Economics For Sustainable World: A Case Study Of Puravankara Projects

Background of the Business

Discuss about the Economics for Sustainable World.

Business in India tends to behave in a completely different manner as compared to any other nation across the world. As stated by Searle (2014), it is noted that the companies greatly depend on the prevailing conditions, industry attractiveness, competition and their individual customer bases for developing initiatives. Being recognized as the people`s country, organizations value the environment and thereby undertakes decision making with utmost care. Apart from the various industry sectors across India, there has been a noticeable progress of real estate enterprises. Moreover, it is the management of any organization which not only enables it to fulfil its objectives, but also help in filling up pitfalls and catering to develop capabilities (Rouanet & Halbert, 2016).

For this particular project, a well know Indian Business Corporation named Puravankara Project Limited has been taken into consideration. Additionally, along with a focus on the background of the firm, the report includes a deep rooted study of its existing situations, competencies, requirements and developments as well. Like every other enterprise, Puravankara is also affected by the various internal and external factors. Apart from highlighting the several elements that directly or indirectly impacts the business, the project discuses about the growth of sustainability awareness and the company`s role in it. In addition to a management view, the report tends to emphasize the economical perspective of the business as well.

According to Shatkin (2016), over the years there has been a significant development in the real estate trade of India. Also, among the various firms that carry out business, Puravankara Projects is one of the leaders that prevail in the industry. It is noted that the firm has achieved tremendous success at a domestic as well as international level. As opined by Searle (2016), despite of being inaugurated in the early year of 1975, the management has actively taken part in adapting to the changing atmosphere and thereby integrating modernization in the structural framework. With a growth of core competencies, the brand has expanded from Mumbai to Bangalore, Mysore, Hyderabad, Kochi Chennai and foreign countries like Dubai, Saudi Arabia and Colombo.

Being a real estate developer, the firm involves in building and construction activities across the nation. It is noted that the organization has completed over 48 housing projects, 2 commercial initiatives and has many ongoing development ventures. Additionally, the brand also has successfully established Purva interiors that along with fulfilling designing activities, visions to trun their client`s dream house into a reality. Concerning Bangalore, the firm has successfully developed several projects like Purva Paradise, PurvaCastelaine, Purva Vantage, Purva Pavilion and many others.

Market Position of Puravankara Projects

The management of the real estate organization tend to focus on developing its customer segments to be able to continue business effectively. India being a diverse nation is home to a population of 130 crore and more. It is noted that Purvankara targets both residential and commercial sectors (Crowe et al., 2013). Specifically, people belonging to the age group of 35 to 55 are identified as the most contributing clients of the brand. Further, first time home purchasers, median age of 25 to 35, sole proprietors, and also various business firms form the customer base of the brand. Concerning the location of the buyers, the metropolitan cities of the nation (Kolkata, Chennai, Delhi, Mumbai, and Bangalore) and a few overseas regions seem to be the most feasible options (Top Real Estate and Project Developers | Puravankara., 2017).

According to Vishwakarma (2013), the high profit levels and opportunities have led to a consequent rise in degrees of rivalry as well. Not only do the competitors deal in the same line of goods and services, but also tend to target the same customer segment as that of Puravankara Projects. Several firms like, Era Infra Engineering, Omaxe Ltd, Peninsula Land, HDIL (Housing Development and Infrastructure Ltd), SRS Real Infrastructure, Prestige Group and many others pose a direct threat to the brand. On the other hand, organizations like Brigade Group, Oberoi Realty, DLF Ltd, Godrej Properties and various similar firms tend to increase competition at the local as well as international level. It is noted that major competitors are located in Mumbai, Delhi, Southern India, Dubai and parts of UAE.

Name	Last Price	Market Cap. (Rs. cr.)	Sales Turnover	Net Profit	Total Assets
DLF	126.50	22,567.52	2,451.34	974.56	26,269.57
Oberoi Realty	305.35	10,364.10	1,179.77	475.47	3,824.65
Godrej Prop	322.75	6,983.15	340.26	30.37	4,730.11
Prestige Estate	181.00	6,787.50	2,655.98	361.81	7,803.00
Phoenix Mills	368.75	5,644.34	355.79	150.89	3,061.58
Indiabulls Real	80.75	4,091.31	17.38	55.16	9,016.50
Omaxe	159.30	2,913.61	1,138.25	51.47	2,571.54
HDIL	63.05	2,736.40	1,168.30	264.96	12,947.89
PNC Infratech	104.45	2,679.55	2,014.16	242.74	1,368.31
Sobha	264.45	2,546.78	1,803.30	136.90	4,547.82
Brigade Ent	155.40	1,765.90	1,226.45	146.36	2,421.84
Sunteck Realty	243.05	1,530.39	163.45	140.06	944.46
Anant Raj	43.65	1,288.10	408.20	55.64	5,088.40
Puravankara	44.15	1,047.02	983.49	77.49	3,604.24

Table: Market Position of Puravankara Projects

(Source: Annual Reports., 2017)

Puravankara Projects with a market capital of Rs. 1047.02 cr tends to rank 14^th (5% market share) in the real estate business of India. Analyzing the market condition of the sector, it can be inferred that the industry tends to be closer to a situation of perfect competition. As stated by Squires & Heurkens (2014), the existence of numerous firms and customers in the market disallows monopoly of a single enterprise. Further, there exists a very low bargaining power of the buyers and suppliers as well. On the other hand, there also prevail a large number of close substitutes of the good and services provided by Puravankara. It is noted that the average income of India`s population amounts to $616, thereby affecting pricing strategies of the firm. Moreover, the management tends to maintain a proportionate relationship with the per capita income level of the nation, hence leading to the building up of relatively elastic demand curve (Srinivasan, 2016).

Production Costs and Scale

Concerning mark up of price above the marginal cost, the management might opt to satisfy the need for increased input cost by raising the price level of goods and services. In case when the demand curve is elastic, the mark-up tends to be low or zero (perfectly elastic).

According to Glaeser (2016), the factors of production as per economic terms is describes as the inputs that are utilized as a part of the creation of merchandise or administrations with a specific end goal to make a monetary benefit. The components of production incorporate land, work, capital and business enterprise. These creation variables are also called administration, machines, materials and work, and learning. Variables of production of Puravankara, includes any asset required for the formation of the organisation.

At the core, land, capital, labour and business include the greater part of the information sources expected to create a goods or services. Labour incorporates the greater part of the work that workers and labourers perform at all levels of an association, with the exception of the business person. The entrepreneur of Puravankar is the person who takes a thought and endeavours to make a financial benefit from it by joining every single other variable of generation (Lieser & Groh, 2014). The business person likewise goes out on a limb on the greater part of the dangers and prizes of the business. Capital is comprised of the majority of tools and hardware used to create a goods and services.

As opined by Mitra (2013), the factors of production are of two types namely fixed and variable factors of production. A fixed variable is one, whose amount cannot promptly be changed with the changes in yield or economic situations. Its amount continues as before, whether the level of yield is more or less zero. Buildings, hardware, land, plants and top administration are the fixed variables of Puravankara Projects Limited. A variable element, on the other hand, is one whose amount might be changed in light of an adjustment in yield. Raw materials, power, ordinary labour, fuel are examples of variable factors of the organisation (Thomas, 2015). There is a need of variable factors in larger quantity, when output is more. On the other had it is required less, when output is less or zero.

It is vital for organisation to see how their different costs react to changes in the volume of goods and services produced. The breakdown of an organization’s fundamental costs decides the profit value level for its items or services, and also various parts of its general business strategies. An independent company proprietor can utilize an information of fixed and variable costs to decide the organization’s breakeven point (the quantity of units or dollars at which total revenue is equal to aggregate costs, so the organization earns back the original investment), and in settling on choices identified with evaluating products and services.

As compared to the fixed cost, the variable cost for production in Puravankara is likely to be fluctuating in nature. Further, it is noted that the real estate firm tends to work towards achieving a perfect condition of economies of scale, thereby enhancing lower per unit costs die to bulk purchases, manufacturing and discounts. With a fulfilment of targets and lowering unit costs, the Puravankara`s optimal size is expected to be large.

Puravankara Projects Limited like every other real estate firms is impacted by the changing macro environment conditions. In addition to political and economical factors, the organization is greatly affected by the instable conditions. Among the various elements, the instability in the nation`s legislation tends to greatly affect performance of the enterprise. Further, along with affecting demand rates, the government has a direct impact on prices and functioning of the firm (Viswanathan et al., 2014). It is noted that taxonomy structures, rigid rules, regulations, standardization and subsidies tend to put a pressure on potentiality of the corporation. Also, with a differentiation among the industry, the government tends to outlook every characteristic in a segregated manner. The political aspect tends to have a medium or low stability feature in India.

On the other hand, the economical market of the nation tends to have a strong impact on Puravankara. The policies of RBI, GDP rates, change in foreign exchange rates, land valuation and various other similar elements put a pressure on the business performance. It is noted that the 7.5% ($ 1,498.87) GDP growth, 5.88% CPI inflation and the high potential of the country shapes performance of the firm. Moreover, the 9.4% rise of unemployment rates also tends to affect the job and staffing structure of the firm. According to Chatterjee (2015), a change in the job opportunities is likely to shape the functionality of the industry as a whole. Based on the economical statistics of the RBI it can be seen that the average interest rate of India maintains its position at 6.5% (2016) and is expected to rise in the near future. It is noted that the growth of numerical figures have led lead to a consequent economic boom in the nation, which further will have a impact on the real estate company (Das & Sharma, 2013). Concerning the exchange rates of the nation, US $1 = INR 68.16, thereby impacting foreign business exchange of Puravankara.

Reviewing the macro environmental conditions prevailing in India, the following can be concluded:

Puravankara`s goods and services tend to be normal in nature. Hence, unlike inferior commodities, demand for the products provided is expected to rise with a rise in income level. However, with a nature of one time investment, real estate goods are the most expensive that people might buy in their lifetime.

On the other hand, with a change in the external condition to the industry, the organization will be confronted with consequent problems. In addition to a fall in demand or supply levels, the brand might be confronted with labour shortages, non-utilization of resources, currency rates downfall, and many other negativities.

A change in the exchange rate might provide Puravankara with a multi dimensional condition. In case of exports to the foreign land, a rise of currency values will ensure a higher level of profits. While, on the other hand, it might lead to drain of capital from the firm in case of imports.

According to Sharp (2013), the production process of Puravankara creates negative externalities. In order to carry out the production process the company often tends to utilize harmful chemicals like chlorine and sulphur-based items which, if discharged into the atmosphere, are exceptionally hurtful to biological communities. These are the external cost of production that Puravankara bears. It is noted that with no government intervention, the company would just be worried about their private expenses of generation (MPC). In this way, the firm would deliver where their MPC bend meets the minimal social advantage (MSB) bend at amount Q1 and value P1. In any case, the association’s private expenses do exclude the social expenses of creation (MSC) of contamination portrayed previously. In the event that the firm creating a situation of MSC = MSB (Pareto optimality/socially effective level of yield), then they would deliver amount Q* at value P*. This is not happening in the free market, and this negative externality of generation is shown by the separation amongst MPC and MSC (purple bolt). The red triangles speak to the welfare misfortune to society (where MSC > MSB).

In order to mitigate the issues created due to negative externality, the government imposes a pigouvian tax rate on the company.

The consumption of goods creates positive externalities as the consumption of goods increases the utility of the consumers. The consumers are able to meet their demand and thereby satisfy their consumption needs.

The viability of the business is measured by its long term survival, and its capacity to have supportable benefits over a timeframe. An organization that has a positive market reputation has a developed competitive advantage over its rivals. Puravankara managers understand the significance of putting resources into preventive support to keep gear in great working order (Annual Reports., 2017). Sustainability practices can enhance financial returns and create a positive picture for organizations and their products. It is noted that true supportability initiatives in the organization along with contributing towards fulfilling legislative and ecological requirements, also tends to identify buyer request with higher maintaining capability.

Conclusion

In the above study, the business environment of Puravankara Project Limited has been studied. Analyzing the various aspects of the project it can be concluded that the organization has high level profits and a stable business environment. However, the company has a number of rival companies that increases the market and sustainability threat. Concerning factors of production, the business have both fixed as well as variable assets and factor of production. Additionally, with a lower per unit cost, the optimal size of Puravankara is significantly large. Reviewing, the externalities, it can be inferred that the brand economically and politically stable in the market. Lastly, the sustainability practices of the enterprise contribute towards achieving long term business viability and an increased level of competitive advantage as well.

References

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