International Business Of Abc Pharmaceutical Firm.

2275 words - 9 pages

1. Introduction.ABC pharmaceutical firm is a small Asian firm in China; the firm has its own factory which 200 workers factory. The company currently developed some valuable new medical products using its unique biotechnology expertise. The top managers of the firm want to expend the market and decide how to best serve the European Community market. The company has three options:a. Manufacture the product at home and let foreign agents distribute and sell the product in the European market;b. Manufacture the product at home and set up a wholly owned subsidiary in Europe;c. Enter into a strategic alliance, that is a joint-venture with a large European pharmaceutical firm. The product would be manufactured in Europe by the 50/50 joint venture and distributed and marketed by the European firm.Ultimately, they decided the first option, manufacture the product at home and let foreign agents distribute and sell the product in the European market.As a new expansion company, doing exporting is easy and save cost. Furthermore the company manufacture the product at home can protect its unique biotechnology expertise and using European distributor can enter the market rapidly, save time and cost to build up wholly owned subsidiary.2. Advantage and disadvantages of three entry modesThe above options are the three entry modes, below list out advantages and disadvantages of three entry modes:Advantages/ DisadvantagesExporting:* It avoids the often-substantial costs of establishing manufacturing operations in the host country* It may help a firm achieve experience curve and location economies* It may realize substantial scale of economies from its global sales volume* When there are lower-cost locations for manufacturing the product abroad* High transportation costs* Tariff barriers* The local agent also doing business to another company* The local agent may selling the high price* The agent may not do as good a job as the firm would if it managed its marketing himself.Wholly owned subsidiaries* Reducing the risk of losing control over the firm's competitive advantages which is based on technological competence* It gives tight control over operations in different countries.* It is necessary for engaging in global strategic coordination* When cost pressures are intense, it may pay a firm to configure its value chain at each stage is maximized.* Firm must bear the full capital costs and risks of setting up overseas operations* The risks associated with learning to do business in a new culture are less if the firm acquires an established host country enterprise.* Acquisition may diverges the corporate cultureJoint Ventures (JV)* Benefits from a local partner's knowledge of the host country's competitive conditions, culture, language, political systems and business systems.* The firm might gain by sharing these costs and/or risks with a local partner.* Risk giving control of its technology to his partner* The JV does not give a firm tight control over subsidiaries...

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