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 of this computer. Your CEO has asked you to formulate a recommendation for how to expand into Western Europe. Your options are (a) to export from the United States, (b) to license a European firm to manufacture and market the computer in Europe, or (c) 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

C) Because it saves on shipping costs, and if the European firm got mad we'd be screwed. Wholly owning the subsidiary allows complete control and if it fails we simply pull out. Our patents are protected and free from the potential of sabotage.