For the past 7 years, Zip-6 has been produced and sold in South Korea through a licensing agreement with the Korean beverage firm Lotse Tsangsung through its Chang Dow Trading Co. subsidiary. Mr. Jung Park, Lotse Tsangsung CEO recently visited Ravi and Keith in Atlanta and revealed that his firm was about to acquire its leading rival in the Korean market and as a result, wants to sell its Chang Dow unit. Mr. Park has approached Ravi and Keith with two proposals. First, Lotse Tsangsung is willing to sell Zip-6 its Chang Dow subsidiary. This would represent an acquisition for Zip-6 in the Korean market. Second, if the two firms cannot agree on terms for a purchase of Chang Dow, Lotse Tsangsung is willing to sell its licensing agreement back to Zip-6, which will effectively allow Zip-6 to formulate a new strategy for Zip-6 in Korea.
Based on your reading of Where to Produce in the Hill text on pp. 415-422 (reading is listed below if needed) your Assignment is to address the following in your informative essay:
Checklist:
1. Compare the advantages and disadvantages of acquiring the existing firm and continuing production in Korea through acquisition for Zip-6.
2. Compare the advantages and disadvantages of re-purchasing the licensing agreement and either establishing a Zip-6 subsidiary through Greenfield venture and producing Zip-6 in Korea, exporting the product to Korea, franchising to another firm, or re-licensing to another firm.
3. State your choice of options to pursue and your reasons for this choice.