However, in the given situation, the US firm\'s manufacturing processes is the f

Question

However, in the given situation, the US firm's manufacturing processes is the firm's competitive advantage, and it is allowing the firm to be extremely profitable by cutting costs by 50%. If you were to grant another firm in another country a license to your product, how would you ensure the same profitability and manufacturing procedures would be controlled abroad, as one of the main limitations to licensing is losing control over manufacturing processes, the firm's competitive advantage? Would you be concerned that the firm abroad would obtain inside know-how of your product and manufacturing procedures, and could later become a competitor?

Explanation / Answer

Same profitability and manufacturing process can be maintained in another location by following the standard that company is following into its home country. The company first need to understand the local standard that company need to follow and how can that be re-engineered to accommodate the company’s best practices without causing major change in current process. It will be a concern because the competitive advantage of company is its manufacturing process on which it has no control it means that company has to tweak its process to make it adaptable to local process which makes it lose its uniqueness thus can be easily copied by competitor.

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