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<p align="justify">Daiwa House Industry (DHI) is a Japanese home building company. It started its business in 1955 and has headquarters in three regions Umeda, Kita-Ku and Osaka, Japan. The company operates in the real estate and construction industry. The company employs more than 48,000 people, it has 444 groups of companies, and it has secured a place on the Fortune 500 global companies for consecutive 11 years (Daiwa House Group, 2021). The company has vast experience in the construction industry. It operates through the following segments Single-family Houses, Rental Housing, Condominiums, Existing Home Business, Commercial Facilities, Business and Corporate Facilities, and Other Businesses. In all across these segments, DHI deals with care and required due diligence. DHI is a forward-looking organization with an eye on the future; they have innovated throughout their lifespan. . Since its inception, DHI helps rebuild the Japanese society after the war. Porter&#8217;s five forces model is an appropriate analytical tool to evaluate DHI&#8217;s threats and the opportunities it can potentially explore.</p>
<h2 align="justify">Competitive Rivalry In The Market</h2>
<p align="justify">The construction industry is inherently competitive, and the real estate development segment is concentrated. The Japanese real estate development industry encompasses the innovative spirit of the Japanese culture. DHI is the leading housing company in Japan regarding units sold in 2019; the company sold 43,700 housing units (Statista, 2021). DHI&#8217;s significant competitors are Sekisui House, Misawa Homes and Asahi Kasei. In 2020, DHI was ranked at 311 among the Fortune 500 global companies; the company reported $2.1 billion in gross revenue of $40.2 billion (Fortune, 500). Sekisui House is another major consumer housing developers; they reported a revenue of $23 billion and a gross profit of $4.45 billion in 2020 (Forbes, 2021). In 2020, Misawa Homes reported a revenue of $3.6 billion and a profit of $749 million (Forbes, 2021). Asahi Kasei recorded a profit of $6.4 billion and $19.8 billion in revenues (Forbes, 2021). Large-scale public and private conglomerates competing for the market share make the market highly competitive.</p>
<h2 align="justify">Threat of Substitutes</h2>
<p align="justify">The real estate industry is rigid and is an important sector for the society and economy. The real estate development sector forms an essential part of the economy as its growths help grow the associated industries. The threat of substitutes remains low, as there is no viable alternative available. Even though the industry is not perfect in dealing with consumers, consumers still prefer to lease property developers for safety. Additional benefits such as management and ancillary maintenance are the management company&#8217;s responsibility. The potential natural alternative is digital companies such as Air BnB. They act as agents between the lessee and the lesser for the contracted period. They are competing with the resorts and motels. The affordable prefabricated homes pose the other threat; the market is expected to grow at a CAGR of 8% from 2019 to 2025 (PR Newswire, 2020). However, for now, they still cannot act as a suitable alternative. Therefore, the threat of substitutes remains low to moderate.</p>
<h2 align="justify">The Threat Of New Entrants</h2>
<p align="justify">There are inherent obstacles associated with every industry; the significant barriers to new entrants in the real estate sector are established incumbents, capital and regulatory framework requirements. The industry is moderately regulated, but there are usually layered compliance requirements, thus increasing the compliance cost; sometimes, this is too much for the industry aspirant. It is a big-money industry. To start a business, substantial financing is required. To acquire funding through traditional measures involves collateral. Additionally, the cost of capital varies from client to client based on their risk profile. The implied requirement of high money increases the competitive advantage of the incumbent firms (Embugus, 2020). Therefore, the threat of new entrant in the large scale real estate development sector remains low.</p>
<h2 align="justify">Bargaining Power of Buyers</h2>
<p align="justify">The buyers bargaining power depends upon various factors such as their concentration and availability of the alternatives and the attention of the buyers. Generally, buyers have moderate to high buying power. Buyers’ power is indirectly proportional to the company’s profitability. Buyers can negotiate a better price if they belong to the residential area, out of state buyers pay substantially more due to sellers’ bias and asymmetric information (Lambson et al., 2004). Generally, buyers are usually well informed in the urban centres due to the availability of the information and their general awareness. Saturation in the housing market and availability of other suitable properties increases the options for the buyers. Thus they can exercise high bargaining power. Overall, buyers can exercise higher bargaining power.</p>
<h2 align="justify">Bargaining Power of Suppliers</h2>
<p align="justify">Suppliers bargaining power depends upon the underlying factors affecting the supply chain. The vital elements that determine suppliers’ power are the importance of supplies, the nature of collections, and suppliers&#8217; concentration. The essential sources of supplies are raw material required for construction and a skilled workforce. The mega developers in the industry have vertically integrated supply chains and have stored materials to accommodate for lead time. If there are materials that are required to be procured, they tend to get bulk discounts for buying massive quantities. To avoid the supply chain, overreliance on the suppliers can be reduced by dual-sourcing (Pochard, 2003). These firms usually have multiple diversified supply channels to accommodate for supply chain risk. The second important source is skilled workers, yet there is no way around them; they are essential for business, and therefore, they seek higher compensation. They have moderate bargaining power; overall, suppliers can exercise higher bargaining power.</p>
<h2 align="justify">References</h2>
<p align="left">Daiwa House Group. (2021). Home page. Available at: https://www.daiwahouse.com/English/<br />
Embugus, S. A. S. B. B., &; Aliyu, U. S. (2020).ENTRY BARRIERS AND CAPITAL STRUCTURE OF LISTED FIRMS IN NIGERIA. JOURNAL OF ACCOUNTING AND MANAGEMENT. ISSN 1119-2454 VOLUME 3, NUMBER 1.<br />
Forbes. (2021). Asahi Kasei Corp. Available at: https://asia.nikkei.com/Companies/Asahi-Kasei-Corp<br />
Forbes. (2021). Misawa Homes Co., Ltd. Available at: https://asia.nikkei.com/Companies/Misawa-Homes-Co.-Ltd<br />
Forbes. (2021). Sekisui House. Available at: https://asia.nikkei.com/Companies/Sekisui-House-Ltd<br />
Fortune. (2021). Daiwa House Industry. Available at: https://fortune.com/company/daiwa-house-industry/global500/<br />
Lambson, V. E., McQueen, G. R., &; Slade, B. A. (2004). Do out‐of‐state buyers pay more for real estate? An examination of anchoring‐induced bias and search costs. Real Estate Economics, 32(1), 85-126.<br />
Pochard, S. (2003). Managing risks of supply-chain disruptions: dual sourcing as a real option (Doctoral dissertation, Massachusetts Institute of Technology).<br />
PR Newswire. (2020). The prefabricated building market is expected to grow at a CAGR of over 8% during the period 2019-2025. Available at: https://www.prnewswire.com/news-releases/the-prefabricated-building-market-is-expected-to-grow-at-a-cagr-of-over-8-during-the-period-20192025-301036903.html<br />
Statista. (2021). Leading housing construction companies in Japan in fiscal year 2019, based on unit sales. Available at: https://www.statista.com/statistics/667933/japan-top-housing-construction-companies/#:~:text=With%20approximately%2043.7%20thousand%20units,sold%20during%20that%20fiscal%20year.</p>
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