Crosswell at the Brazilian Market

Westminster Company is a giant Global manufacturer of health products whose brand has been recognized by the world. As the company they have three different operations which produce and distribute different product lines. Their main strategy on which they are working and which is a major success for them is decentralized management. Now they are re-evaluating their traditional supply chain strategy because the company is getting too much pressure from their large domestic’s customers and global customers. Now the company has to study on

When an input (machinery, components, capital, labor, etc.) is denominated in a foreign currency, the risk exists that an unfavorable exchange rate movement will increase the cost of doing business. When the products are priced and sold in a foreign currency, an adverse exchange rate movement will make the product appear more expensive to consumers, decreasing demand or forcing the company to reduce its own profit margin to maintain lower price levels. For companies with integrated international business systems, an exchange rate shock can literally force them out of business, with their operations experiencing pressures from both cost and profit centers.

Currency risk is the potential risk of loss from fluctuating foreign exchange rates when an investor has exposure to foreign currency or in foreign-currency traded investments.

The suppliers get the advantages of making their products be showcased for the consumers thru these retailing outlets. A wider scope of retail outlets could mean wider scope for the brand recognition of the seller’s products, that is why these retailing giants has more power than suppliers. But when it comes to distribution, having a strong supplier is important, the company be better over competitors when it comes to qualitative factors such as on time deliveries on their branches and wider network of

When the firm exports to the other nation, there are several risks that they should concern about. The fluctuation of currency exchange rate is the primary issue. When the domestic exchange rate is depreciated, it is the great opportunity to export more to the other foreign nations. However, when it gets appreciated, it will increase the price of the product for the foreign customers. It will lead the decline of export to the other nation due to lack of attractiveness to import from foreign countries. It happened to the Deere & Company in 2015. The U.S. dollar was depreciated during 2013 to 2014, which attracted other nations to import their products. However, once it got appreciated, their export has declined substantially. It also let declines of stock

There are three types of risk that AIFS faces with respect to currencies: bottom-line risk, volume risk, and competitive pricing risk. Bottom-line risk is defined as “the risk that an adverse change in the exchange rates could increase the cost base”. Volume risk is the risk of having too much or too little of the currency based on the fact that projected sales will be different than the actual sales. The third type of risk is competitive pricing risk and is the fact that AIFS cannot change its prices even if the currencies are changing for fear of losing their customers. In order to manage, or ultimately minimize, these risks, AIFS uses currency hedging techniques. Hedging activities begin approximately six months before the prices are due for the catalogs for the college division. For the high school division, the hedging took place throughout the year: 25% by December, 40% by the end of March and 100% by June when the pricing for the catalog is due.

Foreign exchange risk consists of three main types of exposures. First, transaction exposure is when a firm has a contractual obligation under which it supposed to receive or pay a certain amount in a currency that is different than its home currency. Transaction exposure has an effect of the firm’s income statement because the accounts payables or receivables can be affected by currency exchange rates. Second foreign exchange exposure is the translation which impacts the balance sheet of the firm. It occurs when consolidating financial statements of foreign units into a company’s home currency. The third type of foreign exchange exposure is the economic which influences a firm’s cash flows when exchange rates change. This type of exposure can impact assets, liabilities, or any type of anticipated foreign currency cash exchange.

There is also risk of volatility with respect to exchange rates in the short and long term

By setting a certain price in a certain currency (in this case Brazilian real) a company can avoid problems if there is any case of rising currency rate. The price for a asset is already set for the future contract so no matter what condition the market is in the price of the asset will remain the same.

The two major points to keep in mind when providing for the mass consumer in Brazil is they do not trust big companies and face to face contact is of big appeal. Low-income consumers associate a big company with scamming the public just for business profits. They feel as if big companies are for the rich, by the rich. A strategic way of luring in consumers is face-to-face contact. Brazilian consumers purchase based on trust and education the company provides. If a company does not educate the consumer, they become suspicious and fail in trusting the company. The trust is built more through the people than an

Currency risks are majorly involved with expanding into foreign markets. Due to the fluctuations of exchange rates, apples profits can vary due to demand and supply. The value of a currency is varied due to currency depreciation and appreciation and this fluctuation and

c. Exchange rate risks: significant portion of revenue stream born currency exchange risk (peso vs. USD) regardless of geographical and product diversification. These risks were absolutely external and thus could have been hardly mitigated.

Take the currency risk, and buy real, hoping it will appreciate in future. This seemed to be a favorable option because the real had consistently appreciated against the dollar over the past three years, and macro volatility is low and economic policy is sound although the fiscal and external solvencies are now a non-issue and the balance of payments is being backed up by strong inflows of dollar.

While we assume that 50% of German sales are still made in DM, in 1995, 25.9% of Aspen’s 1995 revenues are made in foreign markets, but only in Japan, in the UK and in Germany (increasingly) has the firm priced its products in local currencies. That means that, about 23.8% of Aspen total sales are made in foreign currencies, implying a foreign exchange exposure of $13,670,000. 29.7% of Aspen expenses are abroad and made in local currencies. So, Aspen is also exposed to foreign exchange risk with these expenses, mostly in Japan, Belgium and the UK (28.1% of the total expenses in 1995).

Great Eastern Toys is a company in Hong Kong that exports a huge percent of its total sales to the North American and European markets and hence is exposed to currency risk. Previously, the company was occupied with expanding their business and the company 's management had never given much attention to currency risk until their recent meeting with their banker. The banker pointed out that the depreciation of the European currencies during the previous two years had resulted in a substantial loss of income. The company 's management was indeed convinced that they should begin to devote more time and manage their currency position. In this report, we are going to explore the different options for Great Eastern Toys to hedge