Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001 CASE STUDY...

Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

CASE STUDY PRESENTATION of GROUP 1 CAMERON AUTO PARTS (PART B)

Navid Nazemian

Presentation done by:

AIM 6th term


A presentation from:© waterproof concepts


Table of contents:

Introductionof the team

Working Procedure

Answering Question 4





Our working procedure:

Minutes

Discussions

Teamwork

Calculations

Brainstorming

Regular Meetings

Comparison of different scenarios


Our opinion about McTaggart‘s previous behaviour

Cameron‘s point of view – Opinion about McT‘s behaviour

The proposal of the Australian Joint Venture

The alternative of investing in Michelard

Our strategy towards the European Market



Scenario 1: Cameron‘s point of view






Theoretical BackgroundOUR OPINION ABOUT MCTAGGART‘S PREVIOUS BEHAVIOUR

Types of Licensing

1) H

an

dout

Inte

rnati

onal M

ark

eti

ng,

Pro

f. J. H

öppn

er,

p. 9

8

Production Sales Usage

Brands TechnicalEquipment



McTaggart‘s InternationalisationMCTAGGART‘S INTERPRETATION OF LICENSE

CONTRACT



Constant increase of royalties by 500%ROYALTIES RECEIVED 1994-1996

30,000

150,000

750,000

0

100000

200000

300000

400000

500000

600000

700000

800000

94 95 96 year

$ Royalties

*

* Estimated by McTaggart

Source: [Page 1,2 case study part B]



Performance of McTaggart

McTaggart 1995

Royalties $ 150,000

Revenues:

1,500,000 x 3 = $ 45,000 $ 150,000 - $ 45,000 = $ 105,000

100

105,000 x 100 = $ 5,250,000 $ 5,250,000 + $ 1,500,000 = $ 6,750,000

2



Revenues are growing remarkablyMCTAGGART‘S AND CEMRON‘S TURNOVER (flexible couplings) 1994-

1996

1

33

6,75

65

36,75

128

0,00

20,00

40,00

60,00

80,00

100,00

120,00

140,00

94 95 96

McTaggart

Cameron

mio $ revenues

year

*

* Estimated



Increase of revenues in 1995EXTENSION OF CAPACITY LIMIT

$ revenues

0,00

1,00

2,00

3,00

4,00

5,00

6,00

7,00

8,00

Capacity ofMcTaggart

Additionalcapacity

Capacity Limit

Source: [Part A, page 8; Part B, page 2]

$ 750,000



Conclusion


+ -Orientation to foreignmarkets

Orientation to foreignmarkets

negotiation power

Blackmailing

price reduction

flexible response to market situation

honest reports & payments

more royalties







Cameron‘s point of view – Proposal of Joint Venture


Theoretical BackgroundOVERVIEW OF POSSIBLE ENTRY STRATEGIES1):

Determinants:2)

1. Company oriented

- strategy- cost situation

2. Product oriented

3. Market oriented

- legal situation- economic situation- competitive

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 capital4. Financial

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

Sourc

es:

2) K

uts

chker

1992

, 3) M

eff

ert

, B

olz

, In

tern

ati

onale

s M

ark

eti

ng M

anag

em

ent

Exporting

Licensing

Contract Manufacturing

Mgt. Contract

Joint Venture

Own Subsidiaries

Acquisition 1) H

an

dout

Inte

rnati

onal M

ark

eti

ng,

Pro

f. J. H

öppn

er,

p. 9

1



Domestic company

Home country

sharesprofits

capitalmanageme

nt

Host country

Foreign company

Theoretical BackgroundJOINT VENTURE1):

1) H

an

dout

Inte

rnati

onal M

ark

eti

ng,

Pro

f. J. H

öppn

er,

p. 1

01



Theoretical Background

more control

more influencesecure step to aninfamiliar market

sharedresponsibility

more profit motivation ofpartner

ADVANTAGES OF JOINT VENTURE

DISADVANTAGES OF JOINT VENTURE

dependence on Joint Venture partner

financial risk

losses possibleinvestmentnecessary



Conditions of Australian Joint Venture Contract

§ Conditions §

Assembling in Australia (tariffs)

No management responsibilities

60:40 share

Investment $ 1.2 Mio

40% of remaining profits

Royalties 2.5 %



Cameron‘s total profit from Australian Joint Venture

Profits JV 1997 Profit after tax 1997

300,000

187,000

0

50000

100000

150000

200000

250000

300000

McTaggart Cameron

$

Managementfees

Royalties

Source: [Part B, page 3]

McTaggart$ 360,000

Cameron$ 240,000

60%

40%



Assumed sales in 1997

Estimated sales: $ 7.5 Mio

Royalties/year: $ 7.5 Mio x 2.5% = $ 187,500

Estimated net profit after tax: $ 600,000 x 40% = $ 240,000

Total Profit: $ 187,500 + $ 240,000 = $ 427,500




Cameron‘s point of view – Alternative of investing in Michelard

Joint Venture profit higher than UK-profitCOMPARISON BETWEEN UK LICENSE BUSINESS & AUSTRALIAN JOINT VENTURE

165,000

427,500

-1,200,000-1400000-1200000-1000000-800000-600000-400000-200000

0200000400000600000

UK UK Australia Ausralia

0

UK license conditions referring to estimated sales in Australia

Profit Investment Profit Investment

$

*

*


Cameron‘s final statement to Joint Venture with McT:

More profitable than a pure license

business

Known cost structure on

Australian market

Good market knowledge

Tariff reduction bylocal assembly

Good prospects(New Zealand)

Quick marketentry

Reliable partner


-> Let‘s do it!


Cameron‘s point of view – Alternative of investing in MichelardTheoretical backgroundCOMPARISON BETWEEN GREENFIELD AND BROWNFIELD INVESTMENT

Strategy

Criteria

GreenfieldInvestment

BrownfieldInvestement

Access to market delayed quickInvestment split high entry costsSite selectable given

Source: [Welge/Holtbrügge, 1998, page 122


Michelard & Cie

Family-owned

business

Family-owned

business

No experience in

manufacturing (pure

distributor)

No experience in

manufacturing (pure

distributor)

Cash-shortage

Cash-shortage

High administrative

costs

High administrative

costs

Good knowledge ofFrench, Belgian, Italian & Swiss

market

Good knowledge ofFrench, Belgian, Italian & Swiss

market

Sales problems in the

Netherlands& Germany

Sales problems in the

Netherlands& Germany

EuropeanUnion

EuropeanUnion

Importantcustomer

Importantcustomer



Immense increase in sales figuresCAMERON‘S SALES TO MICHELARD 1994-1996

240,000

85,000

30,0000

50000

100000

150000

200000

250000

300000

94 95 96

Sales

* Estimated

*


$

years



Domestic market is the strongestMICHELARD‘S TOTAL SALES SPECIFIED TO COUNTRIES

2.3%

2.62%

4.59%

18.85%

17.87%53.77%

France

Belgium

Switzerland

Italy

Germany

Holland

Total sales: $ 12.2 Mio

Belgium

France

Switzerland

Italy

Germany

Holland




Conditions of Joint Venture with Michelard

§ Conditions §

$ 4 Mio investment

40:60 share based on profit with couplings

Royalties 4% on sales

10% profit on component shipment (until 1998)

Management competence with Michelard




Immense increase of sales of flexible couplingsPROSPECTED SALES OF FLEXIBLE COUPLINGS 1997-1999

20

12

5

0

5

10

15

20

25

97 98 99

Sales

* all figures prospected

*


Mio $

years **



Biggest profit share made by component shipmentCOMPOSITION OF PROFIT FROM MICHELARD‘S BUSINESS IN 1998

57,7%23,1%

19,2% Componentshipment

Royalties

Share ofincrementalprofit


Total = $ 2.08 Mio



Amortisation within a short period possibleCAMERON‘S INVESTMENT & PROFITS FROM MICHELARD BUSINESS

1996-1999

0

-4

0,70

2,08

0

4

0

-4

-3

-2

-1

0

1

2

3

4

96 96 97 97 98 98 99 99

Mio $


Premise: still dependent oncomponent shipments

years

investment

profit



BUT-> Risk of getting in trouble with McTaggart

Final statementMORE PROFITABLE THAN ANY OTHER FOREIGN BUSINESS AT THE

MOMENT





The proposal of the Australian JointVenture


Our strategy towards the European market

Cameron‘s point of view – Strategy towards the European Market


Cameron‘s point of view – Strategy towards the European Market Subdivision of European Market between McT & Michelard

McTaggart

Michelard


What is our strategy all about?

Enter a Joint Venture with Michelard

More control over European Market

Competition between Michelard & McT shall be avoided

Find a compromise with McTaggart

Optimum marketing

End of 98: new negotiations with McTaggart:to avoid unnecessary competitionhigher royalties

-> Overall aim: profit maximisation


Thanks for your attention!

Sources:

1) Handout International Marketing, Prof. J. Höppner, p. 912) Welge / Holtbrügge 1998, p. 1223) Kutschker 19924) Meffert, Bolz, Internationales Marketing Management5) Microsoft Encarta 1999

Questions?

Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001 CASE STUDY...

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Transcript of Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001 CASE STUDY...