Question
TAG specializes in manufacturing some basic parts for Laptops utility that are produced and sold in Jordan. Its main advantage in Jordan is that its
TAG specializes in manufacturing some basic parts for Laptops utility that are produced and sold in Jordan. Its main advantage in Jordan is that its production is efficient, and less costly than that of some other manufacturers. It has a substantial market share in Jordan. Its manufacturing process is labor-intensive. It hired a consultant to determine whether it should set up a subsidiary in Egypt, where the parts would be produced. The consultant suggested that Forth Worth expand for the following reasons. Offer your opinion on whether the consultants reasons are logical: a. Theory of Competitive Advantage: There are not many Laptops sold in Egypt; hence, TAG company would not face much competition there. b. Imperfect Markets Theory: TAG cannot easily transfer workers to Egypt, but it can establish a subsidiary there in order to penetrate a new market. c. Product Cycle Theory: TAG has been successful in Jordan it has limited growth opportunities because it already controls much of Jordanian market for the parts it produces. Thus, the natural next step is to conduct the same business in a foreign country. d. Exchange Rate Risk. The exchange rate of the Egyptian Pound has weakened recently, so this would allow TAG to build a plant at a very low cost (by exchanging JD for the cheap Pounds to build the plant).
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