Killam Properties Strategic Management

KILLAM PROPERTIES STRATEGIC ANALYSIS 1

Business organizations operate in markets with heavy competition andit requires them to institute a dynamic organizational culture forthem to remain relevant in their various industries. Businessenvironments indirectly dictate the adoption of new methods andoperations procedures due to the various changes that take place. Itis, therefore, common to find companies changing their strategicplans after certain intervals to reflect the changes in the market.Organizations also work under the guidance o set of objectives thatwork to fulfill their missions and visions. These ensure that themanagement institutes activities that keep the business on track andavoid the myriad of deterrent options that are always present duringoperations.

The management also employs various tools to determine the beststrategy for their companies. These tools help in assessing theinternal and the external environments and the capacity of thecompany to exploit the available opportunities nod cushion itselffrom the possible threats. The PESTEL analyzes in crucial inassessing the nature of external factors that directly affect thebusiness operation. It provides a comprehensive inquiry into thefactors in the business environment and helps the management identifythe gaps that should be sealed for a smooth implementation of thefuture strategy. The SWOT analysis is also a common tool used by thebusiness to identify the strengths, weaknesses, threats and theopportunities that that the business can exploit for desirableoutcomes. This paper will lay insight on Killam Properties’economic environment by looking the appropriateness of its mission,vision, and strategic objectives. It will also discuss the externalenvironment surrounding the company and the possible implications ofthe factors on the future of the company.

Killam Properties is a renowned Canadian company that deals with realestates. The company owns estates as well as managing and developingestate owned by individuals and families. Its area of operationextends to Atlantic Canada, Ontario, and Alberta. The proprietorsestablished the business in 2002, and the company recorded positivegrowth pattern that is currently worth 1.7 billion dollars (KillamProperties, 2014). The estates under the management of the companyinclude 13,427 apartment units and 5,165 manufactured home communitysites. The management also forward to maximize its value and gainingprofits in the long-term by concentrating on increased earnings fromits existing properties. Due to its positive growth pattern andprospects of future expansion, the company was registered as a publictrading company on the TSX where it trades under the name KMP (KillamProperties, 2014).

The Killam Properties operate under the guidance of a vision andmission. It mission is to bring together a team of caring staff todeliver clean, secure and quality apartments to tenants who are proudto call their properties homes. The core value that the company worksto fulfill includes building a strong community, doing the rightthings, offering creative solutions and developing strong customerrelationships. The company also has three main objectives. First, itlooks forward to increasing its earnings from its existingproperties. Secondly the management works towards expanding thecompany’s portfolio by diversifying its geographical presencethrough new acquisitions by laying emphasis on new assets that havegood returns. Lastly, the activities of the company seek to develophigh-quality properties in its current markets (Killam Properties,2014).

The company has shown a positive trend in its growth with, and thereare prospects of this trend continuing. The management has set twomajor strategic objectives that have the capacity of giving thecompany a competitive edge over other housing companies. First, thecompany aims at investing 50% of its revenue emanating from itsacquisitions in Ontario. The management considers this decision assviable due to the prospective activities set for the region byseveral international companies like Shell BP and Irving shipping(Killam Properties, 2014). Secondly, the company is working towardsgenerating positive same store Net Operating Income by the end ofthis year.

In assessing the viability of the mission, vision and strategicobjectives of the company, juxtaposing them against the recommendedbest particles is vital. The mission of the company gives it adistinct face in the market. A viable mission should be easy tounderstand for the employees and other stakeholders. When they haveit in mind, they can use it as the denominator for all theiractivities, and this will contribute to achieving the company’sobjectives. It should also be a reflection o the current businessenvironment and be a unique idea. Killam Properties’ mission isfulfilled in these parameters since it highlights the company’sinterests as well as a reflection of what people currently prefer(Killam Properties, 2014).

In the current housing environment, people have a concern widthsafety, cleanliness and a feeling of being at home. These are presentin the company’s mission. The vision of any business should reflectthe future prospects a business and the position it wants to upholdin future concerning the services it offers. The company notablyoverlooked this requirement, and its future goal is only present inthe core values in brief. Investors who have an interest in thecompany cannot find a striking indication of the company`s future,and this leaves a blank picture of the company in the years to come.

The strategic objective that the management puts in place should bespecific, measurable, and achievable. Realistic and time bound. Thetwo strategic objectives that the company is working towards fulfillsthis threshold. First, the idea of investing 50% of the earnedrevenue in putting up units In Ontario is specific in nature since itdefines the source of the revenues to be invested. It also definesthe location where the company will put up houses (Killam Properties,2014). The objective is also measurable in that the amounts if thefunds the company aims at investing will half of all the returns fromthe financial year. According to the current construction rates inthe industry, the company can have an approximate number of the unitsthey can complete while paying attention to any changes that mightoccur such as inflation and price fluctuations.

The current financial position of the company makes the objectiveachievable. As of 2014, the company’s assets amounted to 1.7billion dollars. In 2014, the company invested 60 million dollars,that is 50% of the earnings, and there are prospects of the amountincreasing to about 67 million dollars. It is a realistic and highlyachievable goal (Killam Properties, 2014). The time allocated for theproject extends to the end of 2015 financial year, and it is,therefore, time bound.

Achieving a positive Net Operating Income is also a specific goalsince it targets a particular component of the financial accounts.Also, it will easy to measure since it will only require putting itin contrast with the current NOI as it appears in the financialstatement. It is also achievable concerning the company’s forecastof benefiting from the expected oil price reductions in the countryand the projected decrease number of the citizens moving west (KillamProperties, 2014). It is realistic since the current NOI does nothave a negative result and also the houses will have tenants allthrough while at the same time reducing the cost of operations. Theend of the 2015 trading year will deem the objective as successful orin need of revision.

The operations of the business are subject to the influence of theexternal instigators emanating from the environment in which thecompany does not have a direct control.

PESTEL ANALYSIS

Segment

Macro-environment

Threat or Opportunity

Political

The political conditions in Canada are working in favor of many industries including the real estate industry. The government continues to allow international companies to get roots in the country and extend their operations. The current move to allow the international Shell BP to commence its operations in Scot Nova has opened opportunities for the local companies (Killam Properties, 2014).

Also, the government has also given the operation permit to Irvin Steel in Brunswick and this is expected to attract local investors and laborers into the region.

There is also the government policy that requires the scaling up of energy pipelines and mills in Brunswick as a part of the government efforts to develop the area (Killam Properties, 2014).

The presence of Shell BP Scot Nova is likely to attract many laborers both national and internationals./ they will be in need of decent and affordable housing that are near their places of wok to reduce cost if transport. It is an opportunity for the company to scale up it estates.

Also, the workers I the mills and the pipeline projects a well those working for Irvin Steel will increase the demand for houses and they are opportunities for the company to build extra units.

Economic

The number of people moving to the urban areas to occupy the available vacancies increases the demand for houses.

Secondly, there is an increase number of investor in the real estate especially in new Brunswick, Ontario and Scot Nova and these require companies to manage them effective (Killam Properties, 2014).

There are also prospects of having the price of fuel dropping and this will reduce the cost of operations for many industries.

The inflated number of people looking for houses in an opportunity for the company. it has strength marked by its presence in high demand areas like Ontario, Scot Nova and New Brunswick. The falling oil prices will reduce the operational costs f the company and this may lead to a significant increase in its earnings.

Social

The social environment also affects a product’s market significantly. Most of the Canadians looking for homes want a place they can call home. That is, a place with all the necessary requirements they would install in the houses if they were theirs. Therefore, this instigates the company to put up houses that meet the standards preferred by majority of the people.

Also, a significant number of people is moving towards the high productive areas in search of employment and this changes the demography of the different regions (Killam Properties, 2014).

. For example, the population of Scot Nova is likely to reflect a youthful and middle age population in search of work in the Shell investment. Therefore, they will be in search of houses to rent around the area.

The demand for home-like environment demanded by many turn to be the strength of eh company since one of its objective is to provide houses that make people, feel comfortable as if they owned them.

Also, the social movement of people in search of employment provides an opportunity for the company to fill up its units and build others to cater for the increased demand.

Technological

The building designs continue to evolve with the emergence of new architectural designs and materials. Most of these innovations aim at giving a high level of comfort to the inhabitants as well as reducing the cost of construction.

Also, environmental agencies are encouraging the use of renewable energy for consumption in the house.

The proposed technology an be an opportunity for the company to reduce its operational costs in its units and therefore, charge lower prices than they currently do a well as increasing their profits.

The dynamic building methods are also an opportunity to reduce the cost of construction especially with the current increase in price of materials.

Environmental

The environmental laws relating to real estates in Canada have taken a new direction and they now revolve around low-carbon technology. The environmental agencies require both tenants and owners to use energy efficient practices and materials that have minimum emissions.

This is a threat to its operations since it will have to invest in technology n energy efficient sources.

Legal

The legal environment controlling the development of real estates in Canada has been changing drastically. There are longer bureaucratic procedures surrounding the putting up of houses than there was before. Each province in Canada now has the power to customize its laws on land planning and construction (Killam Properties, 2014).

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This is a threat to the company since it may face restrictions in various provinces due to stringent land planning laws.

The government of Canada is allowing international investors tooperate in the country including shell BP and Irving Shipping. Manypeople will, therefore, look for employment in the regions. Also,there a social trend that people are taking of preferring houses withhomely appearances both from the outside and the interior. The trendwill redefine the construction designs as well as the auxiliaryservices offered in the estates. The increased cost of constructioninstigated by the hiking cost of raw materials is a threat since itwill lead to little earning and long periods before the investmentsbreak even (Killam Properties, 2014).

Industry rivalry is expected in the region especially with theexpected increase in demand for houses due the production andconstruction projects going on in New Brunswick, Ontario, and ScotNova. However, the company has a competitive edge over othercompanies since it is currently the largest landlord in the country. The company also stands a better chance to exploit the new marketssince the industry has a restrictive entry due to high capitalrequired (Killam Properties, 2014).The increasing cost of rawmaterials is making most investors shy away from investing in houses,and this leaves the ground for only a few key players.

Houses do not have close substitutes and people have no option but tooccupy the available units and this is one of the strengths in theindustry. In the newly identified markets in New Brunswick, Ontario,and Scot Nova, there are expectations of people having higher incomeand that will increase their bargaining power. They will, therefore,be in need of houses and this creates a ready market for the company. The inflating cost of raw materials is likely to reduce thebargaining power of the company since it will reduce the number ofunits that it construct for a given amount of money. If the trendcontinues, it can adversely affect the profit margin. In a nutshell,the Canadian real estate industry continues to expand, and it offersa chance for expansion for many companies.

References

KillamProperties. (2014).Killam Properties Inc. 2014 Annual Report.Retrieved fromhttps://www.killamproperties.com/sites/default/files/2014%20Annual%20Report%20Final.pdf

PWC. (2015).Emerging Trends in Real Estate 2016. Retrievedfromhttp://www.pwc.com/ca/en/industries/real-estate/publications/emerging-trends-real-estate-canadian-summary.html