A US auto firm which, up to now, has licensed five manufacturing companies in Europe to produce a range of auto components to its specifications, decides to acquires the full ownership of each of these affiliates. It does so in order to promote better rationalisation of its motor vehicle production thereby lowering its production and transaction costs. Without such control there might be resistance from the individual licensees as their goals may not coincide with that of the licensor.
The capital costs and extra common governance costs incurred are among the additional resource costs which may require to be committed.