These options include: a licensing agreement, a Joint venture, and making a direct investment. Bastion’s strategy has been successful in Canada and in the U. S. , but has to determine which option will bring the most success in Europe while weighing the risks of each option as well. 2) What Information does Mark need to know to develop a solution to the problem or address the opportunity? The information Mark needs to know would include the specifics of the three different options, Bastion’s market share In North America, the racket potential In Europe, and a break-even analysis for the direct Investment option.
The licensing option would include agreeing to let Bar Masses to manufacture and distribute the patented Buxton scissor lift throughout Europe. By agreeing to this, Buxton would in turn receive 5% royalties. The joint venture would include partnering (“50-50 split”) with Bar Masses. By doing so, it would alleviate some risk while capitalizing on the network Bar Masses has already established in Europe. The direct investment option would include Buxton establishing its own manufacturing facility and management group to market the lift in Europe.
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By going this route, there lies the most risk out of the three options while having to more heavily invest. However, all of the profits would go directly to Buxton Technology. Bastion’s market share In the North America Is estimated to be 2. 15% of lift sales (see road in 1997. Of those 14. 2 million (8. 95%) (see Appendix B) were newly registered vehicles. More and more people are beginning to buy cars and become regular drivers in Europe. Specifically for the direct investment option, Buxton would have to ell about 315 (see Appendix C) units in Europe in his first year to break-even. ) Which alternative would you recommend Buxton Technology pursue: 1) great penetration of the U. S. Market, or 2) entering Europe? Explain your answer. My recommendation is to enter the European market. The U. S. Market still has potential market share to be gained, but it will be difficult. Two large U. S. Firms dominate the industry: BAH Lifts and Berne Manufacturing together hold approximately 60% of the market. Buxton primarily sold product In the U. S. Through wholesalers to large direct counts.
The Buxton lift was one of five products the wholesaler sold. Pierre assumed Buxton to be 20% of the wholesaler’s total lift sales in the U. S. , and knew the wholesaler’s objective was Just to sell hoists (not necessarily the Buxton lift). While Buxton and Pierre had thought about opening a sales office in New York to service the three largest Mid-Atlantic states, they were reluctant in doing so because of concerns the U. S. Wholesaler would not be willing to relinquish any of its territory. Europe seems to be a smarter move. The U. S. Ill become a mature market much before Europe, and there is a greater opportunity in Europe. As stated earlier, the market potential shows promise in Europe with 158. 6 million vehicles (passenger/ small commercial), compared to 146 million in the U. S. , on the road in 1997. Of those 14. 2 million (8. 95%) (see Appendix B) were newly registered vehicles. More and more people are beginning to buy cars and become regular drivers in Europe. The U. S. Already has companies dominating the industry, while little to no information was available on the competition in Europe.
There is no dominant manufacturer as there s in North America, and Buxton should pounce on the opportunity to potentially become the dominant manufacturer overseas. 4) If Buxton was to enter the European market, what entry strategy would you recommend? Why? The strategy that I would recommend is a Joint venture. The Buxton lift is a revolutionary hoist product. Buxton technology prides itself on safety with the best safety features in the industry, and only has two competitors that manufacture scissor lifts. Both cost 5% and 20% cheaper, respectively, but lack safety features the Buxton lift possesses.
The licensing agreement poses the smallest risk of the three options, but I think receiving only 5% royalties is too small a percentage. If this were an option they would realistically like to explore, that percentage would need to get raised much higher. Their hoist product is superior and the royalty percentage should reflect that. The direct investment option seems to be a realistic option, but I still do not think the risk is worthy of pursuing this option. If Buxton were to implement a similar employee structure as in the U. S. Canada, implement similar advertising costs and administrative expenses, and add the estimated costs of establishing a manufacturing plant in Europe, the company would need to sell 314. 88 units solely in Europe in order to break-even (see Appendix C). However, Buxton has no networks in Europe and would rely on Pierre and his new salesperson to bring in new business. Although 314. 88 units isn’t necessarily an inconceivable number, the high risks are still present. I wouldn’t be willing to risk that much off capital investment on hope that Pierre and my salespeople can succeed in obtaining new, sustainable business in Europe.