Competition Analysis the Lennar Corporation

Competition Analysis

The Lennar Corporation is a Miami-based homebuilder that also provides financial services such as mortgages. The company is focused on single family homes and has operations across the United States (MSN Moneycentral, 2009). The company has grown steadily since its inception in the 1950s. Lennar has used a variety of different means to enter new markets.

Most recently, Lennar has focused on acquisitions as the primary market entry strategy. For example, in 2001 the company expanded into the Carolinas with a pair of purchases. They bought the homebuilding operations of the Fortress Group in order to enter the Carolinas. They were also able to enter the Charlotte and Charleston markets with the acquisition of Don Galloway Homes. Previously that year they purchased Patriot Homes, a Baltimore firm, in order to further expand into the mid-Atlantic market (Nilsen, 2001).

The company also makes use of joint ventures, typically with local firms, in order to expand their market presence. They have forged partnerships in many markets, and at times have failed in their attempts to do so (Saunders, 2007). Some of the company's joint ventures have many partners; the number of partners required is dictated by the situation. For example, they owned just 16% of the LandSource venture that filed for Chapter 11 in 2008 (2008 Lennar Corporation Annual Report).

The joint venture policy has been Lennar's primary means of entry into new markets for several years. The company typically retains some control over the operations of the joint ventures. For example, when they entered into a joint venture with Morgan Stanley they took 20% ownership but 50% voting rights. Overall, the company remains engaged in a number of unconsolidated entities - joint ventures - that they used to enter markets in the past decade. In total, 57.7% of their homesites are owned through joint ventures, with the rest being wholly owned by the company (Ibid.)

At other times, the company has relied on secular growth. For example, when Lennar was considering expansion into Atlanta, they created a division responsible for the market entry and sought land that they could purchase and develop on their own. They did not seek a partner or an acquisition (Schoolcraft, 2007). As of yet, however, they have not made an entrance into the Atlanta market, as their move came at the outset of the economic downturn.

The Atlanta situation exemplifies a shift in Lennar's approach. For much of the past, the company had relied heavily on joint ventures as a means to enter new markets, in part to mitigate the risks and in part to reduce the cost of entering the new markets. However, the financial crisis has left some of their partners unable or unwilling to meet obligations. As a result, Lennar was forced to writedown many of these ventures, and shifted their focus towards a more secular growth model (2008 Lennar Corporation Annual Report).