Essay on Cameron Auto Parts

969 Words Jul 23rd, 2011 4 Pages
1. Do you agree with Cameron’s decision to grant McTaggart a license? Do you agree with the way Alex went about it? What other options were available to Cameron? What are the advantages and disadvantages of each?
The business potential of flexible coupling was evident to Alex. The salespeople were looking for 35$-40$ million during 2004. He realized that the plant can't hold both lines (OEM and flexible coupling). The costs of expansion were too high and required many of the company's resources. The company's cash flow couldn't support a plant expansion. The flexible coupling industry is different than the auto industry. Every dollar of flexible coupling sales requires an investment in inventory and receivables of about 30 cents.
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* Shared costs/risks with partner. * More profitable than royalty | * Less profitable than producing in house * Risk giving control of technology to partner. * Shared ownership can lead to conflict. |

2. Was McTaggart a good choice for a licensee? What should Alex have done upon hearing Sandy's offer for a licensing agreement?
According to exhibit 3, I think McTaggart was a good choice for a licensee. It was an old and stable company with excellent credit record. It had vast market coverage in 3 continents. This widespread and stability is important when picking a licensee, in order to penetrate new markets. Furthermore, the license to McTaggart was given to 5 years only, not a long term commitment. In that period Cameron can learn about the European market and improve its cash flow, and by the end of that period can

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