Aritronix Corporation has been making custom designed electronic components for more than last 40 years. The company is headquartered in Cincinnati (OH), and this location has Administrative functions, Sales and Marketing function, Engineering function and manufacturing facility. The company also has a large manufacturing base in Mexico, right across the border from Arizona. Samuel Johnson (Sam), is the current president of organization. He has navigated this company through many tough situations in last 20 years, when he became the president of this company.

Today, Sam is facing a unique problem. He was informed by one of the key customer, Medequip, that they recently acquired a company in China. This customer is a global leader in medical equipment market, and Aritronix makes power transformers for this customer. Medequip intends to consolidate and move all of their operations in North America to their newly acquired entity in China. Medequip has asked Aritronix to establish an operation in next 12-18 months in China to be able to continue their supplies in China. Sam thinks that this is a beginning of a new trend given the current macroeconomic conditions, and this is the right time to expand footprint in China.

As Sam is thinking about his options, there are different paths he can pursue to accomplish this task.

1. Acquire a local company in China this would involve identifying potential targets in China, assessing their capabilities and operations, conduct financial and operational due diligence and finally acquire a company
2. Establish a new manufacturing facility this would be a completely greenfield facility built from scratch in China
3. Explore and design an efficient supply chain to supply in China from his current manufacturing facility in Mexico
4. Identify a joint venture partner in China to work with and supply through that JV to existing customers in China
5. Strategic supplier agreement with a local manufacturer in China to do local production in Aritronix supervision
6. Any other option buy a brown field facility through an asset buy of a global operation, OR look to acquire a global company with established operation in China

What would be your #1 and #2 recommendation to Sam, and what advantages (your reasons) do you see with these options? What is the biggest risk that you foresee in your recommendation and how would you assess/manage/mitigate that risk?