“Real-world negotiation analysis – Rental coat of event location”
Mr. A wants to take an event location in rent for the purpose of his office party, from Mr B, who is the owner of the property and gives the property on rent. MR. B is asking for $ 50,000 as rent, however the broker of Mr A from is market analysis told Mr. A that is overpriced as compared to the rate of rent of other event location in that area and the average rent in that area for event location is $ 40,000. Mr. A is in the view that Mr. B is unaware about the recent fall in the price of property in that area and therefore are charging high amount. Here the owner is considering the deal at which he previously rented the event location whereas, the Mr. A is considering the current range of rent in that area.
Here in the given scenario, Mr A can consider the structure of creative deal to solve the resulting issues. One point is to be noted here that the deal regarding renting of the event location is very tight and once Mr. B is committed to someone, he cannot give the property on rent to someone else even if he offers higher price.
Before starting the negotiation, Mr. A shall collect the required information to carry out the negotiation deal smoothly. He shall collect all the possible information regarding the owner of the property to be taken in rent. It requires details regarding the mental status of the owner, his negotiation capability, rent of that particular area for same type of event location and the advantages and disadvantages of that area (Katada 2017). Once he understands all the facts, he can determine whether it will be feasible to ask for lower rent and if possible then to what extent. However, Mr. A shall avoid offering too low amount as rent that will offend the owner. Collection of information may take considerable effort and time. Research can be done through broker, local newspapers, from other persons who have taken the property on rent previously or from other owner in the same area. Normally, these kinds of deals are closed through the broker. Therefore, hiring a broker who has complete knowledge of that area will be beneficial. A broker will also have detailed and quick access to information regarding the market that would have taken much more time if Mr. A tries to find out on his own. However, the timing for negotiation plays an important role as 80% of the concessions are obtained in last 20% of time left for the negotiation deals.
In this circumstance, the structure of “loose” deal may provide a forward way. Let’s imagine that Mr. A will offer slightly higher amount (as the location is Mr. A’s preferred location) that is $ 42,000 and gives the seller 15 days of time to rethink on the deal and by the meantime if he gets any better offer then he has the right to move on by paying back Mr. A the break-up fee that is say, $ 5,000 (Mouzas 2016).
In this circumstance, the structure of the deal will generate value on the basis of various beliefs regarding the event location. Owing to this, Mr. A can say to Mr. B that: “ you are thinking that the rent for your event location is $ 50,000 but I think you will not be able to get any better offer as compared to what I am offering that is, $ 42,000. Mr. A is so confident regarding his offer that he is providing 15 days time to Mr. B for re-thinking on the deal. He also said Mr. B that if he finds better deal, then Mr. A will search for another location and if he does not find any better deal, then the deal will be closed in 15 days at the price offered by Mr. A (Crump 2015).
Though this kind of deals are not very common in United States, as this concept is originally adopted from United Kingdom, a person can always always accept the offer from one person and at the same time keep himself open to other competitive offers till the closing moment. There is a term for this situation where the third party jumps into a deal that is, gazumping. The dealing here are free for all until the deal closes. However, in certain circumstances the structure of creative deal may break through the impasses (Kiryluk-Dryjska 2016).
After considering the offers from other persons, Mr. B is in the decision that the amount offered by Mr. A is the best as per the current situation as rent in the same area has been reduced recently due to the off-season and some parts of the property like garden area, open terrace cannot be used as it is the rainy season. Therefore, it is a win-win situation for Mr. A as he was able to close the deal at $ 42,000 only.
Mr. A reached with his staff on the specified time for the office party. The staffs really liked the place as the property was sea-facing and was away from the city. However, due to heavy rain some waters enters inside the resort and the staffs were not able to use 5 rooms out of the total 25 rooms and therefore, some staffs had to adjust themselves and shared the room with others. As transport facilities were not optimum due to heavy rain, all the staffs of the resort could not reach on that day, therefore, Mr. A and his employees had to face some problems while staying there. Further, some assets of the property that is some glass windows, some wooden doors and some golden arch were damaged during their stay in the resort (Robson and McCartan 2016). At the time of final payment, Mr. B was asking for extra $5,000 for the damages. However, Mr. A claimed that through some damages were taken place during their stay, due to rain and shortages of staffs they had to face various problems. Therefore, charging extra money is not justified and if at all he has to pay extra money, he is also entitled to some refund as they were not able to use 5 rooms as water came inside. With due consideration of both Mr. A and Mr. B’s view the deal finally closed at extra payment of $ 2,000 against the demand of $ 5,000 by Mr. B. Therefore, the cost incurred by Mr. A on closing of the deal was ($ 42,000 + $ 2,000) = $ 44,000.
From the above discussion it is concluded that though it was a win-win situation for Mr. A, but due to the shortage of staffs and rainy seasons they had to face various problems. They also had to cancel the open terrace dinner party as there was no arrangement for covering the rooftop at the situation of rain. Therefore, next time when Mr. A will look for any event location he will direct his broker to consider all these matters so that they don’t have to face any problem regarding these.
Crump, L., 2015. Analyzing complex negotiations. Negotiation Journal, 31(2), pp.131-153.
Katada, S.N., 2017. The True Dynamics of Japan's Participation in the TPP Negotiation: Analysis of its Policymaking Process.
Kiryluk-Dryjska, E., 2016. Negotiation analysis using the theory of moves—Theoretical background and a case study. Journal of Policy Modeling, 38(1), pp.44-53.
Mouzas, S., 2016. A network perspective on negotiation: What is new and why it matters. Negotiation Journal, 32(1), pp.7-21.
Robson, C. and McCartan, K., 2016. Real world research. John Wiley & Sons.
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