Introduction
While most business entities pursue profits as their cardinal objective, the presence of certain wicked problems present significant challenges that impede the swift realization of this objective. The housing development industry faces numerous challenges given the capital-intensive nature of investments in this particular domain. Many businesses struggle to raise the necessary capital to undertake the construction of envisioned housing developments for either residential or commercial occupancy. Other businesses similarly struggle to find land in marketable locations, thereby lowering the chances of earning a steady income from their developments (Aigbavboa & Thwala, 2018). However, the aspect of return on investment from newly developed housing developments poses the most significant challenge to business organizations. In Nigeria the existence of numerous considerations that influence the determination of property value in both rural and urban settings (Aigbavboa & Thwala, 2018). This business report seeks to highlight the predicament facing ABC Limited following its management’s decision to diversify into the real estate development domain. The report will similarly analyze existing soft systems strategies to determine the most suitable avenue that would help to enhance the company’s future business prospects.
Problem Statement
Encouraged by the State Government’s decision to commence the development of a college close to ABC Limited’s site, the company sought to maximize its profitability by constructing units that would be occupied by the college. The development of the college would have a significant impact on the value of land and the commercial developments around the college hence making it easier for the business to profit from its investment. However, the State Government’s decision to hold back the construction of the college in favor of a mortuary and crematorium complicates the project’s profitability prospects. While the company is 90% through with the construction of its envisioned housing project, several issues arise given the stereotypes held by most people concerning mortuaries and crematoriums. The prospects of business development remain rather bleak for ABC limited as its management considers the most suitable solution for the prevailing situation.
Many businesses such as ABC limited suffer from the negative repercussions of emerging wicked problems that threaten their financial bottom lines substantially. While some business scholars have fronted various definitions for the concept of wicked problems in business, critical defining characteristics define these types of problems. The fact that wicked problems are often complex, and may not have an express solution highlights the need for a structured approach towards arriving at solutions (Claxton & Lucas, 2007). In the real estate development sector, for instance, many companies in Nigeria struggle with identifying the most suitable business model for sustained profitability (Ibimilua & Ibitoye, 2015). Nigerian real-estate businesses have been on the receiving end of fluctuating land prices.
The choice of location and the design of the said commercial buildings are important factors for consideration while pursuing investments in the sector. Colleges, for instance, serve to improve the general value of the land around their localities given the enhanced infrastructural developments that they attract (Cordoba-Pachon, 2010). Consequently, an investment in a commercial-residential complex in close proximity to a college as was envisioned by ABC Limited, and its management was critical to the company’s growth prospects. The art of problem solving in business requires the input of strategic thinking in the evaluation, and implementation of possible solutions (Michalko, 2006). The emergence of a wicked problem given the alteration of initial plans by the State government calls for the consideration of various options for the best possible result.
With a population of approximately 205 million people, Nigeria is one of the most densely populated countries in Africa with an ever-increasing demand for housing units. According to government statistics, existing gaps in the production of affordable housing units for the masses present a significant challenge to the government (Ibimilua & Ibitoye, 2015). Consequently, private developers such as ABC Limited have made inroads into the real estate sector to bridge the gap. However, important considerations determine the prospects of housing developments to attract the required clientele and to realize a return on investment. The location of specific developments and their proximity to critical amenities such as schools and hospitals is one such aspect. Secondly, the nature of the landscape within a given location may similarly determine the price of land, cost of construction, and the eventual value of commercial developments. Finally, significant landmarks similarly have a direct impact on the value of commercial developments. For instance, housing units constructed close to dumpsites, mining locations, or mortuaries tend to suffer from varied stereotypes that have a direct impact on their suitability for occupancy and their subsequent occupancy (Reynolds & Holwell, 2010). These three considerations compound the predicament of ABC Limited whose prospects at realizing a return on investment remain uncertain.
Soft Systems Approach
Creative thinking methods offer users a wide variety of solutions to complex business problems arising from various technical and social improvements. However, the soft systems methodology provides a well-structured approach to problem-solving, thereby enabling businesses to direct their energies on important business objectives (Checkland, 2006). The first and most significant aspect of the soft systems methodology is the situation mapping process. At this stage, business professionals scrutinize specific problems from various angles to establish their enabling factors (Patching, 1990). Secondly, the design modeling procedure provides for the evaluation of possible solutions and the recommendation of a specific course of action. The development of an action plan also provides business executives with structured interventions to mitigate the effects of the wicked problem on business development (Michalko, 2006). Finally, other checks and balances are also important in improving the efficiency of the entire process.
While many business leaders associate the concept of innovation with technological advancements, innovative approaches to the development of management solutions are critical to business growth and development. Problem-solving requires an integrated approach that takes various issues into consideration for enhanced efficiency (Proctor, 2013). Given the predicament of ABC Limited following its diversification initiative, important leveraging of opportunities would help to enhance its financial prospects. Organizational innovation is an important business management practice, given its ability to enable business managers to employ various strategies to limit the adverse effects of wicked problems in societies (Proctor, 2013). The Soft Systems Methodology is an effective approach towards the pursuit of solutions to complex problems facing businesses. Through the methodology, business managers can develop models that analyze problems from different perspectives to determine the most suitable solution. The application of strategic thinking and knowledge management enhances the capacity of business managers to develop a global eye view for existing problems.
Situation Mapping
Several avenues could help to offer sustainable solutions to ABC Limited’s problem following its diversification into the real-estate sector. For starters, key stakeholders in the investment project include the company’s owner, its board of directors, the current managing director, and the financing bank manager. This category of business executives constitutes critical problem solvers who will be influential in the determination of suitable solutions. While the state government’s alteration of its intended development project is the cause of ABC Limited’s problem it may not offer any respite to the situation, given the workings of governments. All the enlisted individuals, including the company’s owner, board, and financiers are poised to lose significantly in the event that the housing project fails to accrue a return on investment. The business owner and board of management are poised to lose their share contribution to the company in the event that it fails to recoup its investment. The company-managing director may also lose his/her position following the turbulent financial times that would be occasioned by a failed investment. Finally, the bank manager may similarly fail to recoup the financing advanced for the completion of the project in addition to the anticipated earnings in accrued interest.
Political considerations have played a crucial role in aggravating the predicament of ABC Limited. The state government, which is a political entity, is responsible for the determination of priority projects that it envisions for specific locations. While the business did not consult the state government on its intention to construct a college, the latter’s political decision to change the project of choice only served to aggravate the scenario for the company. In addition to this, important social aspects also serve to deepen the company’s predicament with respect to the perceptions associated with its impending neighbor. Firstly, the Nigerian culture advances several stereotypes related to death and the afterlife. Consequently, many people dread living or working in close proximity to mortuaries and crematoriums. Following these realities, the company is poised to suffer from a significant shortage of tenants as a result of existing social aspects. Despite the development’s impressive design, the imposing appearance of the mortuary next door is poised to diminish its prospects of facilitating the realization of profitability by the company, and its principal financier.
The problem of housing production and financing is not new in Nigeria. Other than the financing aspect, the cost of purchasing land and other building materials have similarly impeded large-scale development of housing infrastructure to accommodate the urban and rural population growth rates of 4% and 2% respectively (Aigbavboa & Thwala, 2018). As the cost of housing financing continues to skyrocket, the ability of commercial developments to generate steady resources is important for the success of real estate developments (Aigbavboa & Thwala, 2018). With the impending problem, it will be difficult for the financing institution to recoup its investment in record time hence the need for a multidimensional approach for seeking solutions.
Design Modeling
Several initiatives could be implemented by the management of ABC Limited, and its strategic partners to avert the impending financial crisis. Creative partnerships are essential for business growth and development, given their significance in providing solutions to various business problems (Rittel, 1973). The first option that would provide the company with the much-needed financial relief would be to sell the housing units to independent purchasers to facilitate the repayment of the commercial facility. While this option deviates from the original investment option considered by ABC Limited and its shareholding, the unforeseen challenges that may dog the investment upon the commencement of operations abound (Hicks, 2004). Following the development of the mortuary and the crematorium, the initially anticipated rental income is bound to plummet as a result of the drop in the establishment’s aesthetic appeal.
Consequently, it might take unnecessarily long to get the housing development at full occupancy hence reducing its cash generation potential and the realization of a return on investment. By selling the housing units, the company is bound to save significantly reasonable revenue from revenues on the accrued interest. Secondly, the company may similarly take a comparatively shorter period to recoup the financing spent on the development project, thereby enhancing its financial position. Finally, the sale of the housing units would also help to avert the marketing nightmare that ABC Limited would have to contend with while popularizing the units amid social concerns. Nigerian cultural practices discourage individual interactions with the diseased. Consequently, a housing complex built close to a mortuary and a crematorium would not attract the targeted clientele and would hence result in financial losses.
The second option that the company can consider is to transform the housing projects from its planned application as a residential complex to a school to enhance its utilization. Given that students only spend parts of the day in schools, a restructuring initiative targeted at remodeling the apartment for use as classrooms and administration offices would improve its financial viability significantly. This option is, however, controversial in the sense that the building was not approved for use as a school. Additionally, the remodeling costs would similarly put additional financing demands on the company. Schools generate considerably reasonable revenues that would finance the company’s loan repayment commitments. Systemic thinking coupled with prudent business management techniques, including offering transport services would enable the company to grow its business portfolio by operating the learning institution.
The third option would be for the company to retain its real estate development while servicing the existing loan obligation from the proceeds of its other business venture. While this option would help ABC Limited to meet its financial obligations, it would pose a significant threat to the stability of the company’s subsidiary. Using this model, the business would similarly incur additional costs that include the building’s maintenance costs. This option would similarly limit the liquidity of the books supply business and would lower its efficiency.
Of the three options, the first option provides the best avenue for the resolution of the investment standoff pitting ABC Limited against its lender. This is as a result of its capability to offer the most economically viable solution to the impending business crisis. By selling the units, ABC Limited reduces several risks, including that of underutilization. Additionally, the company similarly escapes mounting maintenance charges that would accrue as the developed units remain largely unoccupied. The sale of the units would enable the company to finance loan repayments and to generate additional revenue following successful sales. Finally, the company would similarly save on the impending marketing budget that would be necessary to counter existing stereotypes on the suitability of the location given the presence of a mortuary.
Action Planning
The sale of real estate developments in Nigeria remains a tedious task given the various numerous statutory and regulatory requirements that are required before the commencement of sales. The country’s real-estate regulations require the input of seasoned professionals to ease the sale process (Ibimilua & Ibitoye, 2015). Firstly, ABC Limited should finalize the completion of the development complex for occupation upon their subsequent sale. Secondly, the company should scout for a reputable real-estate agency through a competitive process to improve the chances of getting quality services. The company should commence the process of preparing the necessary documentation to prepare the necessary titles for sale.
The company should subsequently collaborate with its realtor of choice to enhance the visibility of the apartment complex on some of the most influential real-estate sale platforms. The company can finally structure its preferred sales models to ease customer experiences and to expedite the sale of all the existing units. Timeframes are of significant importance given their implications on the costs of various aspects of the entire process. Given that the construction process is on course and is scheduled for completion in record time, the company should strive to finalize the sales agreements within a duration of one year.
Monitoring and Control
The resolution of wicked problems often poses serious challenges to companies following the absence of a clear plan of action that can yield specific results. As such, business managers rely on a mixed variety of strategies to provide workable solutions (Michalko, 2006). However, to establish the efficacy of the said strategies, a well-structured monitoring and control rationale is of great importance (Proctor, 2013). In light of the numerous processes undertaken during the sale of real-estate developments, crucial milestones would provide the necessary indicators to outline the successes or failures at various stages. The process of learning through relations is of significant importance during the mechanization of monitoring and control strategies (Claxton & Lucas, 2007). Consequently, the company should finalize the process of recruiting a realtor within two months of completing the project.
Given the tedious process of acquiring the numerous sales documentation, the company should endeavor to acquire all the necessary paperwork within a timeframe of three months. Additionally, the company’s management should be actively involved in the marketing initiatives to ensure that their financial projections are met. The company should similarly oversight sales negotiations to enhance the potential benefit of its shareholding and other financial partners. This would provide its managing director with an additional advantage over other players in the real-estate domain.
Business managers require important skills that can facilitate their development of creative approaches towards problem solving. In the instance of ABC Limited, the company’s managing director can benefit from problem-solving competencies to mechanize the marketing strategy mentioned above. Through such initiatives, the probability of realizing accelerated disposal of the housing complex at market value is significantly enhanced. Other than the enhancement of business efficiency, thinking plans are important for monitoring the progress of commissioned business projects (Claxton & Lucas, 2007). The complex nature of wicked problems in business management call for the drafting of thinking plans, given its tendency to highlight numerous possibilities.
The financial implications of the wicked problem bedeviling the diversification intention at ABC Limited call for the implementation of an efficient strategy that would offer an immediate remedy. The soft systems methodology proposed for application to solve the current crisis recommends the best option for the company and its shareholding (Checkland, 2006). However, it is important to appreciate the fact that the implementation of theoretical solutions to real-life problems often proves problematic. As such, ABC Limited should develop an implementation strategy that enumerates and highlights the important milestones of the project (Proctor, 2013). Its highlight of the various aspects of the problem, its genesis, and possible solutions are essential in enhancing understanding among business executives. This report similarly evaluates the success prospects of the prescribed methodology, vis-Ă -vis the other options mentioned in the paper. Consequently, the company owner, shareholders, managing director, and financier are better placed to take workable business decisions.
Conclusion and Recommendations
In conclusion, wicked problems continue to pose significant challenges to business entities across the globe, given the uniqueness of the challenges they present and the diverse nature of available solutions. In the presence of an imminent financial disaster, ABC Limited has to contend with the possibility of implementing one of the three solutions out of its real-estate development mishap. However, this business report recommends the adoption of the first policy position. This is in light of the fact that the sale of the development would provide a permanent solution to the impending problems. Additionally, it is important to conclude by emphasizing the importance of soft system methodologies in developing solutions to wicked business problems.
Consequently, it is recommended that the management and shareholding at ABC Limited commence the immediate acquisition of the necessary documents to facilitate the sale.
It is also recommended that the company managing director kick start the process of scouting for a suitable real estate agent to streamline the process according to the applicable laws.
Finally, ABC Limited’s managing director should also look into the best available marketing techniques to improve the visibility and eventual sales prospects of the complex.
References
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