Umame Inc 1 - INDIVIDUAL Case Analysis Template (1)

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BUSM35436 Business Cases Umame Inc. 1 – Individual Case Analysis Template Student Name: Anju Bhandari Student ID: 991579301 Due Date:12 th Feb, 2024 Class #:61889 By submitting this document, I confirm that it’s contents reflect only given case information and my original work, and that I am aware of and follow Sheridan’s Academic Integrity Policy. Case Synopsis : In this multimedia case, Kathy MacGillvray, President of Halifax, Canada based, pregnancy clothing manufacturer, Umame comes to the realization that currency risk is an issue for her company. Her company produces goods in U.S. dollars. Fluctuations in currency can really impact her firm's bottom line. The challenge is what to do about it. Decision Maker : Kathy MacGillvray, President, Umame Inc. Problem Statement : Umame Inc. contracts with foreign suppliers to produce their fashions using US dollars as a cost base. In the current business model, Umame opens a letter of credit for each supplier contract to be released 90 days following the contract agreement. Umame is typically paid within 90 days of the release of the letter of credit, often resulting in up to a 6 month gap between opening the line of credit and payment by the supplier. Fluctuations in the currency value over this period of time can have a substantial impact on the bottom line. Umame must develop a cost/selling strategy to minimize foreign exchange risk. Decision Criteria/Goals:  Minimize foreign exchange risk.  Protect gross margins while selling to customers globally. A. Business Case Segmentation – 20 Marks A1: Background segmentation - considering the decision maker, problem statement and goals, segment relevant business case facts using specific headings , i.e. Industry, Company, Financial, Marketing, Competitive, etc . Present relevant facts only, no analysis (5 marks): Background Segmentation :  Industry- Clothing  Company- Umame  Financial- Yearly revenue $1 to $25 million  Size - Small  Employees – Fewer than 25 A2: Why is this problem important ? (2 marks) 1 ALL SUBMISSIONS ARE TURNITIN ENABLED

BUSM35436 Business Cases Umame Inc. 1 – Individual Case Analysis Template  The company is facing currency risk. Her company makes products in U.S. dollars and currency fluctuation is significantly affecting to her company’s earrings. A3: How urgent is the problem? (2 marks)  This problem is an urgent since the company is losing its earnings. The company must look for the way to lessen the financial performance of the company’s exposure to shifting in currency values. A4: What timelines must the decision maker’s recommendations work within? (2 marks)  The company should begin seeking alternatives solutions, as it might take 1-3 months to proceed. A5: Who are the key people and/or groups that you need to consider in solving the problem? (2 marks)  Kathy MacGilvray  Competitors  Government  Company  Customers  Asian suppliers  Retailers A6: Rank order any constraints or considerations that may limit the range of solutions i.e. cost, timeline? (2 marks) 1. Fluctuation of currencies 2. Payment period (6 months) 3. Selling and buying cost 4. Changes in demand by clients A7: Identify and rank order the KEY ISSUES that must be addressed to meet the Decision Maker’s goals. (5 marks) 1. Fluctuation of currency 2. Time frame of payment 3. The result of strong price rivalry B. Situation Analysis – 20 Marks Provide appropriate analyses - based on the Business Case Segmentation and Key-Issues identified above. 2 ALL SUBMISSIONS ARE TURNITIN ENABLED

BUSM35436 Business Cases Umame Inc. 1 – Individual Case Analysis Template You must complete the required analysis identified below plus any additional analysis that you feel is important to the case. For each completed analysis, you must provide Conclusions and Implications. (1) SWOT Analysis – Umame Inc.: Analysis : Strength- Umame holds patents in the US, UK, and Canada for a particular type of pregnant woman's clothing. Umame purchases clothing at low prices from Asian factories, and it does so by using US dollars, which are extremely reliable. Contact with to worldwide markets for maternity clothes Weakness: Fluctuation in foreign currencies. Too long time period to get payment. 6 months of opening the letter of line of credit and payment by the supplier impacts the company’s overall revenues. Opportunities: Umame can sell to overseas markets by utilising their unique patent.The company has experience working in US currency, which might help it reach its objective.The business could expand to a larger market because of its strong network and competence. Threat: The industry is now even more competitive as well-known designers are beginning to provide maternity clothing under their own brands. Company's profitability can be negatively impacted by fluctuating foreign exchange market. Conclusions (Rank Order): Umame is a reputable business with sales all over the world. Umame uses Asian manufacturers to keep production costs low. The business has a patent. The significant impact of currency exchange rate difference must be addressed by the company.5. The payment delay must be renegotiated by the customer. Implications (Rank Order): 1. Management has to bargain with their current clients to guarantee that payments are made in less than six months. 2. Umame has to make a new strategy to tackle with the fluctuation of currencies rate. (2) Currency Fluctuation Analysis – Canada, US, China, Bangladesh: Analysis : 3 ALL SUBMISSIONS ARE TURNITIN ENABLED

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BUSM35436 Business Cases Umame Inc. 1 – Individual Case Analysis Template Canada (CAD)- The Bank of Canada has raised interest rates, which makes borrowing money more difficult. This is less significant for the company because the majority of its transactions are conducted in U.S. dollars. US- The profits of a business is directly affected by changes in US dollars. The rise in the US dollar can lower operating costs for businesses and decline in the currency can also lower the profitability. China-The Chinese Yuan is currently trading at its lowest level in the previous ten years. This is a result of several economic sanctions imposed by the United States.Multiple companies have left China to look for alternative production. Increases and decreases in CNY have a direct impact on Umame's profitability since the majority of its products are manufactured in China. Bangladesh- Changes in BDT have an immediate impact on the company's profitability because Umame's manufacturers are based in Bangladesh. A weak BDT can lower production costs and boost a company's revenues. Conclusions (Rank Order): 1. It can be tough for Umame to receive a genuine payment as currencies fluctuate frequently. If Umame keeps doing business internationally, they must deal with fluctuating exchange rates. Implications (Rank Order): 1. If the business chooses to keep trading in different currencies, they will have to create a risk- management strategy to handle fluctuations in the foreign exchange market. (3) Foreign Exchange Risk Strategy Analysis: Analysis : The exchange rate may fluctuate by the time a payment for a fixed amount has been decided upon, which could take up to three months. In the meantime, Umame might not receive the full amount of profit that is because of changes in the exchange rate. Umame can reduce exchange risk by collaborating with banks or foreign exchange providers, leveraging forward contracts to adjust exchange rates at certain dates and future currency values, and investigating methods of turning internal funds. Conclusions (Rank Order): 1. Using single currency might help for Umame Implications (Rank Order): 4 ALL SUBMISSIONS ARE TURNITIN ENABLED

BUSM35436 Business Cases Umame Inc. 1 – Individual Case Analysis Template (4) Additional Analysis : Analysis : Conclusions (Rank Order): 1. Implications (Rank Order): 1. C. Alternative Solutions: Four alternatives are presented in the video case. Based on your case analysis, you may add additional alternatives if desired. 1. Produce and sell using US currency only. 2. Produce and sell using the currency where production is made. 3. Produce and sell using Canadian dollars only. 4. Find factories that are compliant to Umame Inc. customer’s requirements at lower costs. 5. D. Alternative Analysis – 20 Marks Provide at least 3 PROS, 3 CONS, the MOST LIKELY OUTCOME and RATING for each Alternative. (Pros/Cons - 10 marks, Most Likely Outcomes - 8 marks, Rating – 2 marks) Alternative 1: Produce and sell using US currency only. Pros:  The US dollar is more widely accepted and reliable when goods are traded since its value does not change significantly. Cons:  It might be more costly for foreign buyers to import goods valued in US dollars. Most likely outcome:  One of the world's most stable currencies is the US dollar. Umame and customers, transactions made and completed in USD are probably less risky. Also, the USD is widely used currency all over the world. This solution would work extremely well for Umame's objective of reducing foreign exchange risk. On a scale of 1 to 10, how likely is this alternative to meet the stated Case Solution Goals? 9 Alternative 2: Produce and sell using the currency where production is made. Pros: It might less expensive than US dollars and Cons: there might be economic uncertain in some 5 ALL SUBMISSIONS ARE TURNITIN ENABLED

BUSM35436 Business Cases Umame Inc. 1 – Individual Case Analysis Template also there will be no foreign currency exchange rate risk for buyers  countries  Most likely outcome:  It will be easier to run a business since there is forex risk for customers. On a scale of 1 to 10, how likely is this alternative to meet the stated Case Solution Goals? Alternative 3: Produce and sell using Canadian dollars only. Pros:  Cons:  Most likely outcome:  On a scale of 1 to 10, how likely is this alternative to meet the stated Case Solution Goals? Alternative 4: Find factories that are compliant to Umame Inc. customer’s requirements at lower costs. Pros:  The cost of producing umame is cheap. reduced product costs by companies hoping to purchase from Umame. Umame's low product costs will encourage other companies to partner with them. Cons:  May be cheap quality goods.  Umame will have extremely lengthy procedure to find factories, draft contracts, and begin production, which will ultimately block any potential business deals at that time. Most likely outcome:  Higher profit margins from this option will probably come at the expense of losing manufacturers who won't comply with Umame's requirements. Thus, their reach into foreign markets would likely be diminished. On a scale of 1 to 10, how likely is this alternative to meet the stated Case Solution Goals? 3 Alternative 5 (restate alternative): Pros:  Cons:  Most likely outcome:  On a scale of 1 to 10, how likely is this alternative to meet the stated Case Solution Goals? E. Recommendation – 20 Marks 6 ALL SUBMISSIONS ARE TURNITIN ENABLED

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BUSM35436 Business Cases Umame Inc. 1 – Individual Case Analysis Template E1: Clearly state the alternative solution that you (as decision maker) plan to implement to meet the Decision Criteria/Goals. (5 marks)  As a decision maker I would choose the alternative 1 which is produce and sell in US currency only. Umame and customers, transactions made and completed in USD are probably less risky. Also, the USD is widely used currency all over the world. This solution would work extremely well for Umame's objective of reducing foreign exchange risk. E2: Present and defend the rationale for selecting your recommended solution, referring back to your Analysis of Alternatives and Decision Maker Goals - use this section to convince the reader why you chose each recommended solution. (10 marks)  The US dollar is more widely accepted and reliable when goods are traded since its value does not change significantly E3: Present any important assumptions and/or external references you made beyond the information provided within the case . (5 marks)  In the pregnancy apparel market, Umame at the moment commands a stable market share, and demand is growing.  The Umame management have the ability to develop strategies for managing foreign exchange risk, or at a minimum, has the financial means to hire external consultants F. Implementation Plan – 10 Marks Provide a Step by Step Strategic Action Plan. How will the recommended alternative solution(s) be implemented ? 1. Conduct meeting with associated members of the company 2. Research on currencies fluctuation 3. Have a discussion with factories about the cost of production and time frame 4. Find out the target market 5. Make a plan thoroughly to run a sample market G. Overall Quality (logical consistency & readability – to be completed by Professor) - 10 Marks 7 ALL SUBMISSIONS ARE TURNITIN ENABLED

BUSM35436 Business Cases Umame Inc. 1 – Individual Case Analysis Template 100 Marks Total 8 ALL SUBMISSIONS ARE TURNITIN ENABLED

Umame Inc 1 - INDIVIDUAL Case Analysis Template (1)

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