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Expanding residential real estate in ghana and uganda with audio
- 1. Expanding Residential Real Estate in Ghana and Uganda Presented By: Edna Martinson Sponsored By: Dr. Lee Nordgren
- 2. Research Problem • Where should the company expand and what issues will it face with expansion
- 3. Residential Real Estate • Residential Real Estate is a booming business in Africa especially when it is tailored to serve expatriates. There are obviously still some issues associated with the construction and marketing of these properties, this is why the right strategic process is important.
- 4. Seven conceptual foundations of international business strategy • 1. Transferable Firm Specific Advantage • 2. Non-Transferable FSAs • 3. Location Advantages • 4. Investment in recombination • 5. Complementary resources • 6. Bounded Rationality • 7. Bounded Reliability
- 5. Expansion
- 7. Issues • A lot of areas in Ghana have a poor waste system. • Transport of raw materials in Uganda • Crime
- 8. Possible Solutions • Gate Estate and partner with the local development council. • Utilize uncle’s export business
- 9. Marketing • Though the marketing will be the same for all regions, there is still a need to be culturally sensitive and abide by the rules of the country we are operating in. Different societies hold different views. Thus, a managerial style that works in one culture will not necessarily work in another, and adaptations must be made accordingly.
- 10. Family-Owned Business • The job of operating a family-owned company is often grievously complicated by friction arising from rivalries involving a father and his son, brothers, or other family members who hold positions in the business, or at least derive income from it. Unless the principals’ face up to their feelings of hostility, the business will suffer and may even die.
- 11. Regional Teams
- 12. Ghana Stats Transportation Mean One-way Ticket (Local Transport) 0.65 $ Monthly Pass (Regular Price) 30.00 $ Gasoline (1 liter) 0.98 $
- 13. Ghana Stats Rent Per Month Mean Apartment (1 bedroom) in City Centre 150.00 $ Apartment (1 bedroom) Outside of Centre 137.50 $ Apartment (3 bedrooms) in City Centre 2,500.00 $ Apartment (3 bedrooms) Outside of Centre 1,100.00 $
- 14. Uganda Stats • Real Estate activities: This sector grew by 5.8 percent in the year 2011/12 compared to 5.7 percent annual rate that had been realized since 2008/09 to 2010/11 • Transport and Communication: The sector grew by 8.9 percent in 2011/12 which is slower than the 14.1 percent growth registered in 2010/11. • Services: Services sector grew by 3.1 percent in 2011/12 compared to a growth of 8.4 percent in 2010/11. • Construction: It is estimated that construction grew by 1.7 percent in 2011/12, which was a small growth compared to a growth of 7.8 percent estimated in 2010/11
- 15. Five principles associated with due process • Corporate headquarters’ familiarity with the local situation at the subsidiary level. • Effective two-way communication between corporate headquarters and subsidiaries. • Consistency in decision making across subsidiaries. • Possibility for subsidiary managers to challenge the dominant perspective at corporate headquarters. • A transparent explanation of final decisions made by corporate headquarters.
- 16. THANK YOU!!
Editor's Notes
- My family currently owns residential and commercial real estate property in Ghana and Uganda and is leasing them out to suitable tenants. This business helps to bring in a monthly income that assists in the maintenance of the estate as well as provides a source of income for my parents. My father is a retired logistics manager from the United Nations which gives him a comparative advantage in transportation of goods and my mother is a stay at home mother which allows for a comparative advantage as well since she has more time to invest in the business. My parents chose Ghana and Uganda as their prime locations because they are both familiar with these areas and have family and connections in both countries which would make it easy and convenient for them to go about their transactions even without them being physically present.
- Residential real estate in Africa depends heavily on foreigners coming into the country because this is the demographic that usually rent homes. The local population tends to buy land and build their own home. With Uganda’s power shortage crisis and governance issues, a lot of foreigners are reluctant to stay in the region for a long time and that makes it harder to retain tenants or even attract tenants. One solution to this problem would be to narrow down the target market to foreigners who are working with NGO’s and other organizations to better the nation. This group of people usually have contract that last longer than 6months and at times extend to five or more years.
- A lot of areas in Ghana have a poor waste system and this causes a problem for the environment and makes the areas less attractive to potential residents. “Poor sanitation costs Ghana 420 million Cedis each year, equivalent to US$290 million, according to a desk study carried out by the Water and Sanitation Program (WSP). This sum is the equivalent of US$12 per person in Ghana per year”. (Toni Sittoni, Sylvia Maina 2012) Although in the past my father has gated his estates in order to maintain cleanliness within the estate despite the surrounding area; it has affected us because a lot of people take the surrounding area into consideration..When it comes to the purchase of raw material for the construction of the homes in Kampala, Uganda, I researched a couple of manufacturers within Uganda, but also looked at how much it would cost to buy the material from neighboring Kenya. Though the capital city of Uganda seems like the more dangerous place to start a business, Ghana still has a high level of crime that needs to be dealt with. “The current literature on fear of crime in Africa is limited because of the almost exclusive focus on the United States and other Western nations. In Ghana, very little is known about the extent of and the predictors of fear of crime. Descriptive and logistic regression analyses results show that gender, education, age, satisfaction with quality of life in community, type of community, and indirect victimization are significant predictors. However, direct victimization, satisfaction with local police, and “incivilities” in the community are not significant predictors.” (Samuel Adu-Mireku 2007). Most estates in Ghana that are situated near the ‘ghetto’ are targeted by thieves and armed robbers. My personal view on this is that these people are unsatisfied with their living condition and target those that have a better living condition because they see it unfair that they should be living a better life in the same area.
- Partnering with the local development council or speaking the Mayor to discuss sanitation and road works would be a good idea especially since the capital city, Accra, is open to local residents taking action to better the city, and the city of Accra usually financially supports local residents if a good action plan is put together, presented to the city and approved.My uncle, a Kenyan business man, has a manufacturing company that supplies materials such as roofing sheets, paint and so forth. He too has a stake in the residential estates so cross-border trading with his company seemed like a good option. According to the Office of the United States trade representative, “Trade expansion benefits families and businesses by:•Supporting more productive, higher paying jobs in our export sectors•Expanding the variety of products for purchase by consumers and business•Encouraging investment and more rapid economic growth” (USTR, 2012)Another option was to expand into smaller towns in Ghana that show potential for growth. “The implementation of Ghana’s decentralization programme has involved the strengthening of district administrative capitals… small towns, are seen as focal points for the socio-economic development of districts.” (George Owusu, 2004) This will also provide bigger land space for development since these smaller towns are not as congested as the city. Selecting which town markets to enter still heavily depends on the number of foreigners or business transactions taking place in the town.
- Jeffrey Immelt, CEO of GE, claims that regional teams are the key to his company’s globalization initiatives, and he has moved to graft a network of regional headquarters onto GE’s otherwise lean product-division structure.” (PankajGhemawat, 2005) Though my father’s company is not as big as GE, we can still utilize the same strategies to be successful in these African markets. Regional teams that are well connected and have a good line of communication will help to strengthen the company and properly implement company values in each region. Since the target market is the same within each country, marketing would also be the same and there would be no need to practice regionally sensitive marketing. A transnational strategy would be best implemented. “Transnational strategy is the integration strategy formulation and implementation across all countries in which the company elects to do business, in contrast to a multidomestic (or “multilocal”) approach that provides for independent development and implementation of strategy by management units within each country.” (Christopher Lovelock 1999)
- It is important to take transportation into account because if the target market is expatriates then they would most likely want to be situated somewhere that is close to the airport and near shopping centers and other places of convenience. Accra, the capital of Ghana is the center of commerce in Ghana so that would be the most suitable place as discussed earlier.
- This table will help as a guideline to see how many the new houses should lease out for and what rate will have become the starting rate in order to make sure that the company breaks even at the right time can begin profiting from the clients.
- With all this data gathered it is clear that the five simple principles associated with due process can be implemented. These five principles are as follows:1. Corporate headquarters’ familiarity with the local situation at the subsidiary level: Since both my parents live in Accra, this will make the Accra properties the headquarter and this step will involve my parents continually visiting or receiving reports on the other property locations.2. Effective two-way communication between corporate headquarters and subsidiaries: There must be a clear line of communication between my parents in Accra, my uncle in Tema, my brother in Kampala and my grandparents in Fortportal since these are the main managers of the properties respective of location.3. Consistency in decision making across subsidiaries: Since this strategic form involves the decision making process done by both the headquarters and the subsidiaries in order to profit from the advantages of each location, there has to be a consistency in the decision making across subsidiaries so that one subsidiary is not making a drastic decision without informing the other subsidiaries.4. Possibility for subsidiary managers to challenge the dominant perspective at corporate headquarters: Though my father will be the head of the company, the managers of the various subsidiaries should be able to challenge a decision he makes if they all notice that this would not be the best decision for the company as a whole.5. A transparent explanation of final decisions made by corporate headquarters: Since language a barrier between the two countries, explanations must be clearly translated into the other language so that all parties are clear about the decision being made.