Subject: Negotiation Skills Question text:

Question:

GROUP ASSIGNMENT: SITUATIONAL ANALYSIS SCENARIO A The government has announced a new highway development plan on the East Coast of Malaysia. Due to the speculative development, several developers who are interested in obtaining private land belonging to the residents of Kampung Wira for the purpose of infrastructure development near to the location of the highway. Therefore, the residents of Kampung Pahlawan were approached by a many developers to negotiate the process of acquiring their private land and various offers given by different developers. Haji Rahman is one of the landowners and his land is in the most strategic location for the development of related infrastructure. The current market price for his land is RM150 per square feet (sqf) which amounted to the total market value of RM300,000 of all his 2000 sqf land. Three real estate agents have met with Haji Rahman to discuss the purchase offer. A real estate agent from Company A offered an option agreement, Company B offered a promotion agreement while Company C offered a hybrid agreement. In the option agreement offered by Company A, it mentioned a right which Haji Rahman grants to Company A to 'opt' to buy the land within a given period of time. Company A generally agrees to apply for planning permission (which they do at their own cost and risk) and the option is in limbo until permission is granted. If the permission is deemed satisfactory, then Company A can 'exercise its option' to buy the land, at which point Haji Rahman is contractually bound to sell to Company A, at the price which is agreed, or assessed by a third party if not agreed. Company A believes that Haji Rahman will falls over the idea that their deals is for his best interest and he will not suffer a loss. In return, Company A aims to establish good image from their deals with Haji Rahman, hence they can do much bigger acquiring deals with the other land owners. Under the promotion agremeent offered by Company B, the company and the promoter who is not Company B will work together to promote the land for development. This means the promoter taking steps to assess the suitability of the site, producing plans and liaising with the local authority to encourage the allocation of the land for development and then obtaining planning permission before then directing Haji Rahman to sell the site to Company B. The costs of 'promoting' the land, and so the risk, are borne by the promoter in the first instance but are then repaid when the land is subsequently sold to Company B. How the remaining sale proceeds are split between Haji Rahman and promoter is a point for negotiation but promoters will expect to receive a fair 'cut' of any sale proceeds as a reward for taking on the risk. As with options, a minimum land price is often stipulated. The promoter and Company B are willing to share as much information to Haji Rahman until he feel overwhelmed and hard to reject the offer. In the hybrid agreement offered by Company C, a combination of the above two agreements existed. Where Company C is willing to build a set number of shoplot on part of the land and will have an option to buy at a discount to that extent, but will then promote the rest of the land or indeed the whole, if it does not take up its option for sale to third parties with the benefit of planning permission. Since Company C are capable to offers both of the agreement which similar to Company A and Company B to Haji Rahman, they keep on aggresively convincing Haji Rahman that their offer is the best out of all. Company C believe that this offer could land more concessions and better deals from other land owners. 4. Explain the possible consequences of failed planning if the companies did not carefully plan the negotiation process