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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 5050 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 modes The above options are the three entry modes below list out advantages and disadvantages of three entry modes Advantages Disadvantages Exporting 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
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