Far East Orchard Limited: Business Performance, Competitors And Macro Environment

Background of the company and business environment

Discuss about the International Business and Economics and Anthropology.

Business in Singapore tends to treat in a different way in the comparison with the business of the other countries. As mentioned by Buckley (2016), it can be mentioned that the organisations are depending upon the industry attractiveness, competition and the other individual consumers. The companies mainly aimed to maintain a long term relationship with their stakeholders, so that the satisfaction level of them would be increased. This would in turn also reflect the decision making process of the organisations.

This study has highlighted the business performance of Far East Orchard Limited. This organisation is popular as the famous property developer of Singapore. The background of the study has highlighted the internal and the external factors, which have the influential effect on the business, would be discussed. On the other hand, who are it’s major competitors and what are their market share can be identified in this study. Moreover, this study has also described the effect of negative externalities on the business. This study also emphasizes the macro economical perspective of the organisation.  

Far East Orchard Limited is the greatest private property developer of Singapore. The reputation of the organisation within the Singapore real estate industry has been growing with the rise in time (Cronk & Wickramasekera, 2013). Therefore, the valuation of the consumer’s would be improved. The Far East Limited has also make their business successful in hospitality, retailing, commercial and the industrial sectors. The organisation has established in the year of 20152. Within these few years, the real estate organisation has performed their operation successfully. Far East Limited mainly aimed to maintain a good relationship with the stakeholders, so that the trust on the operation of the organisation would be increased (Biondi & Zambon, 2013).

On the other hand, it can be added that this real estate organisation would focus to make a partnership in the hospitality business along with the Straits Trading Organisation and thee Toga Group, Australia. Far East Limited also performed in the global market. They have 90 properties and also have 90 properties around the world. In addition, they made more than 13000 rooms across the seven nations (Gillespie, 2013). Moreover, in Singapore, it has made one of the largest hospitality portfolios of the country, which comprises 20 hotels. The mission statement of the organisation is to operate their business by serving with love, honesty, integrity and with grace.

Production cost and scale

This real estate organisation has grown their services Australia, Denmark, Germany, Hungary and also in the New Zealand, Malaysia along with Singapore (Granger, 2014). This implies that most of the customers of Far East limited are belonging from the other countries, although major consumers are belonging from Singapore. This proves that Far East organisation has expanded their business in the international market so effectively, that the consumers are willing to take the service of this organisation. On the other hand,, it can be identified the major consumers of this organisations are the middle aged persons, who are willing to purchase a house and are willing to increase their amount of assets. Based on their choice, taste and preferences, Far East Orchard Limited has tried to make their buildings. As a result, the satisfaction level as well as their requirements would match with them and they are willing to purchase it.

The major competitors of this organisation are identified as the Mapletree Commercial Trust, Weiye Holdings Limited, Bukit Sembawang Estate, Hong Fok Corporation Ltd, Capitaland Commercial Trust etc. These all real estate organisations are belonging from Singapore. Far East Limited also has many international competitors as this organisation also successfully across seven countries. The Australian competitors are such as Real Estate Institute of New South Wales, the Real estate Institute of Australia etc. Other competitors are such as Deutsche Immobilieen Holding AG, Phoneix Real Estate Development etc.

This study is helpful to identify the market share of Far East Orchard Limited along with it’s major competitors.

Name	Sales turnover	Net profitability (%)	Total assets
Far East Orchard Limited	318.13	10.76	16.98
Mapletree Commercial Trust	83.01	110.47	1.38
Weiye Holdings Limited	77.19	7.62	83.96
Bukit Sembawang Estate	39.14	24.24	74.75
CapitaLand Commercial Trust	14.02	112.47	1.92

Table 1: Market share

(Source: Created by author)

In this context, it can be mentioned that Far East Orchard Limited is belonging from the perfectly competitive market. It is known that in the monopoly type market structure, there are single seller and number of buyers. However, in the market of Singapore, it can be noticed that there are a large number of sellers in the real industry of Singapore and the products are perfect substitutes to each other.

In the opinion of Shepherd (2015), the factors of production are an economic concept that infers to all the inputs of the production process. These factors of production are used by the organisation to produce goods and services in order to achieve the organisational goals and gain high profit margin. The land, labour, capital and the assets are the main factors of production that an organisation can possess. However, in the current market economy, the skills of the labour, materials, equipment and the management processes are considered as the factor of production. Any kind of asset that the Far East Organization incorporates into the workplace in order to establish the business falls under the variable of production.

Macro business environment

In order to produces the desired goods and services for the market, the organisation requires information related to the market in which it operates. The land, labour and capital of Far East Organization contributes as a great source for achieving the information. The labour includes the performance level of the labourers in the organisation. The capital of organisation further refers to the tools and management that Far East Organization uses in order to produce different goods and services.

According to Hill (2014), there are two types of factors of production such as the fixed factor of production and the variable factor of production. The fixed variables in the production process are those that remain unchanged with the change in output level or due to the change in the economic condition. The amount of fixed variable remains unchanged, even if the level of output increases decreases or becomes zero. The fixed variables of Far East Organization are the land, machineries, building or infrastructure, organisational hierarchy and management (Andries & Czarnitzki, 2014). On the other hand, the variable factors of production changes according to the level of output. The variable factors of the organisations are the fuels to run the machineries, labours, power of the management and the raw materials. Chen & Jiang (2016) mentioned that as the output level of the organization increases, the need for variable factors also increases. On contradictory, when the output is less or near about zero, the need for variable factors falls.

The optimal size of an organization can be effectively determined by an analysing the fixed and variable factors of production. From the financial reports of the organisation, it can be observed that the profit margin has decreased over the recent years. It can be thus inferred that the cost of the organisation is higher than the revenue earned. The return to scale of Far East Organization shows a downward trend (Fareastorchard.com.sg, 2017). However, the cost structure of the company shows that the optimal size of Far East Organization is large. The fixed cost of the company is relatively lower than the variable cost. The cost structure of the company can therefore be considered unstable. The fall in the profit level and decreasing returns to scale are information that helps to determine the breakeven point of the company. Based on the breakeven point the managers can consider decisions regarding the production and output level.

According to Andries & Czarnitzki (2014), it can be mentioned that the macro business environment is helpful to influence the operation of the business in case of the decision making process. This would in turn reflect the organisational performance and the business strategies. In this context, the economical, political, legal, demographic, technological changes would influence the decision making process of Far East Orchard Limited.

Far East Orchard Limited has each of the real estate organisations has an impact on the changing macro business environment. On the other hand, Boons et al., (2013) opined that in case of political as well as economical factors of the business, the real estate organisation has also affected by the instable situation. In this connection, it can be inferred that the instability condition of the nation’s legislation would tend to influence the performance of the business. Moreover, instead of affecting the rate of demand, the government of Singapore has a positive effect on the pricing structure, output level and the performance of the organisation. In the points of Bocken et al., (2013), the taxonomy structure, rigid policy and regulations, standardization as well as subsidies would incline to make a pressure on the capacity of the corporation. On the other hand, in case of the product differentiation within the industry, the government of the economy would be inclined towards the outlook of each of the nature in a separated formation. The political feature would in turn have a medium and lower stability characteristic in Singapore.

Moreover, the economical market of the country would be inclined to have a greater effect on Far East Orchard Limited. The policies of monetary authority of Singapore, the rate of gross domestic product, the alteration in the foreign exchange rate, valuation of the lands, and the other effective pressure on the productivity of the organisation. In this connection, it can be mentioned that the GDP growth rate of Singapore is US$307.9 billion (in the year of 2015) and the position of the country is at 36 within the world. Moreover, the rate of inflation has increased by 1% from the previous year (2014). On the other hand, Boons & Lüdeke-Freund (2013) argued that the unemployment rate of Singapore has decreased by 2%. This economic performance proves that the country has the higher level of capacity to improve the performance of the economy. As per the statement of Hahn et al., (2014), it can be mentioned that an increase in the job opportunities is helpful to increase the operational functionality of the industry. It can be noticed that the continuous growth rate of GDP of Singapore proves that this would has a positive impact on the real estate industry. In addition, Ahi & Searcy (2013) cited that the number of employment would be increased. The purchasing power parity and the standard of living of Singapore would also improve. The exchange rate of the count6ry can be estimated as 1 Singapore Dollar= 0.70 US Dollar, therefore make an effect on the foreign business exchange of Far East Orchard Limited.

From the above analysis, it can be mentioned that the products of Far East Orchard Limited are supposed to be normal goods. In this connection, it can be mentioned that if the income of the consumers rises, then the quantity demand will be increased. In addition, it can be added that the price of the products are remaining constant. Therefore, it can be added that thee income elasticity of demand is positive. Hence, if the country suffers from recession, then the consumers will feel reluctant to purchase the products.

It can be mentioned that Far East real estate organisation creates negative externalities in their production process. In order to carry out their operation, this organisation usually used to utilise several harmful chemicals such as chlorine and sulphur based products. By releasing these products in the environment, the air would be polluted (Bansal & DesJardine, 2014). In addition, it can be added that the health status of the surroundings would be affected. These external costs of production would be carried out by Far east organisation. In the points of Barkemeyer et al., (2014), it can be mentioned that the organisation would be concerned to the private expenses of generation (MPC) in case of the absence of the government of the country. As a result, it can be inferred that the organisation would be able to deliver at the level where, the MPC curve would intersect the minimal social benefit (MSB) curve. More specifically, this level can be determined by the quantity of Q₁ and price level P₁.

Moreover, it can be added that the private expenses of the organisation would keep out the marginal social expenditure creation (MSC) curve. In this case, Lorek & Spangenberg (2014) opined that the organisation were producing at the level where MSB= MSC. This situation can be explained with the concept of Pareto optimality or the yielding of socially effective outcome. Therefore, it can be stated that the organisation would be able to deliver at the level of Q* as well as price level P*. This would not occur in the free market structure. The effect of this negative externality can be seen by the differentiation of MPC curve and the MSC curve. The shaded region highlights the welfare misfortune of the society.

It can be mentioned that in order to mitigate the negative externalities, the government of Singapore requires to impose Pigouvian taxation policy on the real estate organisation (Chen & Jiang, 2016). This taxation policy is benefitted to control the ineffective market structure. Moreover, this specific taxation policy aims to set the social cost in such a manner that the negative externalities would be reduced on the environment. Moreover, it can be mentioned that the presence of the negative externalities, the social cost of the organisation cannot be covered with the help of private cost. Therefore, it can be inferred that Pigovian taxation is helpful to increase the social welfare of an economy.

Consumption of the products can create position externalities as the consumption of products would raise the utility of the consumers. The customers also capable to achieve the demand and also can satisfy the consumers’ necessities (Biondi & Zambon, 2013).

Moreover, the viability of an organisation can be estimated by the long term survival. This real estate organisation of Singapore also has a positive nature and also has competitive advantage within the real estate industry. Far East Orchard Limited is identified as the greatest private property developer of Singapore. They mainly aimed to the business innovations. According to Hill, Cronk & Wickramasekera (2013), it can be stated that the sustainability practices would improve the financial returns.

Conclusion

In this study, the business environment of Far East Orchard Limited has been discussed. After analysing the study, it can be observed that it is the largest property developer organisation in Singapore. The profitability statement and the market share of the organisation is also stable. Nevertheless, it can be observed that the number of competitors have been increasing, hence, it can be recommended that a continuous improvement is necessary to hold the position in the industry both in the domestic market and also in the international market. In addition, it can be stated that the organisation has both the fixed cost and the variable assets. Lastly, this study has highlighted the effect of the negative externality on the environment and this negative impact can be diminished with the help of Pigovian taxation policy has also described.

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