You are the store manager for JAM Fashion CO who has a contract with Wanda Shopping Mall You are located on the 2 nd floor of the shopping mall and currently pay 16000 RMB month The end of the contract is almost near, and it is time for you to decide whether you want to renew it or not The store's sales have dropped significantly compared to last year and you must cut cost to stay in the business You have the option to renegotiate the contract with Wanda or move to a completely new shopping mall Confidential Instructions for the manager You've talked to your accountant, and he has given you the budget for the following year as below Rent month Marketing cost month 15000 RMB 2000 RMB You are currently located at the 2 nd floor and pay a fixed rent of 16000 RMB month According to your observations, you are aware that the shopping mall has the highest foot traffic on the first floor, followed by the second and third You have two other offers from different shopping malls which are located 10km from the city center Their offers are as below Name Rent Wangfujing Shopping Mall 13000 RMB month Giuguang Shopping Mall 12000 RMB month Refurbishment cost for moving to a new location (within outside of the shopping mall) is 4000 RMB Confidential information for Wanda General Information Your mall located in the East Nanjing Rd, Shanghai is situated in the middle of the city center and tourist hotspots JAM Fashion Co has been in Wanda since last year You've heard rumors that JAM is not happy with Wanda and is considering moving to another location due to lack of business and help from Wanda management during the pandemic Wanda Shopping Mall prides itself on hosting world's famous brands such as Gucci, Louis Vuitton etc You would hate to lose JAM Confidential information Rent structure for the shopping mall are as below 1 st floor 20000 RMB month 2 nd floor 16000 RMB month 3 rd floor 12000 RMB month One of the tenants from first floor is leaving this year so the space is available It is located at the center of the shopping mall surrounded by many events and gets high foot traffic You've gotten information from the corporate that any tenant who signs a 3 5 year lease will get free marketing within the shopping mall for the duration of their lease As a manager you are allowed to give up to 20 discount on rent to any tenants on your own discretion JAM Wanda Case Study General Information There are 2 players in this case JAM Store manager Wanda Shopping mall manager JAM Fashion Co JAM Fashion Co is a French fashion store which sells various fashion products such as clothing, handbags etc They are quite famous in Europe and has over 20 locations in many European countries In 2018, they opened their first store in Shanghai, China at Wanda shopping mall, located in the city center Due to their popularity in Europe, many Chinese customers were already familiar with the brand and the store was a success Wanda Shopping Mall Wanda shopping mall located in East Nanjing Rd of Shanghai is owned by Wanda group Wanda is a widely popular name amongst Chinese people, and they have a vast amount of shopping malls all around China Their location at East Nanjing Rd is a prime spot for tourists and travelers The mall also hosts some of the world famous brands like Gucci, Louis Vuitton, BMW, Toy R Us etc The Scenario Due to the pandemic travel restrictions, JAM Fashion Co is facing existential threat in China Although the lockdown and travel restrictions are lifting gradually, it is crucial for JAM to cut cost as much as possible to stay in business They have already fired half of their staff JAM is not happy with the management of Wanda Wanda has not provided them with any sort of rent relief or help during the pandemic However, JAM believes the location is the best They also believe as the pandemic fades away it would be beneficial in long run to stay with Wanda But as of now it's not possible for JAM to stay in Wanda because of the high rent marketing cost JAM currently have two other offers from Wangfujing Jiuguang shopping malls who are located 10 km from the city center They offer a much lower rent and a prime spot on the first floor The end of contract between JAM Wanda is coming soon Their managements will have a meeting to discuss the renewal Question 1st what is your negotiated solution if you got one 2nd what do you think about the case study what information were missing What other elements would have provided to the player

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Mar 06, 2024

You are the store manager for JAM Fashion & CO who has a contract with Wanda Shopping Mall. You are located on the 2 nd

You are the store manager for JAM Fashion & CO who has a contract with Wanda Shopping Mall. You are located on the 2^nd floor of the shopping mall and currently pay 16000 RMB/month. The end of the contract is almost near, and it is time for you to decide whether you want to renew it or not. The store's sales have dropped significantly compared to last year and you must cut cost to stay in the business. You have the option to renegotiate the contract with Wanda or move to a completely new shopping mall.

Confidential Instructions for the manager
You've talked to your accountant, and he has given you the budget for the following year as below:

Rent/month	Marketing cost/month
15000 RMB	2000 RMB

You are currently located at the 2^nd floor and pay a fixed rent of 16000 RMB/month
According to your observations, you are aware that the shopping mall has the highest foot traffic on the first floor, followed by the second and third.
You have two other offers from different shopping malls which are located 10km from the city center. Their offers are as below:

Name	Rent
Wangfujing Shopping Mall	13000 RMB/month
Giuguang Shopping Mall	12000 RMB/month

Refurbishment cost for moving to a new location (within/outside of the shopping mall) is 4000 RMB.

Confidential information for Wanda

General Information

Your mall located in the East Nanjing Rd, Shanghai is situated in the middle of the city center and tourist hotspots. JAM Fashion & Co has been in Wanda since last year. You've heard rumors that JAM is not happy with Wanda and is considering moving to another location due to lack of business and help from Wanda management during the pandemic. Wanda Shopping Mall prides itself on hosting world's famous brands such as Gucci, Louis Vuitton etc. You would hate to lose JAM.

Confidential information
Rent structure for the shopping mall are as below:

1^st floor	20000 RMB/month
2^nd floor	16000 RMB/month
3^rd floor	12000 RMB/month

One of the tenants from first floor is leaving this year so the space is available. It is located at the center of the shopping mall surrounded by many events and gets high foot traffic.
You've gotten information from the corporate that any tenant who signs a 3-5-year lease will get free marketing within the shopping mall for the duration of their lease.
As a manager you are allowed to give up to 20% discount on rent to any tenants on your own discretion.

JAM & Wanda Case Study

General Information

There are 2 players in this case:

JAM Store manager.
Wanda Shopping mall manager.

JAM Fashion & Co

JAM Fashion & Co is a French fashion store which sells various fashion products such as clothing, handbags etc. They are quite famous in Europe and has over 20 locations in many European countries. In 2018, they opened their first store in Shanghai, China at Wanda shopping mall, located in the city center. Due to their popularity in Europe, many Chinese customers were already familiar with the brand and the store was a success.

Wanda Shopping Mall

Wanda shopping mall located in East Nanjing Rd of Shanghai is owned by Wanda group. Wanda is a widely popular name amongst Chinese people, and they have a vast amount of shopping malls all around China. Their location at East Nanjing Rd is a prime spot for tourists and travelers. The mall also hosts some of the world-famous brands like Gucci, Louis Vuitton, BMW, Toy R Us etc.

The Scenario

Due to the pandemic & travel restrictions, JAM Fashion & Co is facing existential threat in China. Although the lockdown and travel restrictions are lifting gradually, it is crucial for JAM to cut cost as much as possible to stay in business. They have already fired half of their staff. JAM is not happy with the management of Wanda. Wanda has not provided them with any sort of rent relief or help during the pandemic. However, JAM believes the location is the best. They also believe as the pandemic fades away; it would be beneficial in long run to stay with Wanda. But as of now it's not possible for JAM to stay in Wanda because of the high rent & marketing cost. JAM currently have two other offers from Wangfujing & Jiuguang shopping malls who are located 10 km from the city center. They offer a much lower rent and a prime spot on the first floor.

The end of contract between JAM & Wanda is coming soon. Their managements will have a meeting to discuss the renewal.

Question

1st : what is your negotiated solution? if you got one?

2nd what do you think about the case study? what information were missing? What other elements would have provided to the player?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Negotiated Solution for JAM Fashion Co Goal Reduce rent and secure a prime location within Wanda Shopping Mall to maximize foot traffic and brand visi... blur-text-image