EL Tek

2 Pages 540 Words

Magnetic Advances and Audio Components have a same business object in the company. Obviously, it is to maximize their profit. Meanwhile, the new magnetic material “Z-25” was developed and became a commercial reality by Audio Components. This is small, high-powered, inexpensive one and it is expected to be a hot product.

But as regarding how to handle this product in the next few years, there is a conflict between Magnet advances and Audio components. Magnet Advances thinks that the product has a great potential in the open market and wants to produce it by their own. Therefore, Magnet Advances want to get the right as cheap as possible from Audio Components to sell it to external clients. On the other hand, Audio Components thinks that the new magnet is a key component to keep their competitive advantages against their direct competitors and do not want to produce externally. However, they had spent a lot of money ($12million) for product development. So it could be assumed that they want to obtain a reasonable profit somehow to recover the development costs as soon as possible.

Thus, each division stands on different position mutually, and has different objectives for the matter. As table1 shows below, for example, Magnet Advances is the only division which has charter to sell or license the magnet to external clients in the company. Besides, they can manufacture the magnet cheaper than Audio Components. However, they are in vulnerable position because they passed on the opportunity to develop the new magnet three years before. On the other hand, Audio Components owns the rights to Z-25. But they can not manufacture the new magnet on relatively high price compared with Magnet Advances and they do not have the charter to sell it externally.

Table1.Standpoint of each division
Magnet Advances Audio Components
Primary
objective • want to sell the new magnet to external client, but they do not have the distribution rig...