Cameron Autoparts

Global Strategy - Session 1 – Cameron Auto Parts (A)

What – Situation/Issues/Risks/ Decision – Include brief case summary
* Cameron Auto Parts (CAP) made auto parts for The Big Three autocompanies in North America
* Alex Cameron needs to decide on how to grow his auto parts supply business
* Business fell in 2000/early 2001
* Manufacture was under strict industry specificationsoffering little to no room to innovate which meant relying on the Big Three.
* In addition CAP had no “in-house” design expertise
* Cameron invested in engineers to develop products for abroader, “non-automotive” market
* This led to developing its own line of flexible couplings
* Sales of the flexible couplings picked up in Canada and the US ($10M in 2003)
* Current plant capacitywas going to run out; in addition the Big Three were confused and the dual lines (OEM auto parts and couplings)
* CAP started receiving orders from overseas/Europe even though these customers paidimport duties, VAT and freight.
* Cameroon met McTaggart in Scotland (one of the customers) and struck a licensing deal (3% on first $1M, 2% after) plus $100,000 fee to set things up; exclusiverights in UK
Case Questions:
1. Should Cameron have licensed to McTaggart or continued to export?
*See PPTX for Business Strategy, Diamond – E and Pros/Cons of licensing vs. exporting

At this stageit is wise for Cameron to enter into a licensing arrangement. His business has been very focused on the North American market with less risk because of Big Three involvement (“guaranteed” orders,support) but focused on reducing costs of manufacturing. Licensing allows him to leverage a local licensee, understand the market and grow with minimal investment. Basically, the resources andcapabilities of Cameron are limited; with licensing, capital required is negligible as McTaggart has most of this responsibility.

2. Was McTaggart a good choice for licensee?

Yes. McTaggart is already...