Heartsong LLC. Heartsong LLC is a designer and manufacturer of replacement heart valves based in Peoria, Illinois. While a relatively small company in the medical devices field, it has established a worldwide reputation as the provider of choice of high-quality, leading-edge artificial heart valves. Most of its products are sold to large regional hospital systems and research hospitals around the world, though primarily to customers in the U.S. and Europe. Specialty heart centers are another emerging, but fast-growing market for its valves. Heartsong has recently embarked on an expansion strategy that requires it to increase its volume, which in turn will demand more component parts than it can source domestically - both from an economic and volume standpoint. The firm has determined that such growth is only viable if it produces these parts itself overseas for a lower cost, or outsources the production entirely to a joint venture it establishes with a local manufacturer, which could both produce the parts more cheaply and in higher volumes. It is considering starting up an owned production facility in Luxembourg, or seeking a joint venture with a precision manufacturer in China.

1. What opportunities and threats might Heartsong be exposing itself to via the Luxembourg expansion proposal?

2. What opportunities and threats might Heartsong be exposing itself to via the China expansion proposal?

3. Which option would you recommend and why?