Week 3 Application

Week 3 Application - could outweigh the disadvantages...

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Week 3 Application We are given three options to chose from when expanding the Computer Company to Europe. The first option is Exporting. “Most manufacturing firms begin their global expansion as exporters and only later switch to another mode for servicing a foreign market” (Hill, 2010). This is the most common out of the choices, and has a couple of advantages. “Exporting avoids the substantial cost of establishing manufacturing operations in the host country, and the ability to realize location and experience curve economies” (Hill, 2010). The disadvantages are high transportation cost and trade barriers. The second choice is Iicensing a European firm. Advantages are low development cost and risk. This is the only advantage that licensing offers. The disadvantages are “lack of control over the technology, inability to realize location and experience curve economies, and the inability to engage in global strategic coordination” (Hill, 2010).The advantage of low development cost
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Unformatted text preview: could outweigh the disadvantages associated with Licensing. The best choice is the one with the highest risk. A wholly owned subsidiary is when a firm owns 100 percent of the stock. Establishing a wholly owned subsidiary can happen in two ways. One is the firm sets up a new operation in another country, and the other is a firm purchasing an already established company in the foreign country. This disadvantage of this option is the high risk and high cost. Like in most situations the advantages could outweigh the disadvantages. In this situation, I believe the advantages do. The advantages are the protection of technology, the ability to engage in global strategic coordination, and the ability to realize location and experience economies (Hill, 2010). References: Hill, C. W. (2010). International Business. Competing the global marketplace (Laureate Education Inc Custome edition ed.). New York: McGraw - Hill....
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