While traveling to Singapore on a vacation, you meet Ms. Jenny Chang, an Asian b
ID: 1115249 • Letter: W
Question
While traveling to Singapore on a vacation, you meet Ms. Jenny Chang, an Asian business executive, in the plane. She is happy to learn that you are the international business development consultant for a multinational company. She becomes interested in your expertise and asks you to work as her company's consultant for a project involving new business development in Pakistan. Her company has just invented a revolutionary new CAD system for designing and weaving wool carpets that can improve the design and manufacturing productivity significantly. Several patents protect the unique design of this technological system. The CEO has asked you to formulate a recommendation for how to expand into Pakistan. Your choices are (i) to export to Pakistan from the manufacturing plant in Singapore, (ii) to license a Pakistani firm to manufacture and market the computer system in Pakistan and elsewhere, and (iii) to set up a wholly owned subsidiary in Pakistan. Select the best of the three choices for Ms. Chang. Support your recommendation by first evaluating the pros and cons of each alternative for Chang's company. This assignment is analytical in nature. You are expected to demonstrate your ability to convert your theoretical understanding of the modes of international business entry into practical applications. Therefore, I would hope that you will relate all of your answers to the situation in the case or the scene presented and not provide generic text book answers. Some factors that must be kept in mind to analyze the situation and make your recommendations look practical to your client. As a consultant, you can make some assumptions about the different aspects, such as: 1. What is the nature of the product: brand new high technology consisting of a computerized CAD system. The CAD system that this company wants to promote in Pakistan consists of two major parts: the hardware which is a sophisticated weaving machine, and the software that designs the carpets and runs the weaving machine. How important is it to protect patents and the technology from being copied illegally? How important is the firm's intellectual property? How do transportation costs affect your decision? 2. Where is it being manufactured now: Singapore. What is the level of manufacturing sophistication in this country when compared with the target country? 3. What is the nature of the target market: What are the relative business barriers in the two countries? Demand? Economic development? Legal system for resolving disputes? Patent protection laws or enforcement of the law? Availability of skilled engineers and workers? Availability of suitable agents or partners?
Explanation / Answer
Answer:
Assumptions
1. The CAD system is a high end technological product. It is also important to hold the patents and do every possible assessment which will reduce the issue of copying the technology.
2. Transportation costs are minimal as Pakistan has been importing products from Singapore on low cost basis. The same distribution system can be reused.
3. Current Manufacture site is Singapore however the throughput needs to be checked.
4.Singapore has well built and better manufacture units compared to Pakistan
5. The socio political situation in Pakistan has taken a hit due to time and again when military rule has taken things under its control.
1)To export to Pakistan from the manufacturing plant in Singapore,
Pros
No extra set up cost on manufacture unit as the plant is well established in Singapore.
Cons
It would have transportation costs to export the system from Singapore to Pakistan.
2)to license a Pakistani firm to manufacture and market the computer system in Pakistan and elsewhere
Pros
Less transpiration cost
Cons
Understand the business dynamics of Pakistan and set up a plant leading to set up cost. Start business with Pakistan org and depend on their advices for decisions.
3)o set up a wholly owned subsidiary in Pakistan.
Pros
A little less cost compared to setting up a manufacture unit in Pakistan & reduces transportation cost too
Cons
Rely on the subsidiaries to function properly and assess their performance.
Ans: I would go with the third option and see if it helps in reducing the overall cost and results in better ROI on the project.
Assumptions
1. The CAD system is a high end technological product. It is also important to hold the patents and do every possible assessment which will reduce the issue of copying the technology.
2. Transportation costs are minimal as Pakistan has been importing products from Singapore on low cost basis. The same distribution system can be reused.
3. Current Manufacture site is Singapore however the throughput needs to be checked.
4.Singapore has well built and better manufacture units compared to Pakistan
5. The socio political situation in Pakistan has taken a hit due to time and again when military rule has taken things under its control.
1)To export to Pakistan from the manufacturing plant in Singapore,
Pros
No extra set up cost on manufacture unit as the plant is well established in Singapore.
Cons
It would have transportation costs to export the system from Singapore to Pakistan.
2)to license a Pakistani firm to manufacture and market the computer system in Pakistan and elsewhere
Pros
Less transpiration cost
Cons
Understand the business dynamics of Pakistan and set up a plant leading to set up cost. Start business with Pakistan org and depend on their advices for decisions.
3)o set up a wholly owned subsidiary in Pakistan.
Pros
A little less cost compared to setting up a manufacture unit in Pakistan & reduces transportation cost too
Cons
Rely on the subsidiaries to function properly and assess their performance.
Ans: I would go with the third option and see if it helps in reducing the overall cost and results in better ROI on the project.
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