The McGrew Company
Mini case 2.1
LeTourneau University School of Business
Dr. Juan Castro
January 14, 2003
McGrew Company has owned a secure share of the market for peanut combines in Brazil while importing all of their products. McGrew Company must have done research and concluded that it was to their advantage to import all of these products rather than producing them locally. Many factors can influence the cost of selling these products in Brazil. One deciding factor is the difference in cost of making the peanut combines in Brazil as opposed to making them abroad and the additional cost of transporting and various import taxes that would apply. Other factors, such as the stability of the economy, environmental factors, or political factors could also influence the risk of producing these products. We assume that McGrew performed significant research before organizing their business and evaluated these factors, concluding that producing these products abroad and importing them into Brazil was the most efficient way of running their business. However, once the local competition arose, these factors evidently changed, because it was evaluated that McGrew should produce the combines locally. Whether some of the economics or political factors changed or whether having the local support of customers would be influenced if they did not produce the combines locally is unknown to us. The local distributor in Brazil recommended to McGrew that they move their production operations to Brazil, and we were asked to evaluate the potential decision and advise them.
The McGrew Company, a manufacturer of peanut combines has for years sold a substantial number of machines in Brazil. However, a Brazilian firm has begun to manufacture them, and McGrew’s local distributor has told Jim Allen, the president, that is McGrew expects to...