WAVERS Inc. is a California based firm that specializes in the manufacturing of high- end surfboards. Consumers in the coastal African region as well as Japan and the UK have recently discovered the joys of surfing. WAVERS has hired you as a consultant to provide advice regarding global expansion. They are debating whether to continue exporting to the UK or possibly licensing the technology to a London firm that has expressed some interest in manufacturing the product in the UK. Currently, Wavers return on investment from their domestic market is 35% with a net profit of $5 million from $20 million in sales. Labor is roughly 50% of total expenses and 20% cheaper in the UK than the US. Costs other than labor in the UK are roughly on par with the US. Discuss whether they should license or continue to export and the contingencies that need to be considered. If they license, what should the royalty rate be? Provide any assumptions that you have made
WAVERS Inc. is a California based firm that specializes in the manufacturing of high- end surfboards. Consumers in the coastal African region as well as Japan and the UK have recently discovered the joys of surfing. WAVERS has hired you as a consultant to provide advice regarding global expansion. They are debating whether to continue exporting to the UK or possibly licensing the technology to a London firm that has expressed some interest in manufacturing the product in the UK. Currently, Wavers return on investment from their domestic market is 35% with a net profit of $5 million from $20 million in sales. Labor is roughly 50% of total expenses and 20% cheaper in the UK than the US. Costs other than labor in the UK are roughly on par with the US. Discuss whether they should license or continue to export and the contingencies that need to be considered. If they license, what should the royalty rate be? Provide any assumptions that you have made
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