Cameron Auto Parts Essay

1. Should Cameron have license McTaggart or continued to export? Cameron Auto Parts has many factors to fence when addressing the future of their company. While Cameron has had their eye on expanding internationalisticly, they must to a fault witness how using licensing, as opposed to say FDI, for international expansion leaveing affect Camerons control of the business. Cameron is said to have close relationships with whom they do business with, and the lose of control and possible communication issues that come with allowing McTaggart in could harm Camerons relations with their clients. I confide that Andy has reason for fearfulness with licensing out the work directly to McTaggart on a silver platter. nonetheless it can be just as risky to stick to export and feeding off Camerons debts. Cameron seems to not have the specific food marketplace knowledge needed to expand internationally, or need to continue to expect the risks of currency exchange and early(a) exporting risks such as theodolite costs. Additionally, the high investment required in expanding the exporting business locally could hurt future endeavors to expand internationally. Although Cameron has the capacity to expand their current shew, that is nonetheless a limited resource, whereas international expansion would allow for potential beyond their current space.While they could invest in a new coiffure or two-shift system, to have licensed with McTaggart is much easier to implement and greatly reduces Camerons risks. While exporting would eventually allow for economies of scale (seen in the estimated 20% reduction of crossroadion cost annually), expanding internationally with the flexible coupling leave alone allow for an economies of scope with Camerons spread out assets. If profits ar expected to increase with the flexible coupling, there is no reason to moot that meeting McTaggarts demand starting line and then later put in a new plant isnt possible.2. Was McTaggart a goodly choice for licensee?Yes McTaggart was a good choice as a licensee for many reasons. McTaggart is already deeply entrenched into their markets, and seem to have the kind of market knowledge that Cameron does not have. McTaggart also has the capacities to renderle such an arrangement, as healthful as taking on the brunt of the financing themselves. Most importantly McTaggart was having be success selling Camerons equipment, bringing in $4,000 in the depression four months alone eon not being sui get across to go for up with demand. Additionally, technology flow-back and McTaggarts excellent credit record were in truth appealing to Cameron. McTaggart also has a good pee, having several sales representatives after-school(prenominal) of the UK. McTaggart holds a boasting reputation that has seen 130 years of business a high caliber sales force with a proven bob record.McTaggart could pose some problems for Cameron as well. Currently McTaggarts sales reach is limited, and perhaps Cameron could become more of an international player through with(predicate) other means. McTaggart also may have separate ideas from Cameron on how to generate sales, and their confederation is cool off a bit infantile.McTaggarts most notable favour though remains their excellent credit. Considering 59% of McTaggarts total assets be tied into equity, their credit will remain very strong. McTaggart was also able to reach a staggering 1.5 million pound profit contempt losing 9 million pounds in total sales, perhaps showing that a licensing opportunity with the flexible coupling can bring a bang into expected sales. McTaggart also seems willing to develop and this could call for future collaborations between the two.3. Was the royalty rate reasonable? Did Cameron leave money on the table?I believe that Cameron could have gotten more out of the deal, solely considering the customs of 1.5% being a universal rate the deal is reasonable for some(prenominal) parties. McT aggart has already been paying an extreme amount of residual costs through importing, and by Cameron sharing their information they are greatly reducing what McTaggart could energise for their product. McTaggart was also able to help capitalize on a product already highly in demand, aswell as acquire the training and insight from Camerons longtime experience in the industry. In return, Cameron is allowed to gain valuable insight on the UK market and is allowed to dip their feet into international operations.The real concern for Cameron is the relationship the two will have after the five-year contract is up. Once McTaggart has the necessary information and training from Cameron, will McTaggart still be fine with a deal that is traditionally higher than normal? Despite this future concern, Cameron still comes away with a $100,000 knowledge pitch fee and an initial royalty rate that is double the norm for the first million.In conclusion nothing will be able to get under ones skin the profitability of Cameron continuing to export. However, the knowledge and reduction of risk that comes through licensing is what makes a partnership with McTaggart so enticing. Through licensing Cameron will be able pay lower labor, import, and transportation costs as well as gaining valuable information from a partner that has been a part of an international guesswork for a long time. Cameron also has plans to go public by 2007, and while allowing for McTaggart to have so much control could hurt the image of Cameron, it also allows for further brand and image recognition for potential stockholders.I believe Camerons plans for expansion are very ambitious and well found, but could perhaps benefit from more time to develop. McTaggart on the other hand is unable to keep up with demand, and with projected sales from flexible couplings only climbing it may be reasonable to hit the market that is proving to be more in need of the product. I believe that in a couple years Cameron w ill benefit from their market knowledge obtained from McTaggart and will be more ready to decide between expanding their current plant or tackling a bigger international project such as a JV or FDI.