At that time, Alex had to cut the workforce from 720 to 470 people. He was thinking Of different Steps Of how to increase his sales. He wanted to enter foreign markets but didn’t have enough resources to do so on its own. He had different options on his mind such as licensing and joint venture. He had a big ambition for diversification, but he never had to design and develop its own products and had never hired any design engineers.
By mid-1993, Alex had hired a key-engineer from a Canadian firm and the company developed its own line of flexible couplings with an advanced design and efficient production process using the latest in production equipment. They developed a good marketing plan and made a successful new product. Cameron was then faced with how to market and sell the product. He needed to decide whether it was better to expand current facilities, or license to outside companies. He was considering licensing since there was an opportunity for it and it would be a good way for quick entry to foreign markets.
Developing new product Being a competitive company Alex should address the importance of the reduce enhancement by technology change and advanced design. Additional returns will be gained with the introduction of new products. Due to Cameron depending on Big Three and neglected to foster the innovation potential of the firm, sales dropped dramatically with the global economy slowdown. For independence Of the Big Three, Alex decided to make a major product innovation. He paid almost $1 million for developing own products and finally the company had an advanced product related to the existing line.
This new product held the greatest opportunity for long-term business growth and product pacification. It is a unique advantage for increasing market share because Ale’s new product could be widely used in large or small firms. It didn’t have a specific target market. For achieving new business goals he should kept sustainability on mind; it can be a powerful tool for both achieving new business goals and avoiding bankruptcy. Alex invested in new technology and hired a professional engineer to design products related to the existing line in order to develop Cameraman’s own product.
It new products hold the greatest opportunity for long- ERM business growth, product specification can be a unique advantage for increasing market share. Additionally, Alex was not worried about creating a new market and he saved money on marketing, By mid-1993, sales increased to $45 million and recovery was well since the product innovation began to make company competitive and get profits As a leader, Alex had a success in organizing, leading, and controlling the development of a new product.
New Marketing Plan Cameron Auto Parts faced some set of problems because of uncertainties when the company attempted to enter the market place. Cameron knew flexible type of coupling could be a good product in market place due to broad applications across diverse industries. However, they did not know how to operate market system effectively and lacked specific marketing plans. Fortunately, Cameron overcame some difficulties related With marketing plan and became pretty successful in competitive markets.
There were some valuable marketing strategies to approach to the competition in terms of flexible couplings. Alex made decisions to hire eight field sales representatives to support distributors all over the country. After that, he also hired some several Canadian Based sales representatives to cover major markets. Moreover, the company tried to continue having good relationships with key buyers associated with major industries. Design group was an essential role to develop new types of couplings. Cameron was willing to pay attention on solving customer’s problem as well.
Licensing Alex wanted to capture foreign markets directly but he didn’t have enough resources on its own to do that, After their promising new product was developed, they had a chance to license to a Scottish manufacturer, McGrath. Muscular couldn’t build the market based on shipments from America because it was too expensive. There was 5% tariff coming in, freight and insurance was another on top of the price and also there was the matter of currency values. He wanted to enter a licensing agreement. McGrath already had a demand for the product So getting into a license agreement With him would be in Ale’s advantage.
For Alex it was a good way to enter the U. K. Market swiftly via Megastars sales force. There was no financial risk involved. If Alex agreed on licensing he would have advantages such as low investment costs, reduced uncial risk and quick market entry. He agreed on a deal With McGrath for the U. K market only so he got his chance to exploit its technology there. The license granted to McGrath will help bring in the cash flow needed so that they can try to expand. However, the profit of the licensor may not be maximized since their involvement in the licensed markets is indirect.
Alex wasn’t quite sure about the agreement, sometimes he thought that an equity investment would have paid off better than being a licensor. Another of his disadvantages was shared profits. And he also had no objective yardstick against which to evaluate the royalty rate that they agreed on. Joint Venture Sandy proposed a 60 to 40 joint venture with Cameron, allowing the authority to control and responsibility tort managing the venture in Australia. Sandy insisted they had lots of experience in Australia and pointed out their knowledge on the market as well.
Sandy also suggested a management tee of four percent on sales for them, and a royalty of two and a half percent to Alex. During the negotiation between Sandy and Alex, about the joint venture agreement in Australia, there as a rising issue. Alex was quite disappointed about Sandy because Alex did not know Sandy was selling flexible couplings in Europe and Australia. Despite of increased profits, the awareness of Sandy taking advantage of imperfect license agreement made Alex to have second thoughts about Sandy. Ender some proposals associated with joint venture from McGrath, Alex preferred having a silent partner basis relating to the joint venture. Moreover, Alex was concerned about whether to expand the market into Australia or not. Since Cameraman’s resources are limited, Alex has to make an informed decision. It takes courage for Cameron Auto Parts to give up the European market for a small percent Of loyalty from Australian market. Cameron Auto Parts had two product lines and they were growing very quickly.
Because of the company just recovering from the economic depression, it was not a good time to expand two product lines so quickly. Outsourcing might be an option to help the company save money, find another company which will be able to produce high quality auto parts for cheaper, Alex signed his licensing agreement within a week; he didn’t take any advice at all trot his managers. There should have been more thought behind the decision than just an unexpected trip without consulting with the Cameron Auto Parts executive team.
He didn’t get consultation from his financial, operational and legal advisers. This is where he made a big mistake. If he took some advice, maybe he could have come up with a better deal, decide whether those were the appropriate royalties for him. The royalties they agreed on were too low and he just agreed on them. A good thing is that the licensing agreement is only for S years so if it’s not going ell he can change it to something different after, or they can renegotiate for a higher percentage in the future if they still want to.
