ASSIGNMENT – 01

Module : Change and Continuity in Contemporary Business

Student Name : Aruna Kailasanathan

Student ID : CMU_BABM_APRIL12_C5_18
Change and Continuity in Contemporary Business

Statement of Originality of Submitted Work

I; Aruna Kailasanathan

Student Id No : CMU_BABM_APRIL12_C5_18

Module Name : Change and Continuity in Contemporary Business

I hereby confirm that the work presented here in this report and in all other associated
material; is wholly my own work.

And I agree to assessment for plagiarism.

Signature : ………………………………

Date : ………………………………

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Acknowledgement

This assignment would not have been possible without the assistance of many people.

I wish to express my sincere thanks to Mr.Shantha Yapa, the lecturer of the module ‘Change
and Continuity in Contemporary Business’ for providing me valuable guidance.

Further I wish to thank my family for their encouragement and support.

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Change and Continuity in Contemporary Business

Executive Summary

The objective of this report is to identify the changes and trends in the global environment
and how it affects the business of Taylor Wimpey PLC.

Taylor Wimpey PLC is one of the top ten house builders in the United Kingdom. The
company was affected by the global economic crises and various other changes in the
external environment. This report will discuss the impact of these changes and how the
company should respond to the changes.

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Table of Contents

1 Introduction 1

2 PESTEL Analysis 2

- Political Factors 2

- Economic Factors 3

- Social Factors 5

- Technological Factors 8

- Ecological Factors 9

- Legal Factors 10

3 Conclusion 12

4 References 13

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Introduction

Taylor Wimpey PLC is one of the largest house builders in United Kingdom listed on the
London Stock Exchange. Its corporate headquarters are located in London. The company was
created by the merger of George Wimpey and Taylor Woodrow in 2007. They have
operations in United Kingdom and Spain. They construct a wide range of properties ranging
from one bedroom apartments to five bedroom detached houses.

The changes taking place in the global environment has affected the house building industry
and Taylor Wimpey as well. Taylor Wimpey should respond to the changes rapidly to ensure
its survival in the house-building industry. The changes in the global environment, its impact
on Taylor Wimpey and the recommended responses are discussed in detail in this report.

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PESTEL Analysis

The factors which are influencing the business environment of Taylor Wimpey could be
analysed through a PESTEL framework. A PESTEL framework is a model which is used to
analyse the external environment of an organization with regard to the political, economic,
social, technological, environmental and legal factors.

A detailed PESTEL analysis of Taylor Wimpey is as follows,

Political Factors

Relaxation of Rules on Planning Permission on Lands

In UK, the use of land is controlled through government systems. This means that house
building firms should seek planning permission to build on a particular land. They will have
to go through the planning application process by submitting their application to regional,
city or other local government units. This is perceived as a costly process by the house
builders. . The government of UK has relaxed the rules on planning permission for lands in
order to boost the economy. The home owners will be able to make major renovations and
extensions to their houses without additional cost or delay of obtaining permission from the
council. Around 200,000 people apply for permission to make renovations and conversions.
The application and the professional fees cost more than £150. According to the current
permitted development rules, the limit for the semi-detached properties is three metres and
for detached homes four metres. The new rule permits almost double of those limits which
means most of the extensions which currently require permission could be carried out
immediately without obtaining permission. Moreover the shops will be free to expand to
another 100 metres of space without seeking permission from the council. This relaxation of
rules will be time limited and are due to expire in 2015.

In addition to that, the government introduced a shared equity scheme for the first time
buyers under which the government and the property developer will each own 10% of the
new home. Almost 16,500 first time buyers are eligible for the scheme.

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Taylor Wimpey could exploit this opportunity by constructing home extensions for home
owners. Although, their core business is building various types of new houses, they could
make use of this opportunity as there is a growing demand for home renovations and
extensions. This will help Taylor Wimpey to increase their profitability.

Economic Factors

Restricted Mortgage Market

Most of the houses in United Kingdom are bought on mortgages. In 2007, many house buyers
who have borrowed were incapable of meeting their mortgage payments and defaulted on
their loans. This led the banks to poor recovery. This is turn, resulted in banks being hesitant
to lend loans to house buyers with doubtful employment prospect and poor credit record.
Due to this credit crunch, the mortgage rates have risen and the demand for mortgages shows
a decline in the recent past.

Figure- 1 Annual Growth rate of mortgages

Source- BBA

The poor availability of the mortgages and the high mortgage rate has had a negative impact
on the business of Taylor Wimpey. The demand for the houses built by Taylor Wimpey came
down as the UK customers are not able to afford the mortgage.

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To address this issue, the government has introduced a scheme named ‘NewBuy Scheme’.
This is a government backed scheme which provides the buyers with 95% mortgages on
newly built properties (Rightmove, n.d). The UK government will provide guarantee for
mortgage against a 5% deposit. This scheme will increase the demand for houses. In addition
to that, the Scottish government has introduced a similar scheme named ‘MI New Home’
which allows the buyers to access 95% loan to value mortgages to buy new homes in
Scotland with a maximum sales price of £250,000/- (MiNewHome.com ,n.d).

In response to this issue, Taylor Wimpey has registered under the ‘NewBuy’ and ‘MI New
Home’ schemes. This would help Taylor Wimpey to increase the sales.

Increasing Unemployment Rate and Renting Out Houses

The GDP of UK has shown a decreasing trend in the recent years. This has led to job cuts in
companies which have resulted in high unemployment rate. This implies that the disposable
income of the customers will be low. Houses are goods with high income elasticity of
demand. Therefore a reduction in disposable income of customers has led to a fall in demand
for houses. This makes the alternative of owning a house such as renting out houses a more
attractive and affordable option. If the customers continue to perceive that renting a house is
more economical and beneficial than acquiring houses, the current business of selling houses
will be adversely affected.

To cater to this trend Taylor Wimpey could step into the business of renting out houses
following a Market development strategy as defined by Ansoff Growth Matrix. It is an
attractive market as the customers prefer the renting out option. Banks being reluctant to lend
loans could also create demand for rented houses. Moreover it will provide Taylor Wimpey a
continuous source of income and will contribute to an increase of the share prices. Having
ownership of houses will enable Taylor Wimpey to get capital gains through selling the
rented houses when property prices are high.

Decreasing Disposable Income and Part Exchange Scheme

The disposable income of customers is showing a decreasing trend. Therefore the customers
are unable to spend large deposits on new houses. This has led them to seek the option of

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selling their house and acquiring a new one. They face hassles such as finding a buyer,
commission on property sales and last minute hitches when selling their properties (Astranti
Financial Training, 2012).

To solve this issue Taylor Wimpey could introduce a ‘Part Exchange’ scheme. Through this
scheme the buyers will be able to trade their current house as a part payment for the new
house. This would improve the customer base of Taylor Wimpey.

Social Factors

Preference for Late Marriages

The social and the lifestyle trends of the customers have an impact on the demand for houses.
Recent trend in UK shows that the people prefer late marriages. Moreover the marriage rates
have shown a declining trend.

General Marriage Rates

90.0
80.0
70.0
60.0
Marriage Rates

50.0
40.0 Females
30.0 Males
20.0
10.0
0.0
30 34 38 42 46 50 54 58 62 66 70 74 78 82 86 90 94 98 02 06 10
19 19 1 9 1 9 1 9 19 1 9 1 9 19 19 1 9 1 9 19 19 19 1 9 19 19 20 2 0 20

Year

Figure-2 General Marriage Rates

Source- Office of National Statistics

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The number of people living alone has increased from 7 million to 7.5 million between 2001
to 2010 (Jen Beaumont, 2011). This has led to an increase in the demand for single
households, flats and apartments.

To address this trend Taylor Wimpey could construct more single households rather than
building luxurious houses for big families. This would increase the sales of the company.

Growing Chinese Market

The Chinese market is expanding and wealthy in Spain. The Chinese desire to buy homes
designed using ‘Feng shui’ a system believed by the Chinese to maximize ‘positive energy
flow’ (Property Wire, 2012). Further some Chinese perceive that some numbers bring good
or bad luck. Based on that belief they change the floor numbers. For example, they avoid
number four as it sounds like the word for death in Chinese language.

Taylor Wimpey has operations in Spain. Capitalizing on this trend, the company could enter
this market as it has a growth potential. Since, the Chinese market and the traditional ‘Feng
Shui’ style are new to the company, this strategy could be considered as a Diversification
Strategy according to the Ansoff Growth Matrix.

Home Owner Location

Research carried out by the Nationwide Building society in 2012 shows that almost 44% of
the homeowners live within 10 miles from where they grew up (Nationwide, 2012). The
people desire to stay close to their families and friends. Another reason stated by the
respondents of the research for staying put is that they are comfortable and familiar with the
surroundings.

Taylor Wimpey could respond to this trend by placing their developments in areas that have a
larger population of families where future generations will look to find accommodation close
to their friends and families.

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Retired Housing Market

The retired people are a growing demographic group in UK. This presents a business
opportunity for the house builders. This implies that the retirement housing market has a
growth potential in future. Retirement Housing is defined as a purpose built accommodation
for sale or rent to old people with a range of care, social and recreational services provided
(Knight Frank, 2010). People over the age of 60 years live a long, healthy life which has a
significant impact on the housing requirements of this demographic group. The designs of the
retirement housing should take account of the social habits of old people such as the need to
accommodate visitors. Some old people continue to work in part time jobs, for example
providing consultancy services from home, which suggests that the demand for space is
rising. Old people usually move to retirement housing due to physical weakness and the
desire to live in close proximity to relatives.

Taylor Wimpey could enter the retirement housing market as it is an attractive opportunity as
per SWOT analysis. It could construct retirement villages with fitness, social and
entertainment facilities. The ageing population and the positive emphasis of old people on the
need for security, socializing facilities and comfort contribute to the growth of retirement
villages. Taylor Wimpey will need to provide access to internet based technology to facilitate
communication with families and to access medical checks. Moreover the company should
offer electronic ‘call’ facilities in the event of an emergency. In order to prevent unauthorized
access to the premises, Taylor Wimpey should provide gate security. Since the old people
spend most of their time in the home the surroundings should be well designed making it
attractive and greenery.

Growing Buy-To-Let Market

Buy-To-Let market refers to the purchase of properties for the purpose of renting out. This
market shows an upward moving trend in the recent years. Low interest rate, high rents and
falling house prices are motivating the house owners to expand their buy-to-let property
portfolio and new players to enter the market (Property Wire, 2012). Buy-To- Let market is
an attractive opportunity for the people who can afford to raise a large deposit. A research
conducted by a mortgage company indicates that the house owners have expanded their
property portfolio by an average of 1.8 properties during the first three months of year 2012

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(Property Wire, 2012). The housing shortage and the difficulty faced by the first time buyers
to step on the housing ladder have increased the demand for buy-to-let markets. Moreover it
should be noted that there has been an increase in the number of mortgage applications from
the first time buy to let borrowers.

Taylor Wimpey could take advantage of these trends to increase its sales. This can be
considered as an opportunity according to SWOT Analysis. It could construct houses for the
landlords who are in the buy-to-let market. It could build terrace houses as it is the most
preferred investment choice suitable for students and professionals.

Technological Factors

Modern Methods of Construction

The technological environment of the house building industry is rapidly changing. The
competitors of Taylor Wimpey have taken advantage of the new advanced technologies to
construct energy efficient houses. Taylor Wimpey should also exploit the innovative
technologies to survive the competition without being left behind the competitors.

Taylor Wimpey has made use of the Modern Methods of Construction techniques including
improved insulation and timber frame technology (Easier Property, 2012). This has made the
homes built by Taylor Wimpey popular for being more energy efficient than older homes.
Further it could use solar panels & air source heat pumps build environmentally friendly
homes. Taylor Wimpey has added value to its houses through technology according to
Porter’s value chain model.

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Ecological Factors

Climate Change

‘Climate change’ is one of the factors which people are concerned about these days. It has
become a major issue which requires urgent and coordinated global response. Climate change
is caused by the build-up of greenhouses (carbon Dioxide, Methane, Nitrous Oxide etc.) in
the atmosphere. Recently, the south-east of UK has experienced drought conditions due to a
decline in the annual rainfall. In contrast, some parts of UK have suffered flooding. Due to
that, people look for houses which are not vulnerable to the damages caused by floods.

To address this trend Taylor Wimpey could construct houses which could survive times of
flooding without damage to the house and the occupants by following a Product development
strategy as defined by Ansoff Growth Matrix. A reputed house builder has innovated a ‘turn
around’ house which operates as a typical house for the most of the year but in a flood a ‘turn
around’ living arrangement is adopted (Flood-proof Houses for the Future, 2008:6). The
occupants of the house can relocate to upstairs when a flood warning is issued and the water
is allowed to penetrate to the ground floor. The ground floor is designed in a way that water
causes no damage and it could be easily cleaned. In addition to that, an entrance is built in the
first floor. Taylor Wimpey could come up with similar designs which are adaptable to floods.

Zero Carbon Emission Target

The UK government is planning on implementing an environmental policy which requires

that all the new homes would meet that zero carbon emission target from 2016 (Tim Webb,
2010). This will include the carbon emission from household appliances, heating and
lighting.

This requires Taylor Wimpey to utilize the advanced technologies to reduce the carbon
emissions. To achieve this target Taylor Wimpey could improve the quality of the building
fabrics, insulation and the airtightness. Moreover, they could install technologies such as
sustainable heating system based on flue-gas heat recovery and waste water heat recovery.
They could use efficient fixtures such as low energy light fittings to reduce energy
consumption.

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Passive Houses

UK shows an increasing move towards an eco-friendly house building. This has increased the
construction of ‘Passive Houses’. A passive house is an energy efficient building that has
comfort and good indoor climate without the usage of heating and cooling system (Scottish
Passive House Centre, n.d). This consists of high grade insulation, internal heat sources,
airtight fabric, advanced window technology, passive solar design and other renewable
energy sources.

Taylor Wimpey could enter this market as there is an increasing demand for eco-friendly
homes. This can be considered as a Diversification strategy according to the Ansoff Matrix
Growth Model since the product and the market are new for Taylor Wimpey.

Legal Factors

Brown Field Lands

Legislations can affect the demand and supply of housing in several ways. The government
announced a target for England that at least 60% of the new homes should be built on
brownfield lands (Brownfield Development, n.d).

Brownfield land is an area of land that was previously occupied by a permanent building
which has become vacant or derelict and now has the potential for redevelopment. It could
only be redeveloped after the removal of chemicals and derelict infrastructure. Campaign to
Protect Rural England (CPRE) stated that there was adequate brownfield land to build 1.5
million new homes (msn news, 2011). This government policy presents a problem to the
house builders as preparing a brownfield land for redevelopment is a costly. It involves the
costly process of ensuring the vacant possession of existing building, the demolition of
building and the remediation of land by clearing the toxic substances that may have been left
by previous industrial users.

To achieve this target Taylor Wimpey could make use of the new technology. The company
should clear up waste by cleaning the chemicals from soil and ground water and remove the

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asbestos from the no longer used buildings. They can use chemical, biological, thermal and
environmental technological to tackle the pollution.

Taylor Wimpey is also a member of Soil and Ground water Technology Association
(SAGTA). This would help the company to understand various efficient and cost effective
ways to deal with contaminated land. Further the government provide subsides through local
authorities to assist the preparation of brownfield land for housing development. Taylor
Wimpey has the possibility to request for the subsidy.

Taxation to Improve Environmental Performance

The UK government uses taxation to encourage environmental protection. Climate change

Levy (CCL), and landfill taxes are some of the examples of these taxes. Climate Change
Levy is a tax on the use of energy in the industry (HM Revenue and Customs, n.d). It aims to
increase energy efficiency and reduce carbon emissions.

Landfill tax is a tax on disposal of waste. (HM Revenue and Customs, n.d). This tax intends
to encourage to produce less waste and to recover value from waste through recycling and
other eco-friendly methods.

Therefore, Taylor Wimpey will have to take steps to reduce the energy consumption and
waste produced in construction. Waste minimization could be facilitated through segregating
waste onsite, re-use onsite, recycling, dealing with suppliers who have buy-back schemes, use
limited packaging for materials and keeping up with regulatory requirements. Further it could
go for ‘finished’ materials since completing the material on-site will result in more waste.

To reduce the energy consumption Taylor Wimpey could use Modern Methods of
Construction including solar panels, air source heat pumps, improved insulation, timber-
frame technology and low-energy light fittings.

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Conclusion

This report has identified several factors which have influenced the business environment of
Taylor Wimpey PLC such as relaxation of planning permission rules, increasing mortgage
rates, poor availability of mortgage facility, rising unemployment, decreasing disposable
income, preference to late marriages, expanding Chinese market, desire to live in close
proximity to relatives, climate changes, zero carbon emission target and g government policy
on using brown field lands.

Taylor Wimpey should implement appropriate strategies to address these trends and changes.
It could utilize the Modern Methods of Construction to reduce the cost and improve the
energy efficiency. Further it could enter the new markets such as retirement housing, renting
out houses and Chinese’s traditional housing market. In addition to that, Taylor Wimpey
could introduce ‘part exchange schemes’ to increase their sales.

By adopting the strategies mentioned above, Taylor Wimpey PLC will be able to cope up
with the changing external environment and ensure its survival in the competitive market.

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References

Christopher Hope, 2011, Hands off Our Land: Enough 'brownfield land' to build 1.5million
new homes, CPRE claims, the telegraph, [online] Available at :<
http://www.telegraph.co.uk/earth/hands-off-our-land/8884269/Hands-Off-Our-Land-Enough-
brownfield-land-to-build-1.5million-new-homes-CPRE-claims.html> [Accessed 28 October
2012]

Easier Property, 2012, Taylor Wimpey ‘Homes in’ on good design, [online] Available at:<
http://www.easier.com/104920-taylor-wimpey-homes-in-on-good-design.html> [Accessed 28
October 2012]

Economics online, n.d, The Housing market, [online] Available at :<

http://economicsonline.co.uk/Competitive_markets/The_housing_market.html> [Accessed 28
October 2012]

Housebuilder, 2007, Private rental sector filling affordability gap – Hometrack, [online]
Available at :< http://www.house-builder.co.uk/news/articles/2007-10-05/private-rental-
sector-filling-affordability-gap-hometrack.html> [Accessed 28 October 2012]

Jen Beaumont, n.d, Households and families, Office for National Statistics, [online] Available
at :< www.ons.gov.uk> [Accessed 28 October 2012]

Knight Frank, 2010, Retirement Housing Report, [online] Available at :<

http://www.knightfrank.co.uk/residential/institutional/documents/pdfRetirementReport.pdf>
[Accessed 28 October 2012]

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msn news, 2011, Enough brownfield land' for homes, [online] Available at:<
http://news.uk.msn.com/uk/enough-brownfield-land-for-homes-78> [Accessed 28 October
2012]

Nationwide, 2012, Nearly half of home owners buy near 'mum and dad', [online] Available
at :< http://www.nationwide.co.uk/mediacentre/pressreleases/viewarticle.htm?id=2008>
[Accessed 28 October 2012]

Politics.co.uk, n.d, Brownfield Development, [online] Available at :<

http://www.politics.co.uk/reference/brownfield-development> [Accessed 28 October 2012]

Property Wire, 2012, Spanish developer brings in feng shui to attract Chinese buyers,
[online] Available at :< http://www.propertywire.com/news/europe/spain-developer-chinese-
buyers-201207186756.html> [Accessed 28 October 2012]

Scottish passive house centre, n.d, Passive house- What is it, [online] Available at :<
http://www.sphc.co.uk/passivhaus-or-passive-house> [Accessed 28 October 2012]

Taylor Wimpey, n.d, At a Glance, [online] Available at :<

http://about.taylorwimpey.co.uk/Who-We-Are/At-A-Glance/> [Accessed 28 October 2012]

The Built environment experts, 2009, Zero carbon targets on the construction industry,
[online] Available at :< https://www.bsria.co.uk/news/clean-home/> [Accessed 28 October
2012]

Tim Webb, 2010, House builders to win reduced carbon target for homes, The Guardian,
[online] Available at :< http://www.guardian.co.uk/business/2010/aug/29/new-houses-
carbon-emission-targets-reduced> [Accessed 28 October 2012]

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UK land Directory, 2004, Brownfield Land Development Information, [online] Available

at :< http://www.uklanddirectory.org.uk/brownfield.asp> [Accessed 28 October 2012]

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