Question 9:

Read the following mini-case and answer the questions listed below: Jim Logans business, the Sports Exports Company, continues to grow. His primary product is the footballs he produces and exports to a distributor in the United Kingdom. However, his recent joint venture with a British firm has also been successful. Under this arrangement, a British firm produces other sporting goods for Logans firm; these goods are then delivered to that distributor. Logan intentionally started his international business by exporting because it was easier and cheaper to export than to establish a place of business in the United Kingdom. However, he is considering establishing a firm in the United Kingdom to produce the footballs there instead of in his garage (in the United States). This firm would also produce the other sporting goods that he now sells, so he would no longer have to rely on another British firm (through the joint venture) to produce those goods.

1. Given the information provided here, what are the advantages to Logan of establishing the firm in the United Kingdom?

2. Given the information provided here, what are the disadvantages to Logan of establishing the firm in the United Kingdom?