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 McGrath in could harm Cameraman’s relations with their clients. Believe that Andy has reason for concern with licensing out the work directly to McGrath “on a silver platter. ” However it can be just as risky to stick to exporting and paying off Cameraman’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 rut 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 McGrath is much easier to implement and greatly reduces Cameraman’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 Cameraman’s spread out assets. If profits are expected to increase with the flexible coupling, there is no reason to believe that meeting Megawatt’s demand first and then later investing in a new plant isn’t possible. 2. Was McGrath a good choice for licensee? Yes McGrath was a good choice as a licensee for many reasons. McGrath is already deeply entrenched into their markets, and seem to have the kind of market knowledge that Cameron does not have.
McGrath also has the opacities to handle such an arrangement, as well as taking on the brunt of the financing themselves. Most importantly McGrath was having proven success selling Cameraman’s equipment, bringing in $4,000 in the first four months alone while not being able to keep up with demand. Additionally, technology flow- back and Megawatt’s excellent credit record were very appealing to Cameron. McGrath also has a good reach, having several sales representatives outside of the McGrath holds a boasting reputation that has seen 130 years of business a high caliber sales force with a proven track record. McGrath could pose some problems for Cameron as well.
Currently Megawatt’s sales reach is limited, and perhaps Cameron could become more Of an international player through other means. McGrath also may have separate ideas from Cameron on how to generate sales, and their partnership is still a bit infantile. Megawatt’s most notable advantage though remains their excellent credit. Considering 59% of Megawatt’s total assets are tied into equity, their credit will remain very strong. McGrath was also able to reach a staggering 1. 5 million mound profit despite losing 9 million pounds in total sales, perhaps showing that a licensing opportunity with the flexible coupling can bring a surge into expected sales.
McGrath also seems willing to develop and this could call for future collaborations between the two. 3. Was the royalty rate reasonable? Did Cameron leave money on the table? I believe that Cameron could have gotten more out of the deal, but considering the tradition of I being a normal rate the deal is reasonable for both parties. McGrath has already been paying an extreme amount of residual costs through importing, and by Cameron sharing their information they are greatly reducing what McGrath could charge for their product. McGrath was also able to help capitalize on a product already highly in demand, as well as getting the training and insight from Cameraman’s longtime experience in the industry.
In return, Cameron is allowed to gain valuable insight on the UK market and is allowed to dip their feet into international operations. The real concern for Cameron is the relationship the two will have after the five- year contract is up. Once McGrath has the necessary information and training room Cameron, will McGrath still be fine with a deal that is traditionally higher than normal? Despite this future concern, Cameron still comes away with a $100,000 knowledge transfer fee and an initial royalty rate that is double the norm for the first million. In conclusion nothing will be able to beat the profitability of Cameron continuing to export.
