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Entry into Local Manufacturing for McGrew Company

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The McGrew Company, a manufacturer of peanut combines, has for years sold a substantial number of machines in Brazil. However, a Brazilian firm has begun to manufacture them, and McGrew's local distributor has told Jim Allen, the president, that if McGrew expects to maintain its share of the market, it will also have to manufacture locally. Allen is in a quandary. The market is too good to lose, but McGrew has had no experience with foreign manufacturing operations. Because Brazilian sales and repairs have been handled by the distributor, no one in McGrew has had any firsthand experience in that country.

Allen has made some rough calculations that indicate the firm can make money by manufacturing in Brazil, but the firm's lack of marketing expertise in the country troubles him. He calls in Joan Beal, the export manager, and asks her to prepare a list of all the options open to McGrew, with their advantages and disadvantages. Allen also asks Beal to indicate her preference.

1. Assume you are Joan Beal. Prepare a list of all the options and give the advantages and disadvantages of each.

2. Which of the options would you recommend?

3. Assuming that the president's calculations are correct and that a factory to produce locally the number of machines that McGrew now exports to Brazil will offer a satisfactory return on investment, what special information about Brazil will you want to gather?

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Solution Summary

The options for the entry into Local Manufacturing for the McGrew Company is examined.

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1. Assume you are Joan Beal. Prepare a list of all the options and give the advantages and disadvantages of each.
Answer: Following are the options available:
(i) Don't change do your business as you doing now
(a) Save the cost of setting up manufacturing unit in Brazil, so use the same cost to do aggressive marketing.
(b) The company will be saved from the trouble of choosing management, political risk of setting up subsidiary there and from other compliance ...

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  • MBA, Indian Institute of Finance
  • Bsc, Madras University
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