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LANCASTER UNIVERSITY MANAGEMENT SCHOOL

AN ANALYSIS OF THE MARKET SITUATION


FOR
PROPERTY MANAGEMENT COMPANY

MNGT 130
ACADEMIC YEAR 2015-2016

BUSINESS ANALYST
JATIN MITTAL
LIBRARY CARD NUMBER-34097953

I have read the coursework declaration form and I accept the


University rules on cheating and plagiarism. I state that the work
submitted is my own and does not contain any unacknowledged work
from other sources. As the author of the submitted work I am
prepared to undertake an oral examination of its contents

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EXECUTIVE SUMMARY-

The report analyses the market situation of current network of the developments on annual
revenue and profitability of each area. In general it has been seen that with the increase in
population, greater revenue can be obtained. Most efficient staff are in area ink whereas
area Kat has been noted as a least productive. It helps us to understand how some branches
manage to have a high productivity and how learning from such areas could be used for the
branches with productivity in decline.

However, to increase the profit it is necessary to decrease the cost in certain branches as
their annual cost is much higher than the revenue they are generating. It is also necessary to
increase number of Flats/offices in areas with population as from the analysis made it has
been noticed that highly populated area got the potential to earn more of revenues.

Overall, Profit made by the Residential development is greater than commercial


development which accounts for 64% of annual total profit. Employees play a crucial role in
earning profit for a business, therefore it is the duty of the company to make sure that they
are happy and motivated by introducing necessary policies for employees.

All in all, Employees in area Kat, Tin and Rat have been recorded as unhappy as productivity
per employee is negative in these areas. The reasons to expand in residential development
makes some sense for the company in some degree. The report explains with more details
these outcomes stated above accompanied by recommendations.

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Contents -
Executive Summary ......................................................................................2

Introduction...................................................................................................4

I. Last year profitability......................................................................... 4 


II. Over capacitated developments........................................................5

III. Underperforming developments............................................. 7


IV. Marketing actions.........................................................9

Conclusion..................................................................................................... 11

Recommendations ..................................................................................... 11

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INTRODUCTION-

The Property management company, is a company developing projects in different vertical


of real estate like residential and commercial spaces. Company has spread its footprints in
26 Locations, although market situations in every location vary from each other. However, it
is possible to categorise these Locations in commercial or residential development. This
report aims to analyse the market situation of the company in each branch in order to find
an efficient way to adjust, and possibly expand the existing network. This report will also
focus on how employee satisfaction affects the overall profitability.

1) Last year Profitability –

MIN: -£457,477; Max: £256,240 (Fig 1.1 shows the annual profit earned by the company in
different areas)

RELATIONSHIP BETWEEN Annual Profit AND AREA

£300,000

£200,000

£100,000
ANNUAL PROFIT

£0
Gre
Pur

Wet
Ink

Qed
Ufo

Jin

Tin
One

Eat
Lot

Zan

Yet

Fur
Kat

Net

Rat

Vue

Arm
Sad

Bro
Man
Can
Hen

Xon

Dim
(£100,000)
annual profit
(£200,000)

(£300,000)

(£400,000)

(£500,000)
AREA/LOCATION

Firstly, it is important to summarize the annual profit from the data with the help of
clustered column. fig 1.1 simply represents the annual profit earned by the company in the
various areas it operates. From the previous year it can be concluded that areas of Kat’ tin
and rat have not yielded profit for the company, instead these areas incurred huge losses
including few other locations with minor losses and there is a need to pay special focus on
these areas to turn them into profitable state.
It can also be seen that area’s like tin, bro, vue and ink lie in the bracket of areas that
yielded profit of at least £150,000 or above which covers almost half of the total profit. So
there is need to learn from the manager of these areas and apply the learning to the area
who are yielding either low profit or running in Loss.
It can be noticed that most of the locations irrespective of development type, earned profit
below 1 million pounds although maximum of the profit in general was generated by
residential development which in total summed up to be £696,122 and on the other hand
commercial development generated profit of just £389,222 in total.

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This symmetrically distributed data informs us about the values around the mean and which
come out to be 3.4%; therefore, it can be concluded that there is quite a similarity between
profits earned by different areas where property management companyis operating.

ANNUAL REVENUES GENERATED BY


DEVELOPMENT TYPE

£1,002,960

£984,984
£631,461
£608,125
ANNUAL REVENUE

£538,140

£484,861

£474,428

£469,667
£456,447

£452,919
£441,261

£439,497
£429,628

£411,722

£368,766
£282,981

£273,977

£258,885
£241,106

£206,938
£201,915

£173,714
£145,964

£137,808

£112,599
£52,533

DEVELOPMENT TYPE

MIN-£52533 MAX-£1002960
(fig 1.2 shows the graphical representation of REVENUE generated by company in
residential and commercial development)

Fig 1.2 shows the graphical representation of revenue earned by the company previous year
more precisely per development type i.e. commercial or residential. This helps us to observe
that even though in some areas the company incurred a loss or lower profits, revenue
earned by the company is much higher which clearly shows that due to high costs the
company is not able to make higher profits. If we see the area Kat company incurred a
negative profit of £457477, but if we look at the revenue of the same area it was in positive
i.e. £52533 and the cost itself was £510010 which seem to be the main reason behind such
a huge loss. Alternatively, if we look at the area zan, here the company earned its highest
revenue in the whole year, but due to high annual costs it could not make that much of
profit.

2.Over-capacitated developments. –

Profit per employee hour is an incipient metric of corporate performance. If a company is


not able to increment its capital intensity, then the profit per employee hour which the
company engenders is a good proxy for the company for returns on its intangibles. In
today’s modern world the ability to earn rent from intangibles is visually perceived as one of
the most consequential aspects to quantify financial performance of an institution. Profit
per employee hour is considered to be one such rent. Rate of Capital Invested (ROIC) is

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another such aspect to quantify financial performance. In this case one of the advantages in
calculating profit per employee hour is that it does not require any kind of adjustment for
accounting principles and it fixates on altitudinal people, who with some investment can
increment the value of intangibles for the company.
By utilizing profit per employee hour, a company can genuinely increase their profit by
abstracting the less efficient employees. For better understanding fig1.3 shows the profit
earned by the company’s employee per hour in each area, which can indeed help to study
employee efficiency which therefore means greater the data higher the employee efficiency
that area possesses. As it can be clearly seen that area net has the highest potential to earn
the profits, therefore, the company should increase the number of employees which may
lead to increase of its profits. In addition, area bro has shown an outstanding performance
in term of profits so the company should increase the numbers of employees here as well.
In contrast the company should decrease some of its employees from area Kat and area tin
as the per employee productivity is less that the average mean which is 1.56.

NUMBER OF EMPLOYEE AND PROFIT PER EMPLOYEE HOUR


20.00

10.00
PROFIT PER HOUR

0.00

Gre
Eat

Arm
Net

Rat
Tin

Bro
Jin

Man

Vue

Kat

Fur

Qed

Yet
One

Ufo

Can
Zan

Hen

Pur
Wet

Lot
Dim

Ink
Xon

Sad
-10.00

-20.00

-30.00

-40.00
PROFIIT PER HOUR AND NUMBER OF employee hour

number of employees profit per office hour

(fig1.3 shows the relationship between number of employees and profit per employee
hour)

From fig1.4 we can make the comparison between revenue and cost per flat size which will
help to identify the area where the company should contract and decrease the number of
flat/office size due to high cost per flat/office over revenue earned, which ultimately is
leading to decreases net profit.
From the line graph below we can see that in area Kat, Tin, Net and rat the cost of building
one flat or office is higher than the revenue the company is earning; for this reason the
company should decrease the number of flats or offices in these areas. From fig 1.3 it is
noticeable that total productivity per employee hour is also not good in these areas, which
can also be the possible reason behind low or negative net profits these areas are making,
hence the company should contract its operations and flat/offices from these areas.

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Comparison between revenue and cost per flat size
£5,000.00
£4,500.00
£4,000.00
£3,500.00
£3,000.00
REVENUE

£2,500.00
£2,000.00
£1,500.00
£1,000.00
£500.00
£0.00

Gre
Rat

Arm
Tin

Net

Eat
Jin

Man

Hen

Kat

Fur

Qed

Yet
One

Ufo
Bro

Pur
Wet

Lot

Can
Zan

Vue
Dim

Ink
Xon

Sad
REVENUE AND COST PER FLAT IN EACH AREA

Cost of 1 flat/office revenue of 1 flat/office

(fig1.4 shows the comparison between revenue and cost per flat size)

3.Underperforming developments –

To think about increasing the number of flats/offices we need to see if we can get the
considerable revenue; regression line can help to forecast weather a company should think
about expanding in particular areas or not. From fig 1.5 we can depict that as the regression
line is linear and upward sloping this shows that the increase in population is ultimately
leading to an increase in revenue by steady rate. In other words this means that areas with
higher populations have the highest potential to earn profits, so a company can think about
expansion in number of flats or offices.

Fig 1.5 shows a relationship between annual revenues and population as the correlation of
R2 IS 0.46971 is close to 1. Interestingly, area yet as a predicted outlier with population of
just 7800 earned 8th highest revenue among all the branches. The possible reason behind
this is that area yet being a commercial hub with high property rates and also recourses
being utilized properly as productivity per employee is also good in this area.

But the number of Flats/offices should be increased in area’s zan, bro, sad and hen as these
areas had a high potential to increase the company’s revenue and profit which can only be
achieved by increasing the total number of flats or offices.

From the analysis of data we found that area tin is the 6th most densely populated area, yet
the company is still running in loss in this area, but if the company can change its focus from
turning the property to residential from commercial development it could lead to
substantial increase in revenue, thus increasing its net profit. From fig1.5 we analyzed that
an increase in population can lead to an increase in overall revenue thus area tin being the
6th most populated area holds the potential to earn more of revenue .

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RELATIONSHIP BETWEEN ANNUAL REVENUE AND AREA
POPULATION
Annual revenues Linear (Annual revenues)

£1,200,000

£1,000,000
ANNUAL REVENUE

£800,000

£600,000

£400,000

£200,000

£0
0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000
AREA POPULATION

(fig1.5 shows the relationship between annual revenues and population points in the circle
are the outliers)

3.2 Staff satisfaction and Training –

annual cost and annual revenue compared per


inhabitant

difference

difference

£0.00 £2.00 £4.00 £6.00 £8.00 £10.00

Series1 Series2 Series3 Series4 Series5

(fig1.6)
Box plot in fig1.6 has been constructed using the minimum, median and maximum value
in each data set, both annual cost and annual revenue per inhabitant 1 st and 3rd quartile has
also been used to create this box plot. As we can see, the line passing through the box the
median of each data set is quite close to each other with median of annual cost per
inhabitant being 3 and median of annual revenue per inhabitant being 3.77 which makes
the mere difference of 77.

From the analysis made in fig1.3 we can see how important employee productivity is to
making more of profit and it could be only achieved if the employee is fully satisfied with
the job he/she is doing, and are completely motivated towards the work. From the chart we

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can make out that area Cat, Tin and Rat have the least employee productivity, so there is
need for the company to lay special emphasis in these areas. This situation could be
improved either by providing the employees with proper training to make them more
efficient, or by recruiting more employees into these areas.
We can see that area ink has the highest productivity per employee, making a profit of
£8.61 every hour which clearly depicts the satisfaction level of employees. This shows that a
high wage could be the possible reason behind such a high level of satisfaction. However,
high wage rates could not be the only reason behind high level of satisfaction, we have to
make sure their wages match with the minimum wage rate in that particular area and to
gives bonuses whenever high revenue is achieved, due to staff which will help us judge their
actual index of satisfaction.
We analyzed performance of each employee by finding out productivity of employee per
hour in every area, this can also help us to find out the company’s possibility to expand
further which is also important.

3.3 Change in company’s focus on development type –

From the pie chart above we can analyze that profit in residential development is 28% more
than profit earned in the commercial developments, therefore, there is a need for the
company to change its focus from commercial developments to residential developments.
From fig1.2 we have also noticed that revenue from selling flats is much higher than as
compared to revenue generated from the sales of office spaces.

SHARE OF PROFIT ON THE BASES OF DEVELOPMENT


TYPE
commercial resenditial

36%

64%

(pie chart in fig1.7 shows the share of profit on the basis of development type
i.e. residential or commercial)

4 Marketing actions-
4.1 Sample questioner

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1) What marketing is most interesting to you and which do you most frequently
notice?
A) Newspaper advertisements (regular newspaper)
B) magazines
C) Radio station
D) Other (please explain)

2) Are you Currently planning to purchase new home or office space ?


A) Yes
B) No

3)Have you noticed any positive or negative employment change is past 10 to 12


months? Is yes how has that impacted your decision to buy new home or office
space?
A) Yes

Please specify -

B) NO

4) According to you is their any form of marketing you feel is irrelevant and no longer
appealing to the general public?

Please explain -

5) Do you think that price of the Flat or office is higher than the services offered by company
in return.
A) YES
B) NO

6) Please specify to us what kind of property development you are interested in?
A) Flat (Residential development)
B) Office space (Commercial development)
C) Land
D) Others: Please write-

7) Choose your Budget for Proceed Further to Purchase a property you are interested in:
A) Between £5000 - £10000

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B) Between £11000-£20000
C) Between £21000-£30000
D) Between £31000-£40000
E) More than this- Please mention:

4.2 SAMPLING PROCEDURE –

Stratified sampling –
 We can divide the population into strata in every area and take samples from that
particular strata on behalf of the whole population in that area.
 With the help of stratified sampling we can observe the relationship between strata
or subgroup of every area.
 From the data given we can see that there are some areas where the population is
quite small so stratified sampling can help us to collect samples from such areas.
 We have to define our strata geographically as it is one of the practical approaches
to collecting the data we need e.g.- price of each flat or office.
 From the given data we can also analyze that the population in each area differs
from each other. Therefore, we have to use the disproportionate stratified sampling
as in our case every stratum will have a different fraction of population.
 One of the advantage of using stratified sampling procedure in our case is that
collected sample are more exemplary due to which we can make estimate from the
past results.

Conclusion -

Although Property management company has 26 Locations, profitability in each branch is


quite different. In the context of revenues, area zan got the highest annual revenue because
of its high population. Showing us that the higher the population the more revenue the
company could obtain.

In terms of profitability, it is important to achieve the positive employee productivity like we


can see in area ink being the most productive area which also achieved the highest profit
among all the branches. In contrast, area net had the maximum number of employees
working still its productivity is negative and one of the lowest among all the branches.

In conclusion, we can increase the profits in some branches by cutting down the costs and
making marginal revenue equals to or more than marginal costs which may offer a sense of
motivation to employees. Moreover, the working models of the locations that are earning
more profit can be used at the areas which are running in losses. Lastly, shifting the
company’s focus from commercial development to residential could be an advantage and
source of earning higher profits.

RECOMMENDATION-
 Cut down the cost per flat/office wherever possible.

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 Provide bonuses and salaries to employees on the basis of their productivity to keep
them motivated and satisfied.
 Use effective marketing strategies to attract more target customers from
neighbouring locations as well.
 Expand or contract its operations on the basis of population in that area.
 Shift its focus more from commercial developments to residential developments as
residential developments have proven to be more profitable.

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