Question

You are the Director of Global Compliance for a U.S. company that just created a revolutionary new portable personal computer (PPC) that is half the size of a laptop, performs the same functions as existing laptop computers but costs only half as much to manufacture. Several patents were filed and approved protect the unique design of this computer. Your CEO asked you to formulate a recommendation for how to expand into South America. Evaluate the pros and cons if you were to license a South American firm to manufacture and market the computer in South America

Answer 1

For expansion of a company in South America, licensing with South American firm would be the most appropriate way by doing the joint ventures or open the franchises. This type of approach would reduce the overall cost involved in operation of the company.
Entering in South America would require basic understanding of the environment as well as detailed understanding of the market segmentation which would help the company to distribute its product in the specific channel. By entering through joint venturing, market understanding can be very widely increased.

Some pros of licensing South American company for manufacturing are as follows.

• It would reduce the manufacturing cost as the firm is located in South America.
• Better market understanding would be present as South American company would have correct understanding of the market situations.
• Profits can be increased as licensing would not require any kind of manufacturing setup.

Some cons of licensing in South America are as follows.

• It would limit the overall impact of the company over the licence firm as that would be very less possibility of inspection.
• Different policies would make it difficult to marriage between two regions.
• Logistics regarding different materials which have to be delivered from one place to South America would also be a problem.s
• Different patent rules and increased competitors are also a great problem for the company.