The case of Lennar Corporation is been chosen to investigate the corporate social responsibility (CSR) issues of a business and critically analyze the ethical backdrop of the Joint ventures that the firm has done. The report shall have a SWOT analysis of the firms CSR practices along with the leadership qualities those are needed in terms of awareness about legal, social and ethical issues. Thus the ventures and the use of such venture to ‘launder money’ are critically analyzed to recommend future ways.
SWOT Analysis of Lennar’s
SWOT stands for strengths, weakness, opportunities and threats that a business has which rules its strategic business outlines.
Strength: The 2009 saw the business of Lennar been visited by the Federal Discovery Institute which questioned about its off balance sheet debts and large personal loans taken by one of its executives. The business had its reach in real estate where the target market was the first time home buyers in communities, multi level buildings all across the US states. The business provided mortgage finance, title insurance, closing services etc. They provided internet connectivity and cable TV for both buyers and sellers. The entire money collected in the loans in a particular market was invested into the secondary mortgage market on a servicing release, non recourse basis. The prices of average homes too dipped in the period of 2007-08 periods. Thus the strengths were in multi-state presence, multiple business and investments to business support the other ancillary businesses so that the focus is not on particular one field of business. Further the joint ventures with GM and later with other significant home developers across US proved to be an equity price booster for the firm, creating strength in the minds of people. Hence, the strengths that the business had were in multitude being a strong player in the dominant US market of residential homes.
Weakness: The major weakness was the investments in the secondarily debt market of its investments. The joint ventures were less clear in its formulation and had unique qualities of itself where the only risk that the business took was in primary investments and the future capital tha needed to be pumped in. The huge demand for homes along with multiple players in the same market was a big weakness where the edge was with the biggest players like D.R Horton, KB Homes, etc. The firm used to use subcontractor for its homebuilding had had no equipments of its own and the options that the other business had were more versatile and feasible for a greater number of consumer as the prices were between 90 to 900 thousand USD. Furthermore, the DHI mortgage had no generation on their own but served as services provider as a secondary agent to its home buyers, same way the subsidiary acted as title insurance agents by providing consumers with examination, closing services etc which for Lennar was entirely done on its own. Thus when the mortgage market dropped the investors lost their value when the pressure for the foreclosed home sales pressure was at its peak. The state Pension fund (CAPLAR) went through a 1 billion loss due to the Lennar’s deceptive business practices.
Opportunities: The entire mortgage market of the US was crashing so the business alone was not affected thus the viability stayed in the market where the business had its foothold in multiple states. The Chief Operating Officer was found to have received from one joint venture partner of Lennar which the business may use as an opportunity to regain the trust. The business may now promote its services and complete home satisfaction guarantee schemes suggesting that the fraud was but an individual’s own done miss deeds. Further the cash reserves for the business was huge to support the business ventures alive during such a troubled times. The local operational schemes are a good idea that the business may keep up to increase its market share in other states of US where they are yet to reach.
Threats: The market revaluation of Lennar’s equity went through a major turndown where the underperformance was 33% to average in 2009. The ethical practices were greatly rammed by the FDI’s visit with 10 point fraud detection observations. The non-clarity in the business objectives, joint venture, underwriting the values and it increased its cash reserve to 1.1 billion. Further the COO of the firm took an alleged bribe from the joint venture partner of the firm which exceeded his mortgage value, creating doubt in the minds of the investors. Lastly the new developers are coming to the market of home building while the other competitors still existed with a better repute which the brand had to deal with.
The strategies of the Lennar Corporation were keen acquiring its business objectives and revenue growth at the cost of its investors. Therefore the leadership needs to formulate the strategies which the business follows in day to day practices. The CSR of a business depends on its ability to reach the consumer’s mind as a god business organization for long term trust and stability. However the frauds those were detected along with the plunge in the secondary debt market have made the business cash reserve backbone brittle while the loss of image has reached as a business that is irresponsible in its practices. Therefore the business leadership should have acted in a manner that were useful for the business and did not have the post 2009 crisis, as in the case. The legal parameters to be followed, the social benefits that the business proposes and the benefits that the business percolates to the society were largely dependent on the perceived CSR and Ethical behavior of the business. Post FDI raid on their financials the business received a set back where the joint ventures and the unconsolidated entries of about 63000 were discovered. These dubious practice of ‘below the table handling’ of funds were increasing the revenue for a few while made thousands more investors helpless due to their mal practice. In future the recommendation would be to follow the law of the land while doing any sort of business transactions.