Question

You are the international manager of a U.S. business that has just developed a revolutionary new personal computer that can perform the same functions as existing PCs but costs only half as much to manufacture. Several patents protect the unique design for this computer. Your CEO has asked you to formulate a recommendation for how to expand in Western Europe. Your options are: to export from the United States to license a European firm to manufacture and market the computer in Europe to set up a wholly owned subsidiary in Europe Evaluate the pros and cons of each alternative and suggest a course of action to your CEO.

Answer 1

As per the given information, there are several ways to operate their new personal computer from Western Europe. They open their new manufacture hub in Western Europe on subsidiary alliance basis so they can give license to some other local manufacturers OR they can open the manufacturing unit directly. In most of the scenario, the main manufacture units open directly with government support. The government also allow on a subsidiary basis because their country unemployment problem will resolve due to they get a job in the new organization.

This is a good step to reduce the import cost and consumers will get the same U.S price in Western Europe.

Let us see some Pros and Cons

Pros:

1. Consumers will get a computer at the same price as the U.S in Western Europe.

2. No tariffs between the U.S and Western Europe for this PC due to subsidiary manufacturing unit available in Europe.

3. Expand business operations from Europe to local and International markets.

4. Personal computer sales will increase.

5. If sales increase of PC’s so it’s positive impact show on both U.S and Europe countries GDP (Gross Domestic Product).

6. Unemployment will reduce in Europe.

7. There is a lot of chances to come up with an innovative idea from Europe regarding personal computer in the future.

Cons:

1. Local manufacturers will get time to adopt a new technology to produce personal computers.

2. In initial days, they will manufacture fewer personal computers in Europe due to lack of skills.

3. It takes huge time to open a new manufacture hub in Europe instead of to do exports from the U.S. In the meanwhile, the consumer goes with other alternative products.

The open a new manufacture hub in Europe is really a good step to increase the business expansion for local and international markets. Also, the fraternity develops between or among the countries. I strongly suggest to CEO to review the above Pros and Cons and do initiate the subsidiary unit in Europe with all good hope.