Analyzing further into the case, Cameron Auto Parts indeed should have licensed McTaggart in the United Kingdom. The main goal of Cameron is to reach into the foreign markets, and this licensing grants a step ahead to fulfill its objective. We should keep in mind that Mc Taggart possesses a great reputation of being a trustworthy company. Keeping in mind that Cameron Auto Parts has seen losses during the past years, and with McTaggart 130 years of experience, with an excellent credit record, and good market contacts.
It is a good risk to take to increase those sales. We should also do not ignore McTaggart Market coverage, which has 15 sales representatives in the United Kingdom, two in Europe (did not specified which countries), one in Australia, one in New Zeland, and another one in India. By looking at their wages, they pay their manufacturing employees £8 an hour, which ranges below the median paid for the same job in the U. K. McTaggart is also a good option to avoid the cultural risk that could face Cameron Auto Parts without the licensing from an experienced company, McTaggart will also provide trusthworty from local customers since they have been there in the market for a very long time.The revenues will also increment because the US dollar is weaker against the British pound, so by the time of converting currencies, Cameron Auto Sales will realize that it was the best option after all, plus we can deduct all the shipping costs that would incur if they keep exporting without being licensed.
Was McTaggart a good choice for licensing? Yes, Mctaggart was a good choice for licensing. As I mentioned in the prewious paragraphs McTaggart holds 130 years of experience with a well-known excellent credit which not only can give trust to Cameron, but to local customers that are already familiar with the McTaggart name. Adding to McTaggart’s experience, they are already familiar with the European market, and the other places where they operate. The risk in here is very low in comparison if Cameron instead chooses to license with a brand new company.This may also open the opportunity to reach other companies and create similar business, and penetrate deeper into the foreign markets.
Looking into the financial part, Cameron has not much to loose in the agreement because McTaggart offered to pay initial costs. And pointing out a previously mentioned information, they know how to keep manufacturing cost low. [pic 4] Their factories are larger, and they are very imaginative in their manufacturing skills, making themselves more productive. Was the Royalty rate reasonable, Did Cameron leave money on the table?The royalty rate was reasonable for both parties, the 1.
5% is the normal amount for each sale. Cameron Auto sales initialy wanted a 3 percent from McTaggart, but after negotiations, and the 5 year contract, it was dropped to a 2 percent of sales. McTaggart will benefit from this on the side that it will save for them all the import expenses, and will allow them to sell the products within a lower rate, and bring even more customers amused by lower prices. Within the royalty rate agreement, Cameron Auto Parts offered to provide McTaggart in choosing proper equipment, training, and better strategies of production.Important to mention that the 2% percent from royalty will be lowered down to the normal 1.
5% after the five-year agreement, when McTaggart becomes more familiar, and prepared to operate with Cameron Auto Sales techniques of manufacturing. Both parties will achieve a Goal in this deal, Cameron Auto Sales by entering the United Kingdom Market, and save money that would incur if producing in the home country. McTaggart in the other side, would be able to sell products with a current high demand in the market, and the proper training provided within their agreement.
