Is entering the European market a good move for Baxton Technology? If so, which
expansion option would best suit the company: licensing, join venture, or direct investment?
Baxton is known for manufacturing surface automotive hoists; a product used by garages, service
stations, and other repair shops to life cars while servicing. The company has been successful in
expanding sales into the U.S. market, but the ability to repeat that success in Europe is the main
concern.
Within the U.S. and Canada, Baxton has developed a reputation for a quality product
backed by good service in the hoist lift market. Approximately 49,000 hoists were sold each
year in North America, with Baxton contributing to 1,054 units with sales of $9,708,000 in 1999.
In that year, about 60% of sales were to the United States with the remaining 40% to the
Canadian market. Within Europe, four countries had more than 20 million vehicles in use, with
Germany having the largest domestic fleet of 44 million vehicles. The number of vehicles is an
important indicator of the European market potential because the more vehicles in use means a
greater number of service and repair facilities that need vehicle hoists.
Baxton Technology has three options to choose from if they decide to expand into the
European market. Those options are licensing, joint venture, or direct investment. A French firm,
the Bar Maisse has already expressed an interest in manufacturing the Baxton life, so the
licensing option is a real possibility. When Pierre questioned his colleagues in the industry, half
of them had not heard of the company, but the other half who has spoke favorably on the quality
of its products. It was also mentioned that Bar Maisse’s management had integrity. If Baxton
did business with them, they would enter into a three-year licensing agreement with Baxton
Technology to manufacture the Baxton Lift in Europe. In exchange, Bar Maisse would pay a
royalty rate of 5% of gross sales....