Investments
11th Edition
ISBN: 9781259277177
Author: Zvi Bodie Professor, Alex Kane, Alan J. Marcus Professor
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 17, Problem 22PS
Summary Introduction
Case summary:
Mary Smith is an analyst of Bank of Ireland, hired for analyze wineries of French wine industry and present a report for examines competition on wineries market. Mary Smith analyzed past five years record and examine profit margin, market share and cost management system. Mary smith identified four major French wineries available for wine industry and made a table for characteristics of such areas. After examination of records available, Mary smith identified few key points about the bargaining power of buyers of French consumer. Mary Smith presented draft report to Mr. Ron VanDriesen for review. Mr. Ron VanDriesen reviewed report and discussed about the strength and weakness of such areas. Then Mr. Ron VanDriesen asked Mary smith for few correction in report and few matters for further analysis.
Character in this case:
Mary Smith, Mr. Ron VanDriesen
Adequate information:
Mary Smith is analyst of Bank for analyzing wine industry.
To select:
The impact of appreciation in French home currency against English currency on the competitive position of the East winery i.e. whether less, equal, or more competitive.
Introduction:
As per global economy system, exchange rate is the best factor that affects the international market competition between home country and other country. Any change in currency exchange rate affects market position of the products of that country in other country.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Which of the following is an example of managing economic exposure by flexible sourcing policy?
An American company sells its products in Brazil and Portugal. Reduced sales in Brazil due to the dollar appreciation against the “real” can be compensated by increased sales in Portugal due to the dollar depreciation against the euro.
If yen is strong, it is preferable for a Japanese company to open a manufacturing subsidiary in the U.S. to produce and sell its products there.
An American IT company hires software developers in Ukraine because of the weak position of grivna against dollar.
A Canadian company spends a lot of money for research & development activities to improve its reputation and gain more customers.
Compare Sweden's H&M and Spain's Inditex/Zara marketshares of their home country markets. Which company has space to
grow in its home markets? In other words, a firm with larger marketshare has less space to grow in its home market whereas a
firm with smaller marketshare has more space to grow.
O There is insufficient data in the case.
O Inditex because its marketshare in Spain is lower than H&Ms marketshare in Sweden
O Inditex because its marketshare in Europe is lower than H&Ms marketshare in Europe.
O H&M because its marketshare in Swede is lower than Inditexs marketshare in Spain.
A US manufacturing firm that produces cars in Mexico to sell in the US and the Eurozone would like to reduce the effect of currency fluctuations on its profits. Describe in words the hedging strategy that the company should take. Remember that a possible answer is that the company should not be hedging at all.
Chapter 17 Solutions
Investments
Ch. 17 - Prob. 1PSCh. 17 - Prob. 2PSCh. 17 - Prob. 3PSCh. 17 - Prob. 4PSCh. 17 - Prob. 5PSCh. 17 - Prob. 6PSCh. 17 - Prob. 7PSCh. 17 - Prob. 8PSCh. 17 - Prob. 9PSCh. 17 - Prob. 10PS
Ch. 17 - Prob. 11PSCh. 17 - Prob. 12PSCh. 17 - Prob. 13PSCh. 17 - Prob. 14PSCh. 17 - Prob. 15PSCh. 17 - Prob. 16PSCh. 17 - Prob. 17PSCh. 17 - Prob. 18PSCh. 17 - Prob. 19PSCh. 17 - Prob. 20PSCh. 17 - Prob. 21PSCh. 17 - Prob. 22PSCh. 17 - Prob. 23PSCh. 17 - Prob. 24PSCh. 17 - Prob. 25PSCh. 17 - Prob. 26PSCh. 17 - Prob. 27PSCh. 17 - Prob. 1CPCh. 17 - Prob. 2CPCh. 17 - Prob. 3CPCh. 17 - Prob. 4CPCh. 17 - Prob. 5CPCh. 17 - Prob. 6CPCh. 17 - Prob. 7CP
Knowledge Booster
Similar questions
- In general, a firm that concentrates on local sales, has very little foreign competition, and obtains foreign supplies (denominated in foreign currencies) will likely ____ a(n) ____ local currency. A. none of these B. benefit from; depreciated C. be hurt by; depreciated D. be hurt by; appreciatedarrow_forwardWhich one of the following is likely discouraging foreign direct investmen (FDI) in one country? A. The foreign firm would produce a good which is currently not available in the host country. B. The foreign firm intends to partner with the local firms of the host country. C. The foreign firm's products are similar with the local firms of the host country. D. The foreign firm is able to compete in the market of the host country. Clear my choicearrow_forwardGeneral Motors exports cars to Spain but the strong dollar against the euro hurts sales of GM cars in Spain. In the Spanish market, GM faces competition from the Italian and French car makers, such as Fiat and Renault, whose operating currencies are the euro. What kind of measures would you recommend so that GM can maintain its market share in Spain?arrow_forward
- Microsoft is contemplating a change in its overseas pricing policy. Currently it is pricing its international sales in foreign currency. The price elasticity for Microsoft products is estimated to be 0.5. Would Microsoft be better off pricing in foreign currency? Explain.arrow_forwardA small parts manufacturer has just engineered a new product for the automotive industry. In order to produce the part the company can expand existing facilities, acquire a competitor, or subcontract production. The company believes the product will either experience (1) increasing exchange rates; (2) stable exchange rates; and (3) decreasing exchange rates. The business believes that the probability for increasing, stable and decreasing exchange rates are 0.6, 0.3, and 0.1, respectively. The following payoff table depicts the costs for each decision alternative under different states of nature. Table 3 Decision State of Nature Increasing exchange Stable exchange Decreasing rates (0.6) rates (0.3) exchange rates (0.1) Expand existing $800.000 $650,000 $550,000 facilities Acquire a competitor 500,000 300,000 200,000 Subcontract 250,000 250,000 250,000 production Using Table 3, Choose the right pair of best decision alternative and cost using expected value?arrow_forwardWhich of the following is not a reason for U.S. firms operating in foreign markets? A.Better economic and political environment (in the U.S.) B.Less expensive labor C.Tax incentives D. To achieve international diversificationarrow_forward
- You are the manager of a U.S. company situated in Los Angeles and manages the import/export division of the company. The company distributes (resells) a variety of consumer products imported to the U.S.A from Europe and also exports goods manufactured in the U.S.A. to Canada. Therefore, your company is very much dependent an the impact of current and future exchange rates on the performance of the company. Scenario 1: You have to estimate the expected exchange rates between your home currency and the other currencies of the major other countries that you deal with in terms of bath imports and exparts. The reason is that increases in the values of other currencies compared to the U.S. Dollar may impact your imports negatively, whilst it may on the other hand, be good for exports. To do this estimate, you obtain the following spot exchange rate information: €/S CADS/S 0.87616 1.30779 You also obtain the following annual risk free rates applying in the countries: U.S.A. 2.660% France…arrow_forwardVitro-X in Malaysia has a subsidiary in Japan. Hence, Vitro-X receives Japanese Yen from the subsidiary, but this has negatively affected company value of Vitro-X, probably because of __________. A. appreciation of the Japanese Yen B. lowering of Japanese interest rates C. depreciation of the Japanese Yen D. weaker Japanese economyarrow_forwardA firm ships its products to foreign subsidiary and charges a price that may increase import duties but lower the income taxes paid by the subsidiary. The most likely reason for these effects is that the a. Price is an arm-length’s price b. Price is a cost-plus price c. Transfer price is too low d. Transfer price is too higharrow_forward
- XYZcompany (US Based) is facing resistance in their growth as it has high sales cost structure. what should be done within the company in order to drive change in the region?arrow_forwardA U.S. firm that sells high-quality tennis racquets in the U.S., wants to expand internationally by selling them in Argentina and Brazil. Describe the tradeoffs that are involved for each method (such as exporting, direct foreign investment, etc.) that this firm could use to achieve its goal. Which method of international business in your view would be best suited for this firm? Explain why you recommend soarrow_forwardThe Law of One Price states that equivalent investment opportunities trading in different competitive markets will have the same price. Yet, one can find examples where that rule seems to be violated. It is a well-known fact that Americans pay a much higher price for most prescription drugs than people in most other countries. Also, the price (when adjusted for exchange rates) for the same make and model of automobile varies greatly across different countries. Furthermore, the price of a barrel of crude oil varies between locations. For example, on October 12, 2012, the price for Brent crude oil produced in Europe was $114.21 and the price for West Texas Intermediate (WTI) crude oil produced in Texas was $91.86. Do these three cases demonstrate that the Law of One Price is false? Why or why not? Remember, provide and cite two references.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Business/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:Cengage
Business/Professional Ethics Directors/Executives...
Accounting
ISBN:9781337485913
Author:BROOKS
Publisher:Cengage