Jun 13, 2018

Using the Gap Analysis Template, prepare a 1,050-1,750-word paper in which you complete Table 1, Table 2, and Table 3 and perform a gap analysis for Global Communications. Be sure to incorporate appropriate citations from your readings.

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Globa lCommunications Gap Analysis

2. Global Communications Gap Analysis
Using the Gap Analysis Template, prepare a 1,050-1,750-word paper in which you complete Table 1, Table 2, and Table 3 and perform a gap analysis for Global Communications. Be sure to incorporate appropriate citations from your readings.

SCENARIO: USAUTO

 

COMPANY OVERVIEW

 

USAuto

A former frontrunner in car manufacturing, USAuto now struggles to maintain a foothold in the industry it helped pioneer. Its old line plant assets are outdated, and labor contracts negotiated in the company`s heyday have ensured that inflated labor costs will put a squeeze on profitability for years to come. As if that weren`t enough, USAuto—like many American businesses—has lost significant market share to foreign auto producers who have built domestic plants to keep pace with U.S. demand. To date, foreign carmakers have not expanded into Central or South America, but given the ease with which they entered the U.S. marketplace, they assume local manufacturers—such as AutoMex—would provide little resistance.

 

In the past 10 years, USAuto has pinned all its hopes and committed most of its available research and development funds to delivery of the hybrid gas-electric engine. Other than that, the company has no strategic advantage, and relies heavily on domestic loyalty to stay afloat.

 

AutoMex

AutoMex is a major player in the Central and South American auto marketplace. Unlike the U.S. auto industry, which has been led by large manufacturers, AutoMex began as marketer of new and used U.S. autos in the Mexican marketplace.

 

This experience of marketing products that are manufactured by other firms has both underscored the value of the marketing function, and at the same time created a strong desire at AutoMex to have a “product of its own” to market rather than just sell the products of others. AutoMex satisfied that desire to some extent with manufacturing, but quickly realized that its corporate comparative advantage—as viewed by other firms—was its ability to marshal low-wage, limited-skills workers in assembly locations.

 

AutoMex has come to believe that low-wage is not really a comparative advantage, because any other competitor can beat it by simply investing in productivity-enhancing equipment. This belief on the part of AutoMex has driven it to seek relationships that create skills-transfer to its workforce. AutoMex concludes that if it can become a leader in manufacturing in a high-technology environment, it will transform itself into a world-class competitor in auto manufacturing and marketing.

 

THE PLAYERS

 

Linda Henderson: USAuto`s Executive Vice President (EVP), Linda is not a USAuto "insider." She joined the company as VP of Planning four years earlier, and was promoted to EVP just two years ago. Even without her strong analytical background, Linda would have easily deduced that USAuto’s high labor cost could sink the company if not drastically reduced. Her plan: Share the hybrid engine technology with AutoMex in exchange for a partnership deal. The hybrid engine would improve everybody’s product, and the partnership would decrease overall labor costs and provide stiff competition for foreign dealers entering Central and South America.

 

Mary Sackrider:  USAuto`s General Counsel (GC), Mary has filled varied legal and corporate roles at USAuto for the past 10 years. Before that, Mary was an assistant U.S. Attorney working to enforce anti-racketeering statutes; during that time, she developed a knack for negotiating and plea bargaining. While she is not an intellectual property specialist, she is familiar with key elements of patent law.

 

Luis Alvarado: AutoMex`s Chief Executive Officer (CEO), Luis has worked in auto manufacturing in both the U.S. and Mexico for the past 20 years. He signed on as Chief Operating Officer at AutoMex five years ago, but has only held the CEO position for three months. Luis believes AutoMex needs to advance technologically in order to grow, and is committed to that vision.

 

Juarez Delgado (JD):  A sharp attorney with well-honed negotiating skills, JD left a senior partnership at a major law firm to become the AutoMex in-house counsel.

 

 

 

MAY 18, 2004

 

To: USAuto Officers

From: Linda Henderson, EVP

Re: Our decision to enter into discussions with AutoMex

 

If the buzzing around the water cooler is any indication, you’ve no doubt all heard that Mary and I are about to begin preliminary partnership discussions with AutoMex. As the talks progress, we’ll be asking many of you for help and input, so I want you to have an understanding of our position.

 

The cornerstone of our bargaining power is our hybrid engine; we hope that in sharing it, we can convince AutoMex that together, we can build a new generation car for both the North American domestic market and the new Central and South American markets. The benefit to us, of course, is that expanding to the south and employing lower cost Mexican labor will help alleviate some our crippling high labor costs and enable us to remain competitive.

 

I will admit to being a little apprehensive about these negotiations. The hybrid has been USAuto’s baby for a long time, and Mary and I have discussed how careful we need to be about protecting our invention and its patents. At the same time, the engine is all we have to offer, and without this partnership and accompanying expansion, I’m afraid USAuto won’t survive the decade.

 

I`m enclosing three documents to help you get up to speed. First, I`m providing tabular data on the engine cost, which makes it clear that spreading the engine’s R&D cost over both a domestic and Latin American market will result in lower overhead. The second document is an analysis of the LAFTA market, which illustrates the potential for sales of the hybrid engine car in Latin America. Finally, I`ve enclosed a legal summary that Mary has prepared to explain Intellectual Property and legal aspects of our patent and invention concerns.

 

Let me know if you have any questions. Thanks, guys!

 

Linda

 

 

Attachment A: Table showing (1) per-unit engine cost with/without additional units in Central/South America, and (2) vehicle labor cost with/without lower labor cost in Mexico

 

 

If sold in U.S. Domestic Market Only (Note 1)

If sold in U.S. and Central/South American Markets (Note 2)

Per-unit engine cost (incremental) (Note 3)

$2,512

$1,855

Per-unit engine cost (loaded for R&D and other related costs) (Note 4)

$3,178

$2,235

Per-vehicle manufactured cost (FOB Final Assembly Plant) (Note 5)

$21,100

$18,250

 

(Note 1)

Per-unit engine cost (both incremental and loaded) is based on market analysis and forecasting of 100,000 units sold in year 1, followed by 200,000 in year 2, and thereafter an increase of 5% per year in market share for demographic projections of vehicle demand for U.S. domestic market in contiguous 48 states. Sales for Alaska and Hawaii are included, but assumptions for these states are different than for other states, and are contained in the Pacific Region sales forecast.

(Note 2)

Per-unit engine cost (both incremental and loaded) is based on domestic analysis and forecasting of units sold as described in Note 1, plus individual country forecasts for markets in Central and South America. Central and South American market sales volume assumes that the Mexican market is enhanced by production of non-engine assembly for both domestic and Central and South American markets at auto plants in Mexico, with concomitant special demand factors. If production is moved from Mexico, forecast demand for Mexican market will decline by additive (not multiplicative) 5% of forecasted amount.

(Note 3)

Incremental per-unit engine cost recognizes direct variable costs plus direct fixed cost of production facility only.

(Note 4)

Loaded per-unit engine cost recognizes direct variable costs, direct fixed facility costs, R&D, and overhead costs. R&D includes cost of developing hybrid engine, amortized over projected market cycle of hybrid engine. Overhead costs include non-R&D non-direct costs of corporation that are charged to hybrid engine project. Overhead also includes cost associated with establishing presence in Central and South America, to the extent that such costs are recognized to the hybrid engine program.

(Note 5)

Per-vehicle manufactured cost includes all chassis, power train (engine) and other final-assembly items as needed for road worthiness in U.S. (for domestic market) and for all target market countries (for domestic and Latin American market). The average cost is derived using the weighted average of all models at first-year target sales for the domestic market. The same mix of weighted average of all models is used for Latin American and domestic composite. In actuality, the model mix would change to reflect smaller, lower priced autos on average. The same mix is used, however, for comparison purposes. Actual average cost would be lower.

(The information provided above is confidential intellectual property of USAuto, Inc and subsidiaries. All Rights Reserved. This information is not to be transmitted to other parties without the express written permission of USAuto, Inc.)

 

 

Attachment B: Analysis of LAFTA market

 

Summary of economic and econometric analysis of Latin America (Central and South America) trade market:

Sum of Gross Domestic Products of LAFTA market nations

The market nations of LAFTA include both fully industrialized and partially industrialized economies, but all share the common attribute of emergence. The economy of these nations is stimulated by a world demand for natural resources at current extraction costs and a labor workforce that is becoming increasingly competent in automated manufacturing. The natural resources have a strategic advantage of being relatively geographically adjacent to the high-demand U.S. market for wood pulp, certain agricultural products, and mineral products. These natural resources are all high-density mass, with concomitant transport costs, and therefore the Latin American market will tend to outperform other low-cost commodity providers, primarily in Asia and Africa.

The labor workforce is increasingly educated to the level of competence required for semi-automated and automated production facilities. Again, the relatively short distance from commodity and manufactured products (e.g., 3000 statute miles from Brazil to U.S. port at Jacksonville, FL, compared to 8000 statute miles from China to U.S. port at Los Angeles) creates a strategic advantage for production of goods in Central and South America. The location of Mexico, within 1,500 miles of 80% of all U.S. consumers, is particularly noteworthy for the production of high-mass, high-density products.

The governments of nations in Latin America are becoming more business-friendly and stable, and they retain a willingness to not have as many costly environmental regulations as the U.S., permitting additional cost advantages.

Disposable Income of LAFTA market nations

The increase of production and skilled labor jobs in Latin America assures that incomes of workers in these markets will continue to increase. These incomes are increasing at a rate greater than the rate of increase in the cost of housing or of taxation by the LAFTA member nations. The result of these dynamics is the growth of income faster than taxes and housing costs, realizing a rapid increase in disposable incomes.

At the same time, these nations are building and improving roads and highways, initially to enable the free flow of commercial vehicles to production plants and agricultural and mining facilities, but with unintended beneficiaries in the person of workers, who are purchasing any cars they can manage to locate.

The result of the increase in disposable income is a rapidly increasing demand for personal autos that are needed to transport workers to factories in areas of highly diversified industrialization, and for non-business purposes for an increasingly affluent populace. The demand for autos will exceed the locally available supply for the foreseeable future. In addition, the demand for autos that are of a quality higher than that locally available will rise particularly.

Finally, the Latin American continent has yet to develop a system for transporting fuels for autos, and the cost of fuel reflects that lack of infrastructure. While the local populace will purchase any car available, it will particularly value autos that have the high-mileage attributes that are appreciated in economies with a high cost of petrol (gasoline) at the pump.

(The information provided above is confidential intellectual property of USAuto, Inc and subsidiaries. All Rights Reserved. This information is not to be transmitted to other parties without the express written permission of USAuto, Inc.)

 

 

Attachment C: Memo to Corporate Officers, USAuto, Inc. from Mary Sackrider

 

As we prepare to negotiate with AutoMex, I’d like everyone to have a layman’s understanding of intellectual property and copyright law so that we’re mindful of how we can protect our hybrid engine technology throughout the discussions.

 

There are two key elements in discussing anything related to patents, copyrights and trademarks: income generation and identity. Income generation -- making money -- is the number one reason for developing patented and copyrighted material. There may be other reasons -- artistic expression or a desire to create new methods -- but they take a back seat to income generation when we’re talking about lawsuits. If somebody stole your tractor or your computer, he would be depriving you of at least one way that you earn money; theft of the concepts in a patented or copyrighted idea works the same way.

 

Now, if there were no protection of these income-generating ideas, it might be unethical to steal the ideas, but it wouldn’t be illegal. That kind of risk would certainly deter businesses from spending millions to develop new ideas. If there were no protection of patent, we could all let a pharmaceutical house spend billions inventing a new drug to cure a horrible disease, then copy it and sell it for less.

 

For most of the past 200 years, America`s patent law was the best in the world, but a changing world has made the law less effective. In the past two decades, aggressive new legal tactics have often put American inventors at a disadvantage compared to their foreign competitors. Sometimes all it takes to disarm an inventor is a lawsuit challenging his patent; often, the inventor simply doesn’t have the resources to fight. Some American inventors, thinking they were first, invested their life savings in a new "patent-pending" idea, only to discover years later that someone else had secretly beaten them to the Patent and Trademark Office (PTO). (There are patents being litigated today whose claims were kept secret for more than 40 years.) Most infuriating, foreign entities have begun to secure U.S. patents on U.S. manufacturing processes and trade secrets that had been in use for years.

 

For the past six years, a coalition of manufacturers, academics, patent professionals, and individual inventors  have been working to bring patent laws up to date. The result of their work --the American Inventor Protection Act of 1999 (Senate Bill 1798) -- finally passed Congress in December 1999 as part of the Intellectual Property and Communications Omnibus Reform Act of 1999.

The new law has made three important changes:

1) It allows settlement of validity disputes in the PTO instead of in the courts. Typically, an inventor could spend $2 million in legal fees to re-establish the validity of his patent. The new reexamination procedure should do away with most of this cost.

2) Patent applications that are also filed abroad -- and this is of particular interest to us regarding the hybrid engine -- are made public 18 months after filing. In the past, an application could be held secret in the PTO for decades so that inventors had no way of knowing if someone else was already in the process of patenting the same invention.

3) It establishes a "first-to-invent" defense, a prior user right much like a "grandfather clause." Under the old law, such patents were arguably enforceable if the technology in question had not been published. Now, business methods cannot be patented by anyone after they have been in use for more than a year.

 

While the new law is a step in the right direction, protestors have succeeded in leaving a few loopholes open. For starters, reform opponents managed to slip in a provision allowing U.S.-only applications to be kept secret forever. This means ambushing -- writing a patent application and keeping it secret until others have invented and commercialized a similar technology -- can still happen.

 

Identity may also become an issue in copyright law. When we talk about identity, we’re talking about a trademark or brand name. Companies like Band-Aid spend a lot of money protecting their brand name, so that every bandage out there does not generically get called a Band-Aid. Companies that don’t take these steps -- like Escalator -- eventually lose their status as the inventor of a particular product and eventually become genericized.

 

If there were no protection of identity, in the form of trademark, anyone could manufacture an athletic shoe with a "swoosh" on it and call it "Nike." The market, the idea, the effort that Nike has put into its product could be gone with a "swoosh" (sorry!). A fraudulent producer could make substandard shoes, hurt Nike`s reputation, and indirectly damage Nike`s financial state. The "swoosh" is not an income-producing asset in the strict sense, but it is nevertheless a major marketing feature that has value.

 

Private inventors have to have protection to allow them the opportunity to recoup their invention development expenses, or they won`t invent, and society will not advance.

 

(The information provided above is confidential intellectual property of USAuto, Inc and subsidiaries. All Rights Reserved. This information is not to be transmitted to other parties without the express written permission of USAuto, Inc.)

 

 

 

MAY 20, 2004

 

USAuto Negotations Prep meeting minutes

 

Present at meeting: EVP Linda Henderson (meeting chair), GC/SVP Mary Sackrider, USAuto Corporate Staff Officers (SVPs, VPs), plus R&D Engineering, Labor Relations Division Director/East, and Government Relations officer.

 

Ms. Henderson opened by announcing the two key topics on the agenda: (1) Negotiation goals and strategies, and (2) Preparation tasks, deliverables, and lead for each task.

 

She went on to list the goals of the negotiation process:

(1) Protect from disclosure any trade secrets. (Some of our technology was intellectual property relating to the hybrid engine that was disclosed as part of the patent process, but other process elements were not disclosed in the patent and remain trade secrets.)

(2) Secure agreement for AutoMex to produce non-engine parts of the auto and retain engine assembly in the U.S. (to protect our intellectual property).

(3) Gain access to the Central and South American markets to sell our hybrid-equipped cars.

 

The officers then brainstormed strategies likely to achieve these goals. The following were selected as most viable:

· Emphasize to AutoMex the benefits of the hybrid engine, particularly in the Central and South American markets. For example, the hybrid gasoline engine is not a high-performance engine; it merely powers the electric motors. As a result, it  operates with myriad internal combustion fuels, including locally distilled alcohol-based fuel.

· Focus on AutoMex’s commitment to produce as many of the non-engine, labor-intensive parts of the auto as possible, in order to reduce our total labor content cost.

· Clearly detail how many additional car sales AutoMex can realize in the Latin American market because of our superior engine.

 

Mary Sackrider outlined Negotation Preparations.

 

· Outline specific objectives that will enable us to reach our goals. 

· Identify the choices that we have that will get us to our goals/objectives, along with the benefits and costs of each choice.

· Determine what AutoMex`s opening positions will likely be, and prepare arguments about why our approach is better.

· Determine the most likely objections that AutoMex will raise, and prepare feasible counterarguments. Identify fallback positions.

 

Note to participants: The meeting adjourned at 2:30 p.m. Follow up will be by e-mail.

 

 

MAY 25, 2004

 

To: Mary Sackrider

From: Linda Henderson

 

Mary:

As the supporting material we requested comes rolling in, I realize that there is going to be a LOT of information, and I`m not sure how we can best assemble it so we can get what we need quickly during negotiations. Any suggestions?

Linda

 

To: Linda Henderson

From: Mary Sackrider

 

Hi Linda:

There are several ways to do it. My preferred method is to use a "bargaining book" that uses three-hole punch binders, tabbed for topic with an index by topic. That way, we can get to the info we need in short order. I’d suggest tabs for the following:

*Each of our goals, with sub-tabs for each possible course of action which describe benefits and cost.

*Each of AutoMex’s anticipated goals, with sub-tabs outlining our position for each, as well as guidelines for deviating from our positions.

*Deadlines and timeframes, which will include information on how important timely outcomes are to each of us.

*Issues we wish to avoid, and ways to avoid them :)

Does this help?

Mary

 

To: Mary Sackrider

From: Linda Henderson

 

Mary:

This is a start. I also want to be sure that we have the financials of our various scenarios and choices -- what things will cost us, what cash flow outcomes, etc. Also, because we`re doing this as a rush job, I`m worried that some of the numbers may not be reviewed as carefully as we`d like. What can we do to better assure the numbers supporting the alternatives and choices are good?

Linda

 

To: Linda Henderson

From: Mary Sackrider

 

Linda:

Good ideas; I‘ll put some thought into them. Anything else we`re missing in preparation?

Mary

 

To: Mary Sackrider

From: Linda Henderson

 

Mary:

As possible fallback material, you may want to insert tabs about our Just-in-Time linkage technology that works with suppliers, and also our SCAM technology that produces the new-generation paint for the cars. Both of those technologies are valuable, but if sharing them gets us the partnership, it would be worth it. Of course, I still worry that if AutoMex decides not to partner with us, we‘ve given them enough information to become a major player and competitor...

Linda

 

 

JUNE 3, 2004

First meeting between USAuto and AutoMex -- 10:00 a.m., AutoMex headquarters.

 

Present are USAuto EVP Linda Henderson and General Counsel Mary Sackrider, and AutoMex CEO Luis Alvarado and in-house counsel Juarez Delgado

 

HENDERSON: Thank you for welcoming us into your offices, and for agreeing to hear our proposal for a possible partnership. We believe this is a an opportunity for both of us to generate a win-win outcome. If you’re ready, I will begin my presentation.

 

ALVARADO: AutoMex shares your belief that this proposal carries much promise. Please, summarize what you believe to be the game plan.

 

HENDERSON: USAuto has been working for years on a commercially viable hybrid gas-electric engine. We have the patent application, and we are the first. These engines are highly efficient, using the gas motor to power the electric motor, in much the same way diesel-electric engines power rail locomotives and non-nuclear submarines. They are designed to capture kinetic energy as well; for example, the auto applies the brakes by linking a dynamo to the wheels to capture part of the energy that is usually lost when brakes are applied.

Because the hybrid engine technology continues to evolve and because so much of the development infrastructure is in place in our plants, we anticipate building the new engine at our facility. We would like AutoMex to manufacture as much of the remainder of the auto as possible, because we recognize the comparative labor cost advantage that you bring to the relationship.

With our engine, and your labor costs, together we can build an auto that will meet emerging consumer demand and permit a very satisfactory profit margin. That profit can first be applied to compensate USAuto for the R & D investment made to create that engine, and then the remainder can be shared between us based on what each of our organizations has invested. Our analysis suggests that if we share the workload as proposed, USAuto will receive 75% of the per-auto profits, with AutoMex receiving 25%. This difference reflects the substantial up-front money that USAuto had to spend to develop the engine.

That profit sharing will be enjoyed on an expanding market base, because beyond the value of our hybrid engine, we see the opportunity to market our auto in markets that are new to USAuto, primarily in Central and South America. With your labor cost advantage and exposure in Latin American markets, and our engine and market share in North America, we can work together for the benefit of both our organizations.

 

ALVARADO: Your plan brings up many valid points. We agree that the opportunity is great, and that we at AutoMex can play an increasing role in bringing the best autos to the Americas. We believe, in fact, that we can prove to be a valuable partner in all auto assembly, including assembling the new hybrid engine.

While there may be additional R & D efforts needed on the engine, we are confident that we can successfully apply that knowledge in a Mexican assembly plant. I can think of no vehicle assembly plant that uses two plants to make one car, let alone two plants in two different countries. Everyone knows it is more efficient to use one plant.

 

We also thank USAuto for recognizing the value of our highly efficient and inexpensive labor. We view that as a major resource. In fact, it is just as much a resource as the financial backing that USAuto supplied to develop the engine. We believe that the profits should be split 50-50. USAuto gets a share of the profits for the investment it made, and AutoMex gets the other share for the investment it now must make in training workers to be ready to assemble the automobile. Your R & D. Our workforce. Two assets working as partners, paid as partners -- 50-50.

 

SACKRIDER: Mr. Alvarado, USAuto has legitimate concerns about the protection of our engine patent. We can’t risk having the technology shipped to another country, where it can be copied by anybody who chooses to copy it.  I’m afraid we have to insist that the engine assembly be performed at our plant, as originally agreed.

 

DELGADO: Ms. Sackrider, we have no agreement; Ms. Henderson has merely proposed a possible scenario. I thought we were here to negotiate. We believe it is reasonable to train our workers to build the hybrid engine here in Mexico. If we don’t build it here, we are no more than convenient labor for you, labor easily replaced if you find some other nation willing to do the work for less. If we are true partners, then we sit at the same table; we are not master and servant.

 

SACKRIDER: Are you saying you don’t want the job of building the auto of the future? Surely, there are other nations willing to supply the labor on our terms.

 

DELGADO: I note that we have not yet built one auto, and you are already threatening to take away the work, which proves my concern!

 

ALVARADO: Senor Delgado`s issue is not that we don`t want the work, because we do. But I have to side with him: Unless we have the opportunity to work with and build the new engine, AutoMex is nothing more than labor, with no stake or interest in the outcome of this partnership. We might see increased profits but they could disappear in the blink of an e-mail if USAuto decided to outsource labor to any other nation, or even a U.S. plant. If we build the engine, we have assurance that we are true partn


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