How do these options compare with one another? That is, what are the advantages and disadvantages of each option from the perspective of the Beta Group? (As part (but only part) of your analysis, and only to the extent possible, compare the options using quantitative analysis, making assumptions as appropriate.) (50%).
Option 1: Licensing.
Advantages: 1) From financial point of view, issuing a license can provide instant and guaranteed revenue for Beta in this case Beta can get 8% to 10% royalty on wholesale sales under exclusive license or 6% to 8% royalty under non-exclusive license. In addition, it would not require investment, at the beginning of license, on manufacturing, marketing, distributing the clubs; 2) from business development point of view, because the HXL technology and investing in industry is unrelated to the core business of Beta , and considering the uncertainties, licensing out this technology would not distract Beta from its core business; 3) from technology sustainability point of view, licensing out the HXL technology would help Beta avoid sunk costs, Beta could continue to work on R&D, but if not successful, there would not a big loss on sunk costs. .
Disadvantages: 1) Beta would have less control patent defense. Especially for non-exclusive licensing, the more people who know it, the higher the risk that somebody will breach confidentiality; 2) from product quality point of view, Beta would have no control on product quality, if product quality were poor, it would damage the image of Betas HXL technology. .
Option 2: OEM Supplier.
Advantages: 1) As a OEM supplier, Beta would have strong control on patent; 2) Beta would have greater assurance of quality and keep the great image of the technology; 3) it requires not so much investment but would be profitable Beta would sell pixel inserts at 30% to 60% gross margin and would charge club makers an 80% to 100% markup on direct cost and a 8% to 10% technology license on wholesale value of the club.
