2 The Importance Of Michael Porter

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2. The Importance Of Michael Porter’s ” Essay, Research Paper 1. Introduction Goodwill Management Limited (”Goodwill”) is one of the largest property management company in Hong Kong. It is a wholly owned subsidiary of Henderson Land Development Company Limited (”Henderson”), which is one of the top four land developers in Hong Kong. The chairman Dr. Lee Shau Kee is one of the wealthiest man in the world. Goodwill, Hang Yick Properties Management Limited (”Hang Yick”) and Well Born Real Estate Management Limited (”Well Born”) are the three property management companies of Henderson. Goodwill is mainly responsible for the leased office tower and shopping arcade. Currently, there are 26 premises under our direct management and 7 premises under our indirect

management. Most of the landlords of these premises are Henderson Real Estate Agency Limited, another subsidiary of Henderson. Therefore, Henderson will be our internal customer while the tenants of those premises will be our external customers. 2. The Importance of Michael Porter’s “Five Forces of Competition” in the Property Management Industry According to Michael Porter’s of Harvard Graduate School of Business, the state of competition in an industry depends on the following five basic forces. The collective strength of these forces determines the ultimate profit potential of an industry. Understanding these sources of competitive pressure, our company can formulate our strategies accordingly so as to achieve the highest efficiency and effectiveness. 2.1 Threat of New

EntryFactors like economies of scale, product differentiation, capital requirement, etc., will determine how easy or hard it is for new competitors to enter an industry. In fact, the threat of new entry for the property management industry is quite little. On one hand, the whole property management market is monopolistic. There is merely no legislation or specific requirements for new entrant to get into the market. Notwithstanding, on the other hand, the market for the major market segment as well as the future trend are oligopoly. The new entrant can only take the management of some old or small premises. It is almost impossible for them to obtain the management of any premises of the major developers. The four largest land developers (Cheung Kong (Holdings) Ltd., Henderson

Land Development Co. Ltd., New World Development Co. Ltd., and Sun Hung Kai Properties Ltd.) all set up its own property management company to take care of the management of its premises. A few famous independent property management companies like Guardian Property Management Ltd., and Jones Lang Wootton Management Services Ltd. also taken up a considerable share of the remaining market of independent premises without associated management company. Hence, the target market for new individual entrants is very limited and not profitable which hinder the growth of these new entrants. 2.1.1 Economies of ScaleApparently, large companies can realize the economies of scale which lower the average costs. The new entrant will definitely cannot enjoy this advantage since the market share

is incomparable to the large company in the industry. 2.1.2 Product DifferentiationBrand identification also creates a barrier to the new entrants. No matter it is a commercial building or residential building, most owners/ tenants will spend more than half of their day in it. Moreover, many valuable assets are keeping there. It is therefore very important to choose a reliable property management company to do the management. New entrants will need to put extra effort in promoting itself, creating brand identification & customer loyalty, etc. 2.1.3 Capital RequirementProperty management can be described as a multidisciplinary profession with a comprehensive coverage across different professions to furnish quality service to the tenants. Therefore, the capital requirement is