Luna Pen - Immersion Program: Case Analysis

Immersion Program: Case Analysis (Winter 2011)

Luna Pen

Key issues

The most important issues are that the Luna pen contributes the major sales of Global that reached to one fourth of total sales and Global is ready for a major expansion. It showed that there is already a good base of customers in Asia for the Luna pen, and it would be detrimental if Global were to lose the product. Whereas Luna pen produced a lot of profit to Global, DGG doesn’t want to be in the fountain pen business which weakens their lawsuit. Also, the company doesn’t have any real damages. The lawsuit would be expensive, there is not enough corporate support to pursue a lawsuit, and there is no guarantee that they will not be responsible for the costs of both parties in the lawsuit.

A cooperative strategy is the only way DGG and Global can productively do business together. Global cannot do business in the American or Europe without an agreement with DGG. DGG cannot realize a benefit from Luna without an agreement with Global. The negotiation should be agreed on collecting past revenue, collecting future revenue, and selling or licensing the Luna name. An agreement for a percentage of profit will directly influence the compensation DGG receives. However, Mr. Feng will probably not be interested in a relationship unless a mutually beneficial agreement can be arranged.

Alternative Strategies

There’s a conflict situation showed here, for Erika, she doesn’t have much time to play in the area that haven’t made profits to the company anymore. If DGG goes for negotiation, she has to put much time and effort in the process. She feels that there are more important things to be working on. But Chinese relationships take time to grow, and a relationship is almost always a prerequisite for a strong agreement. Erika must decide what would be best for the company; She has three choices:

1. Take a lawsuit for violating DGG’s trademark

A lawsuit would not gain any huge benefit for DGG except possible royalty damages. Also, a lawsuit is a risky venture because it might not be considered valid because of the abandonment of the Luna name and fountain pen industry. A big disadvantage of this agreement might be the tarnished image of DGG in Asia. Chinese individuals do not like confrontation or to lose face. If DGG proceeds with a lawsuit, it could cause other Chinese businesses to avoid doing business with DGG in the future for fear of a legal dispute. However, this option provides the fastest outcome.

Pros Cons

- Gain royalty on Luna’s brand - High risk of taking lawsuit