The United States Real Estate Services industry is one of the industries that have been reporting low profitability over the past decade. Michael Porter's Five Force Model can be used to assess the causes of low profitability in this industry and remedies that can be used to address the issues.
In the US Real Estate Services industry, the threat of buyers is strong. The industry primarily depends on the retail and services-oriented business industry ( Fern Fort University, 2020) . Although customers are not a potential threat, they expressively influence the business activities of firms hence affecting the profitability of this industry.
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The threat of suppliers in the US Real Estate Services industry is strong. Even though there are many suppliers to consider, reducing their effective threat to existing firms, many inputs are required to keep the industry running efficiently ( Fern Fort University, 2020) . The construction industry directly influences this industry due to raw material costs, financing, and wages incurred for the construction of real estate property. As a result, investors are not satisfied with the management of the firms in the industry hence reduces market prices of real estate properties.
Furthermore, the threat of new entrants is comparatively weak. The US current economic condition is the significant cause of the low entry threat in the industry. Firms willing to enter into the industry are experiencing challenges of obtaining the minimum capital needed to operate in the sector ( BizSkinny, 2019) . Also, sales volume is low in this industry hence affecting the overall profitability of firms.
Moreover, the threat of substitute products in this industry is very high. When customers identify new products that meet their needs at relatively low prices, they shift to substitute products ( BizSkinny, 2019) . Consequently, this threat reduces profitability in the industry due to low sale and purchase of real estate properties.
References
Fern Fort University. (2020). Real estate investors plc porter five (5) forces & industry analysis [Strategy] . https://fernfortuniversity.com/term-papers/porter5/lse/1091-real-estate-investors-plc.php
BizSkinny. (2019, January 27). Porter's five forces analysis example | Real estate industry analysis | Marketing . BizSkinny | The Quick and Skinny for How To business. https://www.bizskinny.com/Marketing/industry-analysis-real-estate-operations-2.php
