Case Study: TechCorp's International Expansion Dilemma

TechCorp is a leading U$.$S$.-$based technology company that specializes in the design and manufacturing of high$-$quality computer peripherals, such as keyboards, mice, and webcams. The company has been operating in the domestic market for over a decade and has established a strong brand reputation. However, in recent years, TechCorp has been facing declining sales and profitability due to increased competition from lower$-$cost Asian manufacturers and a saturated U$.$S$.$ market.

TechCorp's total assets stand at $$500$ million, and the company has reported a net income of $$25$ million in its most recent fiscal year. However, the company's return on assets has dropped from $12\%$ three years ago to only $8\%$ in the last year. Shareholders have been pressuring the management to improve the company's performance, and the stock price has fallen from a high of $$35$ per share to $$28$ per share over the past two years.

In response to the declining performance in the domestic market, TechCorp's Chief Financial Officer $($CFO$),$ Emily Wilkins, is considering exploring international expansion opportunities. She believes that importing components from overseas and$/$or expanding sales to foreign countries could help the company reduce costs and increase profitability.

Emily's initial focus is on China and the European Union $($EU$)$ markets. China has emerged as a global manufacturing hub, offering low$-$cost components that could potentially reduce TechCorp's production costs. Additionally, the EU market, particularly the Eastern European countries, is seen as an attractive target for TechCorp's products, as the region is experiencing economic growth and a rising middle class with increasing demand for high$-$quality technology products.

As a financial analyst for TechCorp, you have been tasked with analyzing the international expansion opportunities and providing recommendations to Emily Wilkins. Your assessment should focus on the potential barriers and opportunities that international trade may offer, as well as the long$-$term implications for the company.

Questions to Address:

What are the potential advantages and disadvantages for TechCorp in importing components from China?

What are the potential benefits and risks of exporting TechCorp's products to the EU$,$ particularly Eastern European markets?

What long$-$term strategies, such as establishing a subsidiary or pursuing alternative options, should TechCorp consider for its international expansion plans?

Which theories of international business described in this chapter apply to Blades, Inc., in the short run? In the long run?

Based on your analysis, which international expansion option$($s$)$ would you recommend to Emily Wilkins, and why?