Think Big Report: A Critical Analysis of the McGrath Business Model

This report provides a critical analysis of the McGrath business model, a prominent real estate organization, utilizing the nine components of the Business Model Canvas. The analysis identifies key partners, resources, activities, customer relationships, channels, segments, cost structures, and revenue streams. It reveals McGrath's high-touch business model, emphasizing consumer relationships. The report explores interrelationships between these components, identifies critical success factors, and discusses potential business model changes and downside risks. Finally, recommendations for McGrath's future growth are offered, incorporating insights into market trends and technological innovations, providing a comprehensive overview of McGrath's operations and strategies.

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Executive Summary
This is a report which has critically analysed the business model of the organization
McGrath. The nine components of the business canvas model has been analysed to identify
the key partners, key resources, key activities, customer relationships, channels, customer
segments, cost structure and revenue streams of the organization. The analysis revealed that
the organization has been using the high touch business model that is dependent on the
relationship between the consumers and the organization. The report has provided the
interrelationships, downside risks, business model changes and the recommendation for
McGrath.

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Table of Contents
I. Introduction.............................................................................................................................3
II. Business Model.....................................................................................................................3
A. Building Blocks.................................................................................................................3
1. Customer segments........................................................................................................3
2. Key partners...................................................................................................................4
3. Value proposition...........................................................................................................5
4. Key activities..................................................................................................................5
5. Channels.........................................................................................................................5
6. Revenue Streams............................................................................................................5
7. Cost structure.................................................................................................................6
8. Key resources.................................................................................................................7
9. Customer relationships...................................................................................................7
B. Interrelationships...............................................................................................................8
C. Critical Success Factors.....................................................................................................8
E. Business Model Changes...................................................................................................9
III. Conclusion........................................................................................................................9
IV Recommendation..............................................................................................................9
References................................................................................................................................10
Appendix..................................................................................................................................11

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I. Introduction
McGrath is one of the most successful and prestigious housing real estate
organizations. The organization commenced in the year of 1988 in Paddington, Sydney. The
organization operates on the east coast of Australia and consists of more than 94 offices
(Mcgrath.com.au, 2018). McGrath has developed a real estate integrated with the service
provided. The organization has their expertise in career training, auction services, mortgage
broking, property management and residential property sales. The organization has been able
to establish their presence strongly in markets such as QLD, ACT and NSW
(Mcgrath.com.au, 2018). However, the organization had been making their expansion into
other states such as Victoria.
II. Business Model
McGrath uses the high touch business model where they aim to interact with the
consumers as much as possible (Saebi & Foss, 2015). The overall revenue generation of the
organization is dependent on the relationship between the consumers and the salesperson.
Therefore, credibility, trust and transparency are key features of this business model.
A. Building Blocks
1. Customer segments
The majority of the consumer segments for the companies are the immigrants from
Asia where China and India are the biggest target audiences in the upcoming decade. The
native Australians are also the target audience due to the increase in development of the
suburbs and the main cities. The majority of the immigrants residents come from India which
around 40% of the total number of immigrants (Cdn.mcgrath.com.au, 2018). There has been
significant increase in the diversity of the population in the country and therefore, identifying
their preferences and needs and providing them with the best possible and suitable offerings
is the aim of the organization.

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Figure 1: Customer Segments
(Source: Cdn.mcgrath.com.au, 2018)
2. Key partners
The key partners of McGrath are investors, civil engineering community, subsidiaries,
construction material suppliers, government, social media and agents. The investors,
suppliers and civil engineering companies are one of the key partners as suppliers and civil
engineers develop properties and supply them with materials at reasonable prices. The
investors provide the organization with enough capital to develop such luxury properties and
promote them on the social media websites and by using the tradition marketing media (Joyce
& Paquin, 2016). Government plays an important role as the organization has to follow all
the guidelines, rules and standards prescribed by the government. The agents are the link
between the organization and the consumers. The agents brings forth the consumers by
providing them with valuable information regarding the properties that are for selling and
rent along with the mortgaging facilities. Recently, the organization has secured investment
from Aqualand where they became the shareholders in the company by acquiring 25% of the
stakes (Miles Advisory Partners, 2018).

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3. Value proposition
The value proposition of McGrath is that they are an integrated real estate services
business that focuses on transparency and integrity to provide the consumers with the best
possible experience (Joyce & Paquin, 2016).
4. Key activities
The key activities of the organization are Residential property sales, property
management, mortgage broking, auction services and career training (Mcgrath.com.au,
2018). The organization develops new properties and sells them to suitable clients as per their
needs and wants. They also manages different properties of different owners that are provided
on rent. They even offer loans to first time buyers of housing properties. Auction service is
another key activity of the organization where they action properties for their consumers.
5. Channels
The key channels of McGrath limited are Social Media, Websites, Corporate offices,
Project teams, Agents and Local News (Toro-Jarrín, Ponce-Jaramillo & Güemes-Castorena,
2016). The organization has been making use of the digital marketing as a medium to
showcase their offerings. The agents act as a mediator for the immigrants that migrate to
Australia and they provide them with information regarding the types of apartment they are
searching for. They have corporate offices all over the east coast of Australia that guides the
consumers in identifying the different types of properties they would opt for. The local news
are also essential contributor of information to the local consumers. There are plenty of local
consumers investing in properties due to the rapid increase in the property prices. Moreover,
the growth of Sydney and Melbourne is immense and there are large number of population
migrating into these cities. Therefore, the local news partners play a key role in acquiring
consumers.
6. Revenue Streams
The key revenue generating streams of the organization are Rental apartments, Real
estate sales, Auction services and Mortgage Broking. The revenue in the year of 2017 is
51,561 and in the year of 2016 is the 67,251 (Publicnow.com., 2018). Even though the
revenue generation in the year of 2016 is more than in 2017, the expenses are also high. The
profit margin in the year of 2017 is 18% when compared to the margin of 2% in the year of
2016 (Publicnow.com, 2018).

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Figure 2: Financial Position
(Source: Publicnow.com, 2018)
7. Cost structure
The cost structure of the organizations includes components such as construction
materials and machineries, logistics, technology, suppliers, taxes, promotion and marketing.
The organization spends large sum of capital on the logistics, machineries and construction
materials. This is one of the basic fixed cost of the organization and along with that the cost
of marketing and promotion are variable costs. In the year of 2016, the total cash outflow
due to the investing activities were high when compared to the total cash outflow in the year
of 2017 (Publicnow.com, 2018). This can be seen from the fact that the number of properties
purchased along with plant and equipment were much higher.

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Figure 3: Cash flow statement
(Source: Publicnow.com, 2018)
8. Key resources
The key resources of the organization are high market Growth, properties across the
East Coast of Australia, and 936 sales representatives, 33,082 properties under management,
45,000 readers per month, 5 business units and 94 offices (Mcgrath.com.au, 2018).
9. Customer relationships
The consumer expects transparency and integrity along with best property deals at
reasonable prices. The consumers want luxury properties at premium locations like Sydney
and Melbourne (Cdn.mcgrath.com.au, 2018). These information is provided to the consumers
via emails and messages along with the great deals and lucrative properties that they would
look to purchase based on their preferences.

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B. Interrelationships
The nine building blocks are related to each and defines the overall process of the
business. The key partners of the organization will determine the key activities of the
organization. The higher the number of key partners more will be the key activities.
Similarly, the key resources are dependent on the key activities of the organization. The key
resource needs are generated based on the activity of the organization. The value proposition
is based on these activities which defines the offerings of the company (Toro-Jarrín, Ponce-
Jaramillo & Güemes-Castorena, 2016). The customer relationship and the different channels
are used to communicate the value proposition of the company to the target market segments.
The organization will identify their target consumers segments at first and the value
proposition and other factors are decided based on the needs. The overall process requires
investments and cash outflows and cost structure provides information regarding the overall
cost of the organizational activities and processes. Revenue Stream defines the cash inflow
generated from the investment made by the organization which assists in identifying the
effectiveness of the business model used by the company.
C. Critical Success Factors
The current real estate market is booming and there are lot of opportunities in the
market due to the increase in the number of migrants from different countries. The
organization should identify the preferences of the different target segments and prepare
estates based on these requirements (DelPrete & DelPrete, 2016). McGrath should also
emphasize on the marketing and promotional efforts so that they can penetrate more into the
market.
D. Downside Risks
The Australian residential market is the main target market for the organization and
the majority of the revenue is generated from it. There are different factors such as
employment, housing affordability, commissions and sale properties will affect the revenue
generation streams. Disintermediation is another factor that will cause risk for the
organization as the buyers and sellers can interact directly without any via medium. Digital
Disruption in the market will increase the level of competition in the market due to the
emergence of the global organizations in the market. These are major downside risks that will
affect the revenue streams and will reduce the profit margin of the organization.

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E. Business Model Changes
The organization should not restrict their operations to the East Coast of Australia and
should further make expansions. They should expand their business in local and global
market respectively.
III. Conclusion
It can concluded from the study that McGrath has been operating with an effective
and efficient business model but the real estate is changing and the organization will have to
make changes to the product offerings according to the emerging trends in the market.
IV Recommendation
It is recommended that the organization should prepare themselves for the upcoming
trends in the market by expanding their business both locally and globally. McGrath should
also incorporate technological innovation to reduce their cost structure and develop an
optimal business model.

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References
Cdn.mcgrath.com.au. (2018). Retrieved from
http://cdn.mcgrath.com.au/web/content/download/report/2017/2018McGrathReport.p
df
DelPrete, M., & DelPrete, M. (2016). The 3 emerging real estate models most likely to
revolutionize the industry. Retrieved from
http://www.mikedp.com/articles/2016/10/18/the-3-emerging-real-estate-models-most-
likely-to-revolutionize-the-industry
Joyce, A., & Paquin, R. L. (2016). The triple layered business model canvas: A tool to design
more sustainable business models. Journal of Cleaner Production, 135, 1474-1486.
Mcgrath.com.au. (2018). McGrath Estate Agents - Property Listings, Rentals & Sales.
Retrieved from https://www.mcgrath.com.au/
Miles Advisory Partners. (2018). McGrath Limited secures strategic investment by Aqualand
- Miles Advisory Partners. Retrieved from https://www.miles.com.au/news/mcgrath-
limited-secures-strategic-investment-by-aqualand/
Publicnow.com. (2018). Mcgrath Ltd. (via Public) / 2017 Annual Report Opens in a new
Window. Retrieved from
http://www.publicnow.com/view/32BFCF95EDE2699EEEE4E872BC2CF10C77782
5BC
Saebi, T., & Foss, N. J. (2015). Business models for open innovation: Matching
heterogeneous open innovation strategies with business model dimensions. European
Management Journal, 33(3), 201-213.
Toro-Jarrín, M. A., Ponce-Jaramillo, I. E., & Güemes-Castorena, D. (2016). Methodology for
the of building process integration of Business Model Canvas and Technological
Roadmap. Technological Forecasting and Social Change, 110, 213-225.

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Appendix
Key Partners
 Aqualand
 Investors
 Civil Engineering community
 Subsidiaries
 Construction material suppliers
 Government
 Agents
Key Activities
 Residential property sales
 Property management
 Mortgage broking
 Auction services
 Career training
Value Proposition
 McGrath is an integrated real
estate services business
 The organization focuses on
transparency and integrity
Customer Relationships
 The consumer expects
transparency and integrity along
with best property deals at
reasonable prices
 The consumers want luxury
properties at premium locations
like Sydney and Melbourne
 Regular emails and messages are
sent to consumers regarding the
current offers.
Customer Segments
 The majority of the consumer
segments for the companies are
the immigrants from Asia where
China and India are the biggest
target audiences in the upcoming
decade.
 The native Australians are also the
target audience due to the increase
in development of the suburbs and
the main cities.
Key Resources
 High Market Growth
 Properties across the East Coast of
Australia
 936 Sales representatives
 33,082 properties under
management
 45,000 readers per month
 5 business units and 94 offices
Channels
 Social Media
 Websites
 Corporate offices
 Project teams
 Agents
 Local News
Cost Structure
 Construction materials and machineries
 Logistics
 Technology
 Suppliers
 Taxes
 Promotion and marketing
Revenue Streams
 Rental apartments
 Real estate sales
 Auction services
 Mortgage Broking