Question 2  Read the following scenario carefully and answer all the questions below

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Question 2 

Read the following scenario carefully and answer all the questions below. It is important to support your answers with specific examples based on the scenario below, to demonstrate your understanding and application of the relevant concepts. You may make reasonable assumptions, as part of your answers. 

Mr. L is a 60-year old retired businessman. He is married to a housewife and they have a son and a daughter. Both of them are studying in SIM. Mr. L sold off his successful chain of restaurants selling Cantonese food and invested his proceeds in a residential property, two shop-houses and stocks. He is comfortable living off his passive income from the rental of his properties and stock dividends. Mr. L has accumulated knowledge of property trends and how to negotiate with potential tenants. He is a kind man and he treated his ex-workers well. After retirement, Mr. L volunteers at an old age home. With time on his hands, he wishes to help his wife set up a website to promote and sell her delicious home-made cakes. However, he is not very IT-savvy. He likes to learn and he intends to learn how to set up the website. 

One of Mr. L's shop-houses for rent is situated in a single block of mixed development in Rangoon Road. It is conveniently located near the Farrer Park MRT station. A spa shop owner rented the shop-house from Mr. L for two years but she did not renew the contract due to poor business. Mr. L's shop-house has been vacant for a year. Mr. L received a few offers from potential tenants but the offers were way below his asking price of $5,000 a month (market rate). Some of them even asked Mr. L to pay partially for their renovation works like partitions to sweeten the rental deal. Some only wanted to rent Mr. L's shop-house for a year only, with an option to renew for another year just to try out their businesses. But Mr. L found these options a hassle. He preferred a two years' rental lease at the very least. Mr. L had an offer a week before he met Ms. T of $3,500 a month but he felt it was too low. Mr. L had sufficient 

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money to service his bank loan for his vacant shop-house. He was in no hurry to rent out his shop-house. However, for every month that it is vacant, he is losing around $5,000 a month. 

Ms. T is a 22-year old undergraduate studying for a business degree at SUSS. She stays with her father, a provision shop owner and her mother, a housewife. Her home is within walking distance from Mr. L's shop-house. Since young, Ms. T's father has always encouraged her entrepreneurial instincts. He was prepared to lend her a small sum of money and help her fulfil her dream of setting up a café in partnership with her good friend, Ms. Y. Ms. Y is studying at the NUS. Ms. T has a diploma in IT and is adept at setting up websites and IT-related work. Both entrepreneurs planned to use social media to promote their café. 

Ms. T and Ms. Y have been hunting for a shop-house to rent as their café premises for the past nine months. They prefer a two plus one-year rental lease. It was tiring work. That both of them are young, impatient and inexperienced in renting shop-houses made their experience worse. Also, their schools' term breaks are ending soon. When their studies start, they will have less time to look for a shop-house for their café. 

Both of them have viewed 20 shop-houses. Their criteria are (a) good location with decent footfall (b) not too far from where they stay and, (c) rent is within their $4,000/mth budget. Both entrepreneurs made three offers to shop-house owners but they were rejected. Potential landlords found their $4,000/mth budget too low. Seeing their youthful looks, some landlords were dismissive of their plans to open a café. One of them even told them they may not be able to sustain their business and may break the lease after a year. 

Ms. T was patronising the photo shop next to Mr. L's shop-house when she chanced upon the "For Rent" sign Mr. L had put up. She peeked inside. Mr. L happened to be there to check on his shop-house. The shop-house appeared to have been vacant for a long time. The windows and floors were covered by a thick layer of dust. Ms. T did not dig further though as she felt that it was impolite to ask Mr. L how long his shop-house had been vacant. 

When Ms. T saw Mr. L's shophouse, she knew she has found her shop-house for her café! The location was good and the layout of the shop-house was perfect for her café. Also, there was a huge car-park nearby. Ms. T knew that she needed to have staff run the café as she and Ms. Y were still studying. They would have to devote a huge amount of time during some week nights and weekends to ensure their café runs smoothly. Hence, it is important that Mr. L's shop-house is near both their homes. Ms. T can walk to Mr. L's shop-house while Ms. Y stays just two bus-stops away from Mr. L's shop-house. 

Mr. L told Ms. T he is asking for a rent of $5,000/mth which is 20% above their budget of $4,000. Ms. T told Mr. L her budget was around $3,800/mth when he enquired. Ms. T called her partner Ms. Y excitedly to take a taxi immediately to view Mr. L's shop-house. 

Ms. T and Ms. Y struck a long conversation with Mr. L. When Mr L. enquired about their efforts, they told Mr. L about their predicament of not being able to find a suitable café location for nine months. Both entrepreneurs also told Mr. L that they stayed near Mr. L's shop-house and the location of his shop-house was ideal. They were keen to take Mr. L's shop-house in its existing condition. They learnt that Mr. L used to have a successful food business before he sold it off and his children are also around their age and were studying at SIM. Mr. L told them that with time on his hands, he was trying to help his wife set up a website to promote and sell her delicious home-made cakes although he is not very IT-savvy. He told them if they liked the cakes his wife made, they could sell them in their café. He would offer them a good margin. 

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The two parties clicked well. Mr. L told Ms. T and Ms. Y that both of them were so much like his son and daughter. Four of them 'know what they want and had fire in their bellies'. In Mr. L, Ms. T and Ms. Y saw a fatherly figure who also loved the food business. Ms. T and Ms. Y were keen to rent Mr. L's shop-house at their maximum budget of $4,000/mth although they did not tell Mr. L that. Mr. L had earlier shown them transacted rental prices of similar properties ranging from $4,800 to $5,200/mth. 

Mr. L saw a bit of his younger self in the two entrepreneurs. Like him, they were both young and passionate when they decided to be food entrepreneurs. He started on his food business when he was 26 years old. Mr. L has a soft spot for the two young entrepreneurs. He felt that they could go far with his help. He offered to help both of them design their café if they rented his shop-house. He could ask his contacts to sell them second-hand kitchen equipment at good prices. He told them he was prepared to lower his asking rental price of $5,000/mth. 

If the deal did not go through, Ms. T and Ms. Y's would have to continue to look for a suitable unit. Mr. L's alternative was to lower his asking price of $5,000/mth substantially to close the rental transaction. He could even enquire from the previous prospective renter if her offer of $3,500/mth made a week before he met Ms. T and Ms. Y was still on. 

(a) Assess any two (2) types of power you can identify from the case and conclude which of the two (2) negotiating parties would likely have the greater power in each case based on the above scenario. Formulate two (2) actions which Ms. T and Ms. Y can take to strengthen their power over Mr. L.