CASE STUDY PRESENTATION of GROUP 1 CAMERON AUTO

CASE STUDY PRESENTATION of GROUP 1 CAMERON AUTO PARTS (PART B) Presentation done by: Navid Nazemian AIM 6 th term Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

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

Table of contents: Introduction of the team Working Procedure Navid Nazemian Answering Question 1 Prof. Dr. Rainer Schnauffer Answering Question 2 Answering Question 3 Answering Question 4 © all copyrights: waterproof concepts 2001

Our working procedure: üMinutes üDiscussions üTeamwork üCalculations üBrainstorming üRegular Meetings üComparison of different scenarios Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Opinion about Mc. T‘s behaviour Our opinion about Mc. Taggart‘s previous behaviour The proposal of the Australian Joint Venture The alternative of investing in Michelard Our strategy towards the European Market Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Opinion about Mc. T‘s behaviour Our opinion about Mc. Taggart‘s previous 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 Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Opinion about Mc. T‘s behaviour Theoretical Background Types of Licensing Production Sales Usage 1) Brands Technical Equipment Handout International Marketing, Prof. J. Höppner, p. 98 OUR OPINION ABOUT MCTAGGART‘S PREVIOUS BEHAVIOUR Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Opinion about Mc. T‘s behaviour Mc. Taggart‘s Internationalisation MCTAGGART‘S INTERPRETATION OF LICENSE CONTRACT Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Opinion about Mc. T‘s behaviour Constant increase of royalties by 500% ROYALTIES RECEIVED 1994 -1996 $ Royalties * year * Estimated by Mc. Taggart Source: [Page 1, 2 case study part B] Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Opinion about Mc. T‘s behaviour Performance of Mc. Taggart 1995 Royalties $ 150, 000 Revenues: 1, 500, 000 x 3 = $ 45, 000 100 $ 150, 000 - $ 45, 000 = $ 105, 000 x 100 = $ 5, 250, 000 + $ 1, 500, 000 = $ 6, 750, 000 2 Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Opinion about Mc. T‘s behaviour Revenues are growing remarkably MCTAGGART‘S AND CEMRON‘S TURNOVER (flexible couplings) 1994 -1996 mio $ revenues * year * Estimated Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Opinion about Mc. T‘s behaviour Increase of revenues in 1995 EXTENSION OF CAPACITY LIMIT $ revenues $ 750, 000 Source: [Part A, page 8; Part B, page 2] Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Opinion about Mc. T‘s behaviour Conclusion §flexible response to market situation + §honest reports & payments Orientation §more royalties Navid Nazemian to foreign markets Prof. Dr. Rainer Schnauffer §negotiation power §Blackmailing §price reduction © all copyrights: waterproof concepts 2001 -

Cameron‘s point of view – Proposal of Joint Venture Our opinion about Mc. Taggart‘s previous 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 Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Theoretical Background Determinants: 2) Exporting Objectives: 3) 1. Market Position 1. Company Licensing oriented - strategy - cost situation 2. Product oriented 3. Market oriented - legal situation - economic situation - competitive situation - trade situation - consumer situation Contract Manufacturing Mgt. Contract Joint Venture Own Subsidiaries - share sales volume new markets 2. Cost objectives scale of economy productivity gains 3. Profitability profits return on sales return on capital 4. Financial objectives credit liquidity self financing capitalconcepts lay-out 2001 © all copyrights: -waterproof Acquisition Navid Nazemian Prof. Dr. Rainer Schnauffer Handout International Marketing, Prof. J. Höppner, p. 91 OVERVIEW OF POSSIBLE ENTRY STRATEGIES 1): 1) Sources: 2) Kutschker 1992, 3) Meffert, Bolz, Internationales Marketing Management Cameron‘s point of view – Proposal of Joint Venture

Cameron‘s point of view – Proposal of Joint Venture Theoretical Background Home country Domestic company capital management shares profits 1) Foreign company Handout International Marketing, Prof. J. Höppner, p. 101 JOINT VENTURE 1): Host country Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Proposal of Joint Venture Theoretical Background ADVANTAGES OF JOINT VENTURE more profit more control more influence motivation of partner secure step to an infamiliar market dependence on Joint Venture partner losses possible shared responsibility investment necessary financial risk DISADVANTAGES OF JOINT VENTURE Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Proposal of Joint Venture 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 % Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Proposal of Joint Venture Cameron‘s total profit from Australian Joint Venture Profits JV 1997 Profit after tax 1997 $ Mc. Taggart $ 360, 000 Cameron $ 240, 000 40 % 60 % Management fees Navid Nazemian Royalties Prof. Dr. Rainer Schnauffer Source: [Part B, page 3] © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Proposal of Joint Venture 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 Navid Nazemian Prof. Dr. Rainer Schnauffer Source: [Part B, page 2] © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Alternative of investing in Michelard Joint Venture profit higher than UK-profit COMPARISON BETWEEN UK LICENSE BUSINESS & AUSTRALIAN JOINT VENTURE $ * 0 Profit Investment * UK license conditions referring to estimated sales in Australia Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Proposal of Joint Venture Cameron‘s final statement to Joint Venture with Mc. T: Quick market entry Tariff reduction by local assembly Reliable partner -> Let‘s do it! Good market knowledge Good prospects (New Zealand) Known cost structure on Australian market More profitable than a pure license business Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Alternative of investing in Michelard Our opinion about Mc. Taggart‘s previous 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 Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Alternative of investing in Michelard Theoretical background COMPARISON BETWEEN GREENFIELD AND BROWNFIELD INVESTMENT Navid Nazemian Prof. Dr. Rainer Schnauffer Source: [Welge/Holtbrügge, 1998, page 122 © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Alternative of investing in Michelard & Cie Family-owned business No experience in manufacturing (pure distributor) High administrative costs Cashshortage Navid Nazemian Important customer European Union Good knowledge of French, Belgian, Italian & Swiss market Prof. Dr. Rainer Schnauffer Sales problems in the Netherlands & Germany © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Alternative of investing in Michelard Immense increase in sales figures CAMERON‘S SALES TO MICHELARD 1994 -1996 $ * years * Estimated Source: [Part B, page 5] Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Alternative of investing in Michelard Domestic market is the strongest MICHELARD‘S TOTAL SALES SPECIFIED TO COUNTRIES Holland Germany Italy Switzerlan d France Belgiu m Total sales: $ 12. 2 Mio Navid Nazemian Prof. Dr. Rainer Schnauffer Source: [Part B, page 11] © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Alternative of investing in Michelard 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 Source: [Part B, page 11] Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Alternative of investing in Michelard Immense increase of sales of flexible couplings PROSPECTED SALES OF FLEXIBLE COUPLINGS 1997 -1999 Mio $ * * * years * all figures prospected Source: [Part B, page 5] Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Alternative of investing in Michelard Biggest profit share made by component shipment COMPOSITION OF PROFIT FROM MICHELARD‘S BUSINESS IN 1998 Total = $ 2. 08 Mio Source: [Part B, page 11] Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Alternative of investing in Michelard Amortisation within a short period possible CAMERON‘S INVESTMENT & PROFITS FROM MICHELARD BUSINESS 1996 -1999 Mio $ investment profit years Premise: still dependent oncomponent shipments Source: [Part B, page 11] Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Alternative of investing in Michelard Final statement MORE PROFITABLE THAN ANY OTHER FOREIGN BUSINESS AT THE MOMENT BUT -> Risk of getting in trouble with Mc. Taggart Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Strategy towards the European Market Our opinion about Mc. Taggart‘s previous 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 Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Cameron‘s point of view – Strategy towards the European Market Subdivision of European Market between Mc. T & Michelard Mc. Taggart Michelard Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

What is our strategy all about? üEnter a Joint Venture with Michelard üMore control over European Market üCompetition between Michelard & Mc. T shall be avoided üFind a compromise with Mc. Taggart üOptimum marketing üEnd of 98: new negotiations with Mc. Taggart: to avoid unnecessary competition higher royalties -> Overall aim: profit maximisation Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001

Thanks for your attention! Sources: 1) Handout International Marketing, Prof. J. Höppner, p. 91 2) Welge / Holtbrügge 1998, p. 122 3) Kutschker 1992 4) Meffert, Bolz, Internationales Marketing Management 5) Microsoft Encarta 1999 Questions? Navid Nazemian Prof. Dr. Rainer Schnauffer © all copyrights: waterproof concepts 2001