Assignment task:
You are the CEO of AlphaSports, a large retailer of workout and "athleisure" clothing. Athletic gear is increasingly popular among millennial consumers. You currently carry numerous brands, some of which are exclusively available at AlphaSports. Retail margins are typically higher than wholesale margins. You have recently learned about a new apparel manufacturer named Garnet Gear, which uses a new synthetic fabric. This new fabric is much better at wicking sweat without retaining its unpleasant smell. Garnet Gear has indicated that it plans to license this technology to other apparel manufacturers. Two of your executives are advocating that AlphaSports should acquire Garnet Gear. Both agree that the acquisition would be a good idea, but they offer different justifications for this position. The arguments given by the two executives are given below. Question: For each argument, state whether or not you believe it is a compelling reason to acquire Garnet Gear. If so, why? If not, why not? If uncertain, what information would you need to determine whether it was compelling or not? (This question requires an answer of 2-4 sentences for each of the two sub-questions below.)
a. Executive A: Garnet Gear's technology would let us substantially increase the prices we can charge our customers. However, there are no close substitutes to this technology, and so I am concerned that Garnet Gear would be able to charge us substantial licensing fees. We should buy Garnet Gear to reduce the cost we incur to use this technology.
b. Executive B: Garnet Gear's technology is a true breakthrough. Customers are almost certain to be willing to pay a premium for it, and we are unlikely to see similar technologies in the near future. As a result, several of our competitors are also investigating Garnet Gear's technology. Therefore, we should acquire Garnet Gear to ensure that we have access to this technology and our rivals do not.