Cameron Auto Parts Case Study
MGMT 4850
Cameron Auto Parts
1. Should Cameron have licensed McTaggart or continued to export?
Cameron Auto Parts has many factors to consider when addressing the future of their company. While Cameron has had their eye on expanding internationally, they must also consider how using licensing, as opposed to say FDI, for international expansion will affect Cameron’s 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 Cameron’s relations with their clients. I believe that Andy has reason for concern with licensing out the work directly to McTaggart “on a silver platter.”
However it can be just as risky to stick to exporting and paying off Cameron’s debts. Cameron seems to not have the specific market knowledge needed to expand internationally, or need to continue to run the risks of currency exchange and other exporting risks such as transportation 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 plant, that is still a limited resource, whereas international expansion would allow for potential beyond their current space.
While they could invest in a new plant or two-shift system, to have licensed with McTaggart is much easier to implement and greatly reduces Cameron’s risks. While exporting would eventually allow for economies of scale (seen in the estimated 20% reduction of production cost annually), expanding internationally with the flexible coupling will allow for an economies of scope with Cameron’s spread out assets. If profits are expected to increase with the flexible coupling, there is no reason to believe that meeting McTaggart’s demand first and then later investing in a new plant isn’t possible.
2. Was McTaggart a good choice for licensee?
Cameron Auto Parts
1. Should Cameron have licensed McTaggart or continued to export?
Cameron Auto Parts has many factors to consider when addressing the future of their company. While Cameron has had their eye on expanding internationally, they must also consider how using licensing, as opposed to say FDI, for international expansion will affect Cameron’s 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 Cameron’s relations with their clients. I believe that Andy has reason for concern with licensing out the work directly to McTaggart “on a silver platter.”
However it can be just as risky to stick to exporting and paying off Cameron’s debts. Cameron seems to not have the specific market knowledge needed to expand internationally, or need to continue to run the risks of currency exchange and other exporting risks such as transportation 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 plant, that is still a limited resource, whereas international expansion would allow for potential beyond their current space.
While they could invest in a new plant or two-shift system, to have licensed with McTaggart is much easier to implement and greatly reduces Cameron’s risks. While exporting would eventually allow for economies of scale (seen in the estimated 20% reduction of production cost annually), expanding internationally with the flexible coupling will allow for an economies of scope with Cameron’s spread out assets. If profits are expected to increase with the flexible coupling, there is no reason to believe that meeting McTaggart’s demand first and then later investing in a new plant isn’t possible.
2. Was McTaggart a good choice for licensee?