing monarchal rule. Also, there is hardly any power transition that would jeopardize the operation of business. Of interest, the government of Norway is in the fore line of ensuring that the business environment is as favorable as possible where it has gone as far as lowering the business tax. In other words, the government has made it a priority in ensuring that the country enacts tax reforms within the country to favor growth and entry of new businesses including the foreign countries. In other words, the political environment for Norway is characterized by all the positive factors that can nurture the entry and growth of Knight Frank real estate. It has in addition to the stable political and government sufficient internal security and also has good international relations which enable business interactions. Finally, the country experiences a positive government integrity and a strong judicial effectiveness both of which create an efficient rule of law that nurtures business growth as the businesses are under sufficient protection by the government (Heritage.org, 2017). Economical
Norway is characterized by a stable economy especially given the stability of the political environment it experiences. The country is associated with a good fiscal responsibility, has an efficient banking system accompanied by a stable stock exchange environment. According to the 2017 Index of Economic Freedom, the country GDP (PPP) of approximately $356.2 billion with a growth rate of 1.6% and a per capita of $68,430 (Heritage.org, 2017). Even though the countrys economy has been said to have issues to do with the freed of labor, tax burden, and government spending factors, the country has established a successful and the supportive rule of law, has embraced business and trade freedom as with a positive change in economic freedom. The economic freedom score changed by +3.5 as of the period between 2013 and 2017. Additionally, the country has favorable inflation (CPI) rates of up to 2.2% and has an FDI of $-4238.6 million as of 2017 (Heritage.org, 2017). The country also has a good regulatory framework which is termed as to be efficient and transparent and thus supportive of entrepreneurial and innovative business activities. Finally, the country offers a supportive economic environment for local and foreign businesses through ensuring that there is sufficient market and trade openness. Therefore, the country does provide a perfect working environment for Knight Frank in as far the economy is concerned.
The country reaps the advantages of having an enabled social capacity for buying goods and services and thus offers an excellent environment for ensuring good customers bargaining power. The country has a population of 5.2 million people who would offer a good and diverse market for the goods and services sold there. It is also associated with an unemployment rate of 4.2% which is among the lowest rates in the world (Heritage.org, 2017). The company is also related to having a positive urbanization rate which means that the people are engaging in many real estate activities as they seek to expand their urban centers. In addition to this feature, the country has a good legacy of having low corruption rates especially since it is a monarchal governed country. In this case, the culture of low corruption has trickled down to the general population which makes it conducive and efficient to set up business enterprises within the country. Finally, as already mentioned earlier, the labor freedom has increased within the country and is projected to get even higher with time. With this increase in freedom, the country experiences a favorable change in labor cost which means it is easy to acquire affordable labor within the country even for new entry companies from other countries.
The use of technology has become a major commonality within the country starting from the use of email to the use and construction of modern houses and facilities. In this case, the use of Information and Communication Technology (ICT), which is important in the real estate business, has become common and well embraced by the people of Norway both in the business (public and private) and household levels. Therefore, the Knight Frank Company will reap the advantages of serving a knowledgeable and informed technology in addition to which they will enjoy having the privilege of using online marketing and promotion avenues. This means that the ICT intensive environment will offer good grounds for great customer experience and simpler service rendering practices.
The country, as already hinted out, has a well-defined legal system in which regulations and policies favor the nourishment of new businesses. Ranked as 5 out of 168 countries in the Transparency Internationals 2015 Corruption Perception Index, the country has an independent and effective judiciary system. In this case, the country has a good regulatory framework that ensures monetary freedom and stability. Further, the country is working towards establishing a lower restrictive subsidy framework for the housing market to enrich and encourage the growth of the housing market as suggested by the IMF (Heritage.org, 2017). Finally, the country has a stable corporate and value added tax framework which is not exploiting the business sector. Again, the tax incentives are increasing with time which means that the businesses have much to gain from an entry into the market.
On entry into the market, a company is expected to adhere to the Euro Emission Standard and the Kyoto Protocol. Notably, these two obligations are meant to ensure that the business participates in business activities while ensuring environmental sustainability. Further, there is the Government Opinion on Water Pollution and the Public Opinion on Green Issues which also are intended to address pollution. Therefore, the Knight Frank should ensure that they can meet or the environmentally set standards be it in their dumping of waste, advertising or any other activity they participate in. In other words, the company ought to recognize that it has a corporate social responsibility of ensuring environmental sustainability and conservation as it ventures in the new market.
Porters 5 Forces
This section is intended to analyze the competitiveness of Knight Frank within the new market by analyzing and outlining the major competitors within the target market. Further, the section will contain a general analysis of the customers and the backing up forces which determine how the market demands and dynamics fluctuate. The section will specifically include an analysis of the competitive rivalry of the real estate market in Norway; the bargaining power of the buyer; the threat of new entry; the threat of substitution; and the bargaining power of suppliers.
In the specific area where Knight Frank intends to venture, Oslo, Norway, the major competitor is DLA Piper. The company, DLA Piper, has been ranked as the worlds largest real practice estate as such, the company poses a significant competitive threat to the new entry company which means that the Knight Frank company has to be very strategic in entering the specific market. The only advantage is that DLA Piper deals mainly with legal advice offering services to clients venturing into real estate (DLA Pieper, 2015). As such, the companies can work for the mutual benefit of each other instead of just being rivals. There is also the Norges Bank Real Estate which recently signed a co-investment program with the AXA Real Estate. These two companies are well-established and renowned in the country and the specific locality of Oslo. In other words, the three companies mentioned in this section are the competitive rivals of Knight Frank and call for an in-depth study of the competitive aspects that they apply if the entering company is to succeed in that market. Finally, there is the aspect of the globalization of the real estate industry which may pose a threat to Knight Frank in its new market. Here, other foreign companies outside Norway may increase the rivalry in terms of introducing new companies or selling within the market.
Bargaining Power of Buyers
Notably, the customers within Norway have a high bargaining power in that majority of them have the good financial capability. However, due to the fact that there is an increase in urbanization, the customers are in dire need of investing in the real estate sector which gives the companies an upper hand of...
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