Question

You are the international manager of a US business that has just invented 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 of this computer. Your CEO has asked you to formulate a recommendation for how to expand into China. Evaluate the pros and cons of each alternative and suggest a course of action to your CEO. Please go in depth on the Pros/Cons.

Your options are:

                      

a. to export from the US

                                

b. to develop a Turn-key project for a Chinese firm to manufacture and market the computer in Asia

                                            

c. to acquire an existing Chinese PC manufacturer’s factory and produce it there

                              

d. to do a greenfield investment to China

                        

Your Suggestion – Why?(Please go in depth)

Answer 1

You have to understand the fact that exporting from United States is a cheap option but the fact is that there can be in position of trade and tariff barriers by the local government there as a result of which you have to sell at high price only.

That is the reason why it is not preferred for export

Greenfield investment in China can also help but the disadvantage of this is that there would be very high cost that takes place because you have to develop your company from scratch and also the advantage is however there which is there is no trade or tariff protections from the local government.

Turnkey project can also be a better option but what happens here is that you transfer your technology which might not be a better or preferred alternative because you are transferring your source of competitive advantage

In this regard the above options are not suitable and therefore (a,b,d) are not advisable.

brownfield investment is probably considered as the best one here because the cost is not very high as Greenfield investment because your taking up the already existing facility and apart from that you don't have the restrictions of tariffs and you don't need to transfer your technology and with your existing technology and the company there you can expand your business and customer base their and that is the reason why

(c) is the answer to this question