Business Strategies
Home building market: Models, strategy, and segments
Business models
Risk mitigation has become more important in the new home building market, although real estate is always risky. Builders are carrying smaller inventories and looking for a more financially stable customer base as well as selling more modest homes that are easier to 'move' in these economically anxious times (Vogel 2008).
Some residential builders are diversifying and expanding into commercial properties or innovative homes, such as green homes to combat the oversaturated market through higher-volume sales to different consumer bases. Labor, materials, and fuel is cheap so a 'low cost' model is appropriate in some areas as people are scaling back their lifestyles.
Presenting a trustworthy image, given the lack of trust pervading the industry, is also essential, so some builders are focusing on specific communities and focusing on making themselves into local, friendly businesses.
Generic strategies
Reducing overhead costs: now that every penny counts, emphasizing the Internet to advertise homes and cut out the costs of 'middlepersons' in the form of local realtors can be helpful.
Using the current downturn to a business' advantage is another option. This can include 'greening' existing homes to make them less costly to run and more energy-efficient, selling cheaper homes to buyers looking for 'less home,' especially seniors with retirement funds that have been depleted as a result of the stock market's losses, and refurbishing long-abandoned structures. Diversifying by offering second homes and vacation homes is another possibility for companies wishing to modify and expand their brand image and offerings to consumers (Witkowski 2009).
Market segments
First time homebuyers are looking for bargains are a key segment. Some long-term speculators not burned in the first housing boom may rationalize property is always profitable eventually. So are individuals looking for homes that are less costly to maintain.
Works Cited
Vogel, Mike. (2008, May 1). Homebuilders changing business model. Florida Trend.
Retrieved April 1, 2009 at http://www.floridatrend.com/article.asp?aID=48790
Witkowski, Wayne. (2009, February 22). Poconos builders change business model to weather economy fairly well. Pocono Record. Retrieved April 1, 2009 at http://www.poconorecord.com/apps/pbcs.dll/article?AID=/20090222/NEWS02/902220302/-1/rss01
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