Environmental Scanning
Introduction
In the following pages, discussion will take place on the construction industry, including a clear description of the industry and the business environment problem. This paper will be broken down into several parts starting with the introduction. Next key macroeconomic variables that affect the construction industry will be identified. The macroeconomic variables and the corresponding industry variables will be graphically represented for the last five years. Information will be integrated from the text and outside sources to illustrate the effects of the economic variables on the construction industry. The paper will conclude with a look at the challenges and opportunities that exist for construction firms in the operating environment.
Industry Overview
This paper will focus on the construction industry, NAICS code 236115 - New Single-Family Housing Construction (except Operative Builders). This U.S. industry comprises general contractor establishments primarily responsible for the entire construction of new single-family housing, such as single-family detached houses and town houses or row houses where each housing unit (1) is separated from its neighbors by a ground-to-roof wall and (2) has no housing units constructed above or below. This industry includes general contractors responsible for the on-site assembly of modular and prefabricated houses. Single-family housing design-build firms and single-family construction management firms acting as general contractors are included in this industry. (NAICS, 2008)
Description of the Business Environment Problem
Housing starts, are one of the most closely followed measures of construction activity. From 2002 – 2005 the housing construction industry was spurred by some of the lowest mortgage rates in recent memory, leading to a strong rise of housing starts, which reached 2.1m units in 2005. Low mortgage rates also inflated house prices, which recorded double-digit 12-month rises since mid-2004. Since 2006, however, the housing market has cooled considerably, with home sales falling sharply and house price inflation slowing. Besides a sharp fall in housing starts the construction industry must also work through a backlog of unsold homes. The rising number of foreclosures will also have an impact on housing prices, which until now have merely stabilized or fallen slightly. And lastly with the liquidity in the sub-prime market drying up—through stricter lending standards and rising risk aversion by more mainstream lenders—demand for housing will fall considerably in 2007. Repossessions will also add to the stock of unsold homes that builders are trying to work through.
The housing market is very unique as unlike other goods and services, houses have permanence, it is a fixed location good causing the rules of supply and demand to be taken to new extremes. In the case of the Toronto housing market we can view in almost real time the role supply and demand play on he ever increasing house prices, additionally the fundamental economic issue of scarcity is made extremely apparent by the limited size of the city of Toronto.
Currently, XYZ Construction Inc. receives a majority of their contracts from the state government. The purpose of this essay is to analyze and discuss ethical and social issues, along with cultural diversity when expanding
“The housing market will get worse before it gets better” –James Wilson. The collapse of the United States housing market in in 2008 was one of the most devastating moments for the world economy. The United Sates being arguably the most important and powerful nation in the world really brought everyone down with this event. Canada was very lucky, thanks to good planning and proper preventatives to avoid what happened to the United States. There were many precursor events that occurred that showed a distinct path that led to the collapse of the housing market. People were buying house way out of their range because of low interest rates, the banks seemingly easily giving out massive loans and banks betting against the housing market. There were
When we see an economic downturn many of the different industries are affected in different ways depending upon their demand. The industry which always seems to be affected first and the last to recover is the construction industry. The construction industry is one of the largest sectors of the UK’s economy. It contributes around £90billion which is 6.7% of the total and 2.9 million people are employed within the construction sector. (HM Government, 2013) (Barawas and Fleetwood et al., 2013) This contribution is measured by the Gross Value Added (GVA), here below is a table to represent the contribution the construction industries GVA (for 2012 prices) and its % of economy.
The IZ programs are likely to take several years to be effective and support low to moderate-income residents. Developers and administrators need some time to be well informed to the new program. The Furman Center research team finds that the programs in San Francisco region exempt smaller projects or provide density bonuses tend to produce more units, indicating that more flexible programs may result in greater production. In the Washington D.C area, IZ programs have produced a total of 15,252 affordable units (as of 2003). In San Francisco area, IZ programs have produced 9,154 affordable units (as of 2004), and the programs with density bonuses and exemptions for smaller projects...
With lower rats of employment the United States Federal Reserve needed monetary policy to stimulate the economy. With many individuals loosing their jobs primarily in the housing sector the spiral continued through other sectors. It was not only builders and contractors who lost their jobs. The housing and development market affects many other markets. Builders affect the pluming, wood, furniture, lighting, electricity, and supplier’s side of the market as well. With builders and developers loosing their business, going bankrupt, not getting investments they left their suppliers without payments. This caused unemployment in many other sectors of the economy. This lead to many individuals without jobs, and the job market tightening down, which lead to decreases in both savings and spending in the United States money market.
Economic- The home improvement industry is below their normal state with the present economic status. Consumers are putting their wants such as adding new appliances or redoing their bathroom on hold. Construction companies are also in a slump; with the building of new homes on a downward slope the large orders of construction companies are not being made
dropped 10.9% causing the home market to suffer. Individuals who have subprime mortgagees to finance these less expensive homes are often times forced into foreclosure due to substantial rate changes. In affect, the economy faces acontinuing negative cycle of subprime delinquencies that result in tighter credit and lower home prices.17 A worsening of the American housing market will negatively affect the consumers confidence while at the same time worsening the American economy.18
All good things must come to and end. In late 2005, the housing bubble burst, and housing began to decline in price. People who refinanced, particularly those who financed with variable interest rates suddenly found their homes were valued at much less. The housing market became flooded with homes for sale, because the homeowners with variable rates and interest only loans could not continue to make their payments. (Greenspan) The rise in the number of homes for sale caused further lowering of home values.
As such, people are less optimistic about the future and have chosen to scrimp and save to last through the recession. Therefore, this has resulted in a decline, in demand for houses, (Tapper & Travers, 2009). This has also resulted in a decline in prices. However, the prices can change in the future when the economy picks up, and people become more confident about the economy. To conclude, the point, which affects one’s decision to buy a new home, is never constant, one's financial situation, level of income, and even number of family members changes all the time. For this reason, people will take into consideration different factors when making the crucial decision for or against the purchase of a new house.
Building Construction procedures involve the erection of various types of structures. The major trend in present-day construction continues away from handcrafting at the building site and toward on-site assembly of even larger, more integrated subassemblies manufactured away from the site. Construction in the United States is the product of a diverse group of subindistries, with many individuals and organizations involved in the construction of a single structure, from the manufacture of necessary components to final assembly. The major elements of a building are as follows: (1) the foundation, which supports the building and provides stability; (2) the structure, which supports all the imposed loads and transmits them to the foundation; (3) the exterior walls, which may or may not be part of the primary supporting structure; (4) the interior partitions, which also may or may not be part of the primary structure; (5) the environmental- control systems, including the heating, ventilating, air-conditioning, lighting, and acoustical systems; (6) the vertical transportation systems, including elevators, escalators, and stairways; (7) communications, which may include such subsystems as intercommunications, public address , and closed-circuit television, as well as the more usual telephone wiring systems; and (8) the power, water supply, and waste disposal systems.
Unfortunately, much more needs to be done in order to see the light on the other side. First off, the United States economy, in general, needs to improve. The economy is having a domino effect, and now it is hitting the housing industry. Our unemployment rate is up to 10%. Banks are not prospering like in the past.
Vrijhoef, R. and Koskela, L. (2004) ‘The four roles of supply chain management in construction’, European Journal of Purchasing & Supply Management, 6(3-4), pp. 169-178 ScienceDirect [Online]. Available at: http://www.sciencedirect.com/ (Accessed: 6 February 2010).
This paper explores what it takes to be a construction manager and the responsibilities of being a construction manager and the skills that a construction manager should have. It also explores what good construction managers do to have success on their construction projects and the steps that a construction manager must follow to end a project and meet their deadlines at the same
Introduction Real estate is a fixed, tangible and immovable asset in the form of houses or commercial property (Seldin & Richard 1985). Real estate market involves developing, renting, selling/purchasing and renovating of these assets (houses). Market participants include developers (contractors, engineers, and so on), facilitators (mortgage companies, real estate brokers, banks, management agents and so on), owners, renters (leasers) and renovators (Seldin & Richard 1985). Like other economic markets, real estate markets have internal and external forces that impact the market (Seldin & Richard 1985). Demand and supply forces have the major impact on the industry as they determine growth or decline in the market (Seldin & Richard 1985).