Unable to sustain business by focusing on its traditional core products, such as wiper blades, fan belts and air filters, Cameron Auto Parts realized that it needed to diversify its product line and capture market share with new product development and sales strategies. This was highly difficult due to external market conditions, which were unfavorable and in the midst of a recession, and the high costs of research and development. Coupled with ongoing sales losses, Cameron had many risks in trying to develop new products to capture new market attention.
In 2003, after recovering modestly from two years of losses, Cameron suddenly witnessed an explosive growth in the costs associated with selling and administration. This was due to the costs of developing new sales strategies and sales team, along with higher salary budgets for design concepts for diverse new products. The high costs of research and development put Cameron in a difficult cash position where they were unable to reach new markets because of cost issues.
However, after finding success, finally, in keeping costs of new product development low and recruiting the talent needed to build a new product line, sales began to increase. Cameron Auto Parts began to consider different licensing agreements with foreign suppliers and manufacturers in an effort to get their product to international markets. However, there are costs associated with these agreements and Cameron wondered whether these royalty costs would actually be worth the investment. Deciding to take a chance, Cameron worked out a licensing agreement with a foreign facility to take on the role of selling and producing licensed products.
During this time, sales of the new product began to take off, bringing new profit opportunities, however the business did not have the operational capacity to support