Strategic Analysis: Stockland's Porter's Five Forces Model Report

This report presents a comprehensive analysis of Stockland, a major property development company, using Michael Porter's Five Forces model. The analysis examines the competitive dynamics within the real estate industry, focusing on the threats of new entrants, the bargaining power of suppliers a...Read More

Porter's five forces model

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
Application of model..............................................................................................................1
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Porter five forces model is known as a strategic tool which is used to evaluate whole
industry and identify the factors which impacts organisation, and its productivity (Ovidijus
Jurevicius, 2013). It was developed by Michael E. Porter as to assist sector in identifying
weakness and strengths. The managers of Stockland Pvt Ltd uses this method as to understand
variability of all five forces existing in competitive market. This assist them in understanding the
influence of these factors and develop a new strategy to overcome issues as to enhance long term
profitability.
TASK
Application of model
Michael E. porter determined five forces which runs an industry and shape each and
every activity that ever takes place in it. Stockland is one of biggest property development
company which has estimated business of 16.6 billion Australian dollar market. This analysis
will assist company in gaining a sustainable competitive advantage in real estate industry
(Rothaermel, 2015). It has to analyse five forces which are mentioned in image below:
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(Source: Jeffrey Lau, 2017)
 Threats of New Entrants: New players in real estate market are known to bring more
innovation and put pressure on Stockland to lower prices of their offerings, reducing
expenses and ensuring to provide right value to consumers (Dobbs, 2014). All the
challenges have to be managed by company as to ensure that they maintain competitive
edge. The threat of new players in real estate is very LOW, as there are different policies
and laws which restrict new entrants from entering into the market. Also, the competition
in market is already very high which leaves no room for new players to make their move.
Currently, the overall cost as well as policies are too high and strict which lowers down
the level of threat.
◦ The company can tackle new entrants by innovating new packages which will
increase the value of offerings. Also they can reduce expenses which will increase
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Figure 1: How Not to Start from Zero for New Start-ups.

profit margin. Organisation can also increase their capabilities by acquiring new
firms.
 Bargaining power of suppliers: There are numerous suppliers from whom real estate
industry buys its products from. The dominant position of sellers leads to decrease in
margins of profits for company as they have to pay more for buying land and can not sell
at higher rate. The powerful suppliers in industry keep on extracting more amount in turn
of land. The prime impact is seen as a lower profitability for company in case of higher
dominant position of supplier.
◦ They have to establish a supply chain where more suppliers are there with company
so that bargaining power can be controlled more effectively. Also developing
suppliers who are solely dependent on company will reduce their level of domination.
 Bargaining power of buyer: The demands of buyer needs to be fulfilled. They want to
buy something which has higher value while they want to pay minimum price for same.
This pressurises functionality of company in long term (Tavitiyaman, Qu and Zhang,
2011). If company have small and more powerful buyers than bargaining power will be
higher. They will seek for more discounts and offers. The level of influence of this factor
very high. With the rise in the prices of housing, there are multiple challenges which are
faced by Stockland. The Bargaining power of buyers is very HIGH as people have
multiple options available with them which they can explore. There are numerous
organisation which are operating in the housing sector and hence it is essential for
Stockland to offer best deals.
◦ The company has to engage more customers as to lower down their bargaining power.
There are two different benefits of this, first they will be able to reduce consumers
bargain level and also they will be able to streamline its sales as well production
activity.
 Threats of substitute products or services: The industry suffers more when ever there is
a new product in market that fulfils demand in same manner like original good. For
example, the demand of tea suffers due to coffee. Separate land deals had a blow when
mega cities started to form, multiplex, apartment buildings use less space while offers
more items. The level of threat is very LOW. Even though there are substitutes which are
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impacting the business of Stockland. Such as Caravan parks and increase in online
commercial activity.
◦ Caravan Parks: There is significant rise in the home on wheels. These movable
vehicles are used as homes these days and people like to use them as a way to live in
different places or go on vacations. This impacts Stockland business as their sales of
property is falling. The prices of properties are too high while a Caravan van is
cheaper choice while giving all facilities.
◦ The rise in online shopping is hampering the sales of commercial properties. If in
future people starts buying more from online shops instead of shopping centres then
Stockland would suffer as people would not buy its properties or rent it. At short
term, this rise is causing fall in sell of commercial properties while there is rise in sell
of empty land which can be converted into warehouse or distribution centres.
▪ The company has to be a service oriented organisation instead of being product
centric. Also improving understanding of consumers will aid firm in offering
better services. There is another way which can be used to tackle this issues and
that is, company can enhance the shifting cost for consumer which will stop him
from buying new product.
 Rivalry among the existing competitors: The rivalry in real estate sector is very intense
and this has to be managed by Stockland managers. This intensity leads to fall in prices
and impacts profitability of organisation (Marshall, 2013). At present, company is
keeping its prices at a medium level but with rise in competition they have to cut down
prices which will lower down margin of profit. There are two major companies which are
Mirvac and Lend lease. They are small in size than Stockland but have major impact on
organisation.
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As stated in the image, the competition between these three companies is very high and
all of them is currently trying to gain more and more market share. At present, Stockland is a
market leader and have a market cap of 10.42 billion dollars (Stockland Market Capital, 2017).
While the nearest rival that is Lend Lease has a capital of 9.72 billion dollars. The Intensity in
Rivalry is very HIGH in this sector which somewhere leaves very less room for increase in
market share. Only those companies are running profitably who are using more innovative
approach to attract consumers towards their packages. Mirvac is growing at a very high speed
and is causing serious damage to the market share of Stockland. It is using various marketing
methods to attract consumers. Such as discounts as well as sales offers are being floated
constantly.
◦ They have to build differentiation in market. While also focusing on sustainability
will aid company in maintaining competitive advantage over competitors. The
company also have many opportunity to collaborate with other competitors and
increase their own presence as well as market share.
CONCLUSION
The analysis of these five forces will assist Stockland in gaining knowledge regarding
market scenario. They will be able to develop better strategies to tackle down forces which will
aid in increasing profitability of organisation. Also they will be able to identify changes in trends
and adjust pricing of offering which will attract more customers.
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10.42
9.72
8.15
Stockland
Land Lease
Mirvac

REFERENCES
Books and Journals
E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review. 24(1). pp.32-45.
Marshall, S., 2013. Evaluating the strategic and leadership challenges of MOOCs. Journal of
Online Learning and Teaching. 9(2). p.216.
Rothaermel, F. T., 2015. Strategic management. McGraw-Hill Education.
Tavitiyaman, P., Qu, H. and Zhang, H. Q., 2011. The impact of industry force factors on
resource competitive strategies and hotel performance. International Journal of
Hospitality Management. 30(3). pp.648-657.
Online
Ovidijus Jurevicius. 2013. Porter five forces. [Online]. Available
through:<https://www.strategicmanagementinsight.com/tools/porters-five-forces.html>.
[Accessed on 7th September 2017].
Stockland Market Capital. 2017. [Online]. Available
through:<http://finance.google.co.uk/finance?q=ASX:SGP>. [Accessed on 7th
September 2017].
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