Free Simons Property Merger with Prime Essay Sample
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In the merger, Simon property is an S&P company and among the largest public U.S estate company that is far much integrated. It usually operates from five retail real estate platforms. Currently, the company owns 393 p0roperties comprising of around 264,000,000 square feet of gross leasable area both in North America Europe and Asia. It came into being in 1993, when several shopping center interest of Melvin Simon & and the associates become a public traded company. The company ids headquartered in Indianapolis, India and have employed a total of around 5,000 people globally. The company had annual sales of $492 per square foot by September 30th, which is higher as compared to $438 per foot at its regional malls. In addition, the company's outlets centers as well had a very high occupancy at a round 97.5 percent, as compared to 91.4 percent at regional malls.
On the other hand, prime outlet is headquartered in Baltimore and owns outlets in metropolitan areas including Washington DC, San Antonio, Baltimore as well as Orlando. The company centers were about 92% occupied as of June 30th and ended up generating sales of around $370 square foot. The outlet centers has been selling designers merchandise pat a discounted prices. Almost the entire prime outlet is owned by Lightstone group, which is a closely held real estate investor, founded by David Lichtenstein, and Lighstone Value plus Real Estate Investment Trust.
Some of the companies in real estate development include DLF, whose main responsibility is developing, marketing and retailing properties. Tata Projects is another company which has registered an annual turn over of around Rs 2,300 crore in 2007; it has emerged to being one of the chief players in the industry. Sobha developers are another company which was formed in 1985 and has a round 3,705 skilled employees working for it.
The merging presents Simon in a stronger strategic fit for its existing premium outlets as well as enhancing its leadership position in the outlet business. It also enhances its economies of scale for a quicker company growth, due to access to business tools that might not be cost effective to smaller companies. The merging also presents overall expense reduction due to economies of scale. There will be an access to new markets, which were originally owned by Prime outlets. (Zumpano, & Crellin, 1993)
Products include office buildings and commercial properties, residential developments, real estate fund businesses. Another product is large scale mixed use development ventures. In the production of such products, there are these companies which wither buys them at a whole sale price and then sales them at a profit, While there are these that engages in the real construction of buildings. The industry uses optimal scale of production to ensure that products move in line with the demand within the market. There is no maximum production due to higher expenses involved in the construction process. In the industry, some raw materials like land are obtained naturally through purchase, while other materials like cement are bought from other manufacturing industry. The industry is making use of different technologies like the GPRS and GIS, computer software like the arch card, communication technologies like the mobile phones. They are also using the internet for advertisements among other technologies.
The 4-firm concentration of the firm is (CR4) 0.451, 8-firm concentration (CR8) 0.662 while Herfindahl-Hirschman index, is 0.0672. The CR4 defines the percentage of the market that is held by the largest four firms in the market. On the other hand, CR8 has been used to indicate the market percentage held by 8 largest firms in the industry. These figures have indicated that, the industry has no major players. This is because; their market share is too little. Herfindahl-Hirschman index has been used to provide show the the level of market control among all players in the building and real estate industry. However, the value has been increasing due to merging in the industry.
In this real estate industry, competition is too high as there are only a few barriers to entrance. However, this doesn't matter based on the fact that, there are explosions on demand side that the industry can absorb lots of competitors and still remain ok. Due to the fact that fact that there have been lots of companies in the industry, there has been always an active situation of rivalry, there are no followers. Basically in this industry, quality is the main competitive strategy. This is because for any business to be successful in this industry, the companies that work professionally has little bit of expertise usually do well in this industry (Zumpano, & Crellin, 1993).
The competitive struggle leads to either growth or decline in industries, as this determines the entry of new players in the industry. Competitive environment within the industry hinders the entry of new firms in the industry, hence maintaining the number of players in the industry, though the number of buyers might be increasing. Competition apart from creating incentives for given firms for their better performance, by separating between more and less successful firms, it also induces low cost firms which might challenge the incumbent, as well as facilitating the exist of firms with low efficiency.
Competition in building and real estate industry is much advantageous to customers in the industry. This is based on the fact that, prices are never affected due to completion in the industry, customers have been provided with a variety of goods and services to offer wider selection at the highest quality. It has also led to far much innovative products, apart from promoting accountability as well as transparency in the business behaviors as well as government business relations. This reduces bribery and corruption in the society.
Markets systems allocate goods and services through demand and supply. It has been so common the in terms of allocating goods and series, markets become far much efficient as compared to governments. As a result, market concentrations are advantageous to consumers when the market structure permits equal distribution of resources. In case there are few firms dominating the market and products are either identical or differentiated market concentration also becomes much important to customers, since competition becomes optimal, hence products becomes more innovative and cheap (Zumpano, & Crellin, 1993)
Oligopoly market structure can be beneficial to consumers and business as it prevents the markets into becoming transformation of going rigid, conventional as well as unimaginative. It provides common standards which can be used in rapidly technological advancing industries. The main reason for this is that, businesses tent to make their products more innovative and efficient in the long run. However, the issue remains that, such like reasons might not always be advantages to consumers.