Due to the increased number of firms in the market, an organization may want to expand its services to a wider geographical area or enter new markets as a way of increasing its competitive advantages in the global market. Entry into new markets, however, becomes challenging for a company, especially when the new location has complex demographics, existing potential competitors, and different cultural aspects. This paper is set to analyze Emaar Properties Company’s entry into Argentina real estate industry in attempts to establish whether the business will be favored and the ways in which the company can set its business successfully.
Emaar Properties
Since the formation and incorporation of Emaar Properties in 1997, it has remained one of the leading real estate developers companies in the United Arab Emirates (UAE) (Emaar Properties). As a public joint stock business, it has successfully provided property development and management services across North America, North Africa, Middle East, Europe, and Asian market. With 60 globally known companies and six business segments, Emaar Properties has delivered high-quality services in real estate industries with Burj Khalifa (the tallest skyscraper in the world) and Dubai Mall being two of its popular and highly respected projects.
Since 1997, the company has gained global attention in the real estate industry with major and rich investors, governments, and individual private businesses seeking its services for construction contracts and property management services (Emaar Properties). Despite the decline in real estate market in the years 2009 and 2010, company’s sales increased significantly and by the year 2014, the company had over $11.4 billion real estate value (McGuire). The company has secured its global image as it continues to provide its services to many clients in both developed and developing countries (Emaar Properties). Its existence, however, is threatened by the massive entry of private and public businesses into the industry, causing stiff competition that can bring the collapse of Emaar Properties. To counter the competition, the company needs to continue with constructive strategies as it creates new markets for its services.
Argentina’s Real Estate Industry
Despite Argentina’s high inflation status, political unrest, and several economic crises, its real estate market continues to grow. In Buenos Aires, the country’s cosmopolitan city with a population of about 3 million people, there was registered about 2000 property sales per month in the year 2014 (McGuire), which was a decrease from 7000 property sales in 2010 and its historical average of 5000 sales per month. Even though many companies and individuals have interpreted this decrease as a bad omen for potential investors, real estate analysts have reported that the market has already bottomed out and it is on the rise. In particular, Buenos Aires real estate increased by 2.1 percent in 2015 (Clarke et al. 24).
The country’s cultural values and norms support investments in buildings and other properties. Furthermore, the government of Argentina allows foreigners to invest in real estate markets as long as they provide information about their taxation details, well-documented sources of the capital, and an affidavit process to establish that the money for intended investments was achieved legally. As per the end of the year 2015, the price for a complete apartment in Argentina was about $200 to $240 per square foot (Clarke et al. 22-23). This price, however, is dependent on the prestige of the building, location, and bases of residential or commercial use.
Emaar Properties SWOT Analysis
As a leading real estate market in the UAE, Emaar Properties has a great potential to succeed in the expansion of its operations in Argentina markets. Since establishment, it has been well positioned to enjoy the advantages of estates development in serving American and European expatriates, even though the global economic crisis tends to decline the real estate revenue as prices fail to stabilize in many world markets. In this section, the report carries out a SWOT analysis to determine the strengths, opportunities, weaknesses, and threats the company may face while entering the Argentina market.
Strengths
The UAE government owns about 35 percent stakes in Emaar Properties, which reveals that the company has entire government support, which can facilitate its entry in Argentina. Furthermore, the government of India in collaboration with the American government has entered several building contracts. This factor is of significance since the government of India can approach the Argentina’s government through the application of tender and projects bidding with American government as one of its referees.
Emaar has developed and adopted an effective business model and it has a great expertise in developing communities in the foreign markets. Besides offering quality properties promptly, Emaar also concentrates on creating a sustainable living everywhere it stages its development strategies. Currently, the company delivered over 38000 properties in the UAE market (Smith). In addition, its business model supports the collaboration with prominent companies such as NASA Multiplex, Arabtec, and Samsung.
The company’s image is clean and acceptable for business in many parts of the globe. With examples of Burj Khalifa and Dubai Mall, no country would despise Emaar’s expertise and technology in driving its economic growth. These examples will encourage the Argentina’s government, private companies, and individuals to look for a dealership with Emaar, thus boosting its development and growth after entry into the market (Emaar Properties).
Weaknesses
Despite its success in America and Europe, Emaar remains overexposed to Dubai markets. The company’s greatest sales percentage is dependent on Dubai market. This factor brings the fears that if the Dubai markets, which have been its stronghold pillar, experience the decline, Emaar operations in other countries may suffer significantly. In case the new market in Argentina depends on Dubai market, especially in initial operation years, a decline in Dubai markets would translate to a decline of the company in Argentina markets.
With the company’s rise in the UAE markets, Emaar has attracted much attention of workers from all fields of career. This has resulted in labor problems, including low wages and lack of workers compensation that have caused many organizations to file accusations. With such history, Emaar Properties may have significant challenges in the establishment of its new business in Argentina.
Despite being a leading company in the UAE real estate market, the company suffers operation and funding issues. When establishing new branches in foreign countries, the parent company is not allowed to contribute more than 8 percent of costs. In case Argentina’s centers perform enough to pay 90 percent of its survival costs, the business can close down since there would be no further financial support to enable it to survive recessions and economic downturns (Emaar Properties).
Opportunities
The company can expand its services to other markets in Argentina. It also has an opportunity to develop some other products such as financial segments to facilitate client payments through loans. With its valuable assets and knowledgeable labor force, the company can establish many operation centers to increase its global market shares and diversify its revenue. Finally, the same way, the company has an Emaar Foundation that can expand its business in education and financial sectors (Emaar Properties).
Threats
Since the establishment of the company in 1997, it has been prone to economic downturns. Its operations in different countries and reliance on the US dollar increase its vulnerability to currency fluctuations. Finally, in its struggle to expand into global limelight, countries’ restrictions and other regulations regarding foreign investments pose threats to Emaar’s plans of growth and development.
Marketing Plan for Emaar Properties
Emaar Properties’ successful entry into Argentina’s real estate market requires research to determine various aspects of the market such as potential clients, best locations to center its activities, sources of human labor, and marketing strategies (Fast Market Research). The company also requires preparations, especially capital and equipment necessary for its operations, as well as significant involvement in shaping the market by advertisements, creating awareness and training of potential employees. Such activities will ensure that Emaar Properties is well established with enough labor force, business assets, and information on the market forces in existence (Fast Market Research).
The company also requires learning the business culture of Argentina. With the globalization facilitating rapid growth of organizations such as Emaar Company, there is a need to learn and understand the culture of foreign countries in which the business intends to operate (Clarke et al. 24). The company’s establishment of its operations in Argentina requires the interaction with citizens and other organizations cultured in native business environments. This necessitates learning and understanding the people’s culture together with their core values, which can at least facilitate generating a valuable personal relationship with target clients (Fast Market Research). Given that Emaar Properties was originally founded in Arab settings, it is likely that the company will experience significant differences in cultural values and business behavior in its new Latin American society. It will also be difficult to defeat its Latin American competitors without a proper understanding of Latin American culture and the American economic system existing in Argentina.
Choosing Entry Strategy
A global company like Emaar Properties that has ventured to conduct its business in the overseas market requires a strategic approach. For the basic development and expansion, business has to choose a strategy among the popular four business strategies that include international business strategy, global business strategy, multinational business strategy, and transnational business strategy (McGuire). Having developed an entry plan, Emaar Properties can enjoy the competitive advantage over other Argentina’s real estate companies despite the home ground advantages such as strengths and opportunities they possess. Based on its performance in the global market and the reputation, the company can realize a significant degree of effective cost management and marketing (Fast Market Research).
The entry into a new country may have some hindrances such as marketing intensity, demand uncertainty, entry scale, the scope of economy, and gaining of clients (Clarke et al. 24). In contrary to the expectations resulting from such factors, it is easy for Emaar Company to develop a perfect entry strategy into other new and emerging markets in Argentina through the diversification of its property management services (McGuire). Besides, some marketing research studies have established that with innovation, a late entrant into a market can have a high market potential. With good innovation strategies and the adoption of technology, especially in the delivery of services and marketing, the company can differentiate its services from those of competitors. In addition, Emaar can adopt a short delivery period to increase its market shares (Emaar Properties).
This paper has investigated the Emaar Properties entry strategy into the Argentina’s real estate industry in attempts to expand its operations and penetrate into new markets to increase its market shares in the global market. Real estate markets in Argentina have had their downturns due to harsh economic conditions, currency fluctuations, and political unrest. However, with the new research findings presented in this paper, it is clear that the business environment is shifting toward economic stability and business success. Although Emaar Properties may face cultural, political, and market challenges, its success in the new country is likely if it does strategic planning for its entry, operations, and marketing. In addition, even though it might take time for the company to learn and adopt the Argentina’s business culture, it is important for the business to involve its operations with local activities such as employing local people in its management to align its practices with the Latin American culture.
