Question

A small Canadian firm that has developed some valuable new medical products using its unique biotechnology know-how is trying to decide how best to serve the European Union. Its choices are given below. The cost of investment in manufacturing facilities will be a major one for the Canadian firm, but it is not outside its reach. If these are the firm’s only options, which one would you advise it to choose? Why? Provide pros/cons for each option.

a. Manufacture the products at home and let foreign sales agents handle marketing.
b. Manufacture the products at home and set up a wholly owned subsidiary in Europe to handle marketing.
c. Enter into a strategic alliance with a large European pharmaceutical firm. The product would be manufactured in Europe by the 50/50 joint venture and marketed by the European firm.

Answer 1

Part a. Manufacturing the goods at home and let overseas sales managers handle the marketing.

Advantages

1. Can have a full authority in production activities.
2. It is easy to set up a strategy and multiply the manufacturing.
3. Having better regulator over human resources.
4. The foreign sales agents will enhanced the understanding of European marketplaces.
5. It lower the exit costs if product fails.

Disadvantages

1. Having lack of information in European pharmaceutical procedures.
2. The foreign agents may damage the brand name if not prudently handled.
3. Additional costs in delivery of the products.

Part b. Manufacture the products at home and set up a wholly owned subsidiary in Europe to handle marketing.

Advantages

1. Having full control in manufacturing activities.
2. It is easy to set up a strategy and multiply the manufacturing.
3. Having better regulator over human resources.
4. The brand name will not be damaged since the marketing is controlled by the same company

Disadvantages

1. Utilization of extra resources to be consumed on marketing
2. Having lack of information in European pharmaceutical procedures.
3. Additional costs in delivery of the products
4. Having lack of information in European pharmaceutical procedures

Part c. Enter into a strategic alliance with a large European pharmaceutical firm. The product would be manufactured in Europe by the 50/50 joint venture and marketed by the European firm

Advantages

1. The risk is distributed among the firms.
2. No additional delivery cost included.
3. Knowledge of European organization will be valuable in
4. understanding guidelines and advertising in European markets.

Disadvantages

1. Having less control in manufacturing activities
2. Shared of the profit among the partners.
3. Moderate level of exit cost is included.
4. Additional firm may harm the brand image.