You are the CEO of a firm that has developed a new medical product and is planni

Question

You are the CEO of a firm that has developed a new medical product and is planning to sell it in Europe. Your company has the ability to invest in its own manufacturing facilities, but it will have to incur a major cost to do so. Which one of the following is your best option? Why? I want you to explain your answer using the concepts you learnt in the class. I am not looking for your personal "gut-feel" opinion. (a) manufacture the product yourself in the U.S. and use foreign sales agents to do the marketing. (b) manufacture the product yourself in the U.S. and set up a wholly owned subsidiary to do the marketing. (c) set up a 50-50 joint venture with a European firm, manufacture the product through the venture, and have your European partner do the marketing.

Explanation / Answer

As the firm has ability to invest in manufacturing unit, it is better to manufacture the product in US and set up a wholly owned subsidiary to do the marketing in Europe.

Reasons

Once the product has become successful, the product can be introduced in other developed economies in future. This advantage can be completely leveraged only when the company has the manufacturing unit in home country, where the scientists and analysts are readily available.

As the product is conceptualized, developed and manufactured by the firm itself, it is better to establish a fully owned subsidiary in all the product expansion countries, to leverage the advantages of product sales revenue. The marketing agents or localities can be absorbed as franchisee to the wholly owned subsidiary after indepth interviews and concept clarifications.

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