Hamilton Real Estate Case Study Analysis
Economic Factors
The economic factors for the firm might be resisting during the covid-19 pandemic due to the strict rules and laws regarding social distancing but the firm has a strong financial status concerning its size and the current market. Likewise, the firm has a residential-based construction market that allows the firm to construct luxurious residential buildings that ultimately raise the profit or revenue of the company. The firm has a healthy economic status that reduced the barriers that resist the firm from achieving a strong market presence in the existing market.
Social factors
The existing market of the construction industry is divided into two main categories i-e commercial and residential construction markets. The current market of the firm in Hamilton has a huge volume of customers in the residential construction site because currently, Hamilton has restrictions on commercial construction so by constructing luxurious apartments the company can earn a huge profit. However, the strong relations with the federal government allow the company to build a national interest that improves the social image of the firm.
Technological Factors
The company has a limited research and development budget so that is why the firm merely focuses on technological factors but the firm has 3-D virtual house and apartment tour technology and automated rental as well as purchasing property platforms that allow the firm to regulate its market. However, the firm is required to increase its R&D budget to expand and diversified its market.
Environmental Factors
Environmental factors are the most concerning factors for the construction industry that have a huge influence on the image of the firm. The Estate One needs to regulate the environmental factors by contributing to the reforestation campaigns and least carbon foot printing strategies that allow the firm to build a strong image.
Legal Factors
The real estate industry has strict rules and regulations that play a critical role in the development and disruption of the business. In the case of Estate One, it cannot execute the commercial executions due to the restrictions of the commercial constructions in Hamilton. So the firm must follow the rules and regulations set by the government as the firm followed for decades. However, residential construction is a better option for the firm to develop a strong financial and brand image at the national level which allows the firm to penetrate the global market in the upcoming days.
Alternatives
The problem faced by Estate One currently is the negotiation of prices with Pearl Continental that are market competitive and reasonable and will heed towards expansion. The main focus is on negotiating the price for the land to get the best deal. There’s certain alternative that can be implemented to get the best out of the opportunity. The options needs detailed analysis in order to get a deep insight of market and opportunities and to avail them. The following alternatives might be a better option:
- Alternative 1 –negotiating at reasonable price for residential land
- Alternative 2 -10 year contract
- Alternative 3 –no negotiation
Alternative 1 (negotiating at reasonable price for residential land)
The first alternative is to negotiate the best price offering for residential purpose. The expected price is around $36-44 million so the skill demands bringing Pearl Continental around $40 million in deal. The law of commercialization is confidential so it doesn’t need to be kept in front of Pearl Continental. Estate One can then use it for commercial purpose as the law is imposed. There’s an in-depth demand of win/win principlewhich will enable both parties to hold benefit from the scheme. Strong negotiation power will head the principle in favor of Pearl Continental as well as Estate One. If commercialization law is not imposed or somehow the bill is not passed, the property can still be used for residential purpose providing benefits.
Alternative 2 (10 year contract)
Another way is to mutually decide an agreement of 10 year contract that will enable Estate One to hold the piece of land for residential use for a span of 10 years. They can mutually decide on the prices for that timeperiod and after the span of agreement ends, Pearl Continental can either sale it to Estate One permanently or take it back. This would enable Estate One to commercialize the property whenever the law is imposed and earn an estimated profit of 1.5-2% more than residential land. This profit can then be used to purchase that piece of land after contract ends. (Iasechko, 2022)
Alternative 3 (No negotiation)
Another option would be to not negotiate at all for that piece of land and heed towards other better market options. Compelling them to come around reasonable price is key but if not headed can lead to selection of other options.Cancelling this deal if reasonable price is not offered and other options are tentative then the firm should consider it more. It requires detailed market analysis and market rivalry to understand the best possible option on the way to expand current portfolio. (Pulini, 2021)
Evaluation of Alternatives based on BATNA
The given alternatives for the Estate One are evaluated based on the BATNA strategy that helps to analyze the alternatives required to negotiate with Pearl regarding to purchase the property at the feasible condition.
Alternative - 1(negotiating at reasonable price for residential land)
After look over the negotiation challenge for the organization as a CEO of Estate One consider a land from Pearl Investments on reasonable price that present a fair deal for both the organizations. The land is bought by Pearl Investment seven years ago and in current period it worth considers a ($36 to $44 million), which present a high potential of land value. A challenge towards a negotiation is the Estate One have specific period to close the deal on a reasonable price. In order to reduce the stress for Estate One as a CEO they have to come up with fair negotiation based on BATNA method. It is used to find out the best option for closing deal with Pearl Investment. It considers a Win-Win situation for both the organization. Negotiation on the reasonable price consider a middle percentage of estimated worth of land. Estate used this method and present a (440 million) offer for the land it presents a fair deal for both the firms. However, this offer considers equal loss and profit for Estate One and Pearl Investment. Implementation of this alternative help the Estate One to generate high potential and profit in future.....................
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