You are the owner of a small U.S.-based clothing manufacturer. For the past five

Question

You are the owner of a small U.S.-based clothing manufacturer. For the past five years, t-shirts from your brand have been produced and sold in Japan through a licensing agreement with Japanese firm KUME Co. through its Tokyo Tees subsidiary. The KUME Co. CEO recently visited you and revealed that her firm was about to acquire its leading rival in the Japanese market and, as a result, wants to sell its Tokyo Tees unit. The CEO had approached your firm with two proposals. First, KUME Co. is willing to sell you its Tokyo Tees subsidiary outright. This would represent an acquisition for you in the Japanese market. Second, if the two firms cannot agree on terms for a purchase of Tokyo Tees, KUME Co. is willing to sell its licensing agreement back to you, which will effectively allow you to formulate a new strategy for your company in Japan.

Explanation / Answer

According the situation described in the question, the best deal would be if US based clothing manufacturer buys or acquired the Kume Co. Tokyo Tees subsifiary outright. Though the one time acquistion isvestment will be higher but it will allows the US based clothing manufacturer to run the tokyo tees subsidiary through its own strategy and management controls and also can lead to further expansion in the Japanese niche market. This will be viable option because it has extablished brand network with tokyo tees and acquiring it will run its operations smoothly without any hindrances.

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