In the recent past mortgaging has been instrumental in uplifting the living standards of people in a country. With the current volatile economic world every body has been upset by the pace at which the environment is changing. Coming at a time when every economy is a victim of world’s largest economic and financial crisis, the peoples’ purchasing power has undergone through massive erosion.
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Rational consumers have been demoralized by the inability to take responsibility resulting from their hastily made decisions. In this context, the government of the day is expected to provide common goods to every body. Mortgaging is one such ways in which the government can ensure that there is a better housing scheme for all citizens. This paper discusses the rationale behind subsidizing mortgages to local individuals. It further explores the ways through which an ordinary citizen can buy and own a home. The paper also seeks to show ways through which this can be done.
Life has become so unbearable especially to those who earn less than 1000 pounds; to make a mortgage decision is like a pipe dream to many people. Unlike in the past when everyone was rushing to own property, today it has become almost impossible to even sell ones house. The matter is further exacerbated by the current global economic crisis. The paper also talks about the role of other financial services institutions in ensuring that affordable housing scheme is availed to every individual. It further seeks to explore the part that the government of the day can play to make this mortgage plan a reality to every one.
Mortgaging refers to a process where financial institutions like banks enter into agreements with willing individuals in order to buy homes or houses through a saving scheme. Financial mortgaging is treated in the broad spectrum as a long term savings. Under this arrangement the bank is expected to buy or build houses on behalf of its clients. With the changing of fortunes in the stock market, most people are now shifting from the stock market investment to real estate investment.
The prevailing economic circumstances have become unpredictable leaving investors in suspense. This has led to real estate becoming the only other alternative for investment. Save for the current economic crisis real estate investment has been the only thing that rarely depreciates in value. In most cases real estate is not affected by changes in governance, change of guard in a company and other social factors. Unlike the stock market which is affected by very slight adjustments, real estate is ever solid as a rock. The only thing that can affect the price of real estate is the location of the area, the prevalence of crime or lack of it and other related factors.
This has been the main reason why many people are going the way of real estate. The risk evaluation and management processes has become complex with lots of speculation, not many would want to be part and parcel of victims of any unfavorably changing moments. The scope of this paper is designed and extended to cover the reasons that make real estate an attractive investment portfolio. Through a joint venture mortgaging plans the governments as well as the people are set to benefit. In essence mortgaging is a financial practice whose desired motives swings around the corners of economy aimed at making housing schemes better affordable to the local needs of the people as well as steering economic growth by effectually triggering cash inflows in and out within the domestic context.
Products and services
The product here is likely to be the housing scheme while the service is the mortgage. There will be15 to 20 deposit scheme agents who will serve the following functions, assessing the first time buyer’s qualifications, advising buyers on the best payment methods, explaining to the clients the requirements, providing detailed reports about the buyers to the lenders and the government, carrying out risk evaluation and assessment procedures and etc.
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Only first time buyers aged 25-40 years old and with a household earning of about 50,000 or less and could not afford to buy a suitable property on the open market without assistance in their area of residence or work jurisdiction. It is also recognized that applicants will be subjected to an affordability check. This is to prove that they can afford and maintain the home that they would be buying. This is to eliminate the possibility of a buyer undertaking to buy a home whose price exceeds his income bracket.
The purchaser is likely to receive up to 20 percent of purchase price of the property that is partly funded by the government while the rest being by way of the mortgage which could be required from the lender as regulated by the Financial Services Authority. For the first three years, there will be no service charge levied on the deposit loan until the fourth year when a fee is likely to be charged throughout the repayment period. After successfully securing a home through the proposed scheme, buyers will have an option of selling their homes on the open market, when this is done the loan repayment is expected to take place simultaneously by way of share of the sales proceeds.
The repayment will be shared equally by the government and the mortgage lender. Any appreciation in value of the property is likely to be shared at points of sales. If the value of the property has depreciated, the government and the mortgage lender will only share the sale proceeds left over once the mortgage is paid off.
Homes/houses remain to be the main products offered. Financial mortgaging is increasingly becoming a significant practice in the investment sector. With a sudden stampede towards the real estate development, mortgaging has become the only option through which people with less or average income can acquire and own homes. As currencies of the major economies continue to be on the lower trend, resulting implications are dire on the environments. It is the responsibility of the government of the day to ensure that better housing schemes are made not only available but also affordable to all citizens. Mortgaging is an investment practice commonly used by the financial institutions. One can reasonably believe that the mortgaging is a financial activity aimed at influencing the outflows and inflows of cash within the domestic context.
Market research can be explained by marketing research process which attempts to describe the fundamental steps which define the basic tasks to be accomplished if an effective market research is to be achieved. The process of market research includes the following factors, defining of the problem to be solved, collection of relevant data and analysis, coming up with a report on findings and presenting them, development of research design and coming up with appropriate way of handling the problem. This is a financial services company and the proposal explained thereof seeks the audience and attention of the government. The kind of market research that is likely to be appropriate may be as follows
Defining the Problem
The main problem here is finding first time buyers aged between 25-40 years and willing to buy homes through financial mortgaging plans. This is not an easy target to reach since most people in this age bracket have not yet become serious with their saving plan. The other problem is that most of this age group is only getting to set up their life and hence those who are conscious about saving do not yet have the funds to invest in real estate.
The term problem definition is wide and it entails many things in it which include analyzing certain problems encountered with experts in the given industry, review and examination of secondary data and carrying out a qualitative research. These first time buyers should also be having a household earning of 50,000 pounds or less and can not afford to buy homes through the open markets within their residential as well as their work jurisdictions. The purpose of this study is to demonstrate adequate marketing knowledge and skills in financial mortgaging. The government participation is highly anticipated failure in which may render the whole proposal insignificant.
The purpose of the research will be to find valuable information about the first time buyers, the industry statistics, and the general purchasing power of buyers, work and employment history as well as the prevailing employment climate within the United Kingdom. In order to exhaust the problem, it is important that meetings and interviews with industry experts are held. Industry experts could include banking personalities, economists, academic professors, civil servants in the ministry of finance and treasury, and other small and medium size financial intermediaries.
Interviews with Experts
Banks are known to offer financial mortgages to many people including corporate organizations. The information that is expected will be very instrumental in analyzing the finance and investment industry, the main aim being to reach the first time buyers who are willing to buy homes through government subsidized mortgage systems. We are likely to get both historical as well as current information trends in the financial mortgage which can be used in our report.
This information will be about the market trends i.e. the number of citizens aged 25-40 with a history of financial mortgage. Bankers will also help us with better information about how to screen assess buyers’ credit worthiness. Research shows that the age bracket that we want to reach can easily be reached by banking institutions since majority of them are in the banking industry. Through banks we intend to reach 45% of the age bracket we are targeting. Most of those we are targeting themselves work in the banking industry or in alternative banking sector. By using banks as a means of communicating our message we will be seeking to reach a wider section of the young people.
Economists/ Academic professors
There is nothing that is frustrating as starting a plan that is not viable. Before one undertakes to do a project it is important that they do a feasibility study to see if the project is viable or not. To achieve this objective there is need to get a viability analysis from experts on the field that you are planning to venture in to. Economists and professors will provide the basic and strategic information about the prevailing economic climate in the country.
Remember that this is a long term investment and a careful analysis and feasibility studies are expected to be done before such investment is laid down. Professors are viewed and credited with the capacity to forecast the future of economic performance. This becomes very important for such investment decisions to be made. Where professors have a reasonable ground to believe that economic factors are likely to change adversely then it may be necessary to suspend this mortgage plan. Alternatively if there are strong grounds to dispel any speculation and negative rumors as to changes in the economic climate then there will be no reason to hesitate but to commence the plan immediately.
The ministry of finance and treasury
The government participation is highly anticipated if the success of this project is to be realized. So many individuals are ready and willing to buy and own homes but due to the current economic problems matters have become worse. It is the government’s involvements that will make this dream a success. Interviewing officials from the ministry of finance will provide information as to when and how soon the government is planning to implement the project.
The ministry of finance in collaboration with British Bureau of Statistics will provide information about the current employment and work climate in the United Kingdom. This data will be used in allocating funds once the project has commenced. Regions where most people between the ages of 25-40 are less will least benefit from the scheme. On the other hand if there is a general perception provided by the data obtained from the Statistics Bureau that many people between 25-40 live on a household earning of less than 50,000 pounds, and then it will be difficult to avail this scheme to them.
This is why the participation of the government is so highly anticipated. Without their statistics we will be running around like blind people since we will not know which side of the country to concentrate the project on. We are also relying on the government to fund our project and by interviewing officials at the treasury we will be able to gauge the seriousness of the bank officials in implementing the project.
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Developing an approach to the problem
Coming up with a lineup to problem involves development of an objective which guides the problem definition and coming up with a solution, scheming of models to help in analysis, coming up questions to guide the research, preparing hypothesis and spotting major factors that make up research design. In this scenario the main problem is to sell the idea to the targeted group which are first time buyers aged between 25-40 years and falling within an household income of 50,000 or less with a quest to purchase homes through financial mortgage planning system.
- Are citizens adversely affected by the current global economic and financial crisis?
- Is the government proposed subsidized mortgage plans likely to stimulate economic growth?
- What role do other financial service sectors play in financial mortgage plans?
- Does the percentage of men who buy homes exceed that of ladies?
- Does the income level of every household influence the price of homes they buy?
- What is the rationale behind the government’s decision to subsidies mortgages to the people?
- Are there other key mortgage financiers in the industry?
- Who control the economy in the United Kingdom?
- What will be the direct impact of government’s planned subsidy on the economy?
- Is it likely to intensify competition in the banking industry?
The proposed government mortgage plan is likely to increase competition in the financial industry.
More men do take up mortgage investment decisions than women in the United Kingdom.
There are many other mortgage financiers in the industry.
The current prevailing economic circumstances have adversely affected the lives of many citizens.
Many financial service institutions act as intermediaries in the industry.
The rationale behind the government’s planned mortgage is to ensure that affordable homes are availed to every citizen.
By subsidizing mortgages, the government is set to stimulate economic growth by giving each person a chance to invest in homes.
This will be tailored towards focused groups, holding conferences and seminars. Groups will be charged with a responsibility of looking into some of the interesting features that are likely igniting the investing preference of first time buyers. Each member is assigned a specific task within the group and a report provided at the end. The advantage of using these focused groups is that different talents are acquired and shared at the same time. Where there are technical issues consultation is made a choice. Qualitative research has the advantage of being all rounded, open and participatory approach to problems.
Research Design Formulation
This is usually the outline that gives guideline when carrying out marketing research. Through this design procedures necessary for obtaining the required information are detailed. The purpose of this design is to test the hypothesis already determined above and provide the desired answers to the research questions. In general formulating research design will involve the following:
- Secondary data analysis
- Qualitative research
- Collecting quantitative Data
- Planning of Data analysis
- Measurement and scaling Procedures
- Thorough definition of the required information.
The secondary data analysis
Secondary data here will include financial journals, online libraries, websites, text books, magazines and newspapers. The approach will be to carry out thorough investigation by reading in order to determine the authenticity and validity, relevance and accuracy of the information received. Secondary data is known for being highly susceptible to plagiarism and stereotypes which significantly may put its integrity into test.
In order to provide reasonable assurance to the research team any secondary data is subjected to vigorous and rigorous tests there is need to test every application to make sure it is authentic. Since the rationale of the research study is to look into the possible ways in which the firm can reach and attract first time buyers into the loan deposit scheme. Financial mortgage is not only a long term investment decision but is also large in its nature; this implies that careful financial considerations should be made. Failure to do this will cause the project to fail to reach to the intended group. This will be a cause for our project collapsing and failing to realize its mandate.
Collecting Quantitative Data
Several methods of collecting data can be used including surveys, observation, experimentation and interviews. In this research surveys and experimentation may be the best appropriate techniques of collecting this quantitative data. Primary data should be originated by the researcher to properly address the research problem. Surveys will include reports and any information made available by business and government sources, commercial marketing research firms and digital databases. In this case the relevant source of data for this report will be the government, banks, online libraries, topical journals, commercial marketing research firms. All these put together will form a strong support team. In any form of management a strong team ensures that the project does not encounter obstacles.
The actual fieldwork
The actual field work here will include the selected staffs and personnel collecting data through personal interviewing either in-home, mall intercepts, online interviews etc. This can also be done through mail where the firm selects a panel surveys. Information required could be of national interest and therefore becomes sensitive. Data collection constitutes a very important area in the research study. Office etiquette, close supervision and proper training are required so that errors that occur during the process of data collection are safely minimized.
Data preparation and analysis
After having carefully collected the information in question, the facts gathered should be validated and prepared for further investigation. This can be done through editing, coding, transcription, and verification. Necessary corrections are made on the questionnaires and observation forms. The data is fed into the system, or put into magnetic tapes. During this process staffs are advised to be vigilant so that the original data from the questionnaire are not tampered with neither are they incorrectly transcribed into the system, for this to happen verification must be done at every level of entry point.
Preparation and Presentation of the report
The final report is presented to the management for an action. In this case the action is to persuade the government to go a head and commence their proposed investment. Based on research outcome the government can be able to predict the future trends by carefully studying the detailed report provided. In presenting the research out come different techniques could be used including tables, figures and graphs. These techniques may provide more clarity and hence make the report easily understandable and acceptable for decision making.
Relevance of research study
The main aim of the research study is to define the problem and look for possible answers through field inspection, investigation and questionnaires. By asking and answering questions for the specified problem a reality is achieved. This paper tries to develop a practical problem solving situation by presenting the realistic mechanism through which problems are solved. The main problem is to try to attract first time buyers willing to invest in mortgage plans, before this is achieved, the researcher must be having all the information at hand and hence the rationale behind the field study.
Marketing plan is a kind of preparation which is usually done in order to show the direction which is to be followed in accomplishing a certain task. In our situation a marketing plan is done in order to come with a sketch of what to be done in analyzing the situation and attracting first time buyers who are willing to invest in mortgage given the current situation and the challenges that are associated with mortgaging.
The market plan will come up with a thorough analysis of the factors that in one way or another affect the mortgage process in current world. With such an analysis it will be possible to come up with a strategy that will enable adoption of the project in the market situation. The process of market planning will cover several areas which will be analyzed under current situations in the market as well as in the environment. This will be important in that it will help in identifying those areas that should not be included in the initial implementation of the project. These are areas like water catchment areas, forests and those areas considered as not safe for habitation.
Macro environment analysis
Macro environmental analysis; this will be done in order to have a clear picture of the external environmental conditions that surround the mortgaging process. Identification of these factors will make it easy for the development of a plan which will meet the aim and objectives of the project. There are various factors that fall under macro environment that are going to be covered which include; economic factors, legal factors, government, technological factors, ecological, social cultural etc.
This refers to government policies that are set and that can have either positive or negative impact on the success of business in the marketing environment. They are major factors that ought to be considered when coming up with the mortgage plan; this is because there are certain underlying political factors that may affect the adoption of the plan and that should be highly considered in order for the project to be implemented effectively.
Since the United Kingdom is a politically stable country, the influence of politics is not all conspicuous. The government of UK is dedicated to create maximum conducive political environment for entrepreneurs to enjoy the bulk trade. However there are certain specific areas where much of government attention should be drawn. These include competition commissions and the department of labor that has ensured that the wage floor is ever increasing. If wages keep on increasing all it means that there are groups of people who are advantaged while others are disadvantaged. In this case if the wages increase the people will have enough income to cater for their needs hence they can mortgage.
On the other hand a wage increase could mean inflation in the country, since the suppliers and retailers would pass on the increases to the final consumers. It is therefore important to keep these two checks in balance in order to avoid problems at a future date. This is where the government comes in. Without the swot analysis the final consumer would bear the whole burden of the other chain members.
Given the fact that the economic conditions in the current world are changing drastically, many business activities have been affected in a negative manner. Economic factors are very essential in survival of businesses in the business environment; this is because it is the major determinant of the financial success of the business. Globally the economic conditions have continued to deteriorate over time and because of this many of the businesses have been highly affected. The mortgage business is not exception of this; it has been affected by the worsening economic conditions.
Some of the major economic factors that have been experienced world wide and that have affected the business include high interest rates, high rate of inflation and high unemployment rates. As I discussed earlier, the whole world is going through the worst recession it has ever gone through in over sixty years. Many home owners have had to dispose off their estates in order to make ends meet. This has driven the cost of real estate down to unimaginable levels. This in overall would affect the marketing planning of our project. Many people in the UK today are working two jobs just to make ends meet. It therefore becomes unreasonable to purchase houses when you are barely making ends meet.
High interest rates
High interest rates for acquiring finances have affected the supermarket negatively; this is because it has been challenging to acquire loans and other financial sources because of the high interest rates. This has also affected the customers since many of them can not access these loans hence they lack income hence negative impact on the company. When interest rates are high it becomes challenging for most of the people especially young people and low income earners to access mortgage loans. If the government can subsidize the mortgages it would be possible for many of the people to get mortgages hence growth in the sector.
High inflation rate
Also inflation rate has been very high hence many of the customers not being able to acquire mortgage services. Because of the inflation rates that have increased over the years it has been challenging for most of the people to acquire mortgages since they highly concentrate on other basic things rather that mortgages. The buyers purchasing power has been minimized hence their spending power is limited to the necessities, hence negative impact on the sector.
High unemployment rates
Unemployment has become a global problem and it is highly associated with economic recession which is faced globally. The economic recession has resulted to too many people losing jobs because of company’s closure and reduction of the number of employees in companies. Because of the increased unemployment rates many of the people do not have sufficient income to cater for their basic needs as well as other needs like acquiring a mortgage. Because of this it would be important for the government as well as other financial sectors to support this group of people to acquire mortgages at lower rates. On the other hand the marketing plan identified should take into considerations the prevailing economic circumstances. If this is not achieved, then it would be a great disservice to the lenders and the government.
These are factors that are brought about by people behaviors and include the demographic patterns, lifestyles, culture and beliefs. In the United Kingdom the factors that are specific to the mortgage industry include, increased cases of people becoming bankrupt, changing lifestyles, emergence of shopping classes and ethical practices.
In the UK the population is said to have been ageing over the time and this has affected different sectors in the country. There are certain financial firms that are dedicated to paying their employees pension of which the costs have increased and yet the employees are live long.
However this may have been an advantage to the ageing in the industry while on the other hand for the young people aged between twenty five and forty they lack job opportunities because already the positions are occupied. Some of these social factors have had negative impact on the given group hence not being in a position to get mortgages but if the government can reduce the rates it would be an advantage to this group of people since they would be in a position to acquire mortgages and at the same time the government would benefit from this.
Also another factor that has affected the industry and its operations is the income distribution. The income in the country can not be said to be equally distributed since high population of young people aged between twenty five and forty do not earn decent income and even others have no any source of income due to high unemployment rates. The government should therefore work towards improving the income distribution in the country equally in order for young people to have access to some of these services, together with helping them to get the mortgages.
The current world has turned into a global village; this is because the technology has advanced to an extent that nearly everything can be done in the blink of an eye because the technology is very high. Advancement in technology has positive impacts on the mortgage industry as follows:
Internet marketing: this mortgage plan can receive a massive boost by successfully adopting an internet marketing system. In the modern world, digitalization has increasingly received much attention as business entities try to maintain competitive advantage. Internet marketing is likely to provide market efficiencies.
Advantages of adopting Internet marketing
Personalized marketing: internet marketing ensures that information is available to everyone on a personal capacity and there eliminates the existence of intermediaries. The government and the lenders will not have to employ so many field marketers. This will automatically reduce their operational costs and at the same time increase the speed with which the information reaches the targeted group.
Wide coverage; internet marketing will link every citizen including those in the Diaspora. This will ensure that many people get access to the proposed financial mortgage which is the objective behind market research. Internet marketing is paperless and therefore reduces the need to employ filing personnel.
Limitations of internet marketing
The use of internet marketing requires an already built and established infrastructure e.g. an existing network of computers, electricity, administrative offices which at times may not be easy to establish. The government has other obligations too and it may be impossible to devote much time to one single project. This makes internet marketing unrealistic option to choose for this project.
Internet marketing may lack personal touch and contact. Since an internet is a machine to human communication, it may limit avenues for creating social contacts. Given the fact that the environment is so competitive, Competitors may take advantage of existing customer relationships to complicate matters for the government.
The use of internet marketing eliminates the presence of paperwork. Where there is no paperwork, the information audit trail may be very difficult. In any financial activity proper and adequate documentation is necessary to establish credibility and reliability of the transactions. The repayment of mortgages is a sensitive matter that should be accorded with proper documentation that may form the basis of reference in the event that things change unfavorably.
Internet marketing is highly susceptible to hacking. This means that an intruder may get access into the system and modify information to suit his own interest. This may distort the information intended to reach the clients who are mainly first time buyers. Where this happens, client relationship may be impaired. Considering the above limitations it’s upon the lenders to decide which technology is suitable.
The introduction of modern telecommunications systems which can be used to trace records properly and for fast repayment of the mortgages once acquired. This has made the payment system of the mortgages to be easier and less costly since one can pay using the different services that are provided in the market. The customers can now make informed choices due to the wide range of products that are available in the market. Many media houses are now offering real estate advertisements to the public. Almost all the weekly papers have a section devoted to real estate where they offer the best available prices in the market. This has made the people to have informed choices when it comes to choosing what to buy. Studies show that today’s youth are more media savvy and this is good for our marketing plan.
Also to the firms that are offering the mortgages it has made work easier since keeping of records and follow up of the people who have been offered the mortgages is easier and less costly. The use of technology in business has revolutionized the way in which some of the core activities are done. In the United Kingdom, electronic commerce and related techniques like echo bays has influenced the shopping and purchasing pattern of clients in the retail industry. In England there is the tendency of consumers scanning products in order to purchase them more conveniently; social organizations like co-operatives have also began scanning products.
These are factors that are related to the environment in which the business operates and the impact it has on performance of the company. It covers global as well as the local environment, environmental issues have become a concern for all people globally and because of this there are policies and regulatory guidelines that have been set to govern the environment. These policies and guidelines have both negative as well as positive impacts on the performance of the company.
In the case of the mortgage industry environmental policies that have been set down to govern mortgages. Environmentalists are highly concerned with the areas in which the houses have been built. When purchasing a house using a mortgage it is highly important that the house is at a legible place whereby no disputes can arise later since this may be a loss to the company as well as the buyer. There have been many incidences in the recent past where people failed to adhere to the guidelines regarding environmental factors and suffered the loss of property after the government brought down the illegal structures.
Legal factors refer to the rules and regulations that are set in given country to govern operations in that country. Businesses are required to observe all the legislations that govern the way their activities and operations are carried out. If they fail to observe these rules then their businesses can be adversely affected. In the United Kingdom there have been many considerable legal changes that have affected operations of different firms including the mortgaging industry.
There have been different legislations that have been introduced that include age discrimination, and disability discrimination legislation, an increase in the minimum wage has had negative impacts on the industry. These legal changes can affect a firm’s costs that are passed on to the different individuals and customers of the firms hence impacting negatively on the ability of the people to acquire the mortgages and other financial services to service the mortgages.
A marketing strategy refers to a process that can allow an entity or organization to concentrate its scarce resources on the greatest opportunities to widen its revenues and achieve a sustainable competitive advantage. The main reason why an organization should have a market strategy is to ensure that there is maximum customer care and satisfaction. In this respect our esteemed customers are youths falling under the age bracket of 25-40. The market strategy adopted should ensure that these particular customers receive maximum attention and that their demands and needs are properly met. The following porter generic strategies can be used by both government and the lenders.
Product differentiation is a technique used by an organization to completely distinguish its products from its competitors in terms of design, presentation and quality. This is a financial environment and there is intense pressure from other financial intermediaries who are also wiling to offer the same service to the citizens. In order that the government and lenders succeed, they should try as much as possible to make their financial mortgages as completely different as possible.
The number of clients targeted remains the same so there is so much pressure to win each client. Banks are likely to intensify competition by offering lower interest rates and other attractive repayment schedules. In order to counter this offer the government may increase the general interest rate in the country to be used by any commercial bank or other financial institution. If differentiation is fully achieved, then the stakeholders would have reduced the level of competition in the industry.
Product differentiation could also be pegged on the quality of houses built and acquired for each individual. Many commercial banks are profit oriented and at times may override national statutes to compromise quality by building substandard houses. If this is true then the government should distinguish itself by designing modern prestigious and long lasting homes which are likely to attract so many buyers in the event they are sold in the open market.
All possibilities should be exhausted. Options like e-business should never be ignored, since the question is about achieving a unique competitive advantage, any strategy perceived as being significant should be evaluated and tried. The prevailing economic factors in the United Kingdom seem to spell doom for every single business entity and using electronic business is likely to offer strategic business advantages.
Cost leadership market strategy: Cost leadership approach refers to a situation where an entity provides/produces the same services and products as its competitors but at significantly lower prices. Consumers have become price sensitive perhaps due to the current recession, the living conditions have deteriorated and there no hopes that things can change in the near future. This makes every consumer to be highly sensitive to matters resulting money being spent.
In this scenario, the government and the lenders should try as much as possible to reduce the interest rates on repayment so that more first time buyers are attracted to the loan deposit scheme. The government is in a position to even reduce the rates lower than any business entity.
Market segmentation refers a process of dividing market into small and manageable portions according to regions, income bracket, lifestyles, age, population, cultural, and religious identities. Product that is being offered is for youths aged between 25-40 years. This implies that the market has been segmented according to age. The purpose of any market segmentation is to ensure that critical issues are fully addressed. Its is also clear that this project is meant for those who fall under the income bracket of 50,000 and less who are unable to buy homes through the open market. Market segmentation also ensures that customers’ satisfaction is achieved by presenting relevant products to the right people and at the right place. The accumulative impact is that greater customer convenience is achieved.
Strengths and weaknesses Analysis
It is important to identify the different strengths and weaknesses that are associated with the service that is to be offered in the market i.e. deposit loan that is to be funded by the government for first time buyers between the ages of 25 – 40 years. Through identification of the weakness and strengths it will be easier to know whether the service will work out in the market or not. This will also help in avoiding loan defaulters and hence minimizing the chance for bad debts.
There are many financial industries in the market that have been in apposition to offer the same services to individuals in the society. However adopting and providing such a service to the individuals through the help of the government would have more strength since the government is the determinant of many activities that take place in the market. Having the support of the government will mean the success of the services in the market. Many similar projects have failed to take off after the masses failed to support it due to lack of trust. However people would be more trusting to a project that they deemed to have a government backing.
At the same time it would be easier for the service to be supported against competitors, this is because the government as well as the lender will benefit from the service hence making it possible and easier for the service to survive and meet the targeted objectives in the market. The government puts regulations to everything available in the market. It will therefore be easy to regulate this new market hence making it to be more appealing to the masses.
Applicants will also be subject to an affordability check, for the purpose of assessing the price of the home that they are able to afford and sustain. This is strength because an individual will not go for a house which he or she can not afford and which may in turn bring problems servicing the mortgage. This will ensure effectiveness of the system and efficiency in the business activities that will be carried out. The fact that the purchaser will receive up to 20 per cent of the purchase price of the property is strength of the service as compared to other services that are provided in the market. The deposit scheme will be funded by Government and the rest would be by way of their mortgage which could be acquired from any lender regulated by the Financial Services Authority.
For the people who will take up the scheme they will not be charged for deposit loan in the first trimester but in the fourth year the charges will be implemented until completion of payment of the loan. This also is strength of the service since no charges for the first three years which means it is an advantage to the purchaser. This will draw many people to the project since they will be in a position to service the loan comfortably.
The system is subject to the approval of the government, if the government backs the idea up well and good. But if the government does not support it means that the system will not succeed. Since the government is core in the system there are chances that the government can influence the system negatively and demand to benefit more from the system hence loose its intended purpose of helping those who have minimal income. This is often the case in many projects funded by the government where some people feel that they have to take advantage.
Buyers will be able to sell their home on the open market. When they do so, they will repay the deposit by way of a share of the sale proceeds. This repayment will be shared equally between Government and the mortgage lender. The opportunity that will be created for the buyers to sell there homes in open market is an advantage to the buyers and they will greatly benefit from it. Also the service creates other opportunities to the lenders as well as the government of getting more income. To the buyers they will have even more opportunities of earning income since the homes purchased by mortgage can be resold in the open market even at a higher price.
The system may also face competition from other financial institutions which may wish for to draw the attention of the targeted group by offering more efficient services at lower rates. The economic conditions currently are not very much promising and this may act as a hindrance to adoption of the system the government and other financial institutions that may support the system.
Definition of the problem
Many of the young people in the United Kingdom have not been in a position of buying houses; this has been as a result of lack of enough income to cater for these needs as a result economic recession in the recent years. This has resulted to poor performance in the mortgage industry and the government and other financial institutions can play great role in empowering these high populations to acquire mortgages.
Analysis of the situation
Market analysis includes definition of the target market, in our situation the targeted population or market for the project is young people who are first time home buyers aged between twenty five and forty on a households earning 50,000 or less who are not in a position of acquiring suitable property on the open market without assistance in the area where they live or work.
If the government can intervene and backup the deposit scheme that loan out a 20% deposit on a reduced interest rate of 0.2% to buyers who have already secured a mortgage on the current 0.5% interest rate on a home costing no more than £250, 000 the problems that are experienced by most of the people in acquiring mortgages would be reduced to great numbers.
The analysis of the situation will be basically based on the data collected from the field i.e. both primary and secondary data. Based on this data a conclusion will be drawn and the direction to be followed will be established.
It is important for the analysis of the consumer to be done; this is because it will enable a clear understanding of the kind of the consumers or customers we are dealing with.
Based on current demographics there are huge numbers of people in the age bracket of twenty five and forty who can not afford a home and who need to be supported in one way or another to posses a home. The reason for this being lack of sufficient income. Because of the need of this people the development of the service can play great role of satisfying their needs.
Consumption or expenditure patterns
The income of this group of people is not very high, it is minimal and this means that great percentage of what they get they spend it on basic needs hence no any amount that is saved that can be used for mortgage. If the government and other financial institutions can intervene these people would be in a position of owning homes and creating income to the government as well as the mortgage lenders.
Consumer opinions and attitudes
Also opinions of the consumers and attitudes are very important when introducing a product or service in the market. The opinions and attitudes of the group are expected to be positive since many of them will be in apposition of owning a home in the midst of the economic deterioration that is taking place globally. Having acceptance of the customers it will mean that the project will succeed and be of benefit to the government, mortgage lenders as well as to the home buyers.
Financial analysis of a business refers to the evaluation of the capability, stability and profitability of a business or a project. This analysis gives an insight to the management of whether the business is eligible or not and a new direction is either adopted to improve the business or not. Since in our situation the service is concerned with finances it is important for financial analysis to be carried out in order to determine whether the project is eligible or not for the parties that are going to participate. There are certain goals that guide financial analysis in a business set up.
This refers to the ability of the project to earn income and sustain growth both in short term and long term. This is usually based on the income statement which shows the company’s operations results over a given period of time. The system and the service to be provided if it gets government support it seems to work out and earn profits. This is because when a person purchases a home chances are that the value of the home will appreciate with the economic conditions and if it is resold back it will earn profits to the owner which will be shared by the government and the mortgage lender. Profitability of the service to both the buyer and the other parties that are involved is eligible.
This refers to the ability of a project or business entity to pay its obligation to creditors and other third parties that are associated with it in the long term. If the system will be supported wholly by the government then it will be possible for the services provided to pay back to the government and mortgage lenders in the long term and still the buyer retain something. However if there will be no enough support from the government this may be challenging for the services provided to pay back to the creditors.
This refers to the ability of business entity or a project to maintain a positive cash flow at the same time meeting immediate requirements. Maintenance of a positive cash flow may be a challenge in this situation, this is because it will all depend with the rate at which the homes will appreciate and willingness of the buyers to resell the houses. Also if the scheme is adopted and many people are wiling to take it, it will mean that there will be a positive cash flow but if not it will be the opposite.
This is the ability of a business entity to remain active in business in the long run without incurring huge losses in the business process. The stability of business entity or firm can be revealed clearly by the use of income statement and balance sheet. In our case we do not have these two statements but with the necessary support from the government the business can stand out in the market and show stability. However stability of the business will be dependent upon many factors that surround the provision of the service like competitor’s power and income level of the targeted group among many others.
In order for the business to keep appropriate track of the financial records there are certain things that will be implemented which include the following; budgeting and budget analysis, financial performance management, revenue analysis and cost analysis. Through implementation of these it will be possible to ensure that the financial status of the service provision is maintained appropriately.
The current economic recession has adversely eroded the peoples’ purchasing power, most of the worlds’ economic power houses have not been spared either. In fact if the trend continues for the next unforeseeable future, the average economic man will be poorer in the future than in the industrial revolution era. This will not only happen in the United Kingdom and its environs but also in the rest of the world.
Proper government policies are likely to salvage the situation soonest provided they are potentially tailored into addressing economic issues affecting the average citizen. Financial Mortgages are one such policy geared into ensuring that citizens are able to buy and own homes they could not afford through the open market. Through this mortgage plan the government is stimulating economic growth by giving everybody a chance to acquire a home. At the same time it is opening up business opportunities to small and medium size intermediaries to be appointed as loan deposit agents.
However before this proposal is implemented there should be a proper marketing strategy. Financial mortgage is a long term investment decision characterized by uncertainties and risks. Good market research in conjunction with concrete and strategic market plans should ensure that the proposal is viable from any perspective.