presentation: group 1 cameron auto parts (part a) kai …npeters.com/studium/cameron1.08.pdf ·...

Prof. Dr. Rainer Schnauffer Internationale Kooperation und Lizenzvergabe University of Applied Sciences

Group 1 Cameron Auto Parts (Part A) © allcopyrights: waterproof concepts

PRESENTATION: GROUP 1

CAMERON AUTO PARTS (PART A)

Nils Peters

Navid Nazemian

Tim Steffens

Siegrun Pache

Knut Kirchmann

Kai-Uwe Heesch

Stefanie Wasner



Table of contents:

!Introduction of the team

!Working Procedure

!Answering Question 1



!Conclusion



Should Cameron have preferred licensing or export?

Was McTaggarta good choice as licensee?

Were the royalties appropriate?

Scenario 1: Cameron‘s point of view

1

2

3



Theoretical Background

Our working procedure:

!Teamwork

!Regular Meetings

!Minutes

!Discussions

!Brainstorming

!Calculations

!Comparison of different scenarios



Theoretical BackgroundOverview ofPossible Entry Strategies1):

Determinants:2)

1. Company oriented

-strategy-cost situation

2. Product oriented

3. Market oriented-legal situation-economic situation-competetive situation-trade situation-consumer situation

Objectives:3)

1. Market Position- share- sales volume- new markets

2. Cost objectives- scale of economy- productivity gains

3. Profitability- profits- return on sales- return on capital

4. Financial objectives

- credit- liquidity- self financing- capital lay-out

Sources: 2)Kutschker 1992,

3)Meffert, Bolz, Internationales Marketing

Management

Exporting

Licensing

Contract Manufacturing

Mgt. Contract

Joint Venture

Own Subsidiaries

Acquisition

1)Handout International Marketing, Prof. J. Höppner, p. 91



Theoretical BackgroundLicensing1):

Home country

Domestic company

= licensor

Local company

=licensee

Host country

patentscopyrightstrademarksknow-how

feesroyalties




Domestic company

Home country

directindirect

Export department

Host country

IndependentInternationalMarketing

Intermediator AgentDistributor

Sales Branch

Theoretical BackgroundExport1):




Should Cameron have preferred licencing or export?

Was McTaggarta good choice as a licensee?




Advantagesof Licensing

Advantagesof Export

Disadvantagesof Licensing

Disadvantagesof Export

Licensing vs. Export



Advantages of Licensing

Lowinvestment costs

Reduced financial risk

Economies ofscope

Quick market entry

Minimised risk ofpoor performance oflicensee



Know-how diffusion

Risk of image loss

No control over local business

Lack of revenue transparency of licensee

Communication gaps

Less influence

Loss of flexibility (Com mitment for a specific time)

Shared profits

Disadvantages of Licensing



Economies of scalein the long run

Higher profit / no profit sharing

Independence

Higher quality through own responsibility

Advantages of Export



Lack of capacity

Currency risks

High Investments

No specific market knowledge

Disadvantages of Export

Transport risks

Trade barriers



Preparatory calculations

Premises:Price charged by Cameron as exporter: $ 100/unit

Price charged by McTaggart as distributor: $ 176/unit

Price charged by McTaggart as licensee: $ 176/unit(exhibit3,page 12)

Revenue potential of McTaggart: 100%

Revenue potential of Cameron: 100 x 100= 56.82%176



Preparatory calculations

Licensing:Royalties:

" 3% up to $ 1.5 Mio

" 2% over $ 1.5 Mio

" $ 100,000 knowledge transfer fees

Export:

" Profitabilityon revenue: 16.67 % based on forecast 1994: $ 5 Mio profit x 100 = 16.67%

$ 30 Mio revenue

Cameron‘s profit: f(x)-> 0.03x + 0.02y + 0.1667z

x= McTaggart‘s revenue up to $ 1.5 Mio (Licensing)

y=McTaggart‘s revenue over $ 1.5 Mio (Licensing)

z= Cameron‘s revenue export



Export always more profitable than licensingCO MPARISON OF PROFITS: LICENSING VS. EXPORT

x= McTaggart‘s revenue up to $ 1.5 Mio(Licensing)

y=McTaggart‘srevenue over$ 1.5 Mio(Licensing)

z= Cameron‘srevenue export

x=500,000 x=1.5 Mio x=1.5 Mio

y=0 y=0 y=1.5 Mioz=284,090 z=852,270 z=3,409,090

=6 Mio

Scenarios

Alternatives

bad m edium good

Licensing $ 15,000 $ 45,000 $ 135,000Export $ 47,380 $ 142,045 $ 568,181



15 47 45142 135

568

0100200300400500600

Thousand USD

bad

med

ium

goodLicensing

Export

Export always more profitable than licensingCO MPARISON OF PROFITS: LICENSING VS. EXPORT

Scenario



Conclusion

Export more profitable

BUTLicensing easier to implement because of restricted capacities

New plant: $ 10 Mio

or

Two-shift work

or

Reduction ofcore business

Change to export possible after 5 years






YES!



59%

41%

0

20

40

60

80

100

100%

liabilitiesequity

High equity quota leads to excellent credit worthinessMCTAGGART‘S TOTAL BALANCE SHEET

[Page 12, case study part A]



Intense decrease of McTaggart‘s revenuesREVENUES OF MCTAGGART BET WEEN 1991 AND 1993

44

35

05

1015202530354045

1991 1993

Revenues

Year

£ Mio




In spite of revenue decreases McTaggart reached a remarkable profit

PROFITABILITY OF MCTAGGART IN 1993

1,535

0 10 20 30 40

RevenueProfit

£ Mio




Advantages of the choicefor McTaggart:

Disadvantages of thechoiceforMcTaggart:

Capacities

Excellentcredit records

Good marketknowledge

High calibresalesforce

Reliability throughtradition

Flexible respondto former crisis

Technologyflow-back


No research foralternative solution Difficult to control

McTaggart‘s business

Limited salesarea(UK only)



What we get:3% royalties up

to 1.5 Mio revenues

2% royalties over 1.5 Mio

$100,000 knowledge transfer fee

Free technology transfer clause

License for 5 years, renewable for further 5 years

What we offer:

Our technology know-how for producing flexible couplings

Image, Name, Brand



Royalties to reach export profits:

100 x 0.1667 x 100 = 9.47%176

McTaggart‘s profit on revenue (as export distributor):

35 x 100 = 19.89%176

McTaggart‘s profit on revenue (as licensee):

-> Supposedto be higher because of ...

Lower labour costs

No import and transport costs

No producer margins (Cameron)



Conclusion:

Current royalty of 3% / 2% is TOO LO W !

Export-equivalentroyalty of 9.47% isirrealistic

Our suggestion:

5% would be appropriate

Thisrate wouldn‘t decrease McTaggart‘s motivation



Thanks for your attention!

Sources:1) Handout International Marketing, Prof. J. Höppner, p. 912) Kutschker19923) Meffert, Bolz, Internationales Marketing Management

Questions?

presentation: group 1 cameron auto parts (part a) kai …npeters.com/studium/cameron1.08.pdf ·...

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