Situation Analysis: Following years of successful operation, Houses For Africa (HFA) has become a leading private producer of the low-income housing in Zimbabwe. In the past, HFA has demonstrated its abilities of successfully negotiating both business and political challenges. However, with the growing pressures from both market and non-market environments, HFA needs to formulate a new strategy associated with its market expansion.
From a managerial perspective, the low-income housing market still looks promising: rapid urbanization and population growth had created tremendous demand for urban housing, in addition, with high inflation and low wage of the work force, it is entirely predictable that households with fewer resources and productive assets are more likely to look for low-income housing which is already in great shortage. However, the prevalence of political instability and new regulatory requirements pose potential risks.Decision Criteria: HFA’s management team needs to make two critical decisions regarding Zimbabwe.
First, should it focus on the low-income housing market or expand to the other market segments or even move its business to a new country? Second, if focus on the low-income housing market, what strategy should HFA adapt to cope with the market and non-market environment as situations change. In order to assess the degree of the firm-strategy congruence associated with each alternative, a broad set of decision criteria must be considered.While all of the criteria associated with market entry and non-market strategies as showing in Exhibit One, the political issues, the government relationship and regulation issues, the company’s image and competitive advantages, and potential market issues are of particular importance in this case.
Low-housing has been a political controversy for many years, HFA’s domination in this market and its “American” imagine only fuels up this controversy, directly affect the company’s business practice. Furthermore, the recent government restructuring intensified the friction between HFA and its government partner.However, I believe this friction will be eased shortly with proper communication. With annual GDP per capital of US$700, and average annual inflation of 22. 5%, low-income housing is the only choice for the majority Zimbabwean households.
Thus, the growth of low-income housing will sustain for many years, USAID’s effort and investment will in directly support of this market expansion. HFA could capitalize on the synergies it had created among its manufacturing and construction expertise, steel-frame construction, and its financial skills.The decision criteria advocate HFA’s focus on the low-income housing market in Zimbabwe. Correspondingly, the second part of HFA’s strategy is linked to its non-market environment. Exhibit Two summarizes some of the key advantages and disadvantages associated with each potential markets.
While entering the middle/high-income housing market would eliminate political issues and create the positive spillover effects associated with market expansion, both would stretch HFA’s limited capital to political and economic risk and jeopardize the inherent success associated with its existing expertise.Even though HFA is welcomed by the South Africa, it is highly unlikely that South Africa officials would grant HFA any favorable policies, and South Africa’s economic/political uncertainty does not present more positive grounds than Zimbabwe. HFA has already established itself as a major player in Zimbabwe and to give up all its advantages at home turf with uncertainty are not appealing. At present, focus on low-income housing seems to be the most logical option for HFA.Recommendation / Implementation: Based on the aforementioned decision criteria, it is recommended that HFA focus its attention and resources on the low-income housing market in Zimbabwe, however, HFA needs to alter its current non-market strategies to add value to its current competitive strategy: first, bringing on an local African individual to its board (for example, an influential and highly-respected business man).An African board member would directly address the decision criteria of non-market environment issues, as an African partner will enhance HFA’s “local” company image, ease the political tension therefore reduce the skepticism by the government regulators.
Given its extensive experience in dealing with government agencies and regulators, HFA should be able to leverage its knowledge in order to build constructive working relationships with the new government partner despite the current friction.HFA’s management team should also look into media and other public channels to promote itself as a caring member of the whole Zimbabwe society, for instance, HIV/AIDS epidemic had devastated one-third of Zimbabwe’s population, HFA can set up shelters for the homeless HIV/AIDS patients, donate fund for AIDS research and/or donate medical equipments. Second, utilize the financial resources of the ZBS and USAID and work with local government on mortgage system and construction regulations.
Third, train and subcontract out to specialist firms controlled by local Africans, by doing HFA can form a strong alliance with local business people in facing the challenge by special interests and activist groups. Finally, integrate non-market strategies with existing competitive strategies, HFA need to combining its core competencies of technical know-how, superior managerial capabilities and financial skills with non-market strategies to expand. HFA also need to address the key implementation issues associated with these non-market strategies.Further, from a managerial perspective, HFA can start market research in neighboring South African to identify the potential opportunities there for diversification purpose. Like any African market, Zimbabwe has its share of risks, including political rigidity and economic instability.
Nonetheless, the low-income housing market is ripe with opportunity and represents a significant growth potential. Clearly, by integrate market and non-market strategies it would enable HFA to better align itself with its objective of affirming a leadership position in this market.