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Minicase 15.1 – Method of Entry –The McGrew Company

The McGrew Company, a manufacturer of peanut com- bines, 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 indi- cate her preference.

Answer the following questions. This paper should be 3 pages. It should be single spaced, 12 size font, Times New Roman font style.

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?