McGrath is one of the most successful and prestigious housing real estate organizations. The organization commenced in the year of 1988 in Paddington, Sydney. The organization operates on the east coast of Australia and consists of more than 94 offices (Mcgrath.com.au, 2018). McGrath has developed a real estate integrated with the service provided. The organization has their expertise in career training, auction services, mortgage broking, property management and residential property sales. The organization has been able to establish their presence strongly in markets such as QLD, ACT and NSW (Mcgrath.com.au, 2018). However, the organization had been making their expansion into other states such as Victoria.
McGrath uses the high touch business model where they aim to interact with the consumers as much as possible (Saebi & Foss, 2015). The overall revenue generation of the organization is dependent on the relationship between the consumers and the salesperson. Therefore, credibility, trust and transparency are key features of this business model.
The majority of the consumer segments for the companies are the immigrants from Asia where China and India are the biggest target audiences in the upcoming decade. The native Australians are also the target audience due to the increase in development of the suburbs and the main cities. The majority of the immigrants residents come from India which around 40% of the total number of immigrants (Cdn.mcgrath.com.au, 2018). There has been significant increase in the diversity of the population in the country and therefore, identifying their preferences and needs and providing them with the best possible and suitable offerings is the aim of the organization.
Figure 1: Customer Segments
(Source: Cdn.mcgrath.com.au, 2018)
The key partners of McGrath are investors, civil engineering community, subsidiaries, construction material suppliers, government, social media and agents. The investors, suppliers and civil engineering companies are one of the key partners as suppliers and civil engineers develop properties and supply them with materials at reasonable prices. The investors provide the organization with enough capital to develop such luxury properties and promote them on the social media websites and by using the tradition marketing media (Joyce & Paquin, 2016). Government plays an important role as the organization has to follow all the guidelines, rules and standards prescribed by the government. The agents are the link between the organization and the consumers. The agents brings forth the consumers by providing them with valuable information regarding the properties that are for selling and rent along with the mortgaging facilities. Recently, the organization has secured investment from Aqualand where they became the shareholders in the company by acquiring 25% of the stakes (Miles Advisory Partners, 2018).
The value proposition of McGrath is that they are an integrated real estate services business that focuses on transparency and integrity to provide the consumers with the best possible experience (Joyce & Paquin, 2016).
The key activities of the organization are Residential property sales, property management, mortgage broking, auction services and career training (Mcgrath.com.au, 2018). The organization develops new properties and sells them to suitable clients as per their needs and wants. They also manages different properties of different owners that are provided on rent. They even offer loans to first time buyers of housing properties. Auction service is another key activity of the organization where they action properties for their consumers.
The key channels of McGrath limited are Social Media, Websites, Corporate offices, Project teams, Agents and Local News (Toro-Jarrín, Ponce-Jaramillo & Güemes-Castorena, 2016). The organization has been making use of the digital marketing as a medium to showcase their offerings. The agents act as a mediator for the immigrants that migrate to Australia and they provide them with information regarding the types of apartment they are searching for. They have corporate offices all over the east coast of Australia that guides the consumers in identifying the different types of properties they would opt for. The local news are also essential contributor of information to the local consumers. There are plenty of local consumers investing in properties due to the rapid increase in the property prices. Moreover, the growth of Sydney and Melbourne is immense and there are large number of population migrating into these cities. Therefore, the local news partners play a key role in acquiring consumers.
The key revenue generating streams of the organization are Rental apartments, Real estate sales, Auction services and Mortgage Broking. The revenue in the year of 2017 is 51,561 and in the year of 2016 is the 67,251 (Publicnow.com., 2018). Even though the revenue generation in the year of 2016 is more than in 2017, the expenses are also high. The profit margin in the year of 2017 is 18% when compared to the margin of 2% in the year of 2016 (Publicnow.com, 2018).
Figure 2: Financial Position
(Source: Publicnow.com, 2018)
The cost structure of the organizations includes components such as construction materials and machineries, logistics, technology, suppliers, taxes, promotion and marketing. The organization spends large sum of capital on the logistics, machineries and construction materials. This is one of the basic fixed cost of the organization and along with that the cost of marketing and promotion are variable costs. In the year of 2016, the total cash outflow due to the investing activities were high when compared to the total cash outflow in the year of 2017 (Publicnow.com, 2018). This can be seen from the fact that the number of properties purchased along with plant and equipment were much higher.
Figure 3: Cash flow statement
(Source: Publicnow.com, 2018)
The key resources of the organization are high market Growth, properties across the East Coast of Australia, and 936 sales representatives, 33,082 properties under management, 45,000 readers per month, 5 business units and 94 offices (Mcgrath.com.au, 2018).
The consumer expects transparency and integrity along with best property deals at reasonable prices. The consumers want luxury properties at premium locations like Sydney and Melbourne (Cdn.mcgrath.com.au, 2018). These information is provided to the consumers via emails and messages along with the great deals and lucrative properties that they would look to purchase based on their preferences.
The nine building blocks are related to each and defines the overall process of the business. The key partners of the organization will determine the key activities of the organization. The higher the number of key partners more will be the key activities. Similarly, the key resources are dependent on the key activities of the organization. The key resource needs are generated based on the activity of the organization. The value proposition is based on these activities which defines the offerings of the company (Toro-Jarrín, Ponce-Jaramillo & Güemes-Castorena, 2016). The customer relationship and the different channels are used to communicate the value proposition of the company to the target market segments. The organization will identify their target consumers segments at first and the value proposition and other factors are decided based on the needs. The overall process requires investments and cash outflows and cost structure provides information regarding the overall cost of the organizational activities and processes. Revenue Stream defines the cash inflow generated from the investment made by the organization which assists in identifying the effectiveness of the business model used by the company.
The current real estate market is booming and there are lot of opportunities in the market due to the increase in the number of migrants from different countries. The organization should identify the preferences of the different target segments and prepare estates based on these requirements (DelPrete & DelPrete, 2016). McGrath should also emphasize on the marketing and promotional efforts so that they can penetrate more into the market.
The Australian residential market is the main target market for the organization and the majority of the revenue is generated from it. There are different factors such as employment, housing affordability, commissions and sale properties will affect the revenue generation streams. Disintermediation is another factor that will cause risk for the organization as the buyers and sellers can interact directly without any via medium. Digital Disruption in the market will increase the level of competition in the market due to the emergence of the global organizations in the market. These are major downside risks that will affect the revenue streams and will reduce the profit margin of the organization.
The organization should not restrict their operations to the East Coast of Australia and should further make expansions. They should expand their business in local and global market respectively.
III. Conclusion
It can concluded from the study that McGrath has been operating with an effective and efficient business model but the real estate is changing and the organization will have to make changes to the product offerings according to the emerging trends in the market.
It is recommended that the organization should prepare themselves for the upcoming trends in the market by expanding their business both locally and globally. McGrath should also incorporate technological innovation to reduce their cost structure and develop an optimal business model.
References
Cdn.mcgrath.com.au. (2018). Retrieved from https://cdn.mcgrath.com.au/web/content/download/report/2017/2018McGrathReport.pdf
DelPrete, M., & DelPrete, M. (2016). The 3 emerging real estate models most likely to revolutionize the industry. Retrieved from https://www.mikedp.com/articles/2016/10/18/the-3-emerging-real-estate-models-most-likely-to-revolutionize-the-industry
Joyce, A., & Paquin, R. L. (2016). The triple layered business model canvas: A tool to design more sustainable business models. Journal of Cleaner Production, 135, 1474-1486.
Mcgrath.com.au. (2018). McGrath Estate Agents – Property Listings, Rentals & Sales. Retrieved from https://www.mcgrath.com.au/
Miles Advisory Partners. (2018). McGrath Limited secures strategic investment by Aqualand – Miles Advisory Partners. Retrieved from https://www.miles.com.au/news/mcgrath-limited-secures-strategic-investment-by-aqualand/
Publicnow.com. (2018). Mcgrath Ltd. (via Public) / 2017 Annual Report Opens in a new Window. Retrieved from https://www.publicnow.com/view/32BFCF95EDE2699EEEE4E872BC2CF10C777825BC
Saebi, T., & Foss, N. J. (2015). Business models for open innovation: Matching heterogeneous open innovation strategies with business model dimensions. European Management Journal, 33(3), 201-213.
Toro-Jarrín, M. A., Ponce-Jaramillo, I. E., & Güemes-Castorena, D. (2016). Methodology for the of building process integration of Business Model Canvas and Technological Roadmap. Technological Forecasting and Social Change, 110, 213-225.
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