Running Head STATESMANSHIP IN ORGANIZATIONAL LEADERSHIP .docx

Running Head: STATESMANSHIP IN ORGANIZATIONAL
LEADERSHIP
STATESMANSHIP IN ORGANIZATIONAL LEADERSHIP
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Statesmanship in Organizational Leadership
Name Alfreda Dunlap
Course PADM 610
Professor Dr.Esechie
Date 4/5/20
Statesmanship in Organizational Leadership
Organizational leadership is a method of management which
involves leaders taking active roles in setting up strategic goals
for the company. The leaders, according to Ruben and Gigliotti
(2017), have to motivate their employees to ensure that they
work as a team towards achieving the business goals.
Organizational leadership is essential in meeting the challenges
and goals presented by both the business and the employees.
Managers are always promoted to top leadership roles basing on

their abilities to manage business challenges and achieve future
goals (Ruben & Gigliotti, 2017). Understanding both the
strengths and weaknesses of a workforce is an essential part of
organizational leadership. Interpersonal leadership involves the
ability of managers or leaders to understand their workers. It
requires a deep understanding of the employees, what motivates
them, and how they interrelate with each other at the workplace.
This type of leadership revolves around self-expression, which
determines whether one's leadership capabilities. The authors
define statesmanship as the practice of moral leadership within
an organization or institution. According to Ruben and
Gigliotti, Great politicians such as Churchill and Lincoln have
always been regarded as a true statement due to their ability to
lead their countries during difficult times. From previous
studies, it is still not clear as to whether a state is a right habitat
for statesmanship. Stöckl and Smajdor (2017) put it that
diplomacy involves politicians who have practised high level of
quality leadership. Not all politicians are statesmen, but only
those who exercise wise leadership (Stöckl & Smajdor, 2017).
Statesmanship is a critical factor for successful organizational
leadership.
Statesmanship Model
Statesmanship involves wise leadership among those who
occupy top government positions. An ideal Statesmanship model
is the one which a leader understands their people, both
weaknesses and strengths (Jones, 2019). The author also
identifies that statesmanship does not include leaders who are
exploiting the vulnerabilities of their followers. In
organizational leadership, statesmen are those leaders who
listen to their workers and consider their needs during decision-
making processes. Statesmanship not only involves playing well
the political game but also making every game possible. It
consists in providing the right conditions for politics to grow
and being able to agree on the best courses of actions through

reconciliation. Traditionally, statesmanship has been shown
through constitutional found and reforms and during the crisis
and war (Jones, 2019). Statesmanship is revealed during a
political crisis and when a nation requires an immediate
solution to heal its economy. Majority of previous statesmen
were products of exceptional political circumstances.
Statesmanship should not be associated with other forms of
ruling such as management, mastery and domination. It is
unique and encourages leaders to exercise wise styles of
leadership.
Interpersonal Leadership and Organizational Leadership
Interpersonal leadership is simply the ability to understand
other people and be able to motivate them to improve their
performances (Van Wart, 2017). It focuses on appropriately
reacting to moods, desires and behaviours of other individuals.
For one to be effective with those around them, they need first
to be effective with themselves. Before seeking to find the right
partner in business, ensure you are the right partner as well.
Interpersonal skills are essential in improving interpersonal
leadership. As indicated by Bennett et al. (2019), interpersonal
skills are the attributes that a person depends on when
interacting with others. The skills are essential in improving
cooperation and communication. In a business environment,
business managers must communicate effectively and build
relationships with their employees. Interpersonal skills play a
massive role in both communication and relationships (Bennett
et al., 2019). They include empathy, active listening,
responsibility, leadership, patience, teamwork, dependability,
flexibility and motivation. Interpersonal skills increase both
personal and organizational productivity.
Organizational leadership involves managers setting goals for
the company and then motivating employees to work towards
achieving them (Kollenscher et al., 2017). Organization CEO,
team coach, army general, political party leaders and head of a
department are examples of organizational leaders. The
organization is simply a group of people organized to perform

specific duties and the leader as a person responsible for
directing the group. According to Griffith et al. (2019), the
primary role of a leader is to structure employee work and
combine them to produce organizational inputs. Organizational
leaders are different from executive and functional leaders.
Their leadership qualities are high and can connect their
business understanding with influential future visionaries to
ensure high business productivity. Organizational leaders are
also forward-thinkers as argued by Kollenscher et al. (2017) and
have the ability to lead broad initiatives through integrity and
ethics. There are different organizational skills and mindsets
that individuals need to learn to be effective leaders. They
include problem-solving, excellent communication, effective
decision-making, understanding the workplace and the
employees, innovation, use of integrity and ethics, educating
organizational vision and strategic thinking. Organizational
leadership skills can be learned even through real-world
experiences.
The link between Interpersonal Leadership and Organizational
leadership
Regardless of the industry, interpersonal leadership plays a
huge role in strengthening the organizational leadership.
Through interpersonal leadership skills, leaders in the
organization motivate and encourage employees to work as a
team to achieve business goals. Effective communication is an
essential factor in a successful business (Trivisonno & Barling,
2016). Interpersonal leadership allows employees to develop
close relationships with their workmates and employers hence
resulting in a smooth flow of information and ideas between
them. Effective communication establishes mutual respect and
allows organizational leaders to consider the inputs and
opinions of their juniors. Interpersonal leadership in an
organization also helps in keeping the maintaining feedback
loop. Many companies strive to develop a workplace that can
accommodate both external and internal factors. For this to be a

success, a complete and constructive feedback loop is required
(Trivisonno & Barling, 2016). Employees needed regular
feedbacks regarding their duties to understand whether there are
doing it right or not. Feedback loops allow employees and
employers to give back feedback on their satisfaction. The
ability for organizational leaders to receive and give feedback is
one of the interpersonal skills.
Interpersonal leadership expands opportunities for leaders in an
organization. Interpersonal skills allow leaders to work closely
with workers and other managers, thus increasing their
performances. They are likely to be promoted to higher
positions within the organization. Interpersonal skills help
managers stay close to their workforce and understand their
wellbeing. Customers also feel valued in organizations where
leaders make a follow-up or respond quickly to their needs.
Transparency is critical in organizational leadership. According
to Stead et al. (2017), the majority of US workers think that
their employers are not open to them. Lack of transparency can
result in disenfranchised workers and reduced loyalty among the
workforce. If workers feel that they are undervalued and that
their opinions are not taken into consideration during decision-
making processes, they are likely to leave for other job
opportunities in new companies.
Interpersonal leadership is essential in business organizations.
Not only does it help in developing personal relationships but
also allow leaders to foster their professional relationships both
within and outside the organization. Maintaining professional
relational relationships is difficult than even creating them
since they require consistency and continued empathy (Chiu et
al., 2016). Therefore, the effective way of maintaining the
relationships is to build them on trust. The ability of individuals
to develop interpersonal relationships, god flow of information
and establish trust helps them become effective organizational
leaders. Leaders in organizations who do not have lose and
personal links to their workforce are bound to fail in the future.
Workers are less motivated, and hence production will reduce.

Empathy is an essential attribute of an organizational leader
(Chiu et al., 2016). Through understanding, leaders understand
what is affecting their workers both on and off work. Employees
may have challenges and worries of work, which may affect
their performances. Therefore, leaders must be close to them to
help them solve their life challenges.
Application of statesmanship to organizational communication
best practices
Statesmanship can be referred to as an outstanding moral type
of leadership at the public level. The ideas and concepts of
statesmanship have been used many years ago and have been
passed from generation to generation. New understandings, such
as administrative and judicial statesmanship have been
developed in the modern era (Ray, 2019). The model is tipped
to become more feasible as it transforms from state governance
to multilevel governance. Statesmanship is the best way through
which the public can be administered. It presents the best way
through which relevant information can be conveyed to the
public. Statesmanship determines the best communication tool
to be used. Communication tool needs to be efficient and
facilitates a free flow of information. It is worth choosing the
right channel, which can connect the workforce. Public
statesmanship reduces the noise people have to go through
before accessing relevant information. The model ensures that
the information sent reaches the targeted audience and at the
right time. Organizations need to reduce the chances of their
workforce missing out on important information. Using the right
platforms open opportunity for employees to discuss and share
ideas and chats.
Public statesmanship can also be applied to the development of
internal communication strategies. It helps leaders understand
which information to publish within the organization. The
internal communication strategy should not overwhelm people
with a lot of updates (Andersen & Jakobsen, 2017). Leaders
need to use the strategies and platforms to encourage the
employees to follow their examples. A good plan should

consider how to package and deliver information both to
customers and the workforce. By interlinking, the external and
internal communication strategies can improve communication
both in information flow and in productivity (Cao et al., 2016).
Public statesmanship can also be applied in supporting company
values and improving the organizational culture. The
information that the company chooses to share and how it is
shared plays a role in defining organization culture (Kapucu,
2006). Statesmanship allows a company to operate with their
values in mind. An organization that is built on transparency
and open communication, for example, need to update their
employees from all levels of the organization. Communication
channels should have discussions, debates and feedback. Open
communication in workplace connects and aligns teams as per
the instructions. By creating a room for feedback and reviews,
open communication can be promoted in the company. Internal
communication is two-way traffic. Leaders have to listen to
their workers and regularly for feedback to determine whether
they are motivated or not.
Conclusion
Statesmanship model is essential in promoting effective
leadership in public and business organizations. The model
allows leaders to understand their followers by identifying their
weaknesses and strengths hence choose the most effective
business strategies. Interpersonal leadership, on the other hand,
plays a massive role in improving organizational leadership.
Successful business organizations use interpersonal leadership
strategy to recruit their managers. Such organizations have
leaders who understand their traits and use them to develop
those around them. Before a leader makes an employee
effective, they need first to be effective. One of the most
critical skills for interpersonal leaders in organizations is the
ability to collect and give feedback. Workers need to be given
feedback regarding their performances so that they can improve.
It is also crucial for managers to receive regular feedback from
workers to understand their opinions. Business companies can

use statesmanship model to identify best practices for their
communication. The model identifies the best communication
strategies within the organization and determines which
information can be shared publicly. It provides a perfect
platform for leaders to motivate and encourage their employees
to follow their examples.
References
Bennett, L. M., Nelan, R., Steeves, B., & Thornhill, J. (2019).
The interrelationship of people, space, operations, institutional
leadership, and training in fostering a team approach in health
sciences research at the University of Saskatchewan.
In Strategies for Team Science Success (pp. 509-522). Springer,
Cham.
Cao, Y., Bunger, A. C., Hoffman, J., & Robertson, H. A.
(2016). Change communication strategies in public child
welfare organizations: engaging the front line. Human Service
Organizations: Management, Leadership & Governance, 40(1),
37-50.
Chiu, R. B., Mirowska, A., & Hackett, R. D. (2016). Meaning
and Madness of Leadership: Threat Sensitivity, Moral
Foundations, and the Trump Phenomenon. In Academy of
Management Proceedings (Vol. 2016, No. 1, p. 17911).
Briarcliff Manor, NY 10510: Academy of Management.
Griffith, J. A., Baur, J. E., & Buckley, M. R. (2019). Creating
comprehensive leadership pipelines: Applying the real options
approach to organizational leadership development. Human
Resource Management Review, 29(3), 305-315.
Andersen, S. C., & Jakobsen, M. (2017). Policy positions of
bureaucrats at the front lines: Are they susceptible to strategic
communication?. Public Administration Review, 77(1), 57-66.
Jones, H. (2019). Searching for Statesmanship: a Corpus-Based
Analysis of a Translated Political Discourse. Polis: The Journal
for Ancient Greek and Roman Political Thought, 36(2), 216-
241.

Kapucu, N. (2006). Interagency communication networks during
emergencies: Boundary spanners in multiagency
coordination. The American Review of Public
Administration, 36(2), 207-225.
Kollenscher, E., Eden, D., Ronen, B., & Farjoun, M. (2017).
Architectural Leadership: The neglected core of organizational
leadership. European Management Review, 14(3), 247-264.
Ray, C. (2019). The Concept of Statesmanship in John
Marshall’s Life of George Washington. Humanitas, 32(1-2), 56-
78.
Ruben, B. D., & Gigliotti, R. A. (2017). Communication: Sine
qua non of organizational leadership theory and
practice. International Journal of Business
Communication, 54(1), 12-30.
Stead, V., Elliott, C., Blevins-Knabe, B., Chan, E., Grove, K.
S., Hanold, M., & Smith, A. E. (2017). Collaborative Theory-
Building on Women’s Leadership: An Exercise towards
Responsible Leadership. Theorizing women and leadership:
New insights and contributions from multiple perspectives, 37-
50.
Stöckl, A., & Smajdor, A. (2017). The MMR debate in the
United Kingdom: Vaccine scares, statesmanship and the media.
The politics of vaccination. Manchester University Press.
Trivisonno, M., & Barling, J. (2016). Organizational leadership
and employee commitment. In Handbook of employee
commitment. Edward Elgar Publishing.
Van Wart, M. (2017). Leadership in public organizations: An
introduction. Taylor & Francis.
Case Write-up Overview
Cameron Auto Parts
SI 471Introduction
The case write-up assignment on Cameron Auto Parts is
designed to give you additional practice analyzing business
situations and developing effective plans-of-actions. Although

case studies come equipped with "study questions" and exhibits,
the process of identifying issues, considering their implications,
and developing and implementing a plan-of-action in the real
world is the same, and should be an integral part of your
business skill-set.
Your effectiveness in completing in this assignment should also
provide you with a good benchmark regarding the development
of your analytical skills. By this point in the course, you should
find your class preparation time reduced (i.e., you've become
more efficient), and your ability to accurately identify, and
comprehensively analyze, the relevant issues increased.
Case Write-up Instructions
Please do the following for this assignment:
a) Answer the 4 assignment questions for class #17, in the
syllabus (Cameron Auto Parts) and in writing, and submit your
paper in hardcopy form by the beginning of class on 3/25/20.
b) The maximum length of your paper should be 3 pages, single-
spaced, including all exhibits.
c) It is recommended you label each page of your paper with
only your BU ID #, in an effort to facilitate blind grading.
Please do NOT put your name anywhere on your paper.
d) Please note: You do NOT have to submit your answers via e-
mail for class on 3/25.
What I want, please…
a) Demonstration of in-depth understanding, and thorough
analysis of all relevant issues in the case. Please remember to
use the "5-why's,"and to be rigorous in your discussion of each
issue. Also consider how each issue fits vis-à-vis the entire
company, its strategy, industry, etc.

b) Realistic plans-of-action for the U.K. market, the rest of
Europe, and the company's coupling business (see syllabus for a
list of the study questions).
c) "Backup" for any calculations and/or conclusions. How did
you get to your conclusions?
d) To the extent you feel they are necessary, comparisons with:
1. Definition of entrepreneurship, and/or
2. People, opportunity, deal, context "model," and/or
3. Prior cases, readings or lectures we've studied
e) Out of fairness to all students, please restrict your analysis to
business issues affecting Cameron (i.e. please do not discuss
legal implications, cite cases, code or statutes, or base your
analysis on legally determined precedent.)
What I DON'T want, please…
a) Information drawn from outside sources and/or the Internet,
etc.
b) Words for the sake of words (i.e. long, B/S type papers).
You don't have to necessarily write a three-page paper in order
to effectively complete the assignment.
c) Flashy graphs, diagrams, models and "buzzwords" which add
no value.
d) Conversations/collaboration with others (prior/present
classmates, Professors, instructors, non-BU people, etc.) Please
note this is an individual assignment.
e) Questions to me regarding specific aspects of the case. Out

of fairness to all students, I can’t respond to individual
inquiries. Any clarifications will be posted to Questrom Tools
for the benefit of all.
f) The "right" answer, since it doesn't exist!
Copyright 2020, Gregory L. Stoller
Page #1
W16156
CAMERON AUTO PARTS: EARLY
INTERNATIONALIZATION
Professor Paul Beamish revised this case (originally prepared
by Professor Harold Crookell) solely to provide material for
class
discussion. The authors do not intend to illustrate either
effective or ineffective handling of a managerial situation. The
authors may
have disguised certain names and other identifying information
to protect confidentiality.
This publication may not be transmitted, photocopied, digitized,
or otherwise reproduced in any form or by any means without
the
permission of the copyright holder. Reproduction of this
material is not covered under authorization by any reproduction
rights
organization. To order copies or request permission to
reproduce materials, contact Ivey Publishing, Ivey Business
School, Western
University, London, Ontario, Canada, N6G 0N1; (t)

519.661.3208; (e) [email protected]; www.iveycases.com.
Copyright © 2016, Richard Ivey School of Business
Foundation Version: 2017-01-05
In the spring of 2013, Alex Cameron had just come back from a
trip to Scotland with a signed contract for
collaboration with one of his biggest European customers,
McTaggart Supplies Ltd. As he pondered about
the implications of this deal, he started reminiscing about the
path that had brought him to this point.
Alex’s first years in business were unusually harsh and
turbulent. He graduated from a leading Michigan
business school in 2010 when the American economy was just
recovering from the Great Recession
(2007–2009) caused by the subprime mortgage crisis and the
collapse of the U.S. housing bubble. It was
not that Alex had difficulty finding a job, however; it was that
he took over the reins of the family business.
His father timed his retirement to coincide with Alex’s
graduation and left him with the unenviable task of
cutting back the workforce to match the severe sales declines
the company was experiencing.
HISTORY
Cameron Auto Parts was founded in 1975 by Alex’s father to
seize opportunities created by the earlier
signing of the Auto Pact between Canada and the United States.
The Auto Pact permitted the Big Three
automotive manufacturers to ship cars, trucks, and original
equipment (OEM) parts between Canada and the
United States tariff-free, as long as they maintained auto
assembly facilities on both sides of the border. The
Pact had been very successful with the result that a lot of auto

parts firms sprang up in Canada to supply the
Big Three. In 2001, the Auto Pact was abolished, superseded by
the North American Free Trade Agreement,
which continued to create favourable conditions for trade
between the United States and Canada.
Cameron Auto Parts prospered in this environment until, by
2008, sales had reached $60 million1 with
profits of $1.75 million. The product focus was largely on small
engine parts and auto accessories such as
oil and air filters, fan belts and wiper blades, all sold as original
equipment.
When Alex took over in 2010, the company’s financial position
was precarious. Sales in 2009 had dropped
to $48 million and for the first six months of 2010 to $18
million. Not only were car sales declining in
North America, but the Japanese were taking an increasing
share of the market. As a result, the major
North American auto producers were frantically trying to
advance their technology and to lower their
1 All currency in U.S. dollars unless specified otherwise. Do
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This document is authorized for educator review use only by
GREGORY STOLLER, Boston College until Mar 2020. Copying
or posting is an infringement of copyright.
[email protected] or 617.783.7860
Page 2 9B16M043
prices at the same time. It was not a good year to be one of their
suppliers. In 2009, Cameron Auto Parts
lost $2.5 million, and had lost the same amount again in the
first six months of 2010. Pressure for
modernization and cost reduction had required close to $4
million in new investment in equipment and
computer-assisted design and manufacturing systems. As a
result, the company had taken up more than
$10 million of its $12 million line of bank credit at an interest
rate which stood at 3.25 per cent (U.S. prime
rate charged by banks) in 2010.
Alex’s first six months in the business were spent in what he
later referred to as “operation survival.” There
was not much he could do about working capital management as
both inventory and receivables were kept
relatively low via contract arrangements with the Big Three.
Marketing costs were negligible. Where costs
had to be cut were in production and, specifically, in people,
many of whom had been with the company
for more than 15 years and were personal friends of Alex’s
father. Nevertheless, by the end of 2010, the
workforce had been cut from 720 to 470, the losses had been
stemmed, and the company had been saved

from almost certain bankruptcy. Having to be the hatchet man,
however, left an indelible impression on
Alex. As things began to pick up during 2011 and 2012, he
added as few permanent workers as possible,
relying instead on overtime, part-timers, or sub-contracting.
RECOVERY AND DIVERSIFICATION
For Cameron Auto Parts, the year 2010 ended with sales of $38
million and losses of $3.5 million (see
Exhibit 1). Sales began to pick up in 2011, reaching $45 million
by year-end with a small profit. By mid-
2012, it was clear that the recovery was well underway. Alex,
however, while welcoming the turnaround,
was suspicious of the basis for it. Cameron’s own sales hit $27
million in the first six months of 2012 and
company profits were over $2 million. Cameron was faced with
increasingly aggressive competition from
Canadian and offshore parts manufacturers. The short-term
future for Cameron, however, seemed
distinctly positive, but the popularity of Japanese cars left Alex
feeling vulnerable to continued total
dependence on the volatile automotive industry. Diversification
was on his mind as early as 2010. He had
an ambition to take the company public by 2016 and
diversification was an important part of that ambition.
Unfortunately, working as an OEM parts supplier to the
automotive industry did little to prepare Cameron
to become more innovative. The auto industry tended to
standardize its parts requirements to the point that
Cameron’s products were made to precise industry
specifications and consequently, did not find a ready
market outside the industry. Without a major product
innovation, Cameron’s dependence on the Big Three

was likely to continue. Furthermore, the company had
developed no “in-house” design and engineering
strength from which to launch an attempt at new product
development. Because product specifications had
always come down in detail from the Big Three, Cameron had
never needed to design and develop its own
products and had never hired any design engineers.
In the midst of “operation survival” in 2010, Alex boldly
decided to do something about diversification. He
personally brought in a team of four design engineers and
instructed them to concentrate on developing
products related to the existing line but with a wider “non-
automotive” market appeal. Their first year
together showed little positive progress, and the question of
whether to fund the team for another year
(estimated budget $425,000) came to the management group:
Alex: Maybe we just expected too much in the first year. They
did come up with the flexible
coupling idea, but you didn’t seem to encourage them, Andy
(production manager).
Andy
McIntyre:
That’s right! They had no idea at all how to produce such a
thing in our facilities. Just a lot of
ideas about how it could be used. When I told them a Canadian
outfit was already producing
them, the team sort of lost interest. Do
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John Ellis
(Finance):
We might as well face the fact that we made a mistake and cut it
off before we sink any more
money into it. This is hardly the time for unnecessary risks.
Alex: Why don’t we shorten the whole process by getting a
production license from the Canadian
firm? We could start out that way and then build up our own
technology over time.
Andy: The team looked into that, but it turned out the
Canadians already have a subsidiary operating
in United States — not too well from what I can gather — and

they are not anxious to license
anyone to compete with it.
Alex: Is the product patented?
Andy: Yes, but apparently it doesn’t have long to run.
At this point a set of ideas began to form in Alex’s mind, and in
a matter of months he had lured away a
key engineer from the Canadian firm with an $110,000 salary
offer and put him in charge of the product
development team. By mid-2012, the company had developed its
own line of flexible couplings with an
advanced design and an efficient production process using the
latest in production equipment. Looking
back, Alex commented: “We were very fortunate in the speed
with which we got things done. Even then
the project as a whole had cost us close to $1 million in salaries
and related costs.”
MARKETING THE NEW PRODUCT
Alex continued:
We then faced a very difficult set of problems, because of
uncertainties in the market place. We
knew there was a good market for the flexible type of coupling
because of its wide application
across so many different industries. But, we didn’t know how
big the market was nor how much of
it we could secure. This meant we weren’t sure what volume to
tool up for, what kind or size of
equipment to purchase, or how to go about the marketing job.
We were tempted to start small and

grow as our share of market grew, but this could be costly too
and could allow too much time for
competitive response. Our Canadian engineer was very helpful
here. He had a lot of confidence in
our product and had seen it marketed in both Canada and the
United States. At his suggestion we
tooled up for a sales estimate of $30 million — which was
pretty daring. In addition, we hired
eight field sales representatives to back up the nation-wide
distributor and soon afterwards hired
several Canadian-based sales representatives to cover major
markets. We found that our key
Canadian competitor was pricing rather high and had not
cultivated very friendly customer
relations. We were surprised how quickly we were able to
secure significant penetration into the
Canadian market. It just wasn’t being well-serviced.
During 2012, the company actually spent a total of $2.5 million
on equipment for flexible coupling
production. In addition, a fixed commitment of $1.5 million a
year in marketing expenditures on flexible
couplings arose from the hiring of sales representatives. A small
amount of trade advertising was included
in this sum. The total commitment represented a significant part
of the company’s resources and threatened
serious damage to the company’s financial position if the sales
failed to materialize.
“It was quite a gamble at the time,” Alex added. “By the end of
2012, it was clear that the gamble was
going to pay off.”
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Sales by Market Sector ($ millions)
OEM Parts
Sales
Flexible Couplings
Sales
Total

Sales
After Tax
Profits
2008 60 Nil 60 1.75
2009 48 Nil 48 (2.50)
2010 38 Nil 38 (3.50)
2011 45 Nil 45 0.25
2012 58 10 (six months) 68 5.80
Cameron’s approach to competition in flexible couplings was to
stress product quality, service, and speed
of delivery, but not price. Certain sizes of couplings were
priced slightly below the competition but others
were not. In the words of one Cameron sales representative:
Our job is really a technical function. Certainly, we help
predispose the customer to buy and we’ll
even take orders, but we put them through our distributors.
Flexible couplings can be used in almost
all areas of secondary industry, by both large and small firms.
This is why we need a large
distributor with wide reach in the market. What we do is give
our product the kind of emphasis a
distributor can’t give. We develop relationships with key buyers
in most major industries, and we
work with them to keep abreast of new potential uses for our
product or of changes in size
requirements or other performance characteristics. Then we feed
this kind of information back to
our design group. We meet with the design group quite often to
find out what new types of
couplings are being developed and what the intended uses are,

etc. Sometimes they help us solve a
customer’s problem. Of course, these ‘solutions’ are usually
built around the use of one of our
products.
FINANCING PLANT CAPACITY
When Alex first set his diversification plans in motion in 2010,
the company’s plant in suburban Detroit
was operating at 50 per cent capacity. However, by early 2013,
sales of auto parts had recovered almost to
pre-crisis levels (before 2007), and the flexible coupling line
was squeezed for space. Andy McIntyre put
the problem this way:
I don’t see how we can get sales of more than $85 million out of
this plant without going to a
permanent two-shift system, which Alex doesn’t want to do.
With two full shifts we could
probably reach sales of $125 million. The problem is that both
our product lines are growing very
quickly. Auto parts could easily hit $80 million on their own
this year, and flexible couplings!
Well, who would have thought we’d sell $10 million in the first
six months? Our salespeople are
looking for $35 million to $40 million during 2013. It’s wild!
We just have to have more capacity.
There are two problems pressing us to consider putting flexible
couplings under a different roof.
The first is internal: we are making more and more types and
sizes, and sales are growing to such a
point that we may be able to produce more efficiently in a

separate facility. The second is external:
The Big Three like to tour our plant regularly and tell us how to
make auto parts cheaper. Having
these flexible couplings all over the place seems to upset them
because they have trouble
determining how much of our costs belong to Auto Parts. If it
were left to me, I’d just let them be
upset, but Alex feels differently. He’s afraid of losing orders.
Sometimes I wonder if he’s right.
Maybe we should lose a few orders to the Big Three and fill up
the plant with our own product
instead of expanding. Do
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Page 5 9B16M043

Flexible couplings were produced on a batch basis, and there
were considerable savings involved as batches
got larger. Thus as sales grew, and inventory requirements made
large batches possible, unit production
costs decreased, sometimes substantially. McIntyre estimated
that unit production costs would decline by
some 20 per cent as annual sales climbed from $20 million to
$100 million and by a further 10 per cent at
$250 million. Scale economies beyond sales of $250 million
were not expected to be significant.
John Ellis, the company’s financial manager, expressed his own
reservations about new plant expansion
from a cash flow perspective:
We really don’t have the balance sheet (see Exhibit 2) ready for
major plant expansion yet. I think
we should grow more slowly and safely for two more years and
pay off our debts. If we could hold
sales at $75 million for 2013 and $85 million for 2014, we
would be able to put ourselves in a
much stronger financial position. The problem is that people
only look at the profits. They don’t
realize that every dollar of flexible coupling sales requires an
investment in inventory and
receivables of about 30 cents. It’s not like selling to the Big
Three. You have to manufacture to
inventory and then wait for payment from a variety of sources.
As it is, Alex wants to invest $10 million in a new plant and
equipment right away to allow
flexible coupling sales to grow as fast as the market will allow.
We have the space on our existing

site to add a separate plant for flexible couplings. It’s the
money I worry about.
FOREIGN MARKETS
As the company’s market position in North America began to
improve, Alex began to wonder about
foreign markets. The company had always been a major exporter
to Canada, but it had never had to market
there. The Big Three placed their orders often a year or two in
advance, and Cameron just supplied them.
As Alex put it:
It was different with the flexible coupling. We had to find our
own way into the market. We did,
however, start getting orders from Europe and South America,
at first from the subsidiaries of our
U.S. customers and then from a few other firms as word got
around. We got $40,000 in orders
during 2012 and the same amount during the first four months
of 2013. This was a time when we
were frantically busy and hopelessly understaffed in the
management area, so all we did was fill
the orders on a FOB (free-on-board), Detroit basis. The
customers had to pay import duties of
approximately 3 per cent into most European countries and a
value added tax (VAT) ranging
between 15 per cent (Luxembourg) and 27 per cent (Hungary),
with an average of about 21.5 per
cent, on top of the freight and insurance, and still orders came
in. The VAT for the United
Kingdom was 20 per cent and France 19.6 per cent.

Seeing the growing potential in Europe, supported by clear
signs of recovery from the financial crisis and
the European debt crisis, Alex promptly took a European Patent
from the European Patent Office in the
United Kingdom. The cost of the whole process was under
$10,000.
A LICENSING OPPORTUNITY
In the spring of 2013, Alex made a vacation trip to Scotland and
decided while he was there to drop in on
one of the company’s new foreign customers, McTaggart
Supplies Ltd. Cameron Auto Parts had received
unsolicited orders from overseas amounting to $40,000 in the
first four months of 2013, and over 10 per Do
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9B16M043
cent of these had come from McTaggart. Alex was pleasantly
surprised at the reception given to him by
Sandy McTaggart, the 60-year-old head of the company.
Sandy: Come in! Talk of the devil. We were just saying what a
shame it is you don’t make those flexible
couplings in this part of the world. There’s a very good market
for them. Why my men can even
sell them to the English!
Alex: Well, we’re delighted to supply your needs. I think we’ve
always shipped your orders promptly, and
I don’t see why we can’t continue . . .
Sandy: That’s not the point! Those orders are already sold
before we place them. The point is we can’t
really build the market here on the basis of shipments from
America. There’s a 3 per cent tariff
coming in, freight and insurance cost us another 10 per cent on
top of your price, then there’s the
matter of currency values. I get my orders in pounds (£)2 but I
have to pay you in dollars. And on
top of all that, I can never be sure how long exactly the goods
will take to get here, especially
with the ever-looming risk of strikes. I still remember the 2009
postal strikes. Listen, why don’t
you license us to produce flexible couplings here?

After a lengthy bargaining session, during which Alex secured
the information (see Exhibit 3), he came
round to the view that a license agreement with McTaggart
might be a good way of achieving swift
penetration of the U.K. market via McTaggart’s sales force.
McTaggart’s production skills were not as up-
to-date as Cameron’s, but his plant showed evidence of a lot of
original ideas to keep manufacturing costs
down. Furthermore, the firm seemed committed enough to
invest in some new equipment and to put a
major effort into developing the U.K. market. At this point the
two executives began to discuss specific
terms of the license arrangements:
Alex: Let’s talk about price. I think a figure around 3 per cent
of your sales of flexible couplings would
be about right.
Sandy: That’s a bit high for an industrial license of this kind. I
think one and a half per cent is more
normal.
Alex: That may be, but we’re going to be providing more than
just blueprints. We’ll have to help you
choose equipment and train your operators as well.
Sandy: Aye, so you will. But we’ll pay you for that separately.
It’s going to cost us £500,000 in special
equipment as it is, plus, let’s say, a $100,000 fee to you to help
set things up. Now you have to
give us a chance to price competitively in the market, or neither
of us will benefit. With a royalty
of one and a half per cent, I reckon we could reach sales of
£500,000 in our first year and £1
million in our second.

Alex: The equipment will let you produce up to £4 million of
annual output. Surely you can sell more
than a million. We’re getting unsolicited orders without even
trying.
Sandy: With the right kind of incentive, we might do a lot
better. Why don’t we agree to a royalty of two
and a half per cent on the first million in sales and one and a
half per cent after that. Now mind
you, we’re to become exclusive agents for the U.K. market.
We’ll supply your present customers
from our own plant.
Alex: But just in the United Kingdom! Now 2 per cent is as low
as I’m prepared to go. You make those
figures 3 per cent and 2 per cent and you have a deal. But it has
to include a free technology flow-
2 £1 was equivalent to US$ 1.54 in 2013 (average in the period
between January 1, 2013 and April 30, 2013). Do
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Page 7 9B16M043
back clause in the event you make any improvements or
adaptations to our manufacturing process.
Sandy: You drive a hard bargain! But it’s your product, and we
do want it. I’ll have our lawyers draw up
a contract accordingly. What do you say to a five-year deal,
renewable for another five if we are
both happy?
Alex: Sounds good. Let’s do it.
Alex signed the contract the same week and then headed back to
America to break the news. He travelled
with mixed feelings, however. On the one hand, he felt he had
got the better of Sandy McTaggart in the
bargaining, while on the other, he felt he had no objective
yardstick against which to evaluate the royalty
rate he had agreed on. This was pretty much the way he
presented the situation to his executive group
when he got home.
Alex: . . . so I think it’s a good contract, and I have a cheque
here for $100,000 to cover our costs

in helping McTaggart get set up.
John: We can certainly use the cash right now. And there
doesn’t seem to be any risk (finance)
involved. I like the idea, Alex.
Andy
(production):
Well, I don’t. And Chuck (head of the Cameron design team)
won’t either when
(production) he hears about it. I think you’ve sold out the whole
U.K. market for a pittance.
I thought you wanted to capture foreign markets directly.
Alex: But Andy, we just don’t have the resources to capture
foreign markets ourselves. We might
as well get what we can through licensing, now that we’ve
patented our process.
Andy: Well, maybe. But I don’t like it. It’s the thin edge of the
wedge if you ask me. Our know-
how on the production of this product is pretty special, and it’s
getting better all the time. I
hate to hand it over to old McTaggart on a silver platter. I
reckon we’re going to sell over
$20 million in flexible couplings in the United States alone
during 2013.
As Alex walked back into his office after this conversation, he
wondered whether signing the deal might
have been premature.
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Page 8 9B16M043
EXHIBIT 1: INCOME STATEMENTS
(for years ended December 31 ($000s)
2010 2011 2012
Net Sales $38,150 $45,200
$67,875
Cost of goods sold:
Direct materials 6,750 8,050 12,400

Direct labour 12,900 10,550 12,875
Overheads (including depreciation) 16,450 19,650 27,600
Total 36,100 38,250 52,875
Gross Profit 2,050 6,950 15,000
Expenses:
Selling and administration (includes design team) 3,150
3,800 6,200
Other (includes interest) 2,400 2,900 3,000
Total 5,500 6,700 9,200
Net Profit before Tax (3,500) 250 5,800
Income Tax (500) - 200
Net Profit after Tax $ (3,000) $ 250 $ 5,600
Note: Alex expected total sales to reach $85 million in 2013
with profits before tax of $10 million. Flexible
couplings were expected to contribute sales of $30 million and
profits of $5 million on assets of $12 million.
Source: Company files.
EXHIBIT 2: BALANCE SHEETS
(for years ended December 31 ($000s)
2010 2011 2012
Assets
Cash $ 615 $ 430 $ 400
Accounts Receivable 5,850 6,850 10,400
Inventories 4,995 4,920 7,500

Total Current Assets 11,460 12,200 18,300
Property, Plant and Equipment (net) 10,790 11,800
13,000
Total Assets 22,250 24,000 31,300
Liabilities
Accounts Payable 4,850 5,900 9,500
Bank Loan 11,500 12,000 10,000
Accrued Items (including taxes) 450 400 500
Total Current Liabilities 16,800 18,300 20,000
Common Stock (Held by Cameron family) 500 500
500
Retained Earnings 4,950 5,200 10,800
Total Equity 5,450 5,700 11,300
Total Liabilities $22,250 $24,000 $31,300
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Page 9 9B16M043
EXHIBIT 3: DATA ON MCTAGGART SUPPLIES LTD.
2012 Sales £35 million (down from £44 million in 2010).
Total Assets £11 million: Equity £6.5 million
Net profit after tax ± £1.5 million
Control McTaggart Family
Market coverage 15 sales representatives in United Kingdom,
two in Europe, one in
Australia, one in New Zealand, one in India.
Average factory wage rate £9.00 per hour (which is below the
United Kingdom mean of £12.92 due
to the factory being located in a depressed area) (versus $19.54
in
America).
Factory Old and larger than necessary. Some very imaginative

manufacturing
know-how in evidence.
Reputation Excellent credit record, business now 130 years old,
good market
contacts (high calibre sales force).
Other Company sales took a beating during 2010–2011 as one of
the
company’s staple products was badly hurt by a U.S. product of
superior
technology. Company filled out its line by distributing products
obtained
from other manufacturers. Currently about one-half of company
sales are
purchased from others. Company has capacity to increase
production
substantially.
Pricing Index
Cameron’s price to McTaggart 100
(same as net price to distributor in America)
+ import duty 3
+ freight and insurance 10
import’s cost 113
+ distributor’s (McTaggart’s) margin (30%) 34
+ VAT (20 % on cost plus margin) 29
= price charged by McTaggart 176
versus price charged by American distributor in the United
States 120

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GRST 501
Course Paper Thesis, Outline, & Annotated Bibliography
Instructions: By the end of Module/Week 3, develop a thesis
statement, outline, and annotated bibliography for your Course
Paper based on the guidelines in the Module/Week 3
presentation. Submit the thesis statement, outline, and annotated
bibliography in ONE Word document using the template below
(including the cover page).
Assignment Goals: Plan your Course Paper by clearly stating
your main point, structuring your supporting reasons and

evidence, and evaluating your scholarly sources. Doing so will
prepare you to draft your Course Paper, which must be
submitted by the end of Module/Week 5 of GRST 501 to your
GRST instructor and the Online Writing Center. Next, you must
submit a final, improved revision of your Course Paper based on
the feedback from these two sources. You will pass the Course
Paper Revision assignment if your revised draft earns a 3 or
higher in each category of the Course Paper Rubric. Planning
out your paper will make the drafting step easier.
Specific Requirements: Your thesis statement may not refer to
yourself, your paper, or your readers. Simply state the point that
your paper will argue or demonstrate. Your outline must either
follow points outlined by your assignment instructions from
your other course or must follow the sample provided below by
brainstorming ideas or points that include your thesis statement,
two or more supporting main points with at least two pieces of
evidence (statistics, data, or source quotes) for each of those
points, and a conclusion that sums up the main supporting
points and restates your thesis. Your annotated bibliography
must include a citation, a summary, an analysis, and the
relevance of at least four scholarly sources. Please scroll down
and see the sample thesis/outline below.
*Note: You must submit your completed draft to your GRST
instructor and to the Online Writing Center (due Module/Week
5). You must show your GRST instructor that you have received
a full OWC review of your paper (due Module/Week 6). Then,
you must make a final, improved revision of your paper to pass
the course (due Module/Week 7). Your revised draft must earn a
3 or higher in each rubric category to pass the class. You might
be pressed for time, so remember that though feedback from the
OWC normally takes 48–72 hours, during Week 6, feedback
often takes one week. This means that once you successfully
submit your paper for a full review, you will receive it back
within one week. Feedback from your GRST instructor also

takes about a week. Therefore, your completed draft is due at
least by Module/Week 5. To pass, plan to submit your draft
before or during Module/Week 5 of this course.
Submit your thesis/outline/annotated bibliography in ONE Word
document by 11:59 p.m. (ET) on Sunday of Module/Week 3.
SCROLL DOWN for assignment cover page & template.
Title of the issue investigated:
Thesis Statement, Outline, & Annotated Bibliography
Your name here

Thesis Statement: Write your working thesis statement here.
Follow the guidelines in the Module/Week 3 Presentation for
how to write a good thesis statement and what to avoid in doing
so.
Outline: If your assignment instructions from your other course
do not provide ideas for outline points, please use or rearrange
this structure for your outline and add to it or delete as
necessary. Regardless of the outline points you create, every
main point should have at least two supporting points or
evidence (A & B) below it. Consult the presentation in
Module/Week 3 for more outlining guidelines.
I. Introduction
A. Attention-grabbing opening sentences that motivate your
readers to continue
B. Brief background of issue or controversy
C. Thesis statement

II. First Supporting Reason or Argument (backing up your
thesis)
A. Statistic, data, quote or paraphrase from source
B. Statistic, data, quote or paraphrase from source
III. Second Supporting Reason or Argument (backing up your
thesis)
IV. Third Supporting Reason or Argument (backing up your
thesis)
V. Opposing Viewpoints
A. Statistics, data, quotes or paraphrases from sources
B. Acknowledgement of strengths of opposing views
C. Analysis of weaknesses of opposing views
VI. Conclusion
A. Summarize main supporting points
B. Restate thesis in strong and unique way
Annotated Bibliography: As mentioned in the Module/Week 3
presentation, a good annotated bibliography should include the
citations for each source (at least four) you plan to cite in your
paper (all should be credible, scholarly sources), a 1-2 sentence
summary of the source, a 1-2 sentence evaluation of the source
(accuracy, recency, bias, reliability, etc.), and how the source is
relevant to your paper (what point would it help support or
opposing views does it reveal?). See pp. 3-4 of the Online
Writing Center’s annotated bibliography resourceas an example
of how to structure your bibliography, though be sure to use
your discipline’s own citation style. No abstract needed prior to
your annotations.

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