S&S Air International Essay

1910 Words May 25th, 2012 8 Pages
[Type the company name] | Case Study Four | S&S Air International? | | | 5/7/2011 |

The business world is highly competitive, changes quickly and is filled with risks and rewards. The international business world is no different! Things can change on the international stage in the time it takes to get a cup of tea! S&S Air has been in discussions with a dealer in Europe to sell the company’s model known as “The Eagle”. The dealer, Amalie Diefenbaker, has told S&S Air that she will pay the company €60,000 (€, Euro) per plane. She will order 15 planes a month and will pay for all 15 planes within 90 days; the intention would be to continue to order 15 planes each month. S&S Air is confident that they
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So €60,000 x USD $1.37 = USD $82,200 per plane, subtracting $78,000 from $82,200 give us the additional profit of $4,200. We say this is additional profit because there is already profit in the current selling price of $78,000. As a check let’s say that the exchange rate changes to USD $1.20/€. At the selling price of €60,000 per plane the sales price in U.S. dollars is $1.20 x 60,000 = $72,000, this is $6,000 lower than what S&S has determined is a fair and reasonable price for The Eagle in the United States ($78,000). As with all things there is an upside and a down side to every decision. For a company looking to go international one cost that is almost always incurred is changes to the organizational structure, which can lead to increased operating expenses. It can also lead to payment delays because there is now an entire ocean separating your bank from your customer! One way to avoid this particular problem is to open up a lock box in a costal state, like New York for example. That way the check does not have to travel any farther than the eastern sea board. S&S Air could also complete monetary transactions through an electronic wire transfer. One of the most critical, potential effects of selling The Eagle in Europe is the exchange rate risk. This risk is actually made up of three

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