(This case study is derived from one written by Frank C. Burinsky and Michael A. McGinnis, Shippensburg University. The company name, product and component names, overseas locations for selling the products, and shipping costs have been changed to protect the actual company name and reflect changes in trade agreements and shipping practices) Jaguar Electronics, Inc. is a specialized electronics firm located in Charleston, South Carolina in the United States. The company was founded in 1965 and has enjoyed success and modest growth as a supplier of components to large manufacturers of specialty electronic-mechanical devices. Recently the company's management has decided to begin manufacturing and marketing a product called the 'Airflow'. The Airflow is manufactured by assembling two component parts: (1) mechanical assemblies (MA), which are purchased from a company in Belgium; and (2) electronic assem blies (EC) manufactured by Jaguar Electronics at its Charleston facility. Jaguar Electronics has manufactured and supplied the electronic assemblies to several national manufac turers of products similar to the Airflow for several years. Most of the consumer demand for the final products comes from areas enjoying a relatively warm climate throughout the year. Accordingly, the many facturers of those products have sold their goods with great success throughout the southern and southwest ern United States. The population and economic growth in these areas have contributed greatly to the success of this type of consumer product. The man largely responsible for Jaguar Electronics' proposed moveinto manufacturing and marketing Air flow is the company president, Mr Smith. He has spent his entire career in the electronics industry and was with Jaguar Electronics for several years before becoming its president. His reign as president has been very successful. However, he has viewed the impressive sales growth of EC units with mixed feelings. As a supplier of EC components, Jaguar Electronics has prospered from the growth in sales of products such as Airflow. However, Smith has always felt that his company was not reaping all of the benefits available in sales to the consumers. At the same time he felt that Jaguar Elec tronics did not have the resources to compete success fully with the large firms that dominate the US market. Smith employed a consultant to determine where increasing consumer demand for Airflow-type prod ucts would approach a level sufficiently high to justify entering these smaller markets. After reviewing the con sultant's recommendations, Smith decided that Jaguar Electronics should target two of the higher-income countries in Latin America, Country 1 and Country 2. These nations, because of the income levels in particu lar. cities, had the potential to be lucrative markets for Airflow. The consultant estimated the potential demand for Airflow to be 20,000 units per year in Country 1, and 40,000 units per year in Country 2. The consultant had also recommended four options available to Jaguar Electronics as to how the widgets could be produced and distributed to these markets: 1. Assemble the widgets in Charleston and distribute them from that point. 2. Assemble them in Country 1, and distribute them from that point. 3. Assemble them in a free trade zone in Country 2. 4. Assemble them in a free trade zone in another coun try, Country 3, which had no significant potential domestic market for Airflow, but a lower labor cost